Is There a Fit Regarding the Company Strategy and Resources - Essay Example

Do you agree with the owner that there is a fit regarding the company strategy and resources? To accurately determine the fit of the Fitz-Ritter strategy and resources, it would be necessary to assess its internal capability and external environment through the usage of SWOT and PESTEL. SWOT a. Strength – the high quality of Fitz Ritter’s wine accompanied by long history and tradition. To quote the Fitz, their “production is a craft, not an industrial process”. This manifests the exquisite process of creating the wine from the growing the grape to packaging them. Also, the tradition associated with a wine being a family wine with 238 years of history and being the third oldest wine maker in Germany brings charm to the product which could be its advantage over its competitors in the market. Johann is capitalizing on this by holding events in their estate to ensure customer retention. b. Weakness – expensive. Quality comes at a price and this makes the company hesitate to expand its reach in the market because of the cost associated not only in producing the wine, but also in marketing it (a tour in US costs EUR 5,000). c. Opportunities – the liberalization of the wine market provides an opportunity for Fitz-Ritter to expand to other markets abroad that would widen its market and customer base. d. Threat – new entrants in the market from the New World offering comparable taste at a lower price serves as a very potent threat to Fitz-Ritter. PESTEL a. Political – EU is protective of the German wine manufacturer where it subsidizes the industry. The residue of the George Marshall fund serves as financing assistance to wine manufacturers such as Fitz-Ritter which could help ease the financing of its expansion should the company decide to expand its operation. b. Economic – competitors are flooding the EU market with comparable wines at a lower price which is devastating to the industry. c. Social – there is growing market for the Fitz-Ritter’s wines especially for middle class who would like to partake the wine to have the feeling of being in the upper class. d. Technological – Johann is embarking on the training of his employees to upgrade their technological capability to further improve their wine making. e. Environmental – acreage for growing grapes in Germany has already been allocated. Its implication makes the wine industry less competitive because it meant they have to squeeze more wine from the grape to lower the price which has a devastating effect on quality. f. Legal – EU government is on Germany’s wine makers side being protective of the industry from the foreign competition. Fitz-Ritter’s strategy is basically to promote the quality of the product by stressing its history and tradition; that it is a product of craftsmanship not by industrial process. This way, Johann is able to have a niche in the market. 2) What is Fitz- Ritter’s competitive advantage? How did the company manage to survive in a highly competitive wine business? To better determine Fitz-Ritter’s competitive advantage, it would be helpful to consider Porter’s Five Forces of competition to see how it fared in the highly competitive wine business. a. Threat of New Entrants – players from the New World are indeed a threat. They have comparable wines with lower prices. b. Determinants of Supplier Power – Fitz-Ritter grows their own grape and makes their own wine and such, suppliers has very little leverage on the company. c. Rivalry Among Existing Firms – there may be rivalry among the old wine makers in Germany and EU but the rivalry is not considered to be disastrous to the industry. The threat of rivalry is being brought by new players from the New World instead of the old wine makers. d. Determinants of Buyer Power – Fitz-Ritter use exclusive distributor in the United States whom they can trust and Johann’s mother help in the promotional aspect of the product by giving the product’s comparative advantage which is tradition, quality and history a face whom the customers can relate to. e. Threat of Substitute Products – new entrants from the New World are attempting to substitute the niche which Fitz-Ritter occupies with a comparable wine that has a lower price. Fitz-Ritter counter this by digging in its niche by stressing that its wine are not a product of industrial process but by craft, hence is its exquisite quality. Fitz-Ritter is surviving the competition because it is already relatively established in the market but it cannot sit on its laurel because the competition, particularly those from the New Worlds are aggressive. It cannot also forever rely on government protection from the rivalry which foreign brands pose because eventually, the force of the market will prevail. As of now, Fitz Ritter is in a very precarious position evident by its hesitation to expand in the global market. It is hesitating because Johann knew that even if the quality of its wines are exquisite, its price is not that competitive and it may be devoured in the market with such a hefty price. 3) Imagine you are the new owner. What are the next steps you would take in terms of strategy and why? Where do you see areas to improve? If I am the new owner, I will strive to lower my price without sacrificing the quality of the wine. There is one thing that Johann had missed in the liberalization of the wine industry in Germany. Instead of crying foul with the influx of cheap wines from the New World and seek protection from the government of the EU, Johann can expand the acreage of Fitz-Ritter plantation not in Germany but elsewhere with the same soil quality and other factors to grow a quality grapes but with a cheaper labour and operating costs. This would make the price of Fitz-Ritter very competitive. When this is translated in the market, Fitz-Ritter will become very formidable because it has the best of both worlds, which is exquisite quality and affordable price. I will first attend to this concern before going to the global market to ensure my success when I decide to get in the fray. I will invest in looking for a similar environment in growing my grapes somewhere else, but will recoup it in the long run by lower operational costs. When I have already lowered my costs and established my other plantation outside of Germany, it will be the time to get in the global market. This time, Fitz-Ritter is ensured of the greater probability to succeed because it has a lower cost with the same exquisite quality. Read More