Zealand's Wine Market example essay topic

QUESTION #1 Identify and discuss the core competencies you think Rongopai has. A Core Competency is a special skill or technology that corporation can do exceedingly well and at the same time creates unique customer value. A company's specialized capabilities are largely embodied in the collective knowledge of its people and the organizational procedures that shape the way employees interact (Prahalad & Hamel, 1990). A core competency should -. Be difficult for competitors to imitate or procure in the market, thereby creating competitive barriers to entry; . Enable a company to access a wide variety of unrelated markets by combining skills and technologies across traditional business units...

It must make a disproportionate contribution to customer-perceived value. Rongopai's core competencies In this case, Rongopai Wines core competencies are: . Tom van Damm's vast experience and knowledge. He previously worked at the wine research station at Rua kura, Hamilton.

He had made scientific breakthrough in the way wine could be produced in New Zealand. - Rongopai Wines have unique and special skills to produce wines and this is achieved by the knowledge and experience that Tom Van Damm has. - This is a unique capability that Rongopai Wines have and it's hard to be imitated by competitors... Produce high quality wines through careful selection of the appropriate grapes. - Rongopai Wines always have more control over quality compared to competitors.

This is attained by not being too profit-oriented on their product. - By producing high quality wines to their customers, this gives customer-perceived value on their products... Good Distribution through Glengarry Wines channel. - Glengarry Wines main strategy is to choose outlets that are best suited to selling the various Rongopai labels. - Glengarry Wines good distribution approach gives advantage to Rongopai Wines in distributing their products... Bottle shop on the main New Zealand's highway.

- The new location on the main New Zealand's highway has increased sales. - Strategic location whereby it's easy for the customers to reach the products. - Having well-organized personnel at the bottle shop... Ideal location, soil and climate at Waikato to produce sweet wines. - Rongopai Wines keen to increase production of sweet wines and this requires planting varieties that are prone to fungus. - Waikato's warm and humid summer is an ideal location to produce sweet wines.

- This gives advantage to Rongopai Wines since its hard to imitate by the competitors (soil and climate). QUESTION #2 Referring to the company's core competencies and objectives, write a mission statement for Rongopai. Explain how your mission statement uses the key criteria for effective mission statements. Rongopai's objectives... To become a medium size winery so it doesn't depend on Tom... To provide consistent, high-quality, distinctive wines at value for money-price...

To have an easy accessibility and reliable distribution throughout the country... To increase production of sweet wines to meet demand in the market. Mission Statement "Consistently exceed customer expectations in providing premium quality wine at value for money prices. This will be done through our commitment in controlling the quality of our wines and the accessibility of purchasing our products."..

This mission statement is market oriented whereby it satisfied customer needs. This is stated in the statement 'providing premium wines at value for money prices'. A mission statement should be market oriented rather than being product or technological oriented because this will eventually become outdated (Kotler, Brown, Adam & Armstrong, 2001)... This mission statement is realistic in term of providing the highest quality wines. Rongopai has the capability and resources to provide the highest quality wines to their customers... This mission statement is specific in term of focusing to the market needs in providing quality wines.

By stating how it will be done, this will avoid the statement from being to general... This mission statement is based on the core competencies that Rongopai has... This mission statement is motivating in term of Rongopai's significant commitment in contributing to people's lives in supplying high quality wines... This mission statement gives vision and direction to the company on how to cater their consumers. QUESTION #3 Apply the product-market expansion grid to this case to suggest future opportunities for Rongopai Wines.

To forecast what is likely to happen in your business sector in the immediate and long-term future is very important but also very difficult (Kotler et al., 2001). The company can examine their current position and find out where it wants to be in the future and identify growth opportunities by making predictions on external trends and their likely performance. The firm can also forecast what will happen without any change in strategy (Prector, 1990). Igor Ansoff, often referred as the "father" of strategy (Klippenberg, 1998), came up with a theory of analysing this gap between these two strategies (see graph 1). He also developed the product / market expansion grid as a tool to reduce the gap (Kotler et al., 2001). In the following text an evaluation of Rongopai's future opportunities will be carried out with the help of Ansoff's Matrix.

Wine Sales (cases) Rongopai as a medium size wine producer, 15 000 Gap to fill after changing strategy Rongopai without any change in strategy Year 2000 Time Graph 1. Graph showing gap to fill between expected and required sale Market penetration This strategy is to increase shares in the existing market without changing the product (Kotler et al., 2001). To boost its wine sale to present and new costumers Rongopai wine could advertise and urge for reviews of their products in lifestyle magazines such as art, food and interior magazines. Even though, a research revealed that only 9 per cent of consumers have often bought wine recommended by journalists (Chaney, 2000). Furthermore, they could try to push their products and emphasize even more towards the restaurant industry. Restaurants are a place where people often try new sorts of wine.

