Strategic Management at Hunter Valley Wine Company - Case Study Example

Strategic Management Student’s Name: Instructor’s Name: Course Code: Date of Submission: 1.0 Executive summary Strategic management is the process that focuses on the long term plans that help to achieve the required goals and objectives. The strategic management at HVWC began when the business expanded its operations and wanted to increase the acquisitions and this increased the business management practices. this report discussed the resources, capabilities and core competencies which include quality products and services as well as effective equipment that help to manufacture quality products and in the right capacity. The internal business environment such as the strengths, weaknesses and opportunities were discussed as well as the external business environment using PEST model. The report further discussed the concepts of corporate governance that has enabled HVWC to gain competitive advantage in the wine industry. The recommendations made include developing the market and using BCG matrix to apply appropriate strategies at each market division like divestment Table of Contents 1.0 Executive summary 2 3.0 Findings 4 3.1 History of strategic development at HVWC 4 3.2 The resources, capabilities and core competencies 5 3.3 Competitive advantages and sustainability 6 3.4 The internal and external environments 6 3.5 Relevant economic market drivers and wine consumption patterns 7 3.6 International market entry strategies, entry barriers and Trade Agreements 8 3.7 The potential for mergers and acquisitions 9 3.8 Blue Ocean strategic opportunities that may exist for HVWC 10 3.9 The relevance of strategic leadership and entrepreneurship 10 3.10 Organizational structure, controls and corporate governance 11 Conclusion 12 Recommendations 13 References 13 2.0 Introduction The global economic stability has increased the market for the wine industry especially in Asia where the demand has increased thus creating market for the wine products. This is because the middle class of Asians has increased thus creating demand for the wine products (De & Meyer 2009). The main beneficiaries of the increased market in Asia include Australia which exports its products to the market. Other beneficiaries include China and Japan who also export the wine to the Asian market. This report will discuss the concepts of strategic management as practiced by Hunter Valley Wine Company (HVWC) which is the company specialized in manufacturing and distributing wine to the market. 3.0 Findings 3.1 History of strategic development at HVWC HVWC was founded in the year 1990 and it started with a space of 25 hectares and it is located in the valley of Hunter where the name was derived from. The vineyard mainly comprised of Semillon and Chardonnay as well as Shiraz. The company developed effective strategies that enabled it to improve its performance in the market by increasing the market share. The strategic development in the company started when the market of the company started to increase (De & Meyer 2009). The company had set long terms strategies of increasing the market share through acquisitions which means that the company had a vision of increasing its market share. The neighboring vineyard was acquired and this increased the performance of the HVWC. This effect forced the management of the company to focus on how they can utilize the resources effectively so that they can remain competitive in future. In addition, the strategic management was developed when the company entered into strategic relationship with other Hunter Valley grape producers and this improved the vision of the company as it set long terms strategic plans leading to its success in the wine market (De & Meyer 2009). 3.2 The resources, capabilities and core competencies The first resource of HVWC that has enabled the company to be competitive is the equipment resources. The company has managed to increase its production capacity to meet the market demand due to installation of the wine producing equipment. As a result the company is able to meet the market demand leading to competitive advantage (Hill & Gareth 2012). For instance, the equipment capacity is about 10,000 cases per year. Another resource of the company is skilled workforce which has the ability to focus on future demand and strategic alliances to enter which can benefit the organization. The capabilities of the company include quality products that have met the needs and expectations of the customers. By the year 2000 the company had managed to use techniques such as viticulture and viniculture and this improved the yield and quality of the wine products. This has enabled the company to retain the customers. Another capability of the company is to distribute the products effectively like through direct and using stores outlets (Hill & Gareth 2012). However, using the middlemen increases the products of the company. For instance, a bottle can cost AUD$13.99 unlike AUD$8.00 when it is sold directly to the customers. The core competencies of the HVWC include ability to enter into strategic alliances with other companies with the aim of increasing the market base and manage market risks. Another core competency is the ability to manufacture quality products and distribute the products using effective channels of distribution (Hill & Gareth 2012). This has enabled HVWC to increase its core competency in the wine industry. 3.3 Competitive advantages and sustainability The competitive advantages of HVWC that has enabled it to achieve the competitive advantage include quality products. The management of the company has invested heavily on the equipment that improves the quality of wine products alongside the sufficient production capacity to meet the demand of the market. The demand for the wine products in Asia has increased meaning that the production capacity is able to meet the demand (Kvint 2009). In addition, there is an effective distribution strategy enabling the company to ensure that the customers access the products effectively. For instance, there are 174 stores which are located nationwide meaning that the products can be easily accessed by the customers thus creating competitive advantage as compared to other competitors like Valley Hunter grape producers. The quality wine produced by HVWC has been recognized and was awarded with bronze and silver medals thus increasing the recognition of the brand (Kvint 2009). Taking into consideration the competitive advantage, HVWC has effective sustainability programs like entering into strategic relationship with other producers like Valley Hunter grape producers. This has enabled the company to manage the market risks and also the acquisition has helped to ensure that the company has effective market base thus it can be able to manage its sales appropriately (Kvint 2009). 