Strategic Analysis of Robert Mondavi Inc.

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Robert Mondavi Corp. Analysis
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:
oFocus on Domestic Brands, 90% of revenues
oContinue 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...
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