Pricing of wine is a complex issue; many consumers believe that high price is a statement of quality (Edwards & Spawton, 1990). Nevertheless, it could be worth a try to introduce some price campaigns for Rongopai's products. However, a research revealed that word of mouth recommendation is most likely to influence the type of wine chosen after country of origin (Keown & Casey, 1995). Market development This involves finding a new market for existing products (Kotler et al., 2001). Ringopai is already exporting wine to UK and should consider widening its horizon internationally. Even though it seems difficult to export the companies' products countries like UK, Japan, Australia and the Scandinavian countries have been very positive towards wine from New Zealand.

A survey from the UK showed that wine from New Zealand are more positively favoured and receiving more attention in wine articles than other southern hemisphere countries, such as Australia and South Africa (Chaney, 2000). To compete with major wine makers in France, Italy, US and Spain would be too risky for a small firm from New Zealand. Product development This approach involves a modification of the product to the present market in terms of quality, style, performance and variety (Mercer, 1998). The introduction of new products can have positive impact on sales growth. Initially, profitability may not increase since there may be substantial research and developing cost related to it. However, for a winery such as Rongopai; new bottles, variety in taste and introducing port wine could be new products to offer current costumers and have a positive impact on sales and profit.

Diversification Diversification involves moving into new markets with a new product (Kotler et al., 2001). It can be defined as 'a strategy for promoting company growth by starting up or acquiring businesses outside the companies current products or markets' (Kotler et al., 2001). It therefore involves more risk. Starting up with products like olives, olive oil, and vinegar would probably suite Rongopai's company profile. If we look at Tom van Damm's current objectives and to be realistic, Rongopai's future opportunities would be in the direction of market penetration and market development by increase their market share in the domestic market and export their sweet wine to UK, Japan, Australia and Scandinavia (see fig. 1). Existing products New products Existing Markets Market penetration-Advertising in lifestyle mag.

-Price campaign-Emphasize on sale to restaurants Product development-Size on bottles-Bag in box-Differentiate the sweet wine-Port wine New markets Market development Export to: -Australia-UK -Japan-Scandinavia Diversification Delicacy products like-Olives-Olive oil-Vinegar Fig. 1 Product / market expansion grid of Ringopai's future opportunities QUESTION #4 Which market segment (s) do you think Rongopai should target and why? Try to relate your chosen target market (s) to the opportunities described above. Before targeting the Rongopai Wines' market it is important to understand what is a target market. According to Kotler et al (2001: pp. 306) a target market is the particular group (s) of consumers (or segments) a firm proposes to serve or whose needs proposes to satisfy. The market segmentation is a way to find the best way to view the market structure. Market segments are divided into four different variables (each of them with sub variables) for consumers (Kotler et al, 2001: pp. 295), which include geographical, demographic, psychographic and behavioral variables.

A recent wine marketing research (Patrington, 2000) suggests that the New Zealand's wine market could be segmented into occasional / meal based (Behavioral), social (Psychographic), price conscious (demographic), the connoisseur (Behavioral) and the health conscious (Behavioral). This segmentation completely fit into the four variables previously outlined. However, Rongopai does not follow this segmentation completely. Rongopai Wines should target the following market segments: . Geographic (density). Demographic (age, sex, occupation and income).

Behavioural (purchase occasion and readiness stage). International market (cultural factors) According to the case study, Rongopai Wines has identified its target market, into which these new segmentation is based on. The characteristics of the Rongopai's wine drinkers are as follows: . Urban dweller.

Professional / well educated. Older people in their 30's and mid 50's. Men (about 70% of consumers and largest purchasers). Love learning about wine. Interested about something a bit different. Have discretionary income These characteristics can be associated to the market segmentation variables.

Firstly, the urban dwellers belong to the geographical variable because they inhabit the city; more specifically they can be classified under the sub variable density. Secondly, the professional / well educated, the older people in its 30's and mid 50's, men (about 70% of consumers and largest purchasers) and the ones with discretionary income can be classified in the demographic variable. Then, the ones interested about something a bit different can be classified and the ones whom love learning about wine can be classified under the behavioral variable (respectively, purchase occasion and readiness stage). Finally, the international markets underlined by the current export operations to U.K. and the future potential markets in Japan, U.S. and Scandinavia. On regards with the cultural factors, U.K. consumers have shown that their behavioral patterns toward taste have been held with cheap, sweet and white wines (Patrington, 2000).

Once the segments have been identify it is very important to evaluate each of them. Segment size and growth The New Zealand wine industry is already oversupplied and has limited growth. It has 300 licences and more than a 100,000 wines to choose. Rongopai Wines is a small company and has a small market share (2%). However, the premium international market is under supplied, fact which supports the currents exports to U.K. and potential new international markets in Japan, U.S. and Scandinavia. Segment structural attractiveness This factor is important; it comprises the evaluation of competitors, substitutes products, power of buyers and power of suppliers.

Rongopai Wines domestically competes with small boutique wineries in quality and variety. However, none of these boutiques compete across all of its varieties, which give Rongopai and advantage over its competitors. The weather conditions in particular region can be a domestic competition. The substitutes products are linked with the power of buyers and depend heavily on the lifestyle trends. For example, as said in the case study, the decision of buying a cappuccino instead of a bottle of wine can be a problem for the industry. Another visible trend on lifestyle is the shift from cask wines to bottle wines, which can benefit small wineries as Rongopai.

