External Threats
Table of Contents
Treasury Wine Estates (External Threats)
3
Types of External Threats
3
Wine production model
3
Economic threats
4
Competition and Competitors
4
Technological level
4
Political factors
5
International Environment
5
External Threats Affecting Treasury Wine Estates
5
Technology
5
Global Operations and Weather patterns
7
Research and Development
8
Competition in the Market
9
Political decisions and environmental regulations
9
References
11
Treasury Wine Estates (External Threats)
While companies have control over aspects relating to their environment such as the work force or the organizational structure, external issues existing outside the organization are beyond the range of control of the organization1. These factors might be profitable to an organization in form of opportunities and as well, increase the vulnerability of the organization in form of threats2. This section of the paper examines the external threats that impact Treasury Wines Estates.
Types of External Threats
Several types of external threats can affect operational activities of an organization. These includes the following factors:
Wine production model
Wine production calls for the need to increase the development of efficient tools for controlling the production process. This entails wine making companies to enhance the quality of wine produced and guarantee clients a distinct quality for all products. The biggest challenge to realization of this objective occurs when wine companies have to optimize the control of fermentation processes3. This occurs in terms of identifying the appropriate technological model for optimizing parameters such as fermentation duration, sugar exhaustion, and energy regulation temperatures4. As such, modelling the fermentation process is necessary for improving the wine control process.
Economic threats
There is no doubt that the economy harbors enormous economic threats to wines and winery businesses. Irrespective of an organization’s commitment to hard work and quality products, economic conditions are dictate the extent of success concerning the level of profit or productivity that can be generated5. For instance, a decrease in the economic demand of goods and services can be attributed to an economic downturn. Equally, a healthy economy is capable of inspiring increased consumer spending thereby translating to enhanced business growth. For this reason, analyzing economic trends is critical for any organization because it makes possible for organizations or companies to tract the prevailing economic patterns in the industry.
Competition and Competitors
The level of competition in the industry offers a significant level of external threats to any company. Competition qualifies as an external threat due to the fact that businesses are forced to compete with each other. Equally, understanding all competing businesses is essential for analyzing the level of threats in the industry. An increase in competition in the market means that Wine firms have to compete with the available pool of customers.
Technological level
The technological environment is advancing at an increased rate and therefore, new technology is a potential threat to many businesses. Wineries that adopt technological advancements at a slower rate are more likely to fall behind in terms of competitive advantage. Technology is important in research and development and in leading the process of discovering wine. For this reason, wineries should allocate a significant amount of time and resources towards the process of monitoring and evaluating technological advancements to enable it remain competitive in the industry.
Political factors
Changes in political decisions is certain to deliver potential levels of external threats to any organization6. A great deal of foreign direct investments are influenced by political factors. Political tensions and other decisions that can hamper the level of investments within a business. On the other hand, companies that depend on government funds can suffer in situations of budgetary cuts.
International Environment
The wine industry relies heavily on agricultural products such as grapes and therefore, fluctuations in weather conditions is subject to affect the productivity of wine companies. In this case, Weather patterns is a type of an external threat that can impact the level of resources that can be produced by a company. Negative influence on organizational resources produces a negative influence on profitability and productive activities. It is therefore, emphatically crucial for businesses to engage in examination and analysis of global weather patterns in the global environment in order to minimize the levels of risks that can be suffered.
External Threats Affecting Treasury Wine Estates
Technology
Treasury Wine Estates uses technology is a number of ways. First, the implementation of a new cloud-based system for managing customer relationships was aimed at boosting the delivery of customer service. Lack of improper wine delivery systems often resulted in lengthened waiting times for restaurants and hotels that had ordered for wines7. Equally, a poor customer relationship management system reduces the efficiency on the part of sale’s representatives from the company because of the inability to capture data from the entire system at Treasury Wine Estates8. A decline in the system capability can make it difficult for the company’s customers to place orders using their internet enabled devices thereby leading to slowed processing process for wine orders. Another threat that can occur with the use of technology in CRM is the difficulty in searching information regarding to background details of clients. Such information includes past orders and their feedback on the company’s services. Interactions among customers and sales representatives is also threatened by technology and technological applications.
