Case Study: Robert Mondavi Corporation

1. EXECUTIVE SUMMARY.....................................................5

2. BACKGROUND OF THE CASE STUDY..................................6

3. ANALYSIS & IMPLICATIONS OF PORTER'S FIVE

COMPETITIVE PRESSURES............................................7-17

3.1. The Potential Entry of New Competitors

3.2. Competitive Pressures from Substitutes Products

3.3. Bargaining Power of Buyers

3.4. Bargaining Power of Suppliers

3.5. The Rivalry among Competing Sellers

4. ANALYSIS OF THE STRATEGIC GROUP MAPPING..........18-20

5. KEY SUCCESS FACTORS OF THE WINE INDUSTRY.........21-23

5.1. World famous growing areas

5.2. Larger growing market for premium wines

5.3. Favorable demographic and macro trends

5.4. Quality and affordable prices

5.5. Product differentiation

5.6. Different wine segments

5.7. "Open markets"

6. RECOMMENDATIONS..................................................24-27

6.1. Positive cash flows

6.2. Backward integration

6.3. Expanding to new geographic areas

6.4. Exploring new channels

6.5. Openings to extend quality and image to niche market

6.6. Further mix channels of export strategies

6.7. Clever advertising

7. CONCLUSION..................................................................28

8. LIST OF REFERENCES.....................................................28

1. EXECUTIVE SUMMARY

This report provides thorough analysis of the Robert Mondavi Corporation (RMC) in order to give a best solution to Michael Mondavi, the CEO of the company in terms of the problem face by the company.

It begins by examining the internal and external forces that greatly affect RMC by applying Porter's five forces of competitive pressures to investigate the status of competition of wine industry in U.S. as well as their implications.

Analysis of the strategic group mapping is important in order to give a clear position of RMC's competitor in the market follows by each company's characteristic.

Next, it is essential to analyze the key success factors of U.S. wine industry that contribute RMC in considering its future competitive strategies and changes that should be taken by the company accordingly

Finally, recommendations are provided for RMC for its future expansion's strategies.

2. BACKGROUND TO THE CASE STUDY

RMC is a leading producer and marketer of table wines, located in Oakville, California. RMC markets wines worldwide under the following labels: Robert Mondavi Napa Valley, Robert Mondavi Coastal, Woodbridge, Vichon Mediterranean, La Famiglia di Robert Mondavi, Byron, Opus One, Luce and Caliterra. RMC employs a standard three-tier distribution system where the company sells to wholesalers who in turn sell to retailers who sell to the public. The company finds its niche in the "premium" and "ultra premium" segments of the table wine market (Burns et al., 2001).

In January 1999, Michael Mondavi, the CEO of the RMC and son of its founder, Robert Mondavi, announced the reorganization of the company and the layoff of 4% of the workforce. RMC had experienced a shortfall in supplying its Woodbridge Chardonnay brand. Unhappy distributors had begun substituting competing Chardonnay brands on retailer's shelves. Yet, some distributors remained reluctant to carry the brand even though Woodbridge production levels returned to normal and further reducing company sales (Thompson & Strickland 2003).

During this period, the senior management was completing the process of reconfiguring RMC's future strategies. However, there were two different views had aroused: (i) one group argued for a return to the original vision, complaining that RMC had been so busy focusing on launching new brands and pursuing international ventures that it had neglected its core domestic brands, which made up 90% of revenues, and (ii) another group claimed for continued diversification through its global partnerships in Chile and Italy and one domestic brand. Michael Mondavi was caught between the two groups (Silverman et al., 2001).

3. ANALYSIS OF THE FIVE COMPETITIVE PRESSURES

The graph below demonstrates the state of competition of wine industry in the U.S. Porter's five-force model is used to analyze the principal competitive pressures in a market and assessing how strong and important each one is (Thompson & Strickland 2003).

(Source: Adapted from Silverman 1999, 'Competition in the Global Wine Industry', Wines & Vines, July 2000).

3.1. The Potential Entry of New Entrants

New entrants find it very hard to compete with large and established companies within the industry, such as E. & J. Gallo Winery, Canandaigua Wine Company (CWC), and Beringer Wine Estate (BWE) because of the huge amount of advertising and marketing it would take to gain market share.

Next, wine industry is a capital intensive. This is because producing wine on large scales requires great capital expenditures and therefore, a new entrant would need to secure a huge amount of capital funding to compete in the industry. A huge amount of capital will be required to