Assessment of South Australian Value Chain - Example

SSЕSSMЕNT of SОUTH АUSTRАLIАN VАLUЕ СHАIN RЕРОRT of 2009 Student Name: Course: Institution: Part 1 Sustainable Value Chain Analysis: A Case Study of South Australian Wine. South Australia accounts for 80pc of Australia’s premium wine, the wine in South Australia is produced from one of the world’s oldest vines. South Australia predominates Australia’s wine resource as half of the country’s vineyards are situated there, it is the hub of wine production in the south Pacific region (Anderson, 2001, p 70). The wine industry of South Australia competes with another market leader like Europe, South America, and upcoming South Africa, this competition has brought a lot of worries among the people of South Australia because they are not getting the credits they deserve for the wine they produce. On the year 2012-2013 South Australia’s wine industry generated a revenue of $1.87billion. South Australia has over 250 wineries across the state, producing some of the world’s famous wines. Many of South Australia’s customer based all over the world, just but to mention a few; the United Kingdom, United States of America, Canada and China. In the recent years South Australia has been facing stringent competition from other markets that are producing the same quality of wine but at lower prices than what the Australian wine is going for, this is an indicator of loss of the market grip and customer loyalty if necessary measures are not put in place to ensure customer retention and market leadership. The analysis of this situation was done, and there were proposals for handling the situation of market prices and demand for Sustainable Value Chain Analysis. Sustainable Value Chain Analysis is a concept of business analysis portrays the running of business on chain measure right from the business to the consumer, it defines all the parties involved in moving goods from the supplier all the way to the consumer. The competitive advantage of South Australia wine is that its competitive advantage cannot be discerned by looking at Australia alone, the competitive advantage of business stems from many discrete activities in designing, producing, delivering and other supporting products and services. Sustainable value and competitive advantage do not only rely on an understanding of the business, but how the firm fits in the overall value-adding activities of the chain as a whole. Value chain analysis is important in the analysis of the channel partners involved in distribution, packaging and sell of Australia wine to the final consumers. Analysis can be done on the following perspectives: Consumer value, Material Flow, Emissions, Information flow, and relationships. Consumer Value is actually how the end users of the product actually view the product, wine among UK shoppers matters a lot, many shoppers would prefer wine that is packaged properly and bottled nicely, but the truth of the matter most UK shoppers don’t actually mind the sustainability of the product. In some cases consumer don’t mind a lot about the attributes as if the wine can be taken by vegans or not, most consumers mind the price, type of wine, color, grape variety and the promotional activities surrounding the wine (Cohen-Rosenthal, 2004, p 111-119). Australian wine Oxford landing is always considered the best wine, one that never lets you down. From the above consumer metric it can be concluded that Australian wine can be outdone by any other wine producer because consumers in the UK lack consumer loyalty to their wine, this puts the Australian wine in jeopardy as consumers can be convinced to purchase another suppliers product just because of better promotional activities from that other end. Material flow according to the value chain involves the value brought out by non-value adding services that have to be conducted to facilitate the receipt of wine by consumers in the OLT chain. Wine is taken from Oxford Landing Winery to Yalumba Angaston for bottling, does not seem logical and it is a waste of resources and time. Elimination of this material flow will ease the costs incurred in transportation, this can be eliminated by starting up a bottling area in Oxford Landing Winery. Another factor comes in deciding the projected annual sales, but it is highly affected by Tesco’s constant promotional activities on the Oxford Landing wine, the sales of the year becomes variant times, getting a clear forecast of sales becomes very tough. Emissions- these are a pollutant that are emitted to the environment upon handling of wine right from the producer all the way to the consumer. It is seen that only a substantial contribution to environmental degradation occurs from the vineyard, which is particularly from the trellising system components and the viticulture practices, and at the winery, the packaging and bottling also emits carbon to the environment. According to the life cycle analysis of the carbon release into the environment is not predominant on the transport of wine to Tesco and from Tesco to the consumer’s home, this is just a minor contribution to the carbon emissions that occur in the winery. The bottling, packing and labelling of wine all together accounts for 15 PC of all the emissions, but another thing to put into consideration is that clients are very superficial, and they mind a lot about the appearance of the bottle and the information on the label, this is also a value adding trait. In the future is important to put consideration in the mode of packing and labeling that is satisfactory to the consumer and also considerate of environmental degradation due to emissions. Information flow- the OLT value chain indicates different information flows between sectors players; different information flows depend on the relationship between the sector players. The information flows solely depends on the nature of relationships. The downstream information flows weaker i.e. between Tesco and other secondary players like logistic providers. It can be noticed that its only Tesco that minds the needs of the customer and the value they seek, as you go upstream to growers these concerns are unheard of. Ventures like Yalumba have always relied on product quality and promotional activities to make an impact in the consumer market, there is a limited information flow from consumers to Yalumba, and this is because Yalumba has never bothered to conduct any form of consumer research in order to change their marketing strategy from product perspective to consumer-centered approaches. Relationships- the OLT value chain is highly characterized by relationships i.e. Tesco rate Yalumba is rated as a customer and supplier and also a place of work for many die to its long history and sustainability credentials, Oxford Landing is considered as a good value wine, all these player support Tesco’s vision for a rounded category and a successful symbiosis between these market players. Sector players like Tesco and Yalumba should work hand in hand to build a brand out of Oxford Landing wine, the should be able to capture a certain share in the market in that sales cannot be entirely dependent on promotional activities which can be expensive a times. In conclusion, the Australian Wine industry is on the brink of downsizing on production die to competition from another wine producer around the world. Sector players like Yalumba should consider adopting consumer-centered research and advertising. Product quality is great but without the need of customer needs and customer value it would be difficult to capture the market as other wine producers can buy customer loyalty through use of friendly customer relations and customer-centered designs and packaging. Part 2 The wine industry is a key sector of Australia’s economy; it accounted for 2.48 billion in export in 2008/2009 after peaking a smashing $2.88 billion in 2006/2007. Even before the recession of 2008, the industry stake holders had raised concerns about industry viability, over-production, marketing of products within Australia and outside Australia and the best way to go forward basing it on the interests of the wineries, growers and consumers. In the recent past Australia has been hit hard by competition from other producers around the world and this has challenged the superiority of Australia in the wine industry, this imminent threat from South Africa, South America and also the United Kingdom are becoming competitors in the wine industry. A review of the Sustainable Value Chain Analysis can be used to give a detailed explanation of what happens during the production procedure all the way to customer consumption. The above techniques are normally used as a decision-making tool, the trends and activities that occur in the chain of relationships and correlation. There are certain environmental factors that contributed to the rise of other nation’s wineries, and also the outright decreased and less demand in the market for their products; Global Economy- The global financial crisis has resulted in immense financial pressures on South Australia’s main export, to USA and the UK market. Wine exports have fallen sharply; this is both in terms of unit value and the total volume. On 2009 April, the total export for the year was done by 14pc on the previous year. Interestingly there has been an increase in lower priced bulk wine sales leading to a sharp drop in the higher priced ones. The global financial crisis of 2008, the US dollar, and the UK pound were adversely affected by the recession and the Australian Dollar remained strong, this overseas importation of wine cheaper. Australia’s wine have fallen by 8 million cases and 21 PC in Vale since 2007. The decline has been greatest for higher value exports, and where there has been growth at lower price points it frequently it has been unprofitable and thus unsustainable. Due to this unsustainability, many players in the sector are encouraged to quit the industry and finding other ways in which they can make a living from. Climate: Changes in water supply and the rise in temperature are key contributors of a poor climate that is not great for wine and viticulture. First going through water issues, the availability and the security of water is entirely the business of the state. For any agricultural product to thrive in such environments, growers are forced to transfer their growing vines to greenhouse due to a constant and growing of aridity in Australia, this shows a demand for viticulture to be conducted within green houses. This is a rising trend as many global retailers are constantly asking Australians of their strategy to cope with the climate change that is sweeping throughout the country. Currently there are great climatic changes that is affecting regions within the country one at a time year after year and this brings about competition for the little water available, lack of water definitely impacts of the output of produce and hence the general output of wine from South Australia. Technology- With the rise of technology there are better and much more efficient ways of developing a wine that is of great quality and in a much cost effective way. There is a reduction in the costs incurred in the winery, this in turn reduces the price at which the same quality of the wine is offered at. Other countries have been adopting to these changes but South Australian Wineries have been slow on the adoption of technology in wine making which makes their wine unnecessarily expensive as compared to other brands from other nations of the same Quality Pricing- South Australian wine all throughout the years just because of the brand name and it becoming the hub of the winery in the world thereby producing one of the world’s favorite brands. Due to this, many wineries have put a big price tag on their wines for no reason, currently that is pushing consumers away because they can get the same quality of wine from other wine makers from elsewhere in the country for just a lower price. South Australian Wine makers should ponder over that. Product- Wine is the main product that South Australia is making huge profits on but the current wine makers are making wine not out of passion as the earlier wine makers used to do, but this new group of individuals make wine for the purposes of sales and award winning. This brings about the issues of the longevity of the life of the wine, and it is noticed that the current wine makers produce wine that lasts o a short time. These concerns raised by consumers are what is troubling the wine