Coopers Creek Wine Management Essay

1. 0 Introduction Coopers Creek, established in 1982, became one of freshly Zealands more than(prenominal) successful medium-sized fuddleries by interest a strategy of resource leverage via ne tworks of co-operative relationships with a nonher(prenominal) innovative Zealand drinkmakers in the domestic and export merchandises. This strategy allowed Andrew Hendry, the managing director, to consciously manage the produce of the club to maintain the benefits of small size.However, with increase globalization of the booze-coloured patience, the changing nature of export commercialises, the primaeval maturity of the impertinently Zealand diligence and the constrained supply facing New Zealand drink makers, Andrew Hendry was go about with the decision of how to position a smaller lodge for the future. He had to specify whether the network-based strategies that served the company so good continued to be appropriate low conditions of pains concentration, increasing competition and uphill globalisation. (Robbins S, 2006) 1. 1 The NZ fuddle indus refine When Andrew Hendry established Coopers Creek, the New Zealand environs was senior highly regulated.By 1984, the New Zealand judicature had initiated a programme of deregulation, which included devaluation of the New Zealand nones, exchange rate floatation and general anti-inflationary measures. ( gatekeeper M, 2001) The opening of New Zealands domestic foodstuff place meant that businesses had to remediate their efficiency substantially over a short period. The agricultural welkin sought out unseasoned marts, to replace the loss of their traditional dependance on the UK trade with its increasing commitment to its European trading partners, and smartborn products, reflecting a growing awargonness that much of New Zealands exports were of a commodity nature.This period saw growing exports to Australia, the United States, Japan and the liberalization of Asia and exports of predomina ntly sheep meat and dairy produce being accompanied by more fresh fruit, venison and wine-coloured-coloured. A further response to fiercer competition at home and in overseas markets was an increasingly strong concentrate on on fictional character, a case in point being the New Zealand wine persistence. The New Zealand wine industriousness accepted the consequences of the liberalisation of the domestic delivery and recognised the need to understand how on-going changes in the planetary sparing environment affected its prosperity and how to plan accordingly.Building from a low international base in the eighties ($4. 5 million in exports in 1987), New Zealand wine exports achieved phenomenal growth and accounted for $168 million in 2007, substantially exceeding the $100 million by 2007 tar narrow set in 1999. The UK market was the most substantial export market for the industry in 2007, and at $84 million it accounted for around 50. 22 per cent of contri unlesse exports by value and 54. 28 per cent by volume. Europe accounted for 66 per cent of exports with 85 per cent of that going to the UK. Four large ho use of goods and servicesholds, that is to say Corbans, Montana, nary(prenominal)ilo and Villa Maria, dominated the wine industry in New Zealand in 1999.The pastime course of instruction, Montana obtaind Corbans and Nobilo was bought by BRL/Hardy of Australia. Between them, these large firms accounted for around 80 per cent of all exports in 2007, with a nonher 17 medium-sized companies, of which Coopers Creek was one, treatment 16 per cent in combination. For the most part, industry participants exported among 30 and 35 per cent of their action, but a few producers had much high export intensity. (Wheelen, 2006) 2. 0 Key Issues The mention issues atomic number 18 (Study Guide, 2008) (1)Despite entering early maturity, coopers creek remained constrained by issues of supply.(2)The approach of tonic land for pipeline planting was upri se and more previously marginal land became economic to grow on, the problem was still one of access to capital for these resources. (3)A homogeneously over supply of grapes in New Zealand, which could lead to heavy discounting. (4) A contraction in monomania in spite of appearance distribution companies in New Zealand and in USA, which could lead to certain markets being effectively closed to coopers creek. (5)Protection of strategically implicationant grape supplies so the give the axe insure they still get a coincidence of the very highest quality grapes. 3. 0 Planning.3. 1 intent Cycle From a expect perspective, the worldwide wine consumption has stagnated. harmonize to the fuddle Institute, at that place is only a 2. 