Strategic Management Case Study: Chateau Margaux Wine Company Analysis

This document presents a detailed strategic analysis of the Chateau Margaux case study, focusing on internal and external factors influencing the wine company. The analysis begins with an internal assessment, utilizing resource and capability analysis to identify strengths and weaknesses. The external analysis employs a SWOT framework to evaluate opportunities and threats in the market. An industry analysis examines the wine industry's structure, competition, and the impact on Chateau Margaux. The document also explores strategy formulation, including market positioning, distribution channels, and competitive advantages. The analysis draws on the case study brief and relevant academic literature to provide a comprehensive understanding of Chateau Margaux's strategic challenges and opportunities. The document concludes with a discussion of potential strategies to enhance the company's market position and ensure its long-term success.

Strategic Management

Table of Contents
1. Internal analysis.......................................................................................................................3
2. Chateau Margaux Case Study: External Analysis...................................................................5
3. Industry Analysis of Wine and impact on Chateau Margaux Company:................................8
4. Strategy Formulation...............................................................................................................9
REFERENCES..............................................................................................................................18

1. Internal analysis
Conducting an assessment on internal strength and weakness of organization which may
include basic resources and competencies typically provide a clear portrait of competitive edge
of organization in respective market. As opined by Hill and Jones (2009) conducting resource
analysis is best to perform internal analysis of organization by considering its core competencies,
resources, tangible and intangible properties etc. Internal analysis of Chateau Margaux using
resource analysis has been illustrated below:
Resource and capabilities analysis
Resources Key indicators
Tangible
Financial  High willingness of customers to pay
for wine
 Wine produced per hectare increased
with respect to quality and higher
demand
 Sales in China and Hong-Kong had
climbed to 35% in the year 2012
 Sales in Japan, US and France dropped
 12-15 million bottles of wine were sold
over 150 countries during the year 2012
due to enhanced demand
 Price escalation led to disappearance of
second wine
 Global wine exporting dominated by
EU countries
Physical  250 hectares of estate ground to grow
grapes
 Suitability of soil, climate and
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topography to grow grapes is limited
 Barrels, Bottles and cellars
 118,000 hectares of vineyards
 Strong distribution channel but weak in
expansion to new markets
Intangible
Technological  Frequent innovations to enhance the
quality of wine produced
 Innovations to introduce new flavours
Reputation  Number of Negociants
 High and premium Quality wine
 Innovations in flavours
 Strong brand image
 Traditional wine making
Human resources  Employed 100 people for wine
production
Table 1: Resource analysis
Source: Created by the author
Capabilities Key indicators
Corporate  Large number of exporters
 Good strategic control
 Distributors
R&D  Frequent innovations
 Introduced new flavours
 Extensive market research
Marketing  strong marketing initiatives in China
 Strong distribution channel
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Sales and fulfilment  Maintains strong global sales force
 Enhanced sales
Table 2: Capability analysis
Source: Created by the author
From the internal analysis of Chateau Margaux, it can be identified that, the splendid
wine producer has strong historical background of wine making and have solid core
competencies in its both tangible and intangibles areas. The internal analysis of Chateau
Margaux reveals that the sales of wines in Japan, US and France dropped when compared to
the sales in China and Hong-Kong. While analysing, it can be revealed that the financial
aspects of Chateau Margaux has been under threat due to price escalation executed by core
markets of Pavillion Rouge, the second wine from Chateau Margaux. The unexpected price
escalation was perceived as unduly high by luxury customers and this has led the wine to
get sooner disappear from global wine market. Moreover, the internal analysis of Chateau
Margaux also have shown that the distribution channel of wine producer is strong, but on
the other hand lack of initialization to enter in to emerging markets like Asian, may
negatively affect financial assets of Chateau Margaux. Furthermore, it has also been
identified from the above analysis that, the global exporting of Chateau Margaux is
dominated by EU markets. This hence reveals that the wine producer has strong brand
image and customer base in European markets. The internal analysis of Chateau Margaux
recognized human resources of the wine production is uneven to meet growing demands in
wine market. From the internal analysis of Chateau Margaux, it is clear that the wine
producer has employed nearly 100 people to handle production process of wine. This
lowered figure of employees hence indicates that the human resource of Chateau Margaux
has been under threat for meeting customer demands timely.
