Strategic Analysis of E&J Gallo Winery

This assignment provides a strategic analysis of E&J Gallo Winery, including micro and macro environmental factors, competitive advantages, Porter's generic strategy, growth strategy, and recommendations. The micro environmental factors of the company include the company’s suppliers, marketing team, competitors, publishers and customers to affect the relationship of values and satisfaction with customers. Additionally, macro environmental factors include the company’s effects and success including SWOT and PEST analysis.

Assignments on Wine Company
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Table of content
Introduction.................................................................................................................................... 3
Micro and macro environmental factors............................................................................3
Company’s competitive advantages over its revelries..................................................6
Generic strategy of Porters....................................................................................................... 7
Company’s growth strategy..................................................................................................... 9
Strategic recommendation....................................................................................................... 9
Conclusion....................................................................................................................................... 9
Reference list............................................................................................................................... 10
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Introduction
Here in this assignment, the chosen industry is winery and distributors. The chosen company is
E&J Gallo Winery. It has been founded in 1933 and headquartered in California. This is the
largest wine producing and distributing company. The founders are two brothers named Ernest
and Julio. They sell the most of wine brands about $4 to $5 per bottle. The famous brands are
Brut, Cold Duck, flavored California Champagne et cetera. After the death of the two brothers,
other family members involved to the company to continue the company successfully. From the
beginning, they were passionate about wine and selling the wine for every occasion. Today they
are known as leading global wine producers.The company takes special care on theart of grape
growing for wine and spirits to make the wine perfect. The distribution of alcoholic beverages is
spread over 90 countries around the globe. Gallo Winery is committed to provide its customers
with the best kind of wine available in market (Balland and Mariani, 2017). Contribution to long
term success, the integrity and courtesy for keeping the position of the company in order to
innovate new ideas to satisfy the higher products and services to satisfy the brad name of
company.
Micro and macro environmental factors
The micro environmental factors of the company include the company’s suppliers, marketing
team, competitors, publishers and customers to affect the relationship of values and satisfaction
with customers. Additionally, macro environmental factors include the company’s effects and
success including SWOT and PEST analysis.
PEST analysis
Political:
Political dimension of E&J Gallo Winery is amongst the top producers in world. The individual
state has restriction over the regulation of usual flavor of improvement to approve the retailers
and wholesalers (Roberts et al.2017). As it is approved through the regulation to the network of
trade open to control, the industry has monopoly of various states with control of retailing the
alcoholic beverages. It controls the subjects for subjecting the taxes with impacts of alcoholic
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beverages. Variousstates of different countries have different policies related to the selling of
alcoholic beverages which affects the customers of those products.
Economic:
Economic elements of PESTwill be contributed to generate the appreciation of E&J Winery to
describe. Duties and taxes can be operated to comply with the $100 billion annual revenue.
Taxes on alcohol is significant to maintain the upgradation process of the wine industry in that
particular state. The effects can help the company to increase the final products to create the
significant demands on the products’ price. The drive is anticipated with the slow rate to increase
the revenue next year (Ruijssenaarset al.2017).
Social:
Wine knowledge is considered as the part of education for wealthy family of the community. As
wine is alcoholic product, producers try to launch it to facilitate an increased level of
promotionfor wine. However, customers belonging from a certain age group prefers different
kind of wine based on the cost-income ratio of the customer. The customers belonging from the
new generation tends to try out new and different kinds of wine. Although, the older customers
are prone to a particular brand which they have been consuming for years.Younger generation is
attracted to premium wine collections, the older generation also fancies the same. In accordance
to the rate of consumption of wine among various classes, communities and generations, it can
be assessed that social aspect of a wine industry is depending upon a number of different factors
which are interrelated as well. With the wine consumption,there is voluntary emphasis on the
higher standard enjoyment of the meal.
Technological:
There are recent advancements on the technological factors related to the wine industry. The
processing has become advanced with the launch of steel containers to carefully maintain the
balance of temperaturein order to control the process of fermentation.Quality control and
temperature control are part of the innovation andare being processed in a way so that the
revolutionary processes can be improved.Grape temperature and harvesting along with the field
crushing temperature for separating juice from grapes, are considered to make the process faster.
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To improve the technology, numerous steps can be undertaken. To make fermentation process
quicker, it is requiredto keep the replacements with compositing the malic acid with lactic
acid.An advanced technology is powerful enough to turn a common product into a premium one
by adding more quality to it through its various innovative ways. (Jones and Grandjean, 2017).
SWOT analysis
Strengths:
One of the strengths of E&J Gallo Winery is that it is aprivately-owned company to operate the
corporation strategy and the practicing the low cost to mass production strategy. Gallo Winery,
equipped with excellent strategies, has great impact on thecreation of the awareness for the
company. The sales and production sector of the company is effective enough, also the supply of
raw materials in the manufacturing sectoris seamless. With proper investments in the production
and research sector, the company is implementing new technologies to ensure a better-quality
product for the customers in a cost-effective way.Gallo is supported by the production facility
and the certain conduction of the vineyard.The researchers are activated by these types of
support to bring development positively. General administration may observe the processes as
the regulatory financials work to inform the services for development.
