Wine Industry Essay Example
1. Industry attractiveness
a. Porter’s Five Force Model
To assess the industry attractiveness we will use the Porter’s Five Force Model. • Threat of substitutes
Wine has been the preferred alcoholic beverage of the European people. But with the changing taste of younger generation, wine is loosing customer share to other drinks.
• Threat of entry
The wine industry is not capital-intensive, as it does not require heavy machinery and investments. Moreover, the wine production techniques are not patented or difficult to copy. In Europe, governments have made regulations on how the production of wine should be carried out.
Lately, the new world producers are trying to increase entry barriers by operating on large volume and taking advantage of economies of scale.
• Bargaining power of suppliers
The basic raw material of wine industry is grapes. The quality of wine depends a lot on the quality of grapes. In Europe, the grape farmers had tried to form cooperation to get a bargaining power against the wine manufacturers.
In the new world, however, many wine producers have integrated backwards and have their own vineyards. They try to control the operations right from production to distribution thus reducing supplier’s bargaining power.
• Bargaining power of customers
The bargaining power of customers depends a lot on the size of the producers. The old world producers operate on a low scale. Hence, they lack bargaining power when dealing with the hypermarket chains. The new world producers have large scale of production. Due to their large market share and volumes, they can control their retail operations, thus reducing bargaining power of customers.
• Rivalry amongst existing players
In Europe, there are a huge number of players with no company having a significant market share. In the new world, there exist large players with significant market share. Companies have tried to differentiate their products using the variety of grape and the
a. Porter’s Five Force Model
To assess the industry attractiveness we will use the Porter’s Five Force Model. • Threat of substitutes
Wine has been the preferred alcoholic beverage of the European people. But with the changing taste of younger generation, wine is loosing customer share to other drinks.
• Threat of entry
The wine industry is not capital-intensive, as it does not require heavy machinery and investments. Moreover, the wine production techniques are not patented or difficult to copy. In Europe, governments have made regulations on how the production of wine should be carried out.
Lately, the new world producers are trying to increase entry barriers by operating on large volume and taking advantage of economies of scale.
• Bargaining power of suppliers
The basic raw material of wine industry is grapes. The quality of wine depends a lot on the quality of grapes. In Europe, the grape farmers had tried to form cooperation to get a bargaining power against the wine manufacturers.
In the new world, however, many wine producers have integrated backwards and have their own vineyards. They try to control the operations right from production to distribution thus reducing supplier’s bargaining power.
• Bargaining power of customers
The bargaining power of customers depends a lot on the size of the producers. The old world producers operate on a low scale. Hence, they lack bargaining power when dealing with the hypermarket chains. The new world producers have large scale of production. Due to their large market share and volumes, they can control their retail operations, thus reducing bargaining power of customers.
• Rivalry amongst existing players
In Europe, there are a huge number of players with no company having a significant market share. In the new world, there exist large players with significant market share. Companies have tried to differentiate their products using the variety of grape and the