3.4 The internal and external environments HVWC faces the internal and external market environments. These business environments influence the decision making process in the organisation. The internal business environment includes the organizational structure. This affects the business operations such as communication and delegation of authority. Another internal business environment includes the strengths of the company which include good reputation, quality products and effective distribution of the wine products to meet the demand of the customers. However, the company also faces some weaknesses which include inability to segment the market appropriately and ineffective pricing strategies (Kvint 2009). The opportunities include expansion of the Asian market and increase in middle class creating more market for the company’s products. Finally, the threats facing HVWC include competition from the other wine producers like Hunter Valley grape producers creating a scramble for the market. On the other hand, the external business environment includes the political stability like the changes in political ideologies to give domestic producers the priority. There is also changes in economic conditions like the global financial crisis that hit the globe in the year which affected the sales of the company. The social factor such as increase in the global population also increases the demand for the products thus increasing the sales. In addition, the changing technology implies that the business operations can be conducted online whereby the customers can make their shopping online. This means that the management of HVWC should consider the best strategies to implement so that it can be able to manage the business environment which influence the decision making process (Mulcaster 2009). 3.5 Relevant economic market drivers and wine consumption patterns The main economic market drivers include economic growth. The economic growth helps to increase the buying demand of the customers thus creating market for the wine products. In addition, there is growth in the global population. When the population increases, the rate of doing business operations also increases and this means that the economy will also change by increasing the economy of many economies (Mulcaster 2009). On the contrary, when the population is low the rate of doing business is also low. This implies that the wine consumption will also be high with high population as it influences the demand for the products. The other driver influencing the market economy is technology developments. As technology increases, the business operations will be made easier. This is because the business people will communicate effectively taking into consideration the e commerce strategies. This leads to conducting business globally thus influencing the growth of the market economies thus influencing the consumption of the wine by the global customers (Mulcaster 2009). Finally, globalization is another economic market driver. The economy in the market is influenced when the barriers to global business are eliminated thus making the business people to conduct their business freely in the market. This can increase free interaction of the individuals thus increasing the easy at which the businesses are conducted (Mckeown 2012). 3.6 International market entry strategies, entry barriers and Trade Agreements The first international market entry strategy is exporting. This is the international market entry strategy whereby the products are introduced into the global market by exporting from the production site. For instance, HVWC has been exporting the wine products to Asia as a way of introducing its products into the international market. However, the strategy is not effective when the demand is too high which means that exporting the products might not be able to meet the demand and might be costly as compared to local manufacturing (Mckeown 2012). The other strategy is licensing whereby the local company is licensed to manufacture the wine products with the same quality and distribute the products on behalf of HVWC (Mckeown 2012). However, this can lead to transfer of knowledge in terms of patent rights to the licensed domestic company thus lowering the competitive advantage of HVWC. The barriers to international market entry include trade barriers which affect the entrance into the internal markets. For instance, the protection of the domestic products can hinder the entrance of global organizations. Another barrier is differences in cultural beliefs which might be different in the different markets. The trade agreements also hinder the expansion of business into international market. For instance, the Eastern trade agreements can hinder the entrance of wine companies from other trade blocks (Rumelt 2011). 3.7 The potential for mergers and acquisitions The first potential for merger and acquisition is the financial stability. The acquisition company should have the financial capacity to acquire the new organisation. This is because the shares of the company have to be bought but if the companies have equal financial capacity then acquisition is not possible. Moreover, mergers and acquisitions can be possible if the parties involved have an agreement which means that there is no forced agreement (Rumelt 2011). There should be free consent especially in the acquisition where there is free buyer and seller. Another potential for mergers and acquisition is the production capacity. The mergers and acquisition can be possible when the parties have the capacity to manufacture the wine products that can meet the demand of the customers (Rumelt 2011). If the parties cannot be able to meet the demand of the customers then there is no need to merger. 