Introduction
Wine production increased tremendously in the last century according to the case entitled “Crafting Winning Strategies in a Mature Market” by Jason Hunter et al. Among the reasons for the expansion is that the demand for the commodity specifically during the “dot-com generation” has risen (p.3). Also, winery growing and enhanced production techniques have meant that different grape varieties are available to the world’s market. Unlike the olden days, growing, harvesting and fermenting techniques as well as packaging of wine is done mostly in large scale. However, this does not mean that the wine industry attractiveness is entirely favorable to all stakeholders. This case analysis utilizes the Porter’s five forces framework to determine the attractiveness of the wine industry.
Porter’s 5 forces
Industry Rivalry
Evidently, the expansion in production means that the industry competition continues to be stiff. This is because many producers have entered the market with different strategies. The availability of grape varietal ranging from Shiraz, Chardonnay, Syrah, to mention but a few, means that stakeholders incorporate unique strategies to enter and dominate the market (p.3). Therefore, only the well-established firms have thrived in such a highly competitive market. Different techniques incorporated in packaging, pricing and marketing are some of the frameworks that companies utilize to maintain their competitiveness.
Threat of New Entry
Even though there is an industry expansion of the wine market, new entry into this industry has never been easy. Therefore, in overall, there is a low threat of new entry to the wine industry with the reasons being the high start-up costs and stiff competition. Start-up costs are high since a company needs to invest right away from the growing of grapes and undergo the entire process until the wine is distributed to the market. With the established companies that have existed for long, they have a greater pool of resources hence making it extremely difficult for new entries to successfully enter the global market.
Supplier Power
Suppliers rely on the premium segment as a way of commanding their pricing strategy. The well-established companies have maintained their brand recognition and quality. This has enabled them to survive even though their commodities are of high prices. However, there are those companies that have focused on the price segment. Such companies have provided different choices of wines to the global market in affordable prices hence selling significantly. Thus, the state of the wine industry has made it possible for companies to command high supplier power (p.4).
Buyer Power
Corresponding to the production expansion, the number consumers of wine has also risen (p.4). However, since varieties of wine products are available to the market, the buyer power has remained to be high. It means that suppliers and wine production companies do observe buyers taste and preferences. It is due to this reason that the color, packaging, and marketing techniques are some of the motives that buyers hold a high command on.
Threat of Substitution
As evident, there is no close substitute for wine in the industry except the existence of breweries. Although brewery products sale in the same platform with wine products, the production, taste and customer preferences for the two commodities varies. Customers of wine products enjoy the quality and natural aspect of such products compared to those customers of brewery products. Therefore, the industry’s threat from substitutes has always been low.