2. Chateau Margaux Case Study: External Analysis
The best analysis model for conducting the company’s external analysis is the SWOT
analysis model. The model focuses on the company’s internal strengths and weaknesses and the
external opportunities and threats (Olsen, nod). In this consideration, Chateau Margaux enjoys
the revenue from its international market base brought about by the wine company’s reputation
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build over many years but its production and marketing is also faced with external challenges
(agoodnoose.com, n.d.).
Opportunities
Externally, the company has an opportunity to widen its market and to increase its supply
globally. First, the sales of Chateau Margaux is projected to increase given the increasing
demand for wine in the international market (Ofek and Vogt, 2013). Furthermore, France is
known for best quality wine hence the brands from this country are better placed to appeal to the
wine market (chicagotribune.com, 1985).
Besides, Chateau Margaux should explore the new type of customer in the wine market.
As such, the existence of a new group of luxury wine consumers in Asia and Russia is a great
opportunity that should be explored to increase the company’s sales.
Besides, the wine company should utilize the new distribution channels, especially the
online sales platforms for local and international business. Such channels are a perfect way of
shortening the time taken to promote Chateau Margaux wine and the transaction processes.
Through this channel, consumers can place their orders online and have the ordered goods
delivered by the company.
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Threats: Despite the French wine having appealed to the world market for many years, wine
producing companies such as Chateau Margaux are faced with loss of market share in the world
market (Beyersdorfer and Dessain, 2011). The entrance of ‘new world’ wine producers like the
American countries and other European countries is an indication of a potential loss of market
share by the French wine producing companies (Bohmrich, 2014). Besides the loss of market
share, consumer tastes for wine are shifting towards wines produced using different styles
especially the heavy tannin that are not produced in the Bordeaux region of France
(thewinecellarinsider.com, n.d.).
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3. Industry Analysis of Wine and impact on Chateau Margaux Company:
The existence of the wine industry in the world is from the time immemorial. It was
existing even during the times of the Kings and Queen with the different market structure
existing at that time. The wine production is considered as the process which has been passed on
to the generations of many families (Beyersdorfer, 2011). There are many countries which is
producing the finest wine in the world. France was the largest producer of the wine in the world
but the globalisation increased the competition. The eastern countries like Japan, Australia
which also entered the wine industry posed a great threat for the traditional wine making
countries. In the past decades the wine industry has undergone huge threats due to the
overproduction of the wines (Lorch, 2016).
The big wine markets in the Europe do not have the enough markets to sell the wine. The
increase in the wide variety of the choices like other drinks is also one of the reasons for higher
competition in the wine industry. The changes in the climate is also one of the biggest threat for
the industry as this is creating changes in the taste and the quality of the Wine which is produced.
The compounds like anthocyanin and tannins is giving the wine its colour and thus if there is a
fluctuation in the temperature this would alter the taste of the wine (Roland, 2013).
The main cause of the concern is the global warming and thus the producers have to face the
consequences for this. The wine industry structure could be determined on the basis of the
market size. Europe still holds their position as leaders in the world and this is led by France,
Italy and Spain but this has been changing with the emerging wine producing countries like
Japan, China (Howland, 2014).
Chateau Margaux is a well-established prestige brand in the world and they have the
higher profit margins and the demand for the first – growth is strong and they are growing. One
of the weaknesses for the company is that the marketing of the company is outsourced to the
Bordeaux wine merchants (Howland, 2014). The demand for the wine is increasing and there is
much new type of the customers in the world mainly from the eastern nations. There are also
many new distribution channels present through which the online sales could be made. The
company also has many threats as the French wines are losing its sheen in the market with the
emerging competition from the countries like China, Japan. The changes like shifting of the
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tastes to the different style are also one of the reasons for not preferring the wine of the French
region (Roland, 2013).
