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Strategic Analysis of Robert Mondavi Inc.

Essay by   •  February 22, 2011  •  Case Study  •  1,994 Words (8 Pages)  •  10,817 Views

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Robert Mondavi Corp. Analysis

I. Summary

 Company founded in 1966 by Robert Mondavi in Napa Valley, California

 Company vision to make California a recognized wine producing region alongside great winemaking regions of Europe

 Major focus on technology and wine growing techniques

 Production of premium to super ultra premium wines

 Mondavi focuses on personal sales, wine competitions, and lavish parties to promote the wines rather than conventional advertising

 Mondavi has a portfolio of premium to super ultra premium wines to fill various price points and niches in domestic wine market

 1981 Opus One joint venture with Baron Philippe de Rothschild

 Through 1980's and 1990's, Mondavi acquires many wineries and vineyards throughout California

 Mondavi develops national following

 Phylloxera (vine killing insects) begin to infiltrate California vineyards

 1993, Mondavi, in need of capital due to extensive acquisition expenditures in previous decade plus the replanting costs, issues public shares

 In the mid-1990's, Mondavi begins 3 joint ventures with a Chilean, an Italian, and French firms

 Wine production in California accounts for more than 70% of wine consumed in America

 Wines in America are sold through a three-tier distribution

 100's of wineries emerge in California,

 90% of Mondavi's revenues generated domestically

II. Case Profile

Problem/Issues in Case

 Managing multiple brands in the global markets

 Maintaining domestic market share while foreign competitors enter U.S

 Accurately forecasting demand and acquiring necessary wine grapes

Supporting Statements

 By 1998 Mondavi has about 4% domestic market share (fifth largest)

 U.S. wine exports make up only 4% in the international market places despite being the fourth largest producer of wine in the world {exhibit 1}

 By 1999, Mondavi is managing 13 brands (6 international)

 In 1999, Mondavi experienced major shortfalls in supply resulting in reduced sales, stock price drops 60%

 January 1999, Mondavi lays off 4% of workforce

 Management is divided on future strategy:

o Focus on Domestic Brands, 90% of revenues

o Continue to Diversify, Global partnerships and acquisitions

III. Situational Analysis

External Environmental Analysis

General Environment

Globalization: *** By 1999, 20% of wine consumed in America is imported while the U.S. share of world export wine is a low 4% - The global markets provide tremendous potential {exhibit 2}

Technological: ** Mondavi's success in creating world class wines is often attributed to their advanced technology

Sociocultural: ** In general, the wine consumer's preferences don't change quickly, but firms must look for opportunities to lead when the changes occur, additionally firms must adapt to foreign market preferences

Political/Legal: * Restrictions in some countries have made it difficult for U.S. wine firms to enter markets- Domestically the wholesale distributors have lobby power and control of the regulations overseeing the industry resulting in restrictive distribution

Industry Environment

Rivalry Among Competitors: *** Rivalry is intense and expected to remain so in at all product levels- 10 large domestic producers account for 70% U.S. volume {exhibit 3}

Threat of Substitute Products: *** The beverage industry in the U.S. is extremely competitive because of aggressive advertising and marketing campaigns that are constantly bringing new beverages (alcoholic substitutes for wine) to market- 52% of wine is purchased in supermarkets where consumers are faced with a myriad of beverage alternatives

Power of Suppliers: * Most large firms do not produce enough grapes to meet demand so outsourcing is common and when supply is short (small crops) the prices rise

Competitive Environment

Environmental Trends:

- The total wine market in the United States for 1999 was $18.1 billion with an average growth rate of 8.5% since 1994

- The total volume of the global wine market in 1998 was measured at 6.8 billion gallons, with 25% of the total volume accounting for wine that was purchased outside the country from which the wine was produced

Representing an increase over the 1991-95 period, during which the export segment of the market averaged approximately 17% growth by volume

- Some established wine drinking countries have seen their per capita wine consumption stagnate or decline as the competing beverages take hold in the global marketplace

Attractiveness of Market:

- The growth in the international markets has shown no signs of slowing, especially for premium to super ultra premium wines

- Decreasing barriers to selected foreign markets

- U.S. wine market has been 90% or more of Mondavi's revenue and demand is steady

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