industry in South Australia, there is a shift of wine consumption to other brands from other countries that provide longevity of wine and they still embrace the traditional art of wine making as opposed to chemical wine making. Marketing strategies- The wine packaging and bottling companies like Yalumba are not concerned with marketing the product to the consumer in mind, their main concern is brand quality and product labeling, but currently these methods do not work anymore. Marketers should ensure that they conduct consumer research first before product labeling and bottling, consumer concern are important in the purchase behavior of certain clients. A change of marketing strategies is what is needed in South Australia. Part 3 Wine reconstruction agenda is very important for South Australia; this is of fundamental merit because of the current market trends in the wine industry and the market as a whole. There are many problems that are coming in as constraints that come in to bring about a disturbance the market position of South Australian wine. As the head of Yoruba Winery in South Australia, I have developed four key strategies that will ensure the survival of my company during these tough times in business and also future changes that are unforeseen. The following are strategies that will be employed by Yoruba Winery: Climate change and Water issues: Practically climate change is an upcoming threat, the best way to curb this will be to advise growers on better was of canopy management, telling and their water usage. Growers should be well advised on better proper water usage in a bid to cut down on resource waste as this major cause’s loss of water which soon will become scarce. Proper water management and canopy management by growers will ensure a constant supply of grapes for Yoruba Wineries. Marketing-Marketing of wine should be done with the consumer in mind. Yoruba will ensure to do consumer research in a bid to find the consumer needs and value needed by consumers. This is very important as maintaining brand quality and product quality is not sufficient, the current marketing strategies have the consumer in mind, this is very helpful with as it helps to increase sales due to supply into the market of what exactly the consumer wants. Reorganize the supply chain- Assessment of the sustainable chain value analysis is very important. Yoruba will do an assessment of its partnerships with other organizations be it, suppliers, resellers, logistic providers, and bottlers, analysis of the system will help root out problems in the chain of supply. This is an aggressive move, but it will work, the main agenda here it to root out inefficient systems and unnecessary partnerships that often slows down the supply process of getting commodities to consumers, another advantage of this analysis is that consumers will be able to receive products at the right time and even at a lower price due to elimination of constraints that initially led to an increased pricing of the product. Expansion of Distribution Networks-The biggest challenge affecting wineries is the lack of great distribution networks in the country. There a few outlets to consumers all over the world. A good strategy is to find a range of distribution networks through partnerships with marketing companies and creation of channel resellers all over the world. Wines can be taken easily by a number of hotel and restaurants around the world, the only hindrance is the distribution of these brands to the hotel, and this is mainly due to prevalence of corporates in the retail and hotel sector. Opening up of wine shops in major cities is also very important in expanding Yoruba’s distribution networks, selling wine directly to the customers will add value to the supply chain as brand name will be boosted and the sales would escalate. Adoption of Technology- The wine industry needs to embrace technological changes while retaining traditional methods where appropriate. Yoruba’s winery has been successful in keeping up with technological advances, but not in wine production, Yoruba is planning to get advance state of the art machines that will help in controlling and standardization of the wine making process. These technologies will help get a more accurate and perfect taste for wine. Another advantage is that technology helps out in cutting costs through reduction of long haul systems into a manageable unit that serves the same purpose. Yoruba will avoid too much of a move away from traditional winemaking methods. The solution may be consultation with industry to see how they think the industry should head before considering any strategies. In conclusion, South Australian wine is currently facing one of the toughest times in its history, these challenges arise due to new market competitions, and a global recession that largely affected South Australia’s wine, climate change is coming is like a big factor that has to be addressed immediately or else there is a looming disaster on the way. All the above factors are indicators of a tough time to come for South Australia wine; South Australian Wine Industry leaders should come together and discuss the above challenges in a bid to retain the market position and industry leadership. Outlining and adoption of new strategies is what is required currently in order to solve the crisis at hand, a change of the marketing strategies for wine is what is needed, assessment of the sustainable value chain of wine and its partnerships all throughout the world has to be reviewed, adoption of new technology is of profound importance in order to cut back on costs incurred in production. The adoption of the above strategies and implementation of better taxation policies on wine will greatly help in subduing this threat. Reference Anderson, K 2001, “Prospects ahead for the wine industry”, The Australian Grape grower and Winemaker, 448: 67-74, May 2001. Anderson, K., “Terroir rising? Varietal and quality distinctiveness of Australia‟s wine regions”, Econometrica, (1) March 2009, pp.9-23. Anderson, K., C. Findlay, S. Fuentes and S. Tyerman (2008), “Garnaut Climate Change Review – Viticulture, wine and climate change”, University of Adelaide. Anderson, K., S. Nelgen, E. 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