Executive Decision Making & Strategic Analysis

Robert Mondavi and The Wine Industry,
HBS 9-302-102 (Case 1)

Post-Class Analysis

Individual Assignment

Student: Álvaro Toro

I. Executive Summary

On May 2001, Michael Mondavi took over the position of chairman of Robert Mondavi Company, as well Greg Evans assumed as CEO. They company was founded in 1966, and has became one of the world’s finest and most innovative winemakers, currently having sales for 480 millions, and firm’s market value about $ 600 million.

The executives estate that, as the competitors spent considerable amount of money pursuing aggressive acquisition strategies, they are doing well on the track of organic growth of its premier brands, as they note
The advantage for high quality premium wines is that they are able to build a strong brand reputation, which means many distributors and retailers use this wines for differentiation. In this segment of consuming is relatively price insensible, which follows the importance of the brand identity and differentiation. This pushes down the buyer force, but on the other hand, pushes up the need of producers to be careful of the brand reputation and marketing. In this way, the trend is massive advertisement of jug wine producers, and channel promotion of premium wineries.

Buyers Power. Distribution increasing consolidation, which means they have more force to negotiate with premium wine producers. This trend seems to have even more impact than the positioning and reputation and quality of a brand. In this sense, the buyer power is high.

3. Barriers to Entry

The wine industry have some key success factors, specially related to access to inputs, proprietary learning curve, economies of scales, capital requirements, access to distributors channels and product differentiation. As indicated before, the grapes are a key input to determine the quality of wine production. Usually these grapes are grown in specific lands, and following specific vineyard development. Currently the lands are very expensive, especially in USA and Europe. On the other hand, the development of new vineyards is also expensive, thus capital consuming. In this sense, we have that the