What actions would you take to sustain and enhance Mondavi’s competitive position?
Looking at the wine industry, and analyzing the market wine, we can say that there are three main factors that can bring to success a wine industry: brand image, distributer relationship and access to capital and collaboration. Robert Mondavi winery success depends and will depend on the same factors listed above. In order to ensure a leading market position I think that Mondavi should focus on solutions that enhanced this main factors like enforcing brand image, enhancing relationship with distributors, emphasis on joint venture and collaboration. Let’s have a general overview over Mondavi’s strategies. Michael Mondavi understood that the success of its company depends strongly on the US market. But in a globalized world which has opened to other diversified market for any product, it opened the door also for alcoholic companies such as Diageo, Foster’s, Allied Domecq and others, who entered the premium wine business. The entrance of such companies in the market of premium wine make shiver the Mondavi’s winery and they felt threatened since its sales volume started to decrease.
As a consequence of this analysis, Mondavi should work and focus on the strategy to reinforce the competitive position of the company in order to survive against the huge and aggressive competition there is establishing in US, and in order to confirm its consolidation on the US market. More specifically some challenges it could face can be: managing multiple brand in the global markets, maintaining domestic market share while foreign competitors enter US and accurately forecasting demand and acquiring necessary wine grapes. As already explained, the biggest threat for Mondavi is the big international companies entering the market of premium wine sector and because of their previous relationship and contacts with distributers and retailers, they have a really low barrier in such market. Although Mondavi corporate strategy had a history in the premium wine sector in US of making profits, the problem now is that the same business strategy may not be anymore sustainable because of the saturation of the market that lower the price. Still, Mondavi has a really big concentration on the premium wine segment, and the risk is that it has to decrease the prices to compete and this will clearly limit the company’s profitability.
The great increasing in competition obviously decreased the bargaining power of Mondavi’s company with its wholesalers, retailers and mass-merchandisers. Eventually, if Mondavi increase its prices on premium wines, just to maintain the same profit margin, customers and buyers can buy other wines or they can switch to other brands which will decrease its market share. With this present market situation of growing competitiveness with current and new entry companies Mondavi has to keep developing the competitive advantage that are already a strength, like the brand quality recognition. At the same time Mondavi has to continue to create demand and continue developing new marketing strategies, sales strategies and distribution strategies. Getting back to the point of success of wine industry let’s see what Mondavi has done or can do for each one of them.
Enforce Brand Image
In a competitive market as the wine one, the products differentiation is not enough to ensure the demand, because the tastes can vary very highly. Despite that, brand loyalty can be sustained with a strong brand image and can encourage repeated purchases. Mondavi so far has a really solid brand image in the market due to the emphasis posed on its quality of wine, but he empowered its image also because of the strong association he put between the act of drinking as an aspect of high culture and its brand. The company, for its history, has a great presence in the wine US market and it is seen reputable and high quality winemaker and what Mondavi can do is to focus this reputation on the average drinker by advertise on popular media, like television. Television in fact is not often used as an advertising channel for industry wine, so it could represent something exclusive.
Analyzing the competition in the industry wine market of the US we can see that there are five big major distributors that have almost the monopoly of the distribution of wine products. For this reason is essential and vital for company to make strong working relationship with supplier, wholesaler and distributers. Mondavi for example has a strong relationship with Southern Wines which is extremely important as they account for 29% of Mondavi’s sales and command the 11.7% of the nation’s total market share.
The actions that Mondavi can take in order to strengthen its position could be to diversify their distribution for reach new market. They could also look to form exclusive distribution rights to some of the large distributors. In this direction Mondavi could also re-negotiate the current contracts pushing on having exclusive rights with most of them. In another direction it can improve the distribution of its wine expanding to the international market, and marketing their wine more extensively and effectively to the domestic market.
Access to capital and collaboration
Collaboration and joint venture with other company will make it more difficult for the smaller firms to stay profitable. Collaboration with big company like Mondavi has in Chile, allows a greater access to the global market and to some benefits, like lower international wages and cheaper land. Possible international collaboration or joint venture would increase the brand recognition globally and also would prevent from bad years in terms of vineyard, yield and so on. A risk that could be found doing a collaboration or a joint venture, is that it can create confusion in the mind of customers and consumers but on the other hand, a joint venture with other firms will strengthen market position, and as well limit new entry to the market which will reduce competition. Other possibilities are to merging or collaborate with European firms which already have a solid experience and strong presence internationally and make a presence in market still unexplored by Mondavi, like UK, Japan or China. IT has to be say that this kind of strategy has a return investment on the long-term.
Summarizing we can say that the strategies for Mondavi are more than one: it should focus on marketing their ultra-premium wines to the local market (US) and it also should look for strategic advertisement (like TV) for acquiring new consumers, from middle to high income individuals. In the advertisement Mondavi should choose the right way to educate Americans on the daily consumption of wine rather than just in some celebration. By doing so Mondavi will probably increase the consumers and it will benefit from this since they already have a good system to satisfy the demand and they are among the leaders of US market. The company can grow by improving the distribution of their wine, expanding to the international market, and marketing their wine more extensively and effectively to the domestic market. However one of the key success would be the ability of Mondavi to open, to reach and to extend its reputation to the average drinkers.