Finally, the power of suppliers on which Rongopai has no problem, by the fact that they have four different channels of distribution, gives them more facilities to reach their market segments. Company objectives and resources Rongopai Wines objectives and resources go in the same direction of their market segments. In other words the expansion of the company is one of their objectives and match with accuracy with the international market segmentation; also the quality, another of its objectives, goes along with the market segments aforementioned. Finally the distribution is one of the strengths and core competencies of Rongopai Wines. Consequently, Rongopai Wines would be able to reach all of its targets through the well-organized channels of distribution. QUESTION #5 Recommend a future marketing mix that could be used to pursue the segment (s) Chosen above?

The marketing mix is probably the most famous phrase in marketing (Kotler et al., 2001. The elements are the marketing tactics. Also known as the 'four Ps', the marketing mix elements are price, place, product, and promotion. Some commentators will increase the mix to the 'five Ps', to include people. Others will increase the mix to 'Seven Ps', to include physical evidence (such as uniforms, facilities, or livery) and process (i.e. the whole customer experience e.g. a visit the Disney World). Fig. 2 Marketing mix (Vignali, C. & Davies, B.J., 1994) MARKETING MIX FOR RONGOPAI WINES: PRICING Domestic pricing Since the New Zealand market is oversupplied and is experiencing limited growth; the most appropriate pricing would be value based pricing.

Value based pricing is 'setting price based on buyers' perceptions of value rather than on the seller's cost' (Kotler et al. 2001, p. 230). In order to make more customers to buy Rongopai wines. The pricing of the wine in 15$ or less category should be brought down to the price where the buyers feel that they are being offered value for their money.

Once the sale increases, the production is increased; it will bring down the cost of production as a whole, which will then enable the company to make profits at a later stage. International pricing: Rongopai sees potential markets to be UK, Japan, Scandinavia and Australia. Since these markets are huge with lot of demand, an effective international pricing can have a significant impact on the expansion plan of Rongopai wines. Price setting in international marketing is influenced on three levels - the internal level, which takes into consideration objectives for return on investment, required sales volume and cost factors. The core element of international viability is the cost of producing and marketing the product, which inevitably has to be considered. High production and distribution costs associated with New Zealand's remote geographic location and distance from the major importing countries of UK and the United States should also be taken into consideration.

The macro level incorporates elements such as government restrictions (Marsh, 2000). All these factors should be kept in mind while determining the sale price and the company should opt for Psychological pricing which is 'a pricing approach that considers the psychology of prices and not simply the economics -the price is used to say something about the product (Kotler et al. 2001)... Rongopai should price their wines at a price, which gives an indication of their superior quality in the international market...

They should target the shelf space where the premium brands are kept... There should also adopt smart pricing. For example; a wine for $30 should be priced at $29 which lets customers think in the range of twenties. PROMOTION Domestic Promotion: The market segment for Rongopai is quite diverse. Keeping in mind, most of its buyers are urban dwellers, professional / well educated and in the range of 30's to 50's and love learning about wine. The promotional activities should be based on covering these people.

There should be an increase in promotional activities like: . Contests, games, sweepstakes. Premiums and gifts. Sampling (tasting events). Fairs and trade shows. Exhibits.

Demonstrations (wine tasting) The effective pricing will enable Rongopai to penetrate the middle level income market and the increase in promotional activities in the urban dwelling sector will give it a boost in its sale of premium wines. International promotion: The promotional activities in the international market should have a more attacking approach. In the sense, that it should be more aggressive advertising and direct marketing. Advertising should substantially include all these activities... Print and broadcast ads. Outer packaging (bottle and / or case).

Packaging inserts. Brochures. Posters and Leaflets. Billboards. Internet banners Direct Marketing should be directed towards: . Catalogues.

Mailings. Telemarketing. Electronic shopping. TV shopping PRODUCT The product is a core part of the marketing mix.

A great deal of care should be taken in maintaining the quality and brand of the product. In the case of Rongopai the quality of the wines speaks for itself. Rongopai's domestic customers are very well aware of this. In penetrating its domestic market, Rongopai wines should not make any compromise in their quality even if they are offering the wines at a lesser price. As far as the international market is concerned, it is the quality and the brand name, which can work wonders for Rongopai wines. They can certainly work more on the designing of their bottles and the labeling can be a little more attractive to catch customer's attention.

PLACE Domestic placement: Rongopai should stick to their current distributor, Glengarry Wines because they have been the main attributes to their success for the past few years. Further, they could open more outlets next to other major highways. There has to be an increase in the production level, so that they can cater to the more demand intended for the domestic market. International placement: Keeping in view, the international expansion should follow the vertical marketing network, which is 'a distribution channel network in which producers, wholesalers and retailers act as a unified network' (Kotler et al. 2001, pp. 480-482).

In a vertical marketing network, it would be appropriate to opt for wholesaler sponsored voluntary chains. The following points should be taken care of: . Voluntary chains of independent retailers to compete with large chain organizations... Standardizing their selling practices and achieving economies of sale. (Kotler et al. 2001).

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