04% growth in wine consumption from 1997 to 2001. In fact, worldwide consumption dropped from 227,875 hectoliters to 226,646 among 1999 and 2000. Generally on that point is a drop in consumption from the traditional wine boozing countries bid France a nd East European countries, whilst demand has growth signifi understructuretly from China. (Grant R, 2005) The performance of wine has shifted from the traditional vineyards in France to the rest of the world.There argon New-World boozes from Australia, New Zealand and South Africa. These wines are generally thought to be of moderate to high quality and are essentially challenging the traditional wine producers on the quality front. Furthermore, there are wines coming out from China and India. Because of the pass up wages in these countries, wines can in a flash be produced at a fraction of the costs of the French vineyards. Price has now become a big challenge that the traditional wineries fill to face. Some authors even suggest that the Old-World producing countries like France has followed growth & decline and now has entered a second life human body.While the New-world countries are in an emerging or growth variant As the industry moves towards maturity phase of its life cycle, the pace of consolidation ordain subjoin. (Times of India,2007) 3. 2 PESTEL synopsis The chase is a review of the major environmental factors, which testament impact the industry to a large extent. A closer examination of the more primal factors amongst them will allow for a tighter integration between the external environmental factors and the corporate strategy chosen for Coopers. Political factors Government regulation has unceasingly played a major role in the WI.There are increasing concerns that there will be new bulwarks and contend impediments to trade in the WI. One such example is the trade disagreement between US and European Union in the level of farm subsidies that the US alleged that the EU farmers receive. The same allegations whitethorn besides be as well as levied on the European vineyards. In the Wine Institute report on International Trade Barriers to U. S. Wine 2006, European wine producers were noted to have received certain subsidies . Tariffs in any case have been the most important barrier to the international wine trade.Some governments impose unusually high tariffs on wine imports . Recent announcement in the media like India opening its market and slashing duties on imported wine and sense of smells bring right(a) news to the industry, as this will allow them to enter this lucrative untapped market. Though collect to WTO pressure the tariff has been reducing, which has lead to major wine producing countries imposing various non-tariff trade barriers. One such non-tariff trade barriers are research fundings make available by local governments to improve the boilersuit harvest yields and quality of the countrys grapes . Economical factors.The rising rate of middle anatomy worldwide has led to an increasing appreciation of wine and demand for wine. In developing economies of China and India, this class of consumer is expected to extend significantly over the next decade. With the continued increase of economic growth judge for both countries, these consumers can now afford to consume wine is expected to grow significantly as well . The effect of currency fluctuations on the WI will continue to play an integral part in influencing the WI. The proportion of wine being exported outside the wine producing country has increased. up to now in a traditionally large wine consuming market, the proportion of wine, which ends up in foreign land, has been increasing. The continuing trend of exporting to new markets such as India and China is going to increase as wine producers cope with the declining wine demand in traditional home markets As a result, the wine producers exposure to fluctuations in currency exchange rates will increase further. Socio-cultural factors The increased spending power, sophistication of the middle class in umpteen countries with increased tendency of copying the west has helped to increase the demand for wine consumption.This growing grouping of earners from various cou ntries is often well traveled & highly educated consumers with needs and wants for the expose things in life. The act of middle class across Asia is expected to grow by 1 billion in the next 8 years . With the shift in demographics in the developing countries, there will be more wine drinkers in the future. Increasingly, there are withal more scientific evidences that there are health benefits to be derived from moderate inebriety of wine oddly red wine.As a result, there is an increasing bridal of the drinkable as health-product leading to a healthy heart. Technological factors foot and expert factors continue to drive improvement in production yields and better stock of wine. The Australian WI today has transformed itself from a small cottage industry to one of the largest exporter of wines internationally, even to the extent of eclipsing some of the older Old-World countries. The smashing leap forward for Australia can be attributed to the Australian wine producers c lump to innovate and improve existing processes. (Read C, 2006)The growth of e-commerce infra social organisation and the increasing acceptance of buying things online have led to new opportunities for wine connoisseurs and wine producers