The second level of technological threats that can affect the management and operational system at Treasury Wine Estates is cyber threats. Declined safeguarding of the organizational systems can lead to great losses in revenue and data because cybercrimes has been on the increase. Perpetrators of cybercrimes have sophisticated their strategies to facilitate their criminal acts. Possible types of threats that can affect the organization’s system include fraud, phishing, social engineering, and insider threats. Cyber threats poses a great risk to the security system and networks of Treasury Wine Estates. Therefore, products, network solutions, and services from the company remain potentially vulnerable to increasing threats. Manipulation of data is also capable of compromising confidential information from the company.
Treasury Wine Estates registered higher corporate costs in 2012 because of developing a stand-alone IT system. This can be attributed to the demerger of Treasury Wine Estates with the parent company Foster’s.
Global Operations and Weather patterns
Treasury Wine Estates has global operations that spans four operational regions. These regions are New Zealand and Australia, Middle East and Africa, and Europe9. In addition, Treasury Wine Estates has over 12,000ha of vineyards spread in 12 countries across the globe. With the different weather patterns across the globe, vineyard production suffers from fluctuating weather conditions thereby affecting the total volume of wine production in these regions. For instance, Treasury Wine Estates recorded slowed 2012 earnings in profit after vintages were affected in Australia and California10. As a result, low volumes of wines were produced and at reduced costs. The prices of raw materials has being on a sudden increase over the past few years. Agricultural production costs have risen substantially thereby leading to increased prices for raw materials. This has a negative impact on the level of profitability for the company.
Differences in wine production and distribution patterns proved to be tough for Treasury Wine Estates. Liquor distributors in Canada decided to cut down their inventories while the operating environments in Australia and the US was full of tough conditions. Such factors serves to show that the global wine industry is subjected to several risks and threats.
Still on global operations, acquisition of several wine companies such as the recent acquisition of Rapura Vintners in Marlborough can affect the company’s operations in terms of incurred expenses. This can also lead to excessive supply due to increased capacities. This is attributable to the fact that the Wine industry in New Zealand has been suffering from increased supplies.
Research and Development
Treasury Wine Estates is forced with the challenge of improving its product portfolio in order to remain competitive in the market. To achieve this objective, Treasury Wine Estates has to undertake an aggressive research and development strategies aimed at improving the productive output of the organization. Coming up with fresh ideas requires undertaking regular brainstorming workshops to ensure that the company challenges its own competition. Failure to get into the market place for purposes of collecting information from customers and also to sample products from the company and products from competitors can result to negative implications for the company.
The desire to enhance marketing initiatives is also critical for enabling Treasury Wine Estates to set high standards and project growth in the industry. However, marketing initiatives is subject to threats such as inconsistency in tradition, quality, and authenticity of wine brands11. Marketing strategies that fail to craft the appropriate strategy and style for the company might not convince the audience. Lack of creative adverts and failure to hold first class events is certain to jeopardize Treasury Wine Estates’ global campaign.
Competition in the Market
The marketing environment for Treasury Wine Estates is characterized by intense competition from different sections. Treasury Wine Estates faces intense competition in all its operating segments from large national and international companies in addition to other numerous regional and local wine companies12. First companies in the industry compete on a price basis because majority of wine consumers tend to be price-focused and therefore, failure to segment customers according to their premium preferences can jeopardize the company’s competitive capability in the market. Second, another threat as a result of competition is dependent on the product portfolio of the company and its competitors. Achieving quality in the brand deliver calls for the ability of the company to grow high quality products from their vineyards. While Treasury Wine Estates boasts of having more than 54 brands, a decline in the quality or popularity of these brands can lead to negative influence on the company’s product portfolio13.
Political decisions and environmental regulations
Treasury Wine Estates faces several governmental and environment regulations because of its global operations. For this reason, it is subject to locate, federal, state, and foreign environmental regulations and laws in all operating regions. Such laws and regulations cover the production, sale, storage, and disposal of materials and substances. As such, Treasury Wine Estates might be forced to modify its business operations and objectives to suit these laws. These can have a negative return on the level of returns. Worse still, such practices can lead to restriction of restricting practices.
Political decisions can hamper the level of productivity for the company because a substantial volume of its profits are generated from global environment. Treasury Wine Estates’ international operations is dependent on the local economic and political environments. Political and economic decisions can influence currency, recession, and inflation. Political decisions alone can be disruptive thereby interfering with the operational activities of the company.
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