Robert Mondavi is one of the pioneers of the wine industry and can also be credited to bringing the wine industry to the Americas from Europe. Robert Mondavi began wine making in the relavitely then new region in California back in 1943 and has since become the most innovative and leading winemakers in America. Initially to stimulate and create a market for wine drinkers in America, Robert Mondavi embarked on a journey to educate and enlighten the American people about the culture of enjoying wine and food, this soon also became integrated into the mission and the vision of the organization.
Later on in the 70’s Robert Mondavi entered into the popular premium wine segment and also bought a local co-operative winery to handle production, in addition to partnering with a French winery to manufacture a premium wine for the first time in America, the company remained stable and in its initial state till the 90’s. In 1993 finally Robert Mondavi offered a public offering to boost investments and generate capital for land acquisitions and wine replanting due to a virus which has eliminated almost 90% of the crop.
Throughout the 90’s Robert Mondavi had controlled expansion with some big projects like the mapping technology developed with NASA and also foreign partnerships with wineries in Chile and Australia. Problem Statement Michael Mondavi and Greg Evans have realised that since their markets are heavily dependent on the US markets, they face a legitimate threat from the large diversified alcoholic companies who are aggressively consolidating and entering into the premium wine business.
Thus they should work on a strategy to strengthen the firm’s competitive position in order to survive the huge consolidations and aggressive competitions. Alternative Analysis The Robert Mondavi organization should follow suit and begin consolidations themselves. If they buy out the rivals there will be minimum competition and they will also gain valuable intellectual property along with profitable tangible property and brands.
Also this will give them a broader consumer base and give them the ability to have a sizable price command over their products. The Robert Mondavi firm should invest in marketing and shed their peripheral assets and concentrate solely on the Ultra premium ( $14-$25) and the Luxury ( $25 and up) wine markets. With the majority of the European market consuming cheap table wine and the American average consumption price being $7 this will make them an ultra luxury product, thus solidifying their consumer base and profit margins.
The Robert Mondavi organization should change all its strategic plans and concentrate on creating a niche luxury market for them in Europe and maybe begin consolidating with European wineries in the future Analysis of Alternatives In this analysis I recommend the Robert Mondavi organization to consolidate with the large volume producer Allied Domecq as Allied Domecq has an extremely large portfolio and is also the world’s 4th largest wine producer.
This huge company has large amounts of cash flow which can be further boosted by the liquidation of its food service outlets and franchise outlets. In addition to that almost 87% of the income for the organization came from wine production which also was premium wine. This would be a perfect fit for Robert Mondavi as it will give them the global stage that they desperately need and also give them the copious amounts of funds which can be further boosted by liquidating the franchise assets.
Analysis 2. In this solution Robert Mondavi should liquidate their peripheral assets and should solely concentrate on producing and marketing the Ultra premium and the Luxury segment wines. This will help them in creating a niche market which can command a high price and a profit margin. With the high amounts of consolidation and the global wine industry rise, the industry as a market entity is marketing itself. Using this free marketing Robert Mondavi can rely of the buoyancy of the market and provide a Ultra Luxury brand which will have a future market in Europe as well.
Also creating a nice market will solidify the already loyal consumer base and the exclusivity of the product will market the organization as well since they have market credibility and pre market standing in the public’s perception. Analysis 3 Recommendations and Action Plan I would recommend alternative number 2 to be the best solution to tackle this case. As there is already enough awareness of this specific industry and with the large consolidations the industry will rise more than 2-3% per year to a number far inflated.
Due to the massive and aggressive competitions Robert Mondavi should realistically shrink their infrastructure by liquidating their peripheral assets and working on a Ultra premium and a Luxury product. This will help them create a niche market and also make them the market leader in the specific industry sub product. In addition the exclusivity of the product will lead to price inflations and thus a higher profit margin, thus marketing itself. Thus Robert Mondavi should be a industry innovative leader in leading towards the production of a Luxury brand just like they did in the 70’s.