The business of wine was initially focused on wine making and not the branding and customer satisfaction. Competition has caused players in the industry to result to various generic strategies. These strategies include differentiation, best cost, focused differentiation, and focused best cost strategy while others remain “stuck in the middle.” This paper will discuss the different approaches by various wine makers by comparing three companies: Naked Wines, Brown-Forman (owner of the Sonoma Cutrer brand) and E & J Gallo Winery.
E & J Gallo Winery is owned by two brothers namely Julio and Earnest. They started from scratch growing grapes, making wine and selling it in barrels to distributors, before finally packaging it themselves. They were later licensed to distribute wine in the entire United States under the trade mark Gallo. The entire chain is owned by Gallo.
Naked wines funds wine makers and acts as a ‘direct liaison’ between the manufacturers and the consumer. Naked wines’ sole purpose in the wine business is to find talented wine makers and fund them. This cuts the cost of the wines by up to 50% since it eliminates middlemen . The firm achieves this by acquiring the wine from the wine makers at cost price and delivering it to clients.
Brown Forman is a wine manufacturer producing a wide variety of brands ranging from spirits produced by their spirits brand company and wines by Fester and Sonoma Cutrer. These brands are distributed by completely different groups such as prestige brands (Wakely, 2001). Their focus is on the image and not the price.
Generic Strategy Assessment
E & J winery manufactures all its brands. They also distribute their brands directly to their customers. Since its foundation in 1933, the company markets countless brands to a diverse customer range in different countries. The company grows its own grapes which it uses to manufacture these brands themselves. The firm manufactures customer tailored wide range of wines and ensure that their service is exceptional. Between growing their own grapes, manufacturing their own grapes and marketing themselves, they ensure that their prices are convenient for their customers.
Naked Wines applies the cost-based strategy. The company does this by buying goods directly from suppliers . Naked wines identifies talented wine makers and buys their products at the cost of production and retailing them to their customers.
Brown Forman on the other hand uses the differentiation strategy. It takes care of a wide range of customer needs . Customers who enjoy spirits and wines have a variety of wines and spirits to choose from.
Responding to Naked Wines - Gallo
Naked wines identifies potential wine makers and finances them. Sonoma Cutrer is owned by Brown Forman. With the financial aid of naked wines, Sonoma Cutrer could become an independent winemaking company. By so doing Sonoma Cutrer can brand itself and grow to be an independent wine manufacturer.
Sonoma Cutrer faces obvious and adverse competition from other wine makers. Brown Forman poses as a threat to Sonoma Cutrer. Sonoma cutrer can either use fighting brands or result in a cooperative strategy such as a joint venture. The best option is a joint venture. Brown Forman, being a superior company that makes sales on image, could easily file a suit in court and win. A joint venture would mean that Sonoma cutrer will enjoy the image brown Forman has built for itself.
Responding to Naked Wines - Brown-Forman
Naked wines has a best cost advantage against Gallo. While Gallo manufactures its own brands, a lot of resources are put into production . On the other hand, naked wines has a wide variety of brands at the best possible price.
Gallo can decide to use fighting brands by producing brands that suit the customer needs or get into a joint venture with naked wines. Since Gallo is at a disadvantage as far as their range of brands and pricing is concerned, a joint venture means they will acquire more sales by selling their brands to naked wines at the cost of production.
Corporate Strategy at Brown-Forman
Brown Forman uses the focused distribution strategy. Their sales have been on the increase since 2013 with sales of over 3,000usd per annum. Sonoma Cutrer posed a threat to Brown Forman and Brown Forman responded using the corporate strategy by entering into a business venture with them. This venture eliminated Sonoma Butrer as competition, but it limited Sonoma Cutrer’s potential.
In conclusion, companies result to various generic strategies when faced with competition. These strategies vary depending on a company’s positioning in the market. Whether they result in corporate strategy, to fight back or ignoring the threat it is always important that the company strives in the end.
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