alike. With this new technology, corner wine growers are able to reach out to the someone wine consumers without being drowned out by the marketing noise generated by the large wine producers. The magnate to ship small quantities directly to item-by-item wine drinkers without passing through layers of middlemen whitethorn mean that small niche growers whitethorn be able to witness their position in a market dominated by large pit names . environmental factors.Within the Food and Beverage (F&B) industry, the WI is markedly different from the another(prenominal) products due to the fact that F&B products are limited by market, sequence the WI is limited by resource (land and grapes). Reason being wine is heavy(p) in moderate climates and on certain types of soil. Sudden climatic changes may adversely affect production yields or may even undo crops all together. The significant changes expected in the environment from global warming, rising sea levels, rising carbon emissions and increasing acidity in the water will all add to contribute to the adverse conditions for which growers will find themselves in.These conditions together with a scarcity of good arable land may act to constrain or even reduce the industrys supply. On the positive side, in one of the rare articles published in Newsweek on the positive effects of global warming, the author highlights that fast warming of Artic glaciers and increase in global temperatures may lead to opening of new vineyards in umpteen parts of the world with weather conditions similar to the Frances Champagne region. Legal factors External environmental legal factors have acted in line with other environmental factors changes.For example, the advent of the Internet e-commer ce has resulted in changes in rule for wine sales, which crosses state lines in the United States . In auxiliary, the short letter of the grapes used to make wines as well became a contentious issue for many wine-producing countries. The origin of these grapes and the proportion of local grapes used became an issue for stigmatization and labeling of wines as governed by new local legislation controlling wine labeling. 4. 0 Organising 4. 1 Porters 5 forces analysis We have analyse Coopers internal environmental factors using Porters Five Forces analysis. beingness in a specialize industry, it is not easy for another fake to just come in wanting a portion of the pie. The WI requires specialized skill sets, special knowledge and bulky experience to stay competitive. It also needs very high investing especially for equipments used for bear on of wine. This indirectly induces high entry cost which is work as a barrier of for new entrants. There is also the expected retaliation approach by new entrants from existing players. Coopers together with other existing players may collaborate to deter competitors from coming in.For example, Coopers may out dropping its outlay and the other existing players may follow suit leading to a legal injury war. On the whole, the force of threat of entry is low here. 4. 2 Threat of Substitutes This industry faces stiff competition from not only other wineries but also from other alcoholic drinks such as beer, spirit and pre-blended mixed drinks and carbonated drinks. Product-for-product substitution is also possible should customers of Coopers set to try out other blades/types of wine. For the health conscious, bottled water, energy drinks and natural fruit juices also provide competition.Possibility of generic substitution is also there where as customers may prefer to spend on purchasing cigarettes rather than drinking wine. Thus, there is a high force of threat of substitutes in this industry. 4. 3 Threat of entry Competitive rivalry among existing firms is evident in this industry. Larger companies are acquiring smaller wine producers to monopolize the market resulting in dynamic competition amongst these companies. As the WI is at its mature stage, companies start to ride market share from competitors to survive.As there are likewise many wine producers, adding on to the high power of buyers, companies may decide to go for expenditure wars due to high fixed costs to defecate market share. This industry has high entry and exit barriers due to the extensive capital investment and knowledge & skill set needed. In addition one must have sustainable resource, as it returns several years for wine to mature. This means that industry players do not have many choices. Again this induces competition amongst them and price wars and low margins situations are likely to happen. found on the information above, the groups came to the conclusion that the industry is Medium Attractive. 5. 0 Directing 5. 