Weakness:
E&J Gallo Winery had been impacted by some weaknesses to develop the grapes to process the
distribution of operating system to operate the distribution of business. Due to price hiking of
wine, certain segmentation of customers is restricted.A group of customers with lower income
level has refrained from consuming this wine. Absence of sparkling and white wine in product
can be considered with product portfolio. Unavailability of wine packaging box is also a
weakness of the company. The bad season for grapes and obstacles while growing the grapes
weaken the production process, also buying the fruit from other sources can increase the
expenditure of this segment. The climate and soil type of a particular region can negatively
impact the growth of the wineries located in those regions. (Napolitano, 2017). The company
should be more focused on these factors to upgrade the demand of their product.
Opportunity:
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Expansion of the sparkling wine with associated alcohols should be enhanced with the local
distribution of the wine. Growing perception with the wine can be distributed with the current
distribution network to emerge the markets of network into emerging markets. There are
different types of opportunities to produce the potential risk assessments to give service to many
types of wine producing companies. E&J Gallo currently produces 15 types of wine which is
likely to have the potential impact of promotion to different variety of wines to deliver. For
yearly supply, the wine growth and acres of vineyards has to be maintained properly to produce
the winesand develop it as per the market demand.To produce information analysis on the wine
collection, the business structure is required to be revised (Mora, 2016).
Threats:
There are threats to customers to develop the growth and interest in wine industry. Dry and hot
weather is not appropriate for grapes to grow. As the growth of grapes in directly related to the
production of wine, the company can experience a downfall in its revenue.Poorly maintained
vineyards can be a threat as well. Local labor and local weather for the production are causes
behind the rise of threats.Based on the emergence of local labor market, production and
saturation on the new cost wine manufacturing;new threats can arrivefor wine company.
Company’s competitive advantages over its revelries
E&J Gallo Winery is charged with the overseeing of the portfolio of mass produced wines will
be largest winery company to develop the wine producing company. For better time to add the
pressure for nation’s largest wine company, it comes with the pressures for having the job to
come to add with pressure on the family. The company’s operation system can be developed to
own the family operation with private owned and family to corporate the family operation for the
Gallo family to implement (Wei et al.2017). The advice must be retained with the family to pass
the concentration on the business in generation with distribution of single business as
concentratingon the production of grapes for the industry.
They can gain better resources by concentrating on growing grapes to ensure the manufacturing
of a quality product.They emerge the social beverages with beer millennial consumers to shed
the snobbery with the category at healthy clip. E&J Gallo’s has experienced a healthy rise in
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revenue increasing 5% than the last year. According to the last year revenue, 15.8% where beer
fell while international wine distribution to coordinate with the alcohol supply. Because of
watering tissue, E&J Gallo would improve the quality of education and business over the quality
of wine. Wineries, business, educations and government are working together to uncover the
ideas with the better decision-making(Flint et al.2016). It is an effective way to uncover
innovative ideas by helping people with their decisions.Wineries, situated in over 45 countries,
will help to make the people in making better decisions to uncover the ideas.
The positioning of Gallo’s wine in marketing strategy can be majorly taken as the fragments to
store the marketing ability to emphasis on the effective work on the targeting advertisements to
fragments to popular captions to cover the majority with the digital and store marketing. The
company’s new movements and targeted efficiency will be adopted with the largest wine brand.
Digital direction with the viewers can be placed with the choice and demand of wine preferred
by most of the customers. Diageo, Constellation Brand, Bronco Wine et cetera are the main
rivals of E&J Gallo. Digital impacts and representing of wine will help to modify the medieval
family to compete with the design of the customers crest and modern images to place the
advantage.
Generic strategy of Porters
Porter’s 5 forces:
This is applied to understand the forces with the forces in winery environment to affect the
profitability to be able to adjust the strategy keeping the strategy accordingly. In the adjustments
of strategic input of the right steps is to follow the steps to grow or the improvements on the
strong position with the wrong steps for future of the company. Porter’s 5 forces can be analyzed
as the strengths and weakness of the position to be able to get the impact of long term
profitability.
1. Competitive Rivalry:
The intensity of rival company can be industry-based because the competitors to account as 70%
of Winery to 2000 wineries to exist. The production rate can be concerned with the domestic
wine market for companies with the domestic wine market. Rivalry competition can be evolved
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with the involving concerned in domestic rivalries. The relaxing rivalry is domestic in wine
market as being able to larger ability to hold the advantages to differentiate the products. Rival
companies of the industry can be explained with the industry-based concerns (Liang, 2015).
2. Supplier power:
This is determined as the supply of easy strategy and supply to increase the prices with the
potential suppliers to take as unique potential service to provide. Stronger position can be able to
charge the impact of supply power to be expensive rate of company. The service can be provided
as the supply chain providers would be engaged with the other supply chain of wine.
