Vincor International goal is to become one of the top five wine companies in the world in terms of earnings. In order to attain this goal they have implemented a corporate strategy that focuses on using their existing powerful position in market to help them developing sales, marketing, distribution capabilities on an international scale. The strategy also includes acquiring new wineries and wine brands in new emerging region in the wine market also called “New World regions”(Vincor, 2005) throughout the world.
More precisely Vincor International strategy for growing the market shares involved the six following strategic actions: “(1) emphasizing the development, sales and marketing of wines in the fastest growing segments of the market, particularly the premium wine segments; (2) continuing to participate in the premium wine category through the development of premium brands that we own; (3) expanding the sales and distribution reach of our brands into regions which are supportive of New World wines; (4) continuing to complete acquisitions of premium branded wine companies in New World wine regions; (5) expanding the supply of premium grapes and, in particular, Canadian grapes to satisfy the growing demand for premium VQA wines; and (6) developing ice-wine into an international luxury product, capitalizing on the reputation of Inniskillin.” (Vincor, 2005)
As for the “New world” (Vincor, 2005) expansions, Vincor strategic actions involve in growing in earnings are to improve operating income by acquiring new wineries and rationalizing and integrating the operations. This will also permits the expansion of the company’s product line and the expansion of the company’s currents brands by providing new distribution opportunities. Porter’s Five Forces Model
Risk of Entry by potential competitors:
Vincor International should not be overly threatened by the entry of potential competitors in their market. This is because the wine industry is a market with significantly high barriers of entry. In order to start a successful wine producing business a company needs significantly large capital investments. Given the complexity of the wine industry a strong knowledge is also needed in order to produce quality wine on par with competitors and understanding the market. Finally a new entrant will also be faced with a lengthy process in order to begin its business, licensing procedures and requirement are long and land and vineyard preparations make it for a prolonged initial production. Hence given these multiple obstacles the threat of new entrants for Vincor International is described as low. Intensity of rivalry among established firms:
According to the Vincor International information form “the international wine industry is intensely competitive”. (Vincor International, 2005) This means that there is a lot of producers around the world that competes for shelf space and consumers taste. The rivalry is intense, the businesses in this market need to competitive on price, quality, brand recognition and/or distribution. The leading drivers in the wine industry that will be making the product stand out seem to be product quality. The Intensity of rivalry among established firms is described as high. Bargaining power of buyers:
Vincor international have sales around the world and their principal buyers are consumers, wholesalers, government liquor boards and retail stores. When selling directly to consumers and retail stores the bargaining power lays with the buyer because there are so many wines to chose from. As for wholesales and government liquor board the bargaining power of buyer is even stronger because there are so few of them and there is a lot of wine to choose from. Hence, the bargaining power of buyers for Vincor International is very high and the company needs to find innovative ways and strategy to attract and keep its buyers. Bargaining power of suppliers: