Chateau margaux:launching the third wine - Essay Example

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CASE STUDY FOR THE FORMULATION OF MARKETING STRATEGY FOR CHATEAU MARGAUX TABLE OF CONTENT Introduction.............................................................................3 External Environmental Analysis ….......................................3 Political........................................................................3 Economic......................................................................4 Sociological..................................................................4 Technology....................................................................4 Competitor Analysis …............................................................5 Threat of New Entrants.................................................5 Bargaining Power of Buyers.........................................5 Bargaining Power of Suppliers......................................5 Competitive Rivalry.......................................................5 Threat of Substitutes......................................................5 Internal Analysis........................................................................6 Marketing Strategy …...............................................................7 Market Segmentation …............................................................7 Branding.....................................................................................9 Portfolio Management …..........................................................10 Recommendations ….................................................................12 Works Cited................................................................................14 Introduction Chateau Margaux has a major process and a major system of manufacturing its wines. It has a set of wines that it leaves over and sells directly to other manufactures. Chateau Margaux has resolved to brand their excess wine that they sell in bulk to create a third wine brand. This paper will seek to formulate a marketing strategy for Chateau Margaux. This will involve the examination of the business environment and the industry. Through this, there will be the review of marketing strategy and communication components in order to define a marketing strategy to the company. External Environmental Analysis In order to formulate a good marketing strategy, there is the need to conduct a critical review of the external environment (Henry 57). The external environment provide a fair understanding of circumstances of the terrain and show the way a firm must position its assets and competencies to attain the best results in the larger environment. Political The main political element identified in the case study is the fact that the European Union is offering subsidies on its wine production entities to promote wine production. This means that firm like Chateau Margaux has a better chance than other foreign brands in countries like Argentina, South Africa or New Zealand. The second aspect of political analysis is the fact that China is opening up for business. This gives Chateau Margaux the chance to enter China and sell at high prices to meet its profit targets. On the other hand, countries like Japan and the United States are building self-sufficiency in their production and meeting consumer needs and expectations. Economic The credit crunch and global financial crisis affected most Western nations and was as a result of excessive spending on war between 2002 and 2008 and major credit injections in the economies (Cunliffe 45). This has created a major glut in the traditional markets and people might want to tilt towards cheaper wines and cheaper products. Also, there are many economies in the developing world that are growing and becoming more receptive of wines and other luxury products (Deshpande and Nurse 117). This include the nations in Asia, Africa and Latin America. Cunliffe (32) identifies that during the credit crunch, nations like China did not get affected directly by the credit crunch. This shows that there are new and emerging markets in these countries. Sociological The sociological circumstances indicate that nations in the West are becoming more infiltrated with foreign products that come at lower prices from other nations around the world. The European Union has a lot of foreign products that are being accepted. And in other developed nations outside the EU, self-sufficiency and preferences for local brands is growing. On the other hand, China and other developing nations like India are building strong middle classes which are growing and becoming more receptive of foreign brands and luxury products (Deshpande and Nurse 119). Technology Trade on the global level has grown at an incredibly high rate due to the promotion of electronic communications and other methods. Distributors can be easily contacted and given information through the Internet. There can be easy and simple linkages between distributors and the providers of products in distant lands with very little limitations. Electronic commerce also provide the opportunity for Business to Business (B2B) trade and interactions. Competitor Analysis Porter's five force analysis provide an evaluation of the competition and possibility of the transformation of these competitions based on changes in the business environment (Hill and Jones 43).This include the following: Threat of New Entrants There are a few blockages to the entrance of new players in the wine manufacturing industry. There are new and cheaper methods of entrance and this helps producers to come into the market easily. However, to become a vintage brand like Chateau Margaux demands a lot of specialisation. This has seen an increase in the number of manufacturers from California, Argentina, New Zealand and South Africa. Bargaining Power of Buyers The bargaining power of buyers is quite strong. There is a seasonality of purchasing trends and procedures. Also, there is a clearly strong authority wielded by supermarkets who sell at very low prices like €3. This really beats down the market. Bargaining Power of Suppliers This threat is somewhat negligible. Competitive Rivalry The main competitive rivalry is borne out of the production of other large Bordeaux producers who have a high capacity for the production of high volumes of specialised wines. Threat of Substitutes Substitutes are a major cause of concern. There are cheaper wines that have no tradition and limited heritages that are know throughout the world today. This include wines from the Americas, South Africa, Asia and the Pacific region. These wines do not have the same appeal as French wine and yet, could be rebranded, packaged and sold as if they are of the same legacy as French wines. Internal Analysis Based on the findings of the external and industrial environment, some opportunities and threats can be deduced. In this process, there can also be the identification of the strengths and weaknesses of Chateau Margaux. This can form the basis for the formulation of a vision and mission for the creation of a new brand and a marketing strategy for the brand: Strengths Weaknesses - Strong French Legacy - Efficient infrastructure and manufacturing system - Experienced and dedicated leadership and human resource based - Two brands with goodwill and positive image - Entry level access to different markets around the world. - Growing markets in international markets - Control of a good third wine. - Seasonality of the wine industry - Excessive competition in the industry - Ethnic reputational issues with Greek ownership Opportunities Threats - Positioning a third brand to specialise in meeting international needs and expectations in new markets. - New markets in China offer high end consumers - Direct targeting of importers and distributors - Moving downstream and seeking vintage consumers - Declining brands in traditional markets - Failing to use negociants will affect the traditional positioning and traditional classification of the brand Marketing Strategy From the initial analysis, there is the recommendation for the attainment of the following mission relating to the third wine: 1. Market penetration in new international markets 2. Attainment of optimal results through non-traditional techniques. The vision will be to enter new markets around the world including China and other emerging markets whilst reviving interest in traditional markets through non-traditional wine marketing techniques and tools. This is to be done through the blend of the traditional French reputation of Chateau Margaux into the modern context through modern marketing tools and techniques. Market Segmentation “Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow reaching them” (Reid and Bojanic 128). In this process, there is a logical justification to focus the third win on the international markets. This is because the two wines seem to focus on French and the traditional French markets. Thus, this third wine can concentrate on the international markets and non-traditional French markets. This is because there are opportunities growing in different parts of the world and hence, there is the chance for Chateau Margaux to target these new markets and gain the best results and the best options on the international markets. From the scenario, there are three fundamental markets that the marketing strategy must focus on. This include: 1. The primary international market: China and Hong Kong 2. Secondary international markets: India, Africa and Latin America 3. Revival in declining international markets: USA and Japan Ansoff Matrix The Ansoff Matrix indicates that new products in present markets will need to be marketed through product developing. However, in presenting new products into new markets, there is the need for the product to be diversified. In terms of diversification, there must be the innovation of the product and the use of new factors of production and technology and systems to ensure that the product appears to be unique and provide and retains some degree of competitive advantage To this end, India, Africa and Latin America can be seen as new markets, thus, the third wine will have to be presented through diversification. In China and Hong Kong, there is a present market and the new wine must be presented through product development and the enhanced and positive elements of the third wine must be presented to Chinese consumers. For the markets in Japan and USA, there must be market penetration since there is a present product integrated into present products. These two countries have had two wines in from Chateau Margaux. Thus, there must be three separate strategies for the three different countries and regions that the third wine will be sold to. Branding Branding is the process involved in creating a unique name and image for a product in the consumers' mind, mainly through advertising campaigns with a consistent theme. Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers (Okonkwo 9). Branding is therefore about the creation of an emotional connection between the consumer and a given product that is being sold. In the case of the third wine, there is the need for the creation of a concept that links people from different parts of the world to French wine through Chateau Margaux. This is because the best approach to marketing and promoting the third wine is to present it to different peoples and non-traditional markets around the world. This include different consumers who have little or no connection to French wine. The recommended business name is: Brand Name: L'Espirit: Brand Slogan: Vintage French Wine to the Modern World Conceptually, L'Espirit or The Spirit shows an abstract connection of wine and an unseen linkage between generations of French wine successes and fame to the ordinary person of the 21st Century. The brand slogan is meant to provide a strong brand equity that will ensure that people from different parts of the world and contemporary society can understand the connection between ordinary production of French wines and how it is being transposed to the international community. The slogan needs to be translated into the local languages of the countries that it will be sold. For instance it must be translated to Chinese to sell in China. This will create a brand equity that will build a connection with ordinary consumers in this country and get them to like the brand and try to buy it in the future. Portfolio Management There must be three different brands that will be put together to meet the needs of the three different targeted markets identified above (primary international market, secondary international market and declining international markets). Each of these markets will have a different branding process and branding system that will reflect the exact needs and expectations of the markets. Place As a general trend, L'Espirit must us non-traditional marketing systems and marketing methods. This is because the idea of creating this third brand is to try to use other methods of marketing and promoting the products of Chateau Margaux without using the old ways and traditional methods. Thus, Chateau Margaux must seek to use distributors and other importers in these nations that it targets to enter. These distributors must be chosen based on their competency to penetrate the markets and provide outlets through which they can sell. Also, there must be direct entrance into specific sales outlets like wine shops and restaurants to ensure proper penetration into the core markets being targeted by Chateau Margaux in the sale of the third wine. Price There must be various price strategies that will seek to promote the brand in the right way and the right manner. For the declining international markets of USA and Japan, there is the need for a market penetration price of $30 - $100. This will seek to retain that sense of sacredness of French wine but also give room for high profit margins. For China, there must be an ostentatious pricing regime of $100 – 150 per bottle. This is because the Chinese people place a premium on French wine and if this third brand is able to gain the reputation of a high quality French wine, it has to sell for a high price to reinforce the idea of being a high quality brand. The huge market in China guarantees sales. For the secondary international markets of the developing world, the market penetration price of between $10 and $50 must be applied. This is to create a brand identification. And as time goes on, there will be the chance to increase it in a commensurate manner. Promotion L'Espirit must be promoted through the non-traditional wine promotion system or negociants outside France. In France, the negociants must be used but their views must be captured in mass communication systems and shared in the new markets. However, in the United States, Japan and other declining markets, there must be non-traditional promotions like celebrity chefs and tasting programmes as well as exhibitions and event sponsorships. This can also be applied in the secondary international markets. However, in China and the primary international market of Hong Kong, the wine must be presented with high end brands like international hotels and television shows that present the brand as an expensive and luxurious product. Recommendations Based on the findings, the following recommendations are presented to the management of Chateau Margaux: 1. The Third Wine must be positioned in a way that will enable it to target international markets around world and this must include the declining markets of the United States and Japan, new markets in China and other related markets in the developing world. 2. The brand must reflect the traditions and the rich heritage of France and Chateau Margaux. This will be done by promoting the brand through non-traditional methods like the use of negociants and other French classifications. Rather, there must be a non-traditional system of marketing and promoting the brand throughout the new markets. 3. There must be a market segmentation and analysis that will be done in a way and manner that will ensure that the third wine is presented as a symbol of ostentation in China where the Chinese people see French wine as a top symbol of Westernization. 4. In the United States and Japan, the third wine must be presented as a contemporary brand that will be promoted through conventional channels and systems that will attract contemporary wine users to it. 5. In the developing world (India, Africa and Latin America), market penetration prices must be used and this should be very low to ensure that consumers can build a connection with the Chateau Margaux brand. 6. France must remain a traditional market where traditional marketing approaches will be used to build and retain credibility for the Chateau Margaux third brand. This will act as the basis for the marketing and promotion of the third wine overseas in order to retain the reputation of an ideal French wine brand. Works Cited Cunliffe Philip. Critical Perspectives on the Responsibility to Protect. London: Taylor and Francis. 2011. Print. Deshpande Ashwini & Nurse Keith. The Global Economic Crisis and the Developing World. London: Routledge. 2010. Print. Henry Evans. Business Strategy Oxford: Oxford University Press. 2008. Print. Hill Charles and Jones, Gareth. Strategic Management Theory an Integrated Approach. Mason, OH: Cengage. 2010. Print. Okonkwo Uche. Luxury Fashion Branding London: Palgrave Macmillan. Reid Robert and Bojanic David. Hospitality Marketing Management. Hoboken, NJ: John Wiley and Sons. 2010. Print. Read More