1 Porters Generic Competitive Strategies employ Porter generic competitive strategies, we find that Coopers has the ability to outperform its competitors by adopting a strategy of Focus Differentiation. Porter proposed that a firms competitive advantage in an industry is determined by its competitive scope i. e. , the breadth of companys butt end market coupled with companys unique resource (product range, distribution channels, seat market etc.), For Coopers the scope of the target market is narrow.It is mainly targeting niche markets for subvention wines in the wine drinking markets of Europe, US, Australia, Japan and a few emerging Far Eastern Asian markets. When targeting niche markets, the company either can go for damage Focus or Differentiation Focus. Coopers should not be following the Cost focus strategy as NZWI repugn in the high quality premium category wines. Reduction of overall cost is achievable only to a certain extent, as this industry is highly capital in tensive with many inherent costs along the supply chain.Instead Coopers should concentrate either on particular market segment, or product line segment or geographic market with high growth potential or all three. By following a note strategy Coopers would be able to better focus its resources & capabilities to the serve the special needs of a narrow strategic target more effectively than its competitors. 5. 2 Bowmans strategic clock Using Bowmans competitive strategy clock too, Coopers waterfall under category 5, Focused Differentiation.This strategy is similar to the Porters generic model, which tries to provide high-perceived product benefits justifying a substantial price premium usually to a selected niche market segment. Coopers can use this strategy in new markets, by targeting sales into the same niches in more countries. While in established markets Coopers could even adopt form 4 Differentiation with price premium by offering better wine at the same price or by determi ne it slightly higher than competitive brands in the same price bracket, to run advantage of the fact that fine quality wine will forever demand a premium and at the same promote it as premium category. (Meredith R, 2007).Cost Leadership may not be uphold for Coopers because of some of the following reason Competitors can imitate differentiation may not be sustainable it can easily replicated by competitors like South African or South American wine producers Bases of differentiation become less important to buyers Competing on just quality to demand high price may not be enough. For example in price conscious markets like UK, Holland and Germany, wines from South American and South were seen as better value than NZ wine. Target segment can become structurally unattractive Structure erodes This could happen for Coopers target market in US, restaurants and dress shop retailers. They may form a group for centrally sourcing activities to drive stack costs, somewhat similar to what happened with Tesco Supermarket Chain (UK). (Aylward, 2006) Demand disappears there may be new research findings in future that may lead to dismay consumption of wine. Or even they may be new legislation banning consumption of alcohol products in public places similar to that of smoking, which may lead to total disappearance of a target segment.From the evaluation of Coopers center field competencies, the followings were recognized. Coopers is a typical entrepreneurial venture in that the founding entrepreneur, Andrew, had goaded its tuition and growth. A critical factor of success of Coopers is Andrews ability to build relationships, within the context of an innovative and flexible approach, in social club to leverage critical resources to pursue growth. Coopers strategy was based on having a carefully controlled but finite cadence of wine to divvy up either year. With Andrews commitment to quality, it has earned itself a comparatively good character in the industr y.From the evaluation of the KSF of the WI, the followings were recognized. Historically, the NZWI had focused on the production of premium wines, devoted its constrained supply, small scale, high cost anatomical structures and distinctive clean and common land growing conditions. Availability of consistent high quality products that has strong brand value and recognition are highly sought after and considered KSFs. 6. 0 Monitoring 6. 1 Wineries Both management & employees of wineries play a strike role and yield great power in call of the quantity & type of wine to be produced.Great deal of collaboration exists between the local wineries to share knowledge & costs. 6. 2 Grape growers Being rouge players, they control the quality and quantity of grapes grown. Many of the wineries are backward merged by owning lands or having long-term contracts with individual producers. designer of suppliers is low. 6. 3 industriousness Associations Wine Organizations in NZ like Wine Insti tute, former Wine hostelry with backing of the NZ government are very powerful. all(a) Wineries have to take up compulsory memberships and contribute towards funding & running of the organizations.These key roles of these organizations are promoting NZ wine in international markets, lobbying with foreign governments to open new markets, saturnine of trade restrictions and tariffs etc. They also initiate research programmes and training for the blameless industry, funded by the wineries. (Zalan T, 2005) 6. 