The main competitors for the company are
 Lafite – Rothschild
 Mouton – Rothschild
 Chateau Latour
 Haut – Brion
The company could try many new alternative methods for distribution and take the
complete control of the distribution channels and they could also run a loyalty program among
their customers.The company could strive in making an expansion to the international arena by
sticking on to their tradition. This makes them unique by maintaining their tradition with the
touch of modern distribution channels (Roland, 2013).
The entry of the company into the China market will give them a great scope of the
development of their business but this has to be a cautious approach as the duplication of the
products is high in the Chinese market. The company has to safeguard themselves from the
cannibalisation (Beyersdorfer, 2011). The company being in the market for long time with their
rich old tradition and the brand image must ensure that they keep their image at the same time
make an expansion to stay in the market. The company could modernise their supply chain and
have a modern distribution channel to keep with the competition yet the traditional blend of the
manufacture could be retained to stay competitive and unique in the market.
4. Strategy Formulation
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REFERENCES
Books and Journal
agoodnoose.com, (nod). Chateau Margaux. [online] agoodnose.com. Available at:
http://www.agoodnose.com/index.php?action=page&p=chateau_margaux [Accessed 16
Oct. 2016].
Beyersdorfer, D. and Dessain, V. (2011). HBR Case Study: Preserve the Luxury or Extend the
Brand? [online] hbr.org. Available at: https://hbr.org/2011/01/hbr-case-study-preserve-
the-luxury-or-extend-the-brand [Accessed 16 Oct. 2016].
Beyersdorfer, D., 2011. HBR Case Study: Preserve the Luxury or Extend the Brand?. Harvard
Business Review, 2(1), pp. 23 – 67.
Bohmrich, R. (2014). BORDEAUX: An Iconic Region Battles to Sustain Market Share - Part 1.
[online] inebusiness.com. Available at: https://www.winebusiness.com/news/?
go=getArticle&dataid=126851 [Accessed 16 Oct. 2016].
chicagotribune.com, (1985). It Looks Like A Very Good Year For Chateau Margaux After Some.
[online] chicagotribune.com. Available at: http://articles.chicagotribune.com/1985-12-
19/entertainment/8503280165_1_chateau-latour-chateau-margaux-chateau-lafite
[Accessed 16 Oct. 2016].
Hill, C. and Jones, G., 2009. Strategic management theory: an integrated approach. London:
Cengage Learning.
Howland, P. J., 2014. Social, Cultural and Economic Impacts of Wine in New Zealand. 1st ed.
London: Routledge.
Lorch, W., 2016. Tasting Ranks Château Margaux First Among Equals. [Online] Available at:
http://www.wine-searcher.com/m/2016/03/tasting-ranks-chateau-margaux-first-among-
equals. [Accessed 30 September 2016].
OFEK, E. and VOGT, E.E., 2013. Château Margaux: Launching the Third Wine.
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Olsen, E. (n.d.). Internal & External Analysis. [online] onstrategyhq.com. Available at:
http://onstrategyhq.com/resources/internal-and-external-analysis/ [Accessed 16 Oct.
2016].
Roland, D., 2013. Five things to know about the global wine industry. [Online]. Available
Through :http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/
10414807/Five-things-to-know-about-the-global-wine-industry.html
[Accessed 3 October 2016].
thewinecellarinsider.com, (nod). Chateau Margaux, Margaux bordeaux wine. [online]
thewinecellarinsider.com. Available at: http://www.thewinecellarinsider.com/bordeaux-
wine-producer-profiles/bordeaux/margaux/margaux/ [Accessed 16 Oct. 2016].
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