3. Buyer power:
The customers have the right to discuss over the savvy customers and the power to cut the
increased rate according to the important process to be done with the substitution and easy
management of E&J Gallo. Savvy customers enable switching of the power to increase the
customer care. The strong decision,to be taken by the customers, can be developed.
4. Threats of substitution:
This refers to the likelihood of the customers to find the products for developing the position
thatwill be affected by the important issues to substitutions for important process. The products
are manually outsourcedaligning with the profits to strengthen the position to increase the
profitability.
5. Threats of New entry:
New entry,through efficiently operated technology implementation, can bring remarkable
positive changes as well as threats. Risk factors associated with new entry can sometimes
become a disadvantage in a competitive market. Winery Company has always the threats to
develop the position in market (Santos and Richman, 2016).
Company’s growth strategy
In accordance to the Ansoff’s matrix, the family-based wineryE&J Gallocan consider four
different segments to come up with better growth strategy for the company. In the market
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development segment, the company should target new markets to expand their reach. From the
data derived from the PEST analysis done previously, the company can identify a different
geographical market in home or abroad to expand their business. Through usage of various sales
channels, market segmentation process and marketing mix, new ideas can be implemented by
studying the product and the market thoroughly. Diversification is a risky process and in the
given scenario should not be adopted as introducing a completely different product is not a good
idea for this company. Market penetration is the most preferred segment, as same product can be
sold in the same market without any new production cost being involved(Villanueva,
2015).Development of new business strategy, special price offers, loyalty schemes, buying a
competitor company all these steps can be taken to initiate market penetration. In product
development segment, different variations of the same product can be introduced to make the
customers happy and also gain new customers.
Strategic recommendation
 E&J Gallo should acquire better understanding regarding the market demand and target
customers through adoption of proper techniques.
 Adopt sustainable business methods to catch the attention of the consumers as well as the
marketers worldwide.
 Acquire more knowledge about the competitors and their business infrastructure and
product quality.
 Introduce innovative products to stay a step ahead from the competitors.
 Adopt online marketing tools and techniques rather than old traditional marketing ways
to promote their product.
Conclusion
Wine industry is one of the most profitable industry in business world. If maintained well a wine
company can yield loads of revenues annually. In order to conclude the assignment, the winery
company E&J Gallo can be effective for the protection of the companies. The range and fame of
the company will be effective to hold their position in wine industry. E&J Gallo should revise
their business strategies to maintain their reputation and popularity among the large pool of
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customers. The effects and the winery production can be effective to sort out for the effective
growth of the company in winery industry.
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Reference list
Balland, J. and Mariani, A., 2017. DESIGN OF MATERIAL FLOW AND TRACKING
SYSTEM FOR SUPPLY CHAIN AND LOGISTICS: E. & J. GALLO WINERY–MODESTO
CAMPUS.
Flint, D.J., Signori, P. and Golicic, S.L., 2016. A Global Overview of Wine. In Contemporary
Wine Marketing and Supply Chain Management (pp. 1-14). Palgrave Macmillan, New York.
Jones, G. and Grandjean, E., 2017. Creating the Market for Organic Wine: Sulfites, Certification,
and Green Values.
Liang, J., 2015. WINE COMPANY ANALYSIS IN “THE NEW WORLD” AND “THE OLD
WORLD”.
Mora, P., 2016. Tools for Wine Differentiation and Positioning. In Wine Positioning (pp. 93-
113). Springer, Cham.
Napolitano, J., 2017. UC and California food systems: Growing together through the Global
Food Initiative. California Agriculture, 71(3), pp.100-101.
Roberts, K., Coyle, P., Coriano III, A., Barad, V.K., Christian-Overthun, T.D., Wilkins, D.J.,
Patron, A.P., Sargent, E.R. and Evans, D.L., Gallo E and J Co, 2017. Beverage press. U.S. Patent
Application 29/533,269.
Ruijssenaars, R., Brady, J., Lee, A., Addis, R., Hoffman, L., Thompson, D. and Jones, B., Gallo
E and J Co, 2017. Method and apparatus for wine bottle packaging and display. U.S. Patent
9,669,966.
SANTOS, M.R. and RICHMAN, V., 2016. FINANCIAL RATIO AND VALUATION
ANALYSES OF CONSTELLATION BRANDS INC.: A CASE STUDY. Strategic Winery
Tourism and Management: Building Competitive Winery Tourism and Winery Management
Strategy, p.247.
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Villanueva, E.C., 2015. THE ANGLO-SAXON NEW WORLD WINE
PRODUCERS'PARADIGM SHIFT IN WINE BUSINESS. Global Business & Economics
Anthology, 1.
Wei, H., Thankhot Bio-Tech Co., Ltd., 2017. Goblet-shaped wine decanter. U.S. Patent
Application 29/518,121.
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