4 Consumers The final end user, this group needs to be well informed & kept satisfied by providing high quality premium products with consistent quality and availability at affordable prices.Power high. 6. 5 NZ Government NZ government is a key player with enormous power who has played a pivotal role in the development of the NZWI. The government has been implementing new legislations in consultation with NZWI to meet the current market requirements. Some examples would includ e changes in government policy in the 1980s making it favorable for local manufacturers to export to foreign markets . (Harvard University, 2007) 6. 6 Distributors, Retailers, Buyers Buyers like Supermarkets are powerful players who dictate the price & type of wine stocked with on shelves. WI is a buyer driven industry, where buyers hold a potbelly of power. 6. 7 Domestic and Foreign investors.This group needs the minimal aggregate of effort. They are satisfied as long as they get a good return on their investments. 7. 0 Critical Analysis 7. 1 Competitor Analysis The world WI is currently experiencing a situation of over-production. In the EU alone, it was reported by Food & Drink. com that there is a tautological o f 1. 5bn litres of wine, enough for every European Union citizen to take roughly four free bottles each. Millions of Euros have been spent to turn these surplus wines into industrial alcohol. (All Things, 2006) The WI is a highly fragmented, with over a million wine companies around the globe.None of the firms control more than 1% of the retail sales, with evanesce 10 players controlling 11% of the global market share (based on volume) . These industry competitors come from different wine growing countries and continents. This is especially neat for Old-World Countries in Europe (France, Italy, Spain, Portugal and Germany) accounts for 60% of the world wine production and 80% of world trade . In contrast, the New-World Producers (Australia, South Africa, Argentina, Chile, USA, New Zealand) wines are more consolidated. On average these countries appear to be more structurally attractive compared to Old-World Countries.Moreover, in the last decade the industry structure has been undergoing dramatic change. There is a growing trend of consolidation. Cash string up rich alcoholic beverage companies are investing in the WI as their own markets of beer and spirits are maturing. 7. 2 Stakeholder analysis The WI being a competitive industry has a va ried, vibrant and balanced group of stakeholders, with sponsor and varied channels of communication. All the forces involved try to build consensus within which the primary decisions in the industry are made. 7. 3 Life-Cycle Analysis We have identified Coopers to be in the phase of Mature stage in the life-cycle model.In view of its competitive conditions, we also identify there may be many competitors which are likely to resort to price-cutting strategy for volume. accordingly one of Coopers directive is to differentiate its product portfolio through leveraging on its enhance brand equity to promote customers belongings and loyalty within its existing customer-based and new customer groups whilst consistently thrust cost efficiency through economies of scales and innovative & efficient ways of speech cost down. (Pape E, 2007) 7. 4 Positioning analysis Coopers currently enjoy relatively good brand equity amongst its market segment.To infuse the same branding principle across dist inctive first label allows them to capitalize on its already successful branding strategy, further maximizing the returns of their marketing investment especially for the second label. 7. 5 Value chain analysis done new ways of doing things such as possible bottling in import markets to reduce shipping costs, backward integration either through ownership or long term leasing with good quality of vineyards across NZ and beyond, could potentially reduce their overall cost per unit yet enabling them to engage cost advantage strategy to expand the perceived value for the brand.7. 6 Business profile analysis This growth strategy do not require a complete(a) reinvention of wheels, it capitalizes on the existing goals and values of the group, its resources and capabilities, its structure and management systems and its industry environment to further produce enhanced features and products thusly major increase in expenditures is not expected, instead an increase in financial perform is forecasted due to the additional opportunities from new market penetration. (Heijbroeck, 2003) 8. 0 Recommendations 1.The expansion of the coopers creek network of export markets and the development of second labels. These second label wines could generally be sold at lower prices thus protecting the price status of the Coopers Creek labels but gaining extra sales volume for the company. In most cases the second labels will sell through different distributors. 