3.8 Blue Ocean strategic opportunities that may exist for HVWC The blue Ocean strategy is the strategy which is applied by organizations including HVWC by battling the markets like the wine industry which has been experiencing high competition to create a competitive advantage. This is done by creating blue oceans which is the market space that has not been contested and it is ripe for growth (Thompson & Strickland 2003). The first opportunity which is available for HVWC using the Blue Ocean strategy is product differentiation. This is the strategy whereby the products have to be differentiated from those of the competitors in terms of quality to attract the demand of the customers. This will help to improve the competitive advantage of the organisation since the wine products are unique (Thompson & Strickland 2003). Another opportunity using the Blue Ocean strategy is the market development opportunity. This implies that the wine products should be developed after conducting market research to determine the needs of the customers. Product development will help to meet the diversified needs of the customers in the wine industry and the products should be diversified to meet the diversified needs of the customers. Further, competitive pricing can be the opportunity to attract and retain more customers. The competitive pricing will meet the financial needs of the customers thus improving the reputation of HVWC (Thompson & Strickland 2003). 3.9 The relevance of strategic leadership and entrepreneurship The strategic leadership and entrepreneurship is important for the success of HVWC. In the first place, strategic leadership is important since it helps to motivate the employees to increase their productivity and quality of the products. The end result is that this will improve the performance of the organisation in terms of capacity and reputation leading to increased productivity (Warner 2010). In addition, strategic leadership is relevant to HVWC since it helps to formulate strategies that can help to manage the potential risks facing the organization. The strategic leadership helps to determine the potential risks and develop contingency plan to solve the risks (Warner 2010). This helps to improve the performance of the organisation in future since the risks will not hinder the successful implementation of strategies. Moreover, strategic leadership is relevant as it helps to manage the barriers to change management. Change management can experience resistance but due to effective leadership, the stakeholders can be engaged in decision making thus can be committed to implement the change (Warner 2010). Entrepreneurship is also important since it helps to generate new ideas on how the management of the organisation can be enhanced. It helps to generate new ideas since the employees are encouraged to be innovative thus influencing the development of products (Warner 2010). Entrepreneurship also helps to identify new opportunities in the market and formulate strategies that can exploit the opportunities. 3.10 Organizational structure, controls and corporate governance From this case study, the organizational structure is helpful in managing the business operations. The organisational structure is centralized organisational structure. This means that there is hierarchical structure which is the structure whereby the decisions are made at the top and then communicated to lower level management. This is important because it helps to communicate effectively to the stakeholders since there is unity of command (Hill & Gareth 2012). However, as HVWC expands, the centralized organisational structure might delay decision making process and this implies that the feedback of the customers might take too long before it is impacted upon. The corporate governance which is applied by HVWC is democratic leadership. This is the type of governance whereby the management of the organisation ensures that all the stakeholders are engaged in decision making so that they can be committed to implement the required strategies. The corporate governance influences the motivation of the staff and the strategies which are formulated and implemented by HVWC like market expansion (Hill & Gareth 2012). This can only be successful when the strategies formulated are effective with the inclusion of the stakeholders in decision making. Conclusion The economic growth in the Asian market has attracted many organizations including HVWC to export its products to the market to satisfy the demand. There are economic market drivers which influence the capacity of doing business in the international market. These economic market drivers include technology, globalization and increasing global population. HVWC operates in the business environment which include internal and external environment which influence the strategic decisions made by the management. The international market entry strategies include exporting, licensing and joint ventures. In this regard, the strategic management and good leadership have helped HVWC to remain competitive in the wine market in Asia. Recommendations The first recommendation that can help to improve the performance of HVWC is through market development. The strategic manager should consider the strategies to develop the market like identifying new opportunities in markets and then formulate appropriate strategies to achieve the required goals and objective of increasing the market share (Mulcaster 2009). The strategic manager should also use the BCG matrix to divide the market into various divisions so that appropriate market strategies can be applied in each market division. For instance, the divestment strategy can be applied where the market is not generating appropriate financial revenue (Mulcaster 2009). This will help to sustain the business operations of the organisation. References De, W & Meyer, S. (2009). Strategy Process, Content and Context. London: Thomson Learning. Hill, C. W & Gareth, R. J. (2012). Strategic Management Theory: An Integrated Approach. New York: Cengage Learning. Kvint, V. (2009). The Global Emerging Market: Strategic Management and Economics, London Routeledge. Mulcaster, W.R. (2009). "Three Strategic Frameworks," Business Strategy Series, Vol. 10, No. 1, pp. 68–75. Mckeown, M. (2012). The Strategy Book. London: FT Prentice Hall. Rumelt, R. P. (2011). Good Strategy/Bad Strategy. London: Crown Business. Thompson, A., A & Strickland, A. (2003). Strategic Management Concept and cases. 13th edition. McGraw Hills. Warner, A. G. (2010). Strategic analysis and choice a structured approach. London: FT Prentice Hall. Read More