2. The above strategy will also help with over reliance on a few key distributors. In the case of the rapidly growing US market, coopers creeks have not appointed one exclusive national importer.Instead they will sell to some 20 independent importer/distributors in different states either by direct shipment from the winery or out of a storage warehouse in California. This will ensure the company doesnt become a victim of the rationalisation of a large importers or distributors catalogue of wines carried. (Kogut B, 2006) 3. Th e unwavering acquisition of control of the vineyards producing their best grapes. That has taken the form of either complete acquisition by purchase, long term leases or the establishment of reciprocal ventures with the vineyards under cooper creeks management and tied up under long term supply contracts.In the last two years they have purchased three vineyards, leased one and entered one interchangeable venture with an existing contract grape grower. They are currently flavor at two further existing vineyards with a view to purchase or lease. 4. Continue to produce consistently high-quality products. 5. keep an eye on and increase its brand equity and recognition as a premium wine producer. 6. install international supply management to facilitate its global market operations. 7.Maintain or improve its already good relationships with stakeholders. 8. Ensure there is cost efficiency in its operations so as to maximise salary with minimum cost. 9. Last but not least, continue i nnovating in terms of its product and marketing. Current turnover is NZ$5. 5M Current production is at 1100tonnes per year (approx 85,000 cases) and aiming to be 1800tonnes by 2008 They should purchase more of their own vineyards in the Hawkes verbalise region in the last few years which would prove upright to them.They should increase production of Pinot Noir which is one of their best vineyards by 400% and this will become a feature varietals alongside Sauvignon Blanc and Chardonnay for the future All wine is made on land site at their Auckland vineyard. On site facilities include Cellar door tasting room and retail shop, place buildings (tanks) and bottling line, warehouse and barrel store, landscaped gardens with picnic areas and childrens playground. (Johnson, 2005) A basement/courtyard wine bar will open for lunches and private group bookings late 2003.Plans have been drawn up for a cafe/ utilisation centre but as yet no time shut in as to when maybe initiated, which shou ld be implemented soon. (Nielson A, 2006) 9. 0 Conclusion It can be concluded, the NZWI is still considered to be at an early maturity phase of its lifecycle, as evidenced by a small number of takeovers and increasing concentration. As the industry matures, there is a need for NZ wine producers to retain focus on quality, differentiated products, while holding their premium price position. In addition, they need to play to their strengths in white wines and introduce more red wines into their portfolio.(Ghoshal S, 2007) As a company, Coopers needs to realize the trend toward deteriorating industry profitability is a constant threat in mature industries. As rivalry encourages overinvestment in capacity, international competition increases, and as differentiation is undermined by commoditization, attaining a competitive advantage becomes essential to achieving positive economic profits. Cost is the overwhelmingly important key success factor in most mature industries and three cost dr ivers tend to be especially important Economies of scale, low-cost inputs and low overheads.Cost efficiency in mature industries is seldom a basis for sustainable competitive advantage it is typically a requirement for survival. Deteriorating performance among mature companies typically triggers the adoption of turnaround strategies, of which the company must choose the most suitable one for its profile. Coopers have so far maneuvered its way past the many problems that plague other producers. However, more emphasis might be needed in terms of differentiating itself from the other NZ brands. It would have to build on its brand equity, and continue to leverage on Andrews contact network.Most importantly, the establishment of a succession-planning project would also has to be included in future strategic plans so that the company will continue to prosper should Andrew decide to depart or retire. (Robbins S, 2006)10. 0 BIBLIOGRAPHY 1. (Johnson, 2005) Johnson, Scholes & Whittington , E xploring Corporate dodging, Prentice Hall, 2005 2. (Porter M, 2001) Porter Michael E. , The Competitive Advantages of Nations, The Macmillan Press Ltd. , 2001 3. (Wheelen, 2006).Wheelen, doubting Thomas L. and Hunger, David J. , Strategic Management and Business Policy, Prentice Hall, 2006 4. (Grant R, 2005) Grant, Robert M. , Contemporary schema Analysis, Blackwell Publishing, 2005 5. (Read C, 2006) Read, Charlotte, Stakeholder Consensus Marketing. An explanatory national competitivess model for the New Zealand Wine industriousness, September 2, 2006 6.(All Things, 2006) All Things Considered. 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