Analyzing Penfolds Wine: Strategic Management and Market Position

This report provides a comprehensive analysis of Penfolds Wine, an established Australian wine brand, focusing on its strategic management and growth strategies within the competitive wine industry. The report begins by outlining the company's background and then delves into a macro and micro environmental analysis, including Porter's Five Forces and a SWOT analysis, to assess the external factors impacting Penfolds. It identifies the company's competitive advantages, particularly its unique approach to multi-regional vineyard blending, and examines the generic strategies employed by Penfolds, referencing Porter's framework. The report further explores Penfolds' growth strategies using the Ansoff Matrix, considering market penetration, product development, market development, and diversification. Finally, the report recommends strategies for Penfolds to enhance its market position, including cost optimization, quality improvement in lower-range products, and strategic diversification to maintain competitiveness and capitalize on market opportunities. This analysis provides valuable insights into Penfolds Wine's strategic approach and its potential for future growth and is available for students to use as a reference on Desklib.

RUNNING HEAD: International Strategic Management
0
Penfolds wine
International Strategic Management
(Student Name)
1/19/2019

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Table of Contents
Introduction................................................................................................................................2
Background of the company...................................................................................................2
Macro Environment Analysis....................................................................................................2
Micro Environment Analysis.....................................................................................................3
Porters Five Forces Analysis..................................................................................................3
SWOT Analysis......................................................................................................................4
Competitive Advantage of company..........................................................................................4
Generic Strategy of Porters........................................................................................................5
Ansoff Matrix.............................................................................................................................5
Recommended Strategies...........................................................................................................6
Conclusion..................................................................................................................................7
References..................................................................................................................................8

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Introduction
The Wine industry has huge growth in the market due to their great demand by the
consumers. For their quality as well as consumer values, the wine industry in Australia is one
of the famous around the world and has a long history for it due to the reason of many
physical, social, and human environmental reasons. One of the oldest Australian wine brand
Penfolds plays a prominent role in the wine market. The company has fifty percent market
that made them as a leading company in Australia (Varsei and Polyakovskiy, 2017).
In the following part, there will be a detailed discussion on the marketing strategies adopted
by the company that made them strong in the competitive market and the way they can
improve if they are lagging in such strategy.
Background of the company
The company Penfolds is the oldest wine brand of Australia that was established in the
century of mid-19th by the immigrants as well as medical doctor Rawson Penfolds. In the
starting, the wine was grown for the purpose of medical and the manufacturing of equipped
wine as well as other drinks (Dunn, 2018). The company has acquired a number of vineyards
within the most esteemed viticulture areas of Australia that also include the Barossa Valley
and McLaren Valley. The company has received great national as well as international
acclaim that includes:
 Winemaker of the Year award in 1999 and 2000.
 Winery of the Year since 2012.
 Winemaker of the Year award in 2014

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The company is mainly focusing on four regions which are America, New Zealand and
Australia, Europe, Asia as well as the Middle East. The company has remained a celebrated
aspect of the culture of Australia for 170 years and it is also expected to continue prospering
in the foreign market (Croidieu, Rulingand Boutinot, 2016).
Macro Environment Analysis
Political
The regulation level in the wine industry is very high in Australia. Such an industry is heavily
regulated. It is one of the most complicated industries with respect to the interstate commerce
due to the variety that individual states restrict the sales as well as shipment of the alcoholic
beverages across the lines of states (Costello, Smith and Lane, 2018).
Socio-cultural
While the liquor is vital to the customs of Australia, in taking beer as well as wine is not only
an activity of individual of the everyday life of their individuals other than it is also an
essentially common one. The researchers represent a strapping connection involving the
choice of using up as well as identity. The drinking of wine is not a stuff of option of the
individual but it is also a substance of edifying savour.
Economic
The wine industry is one of the major contributors to the economy of the country that
generating around more than $ 110 billion in revenue on yearly basis. Over 1.2 million
individuals are employees in the product sales as well as the distribution of the products.
Australia has a high growth rate with a low inflation rate that makes the country more in
favor of the wine industry (Zhijing et al., 2018).

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Technological
In the recent scenario, the advancement in technology permits the producers of wine in win
industry to control the process of winemaking than ever before. During the process of wine,
they make the use of containers with stainless steel and carefully control the temperature
during the process of fermentation. The increase in the use of technology enables the
producers of wine to deliver the product that has a more consistent quality (Flores, 2018).
Micro Environment Analysis
Porters Five Forces Analysis
Entry Threat
The risk of entrance for the producer of novel wines in the country is fairly elevated,
particularly from huge worldwide liquor organizations. There is a huge capital investment is
required in such industry that resists the small firms to enter in such market which is one of
the main advantages to the Penfolds.
Industry Rivalry
The wine industry in Australia is subjected as a high competition in the market with the high
competitors in which the competition for the price is also high. It affected the profit margin of
the company at a greater level. The major competitors of Penfolds are Jim Barry, Barossa,
McLaren Vale (Christ, Burritt and Varsei, 2017)
Substitutes Threat
The risk of substitute in the industry of wine is very soaring due to the reason that there is an
elevated volume of their intoxicating beverages in the marketplace. The elevated amount of

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former intoxicating goods that is cheaper in cost as well as a supposed increase of wellbeing
anxiety by the customers which make an elevated risk of substitutes in such business.
Consumers bargaining power
The bargaining power of the consumers in such industry is very high due to the reason of the
whole market is well crowded as well as the competition in the market increase the choice of
consumers that force the companies to lower their price.
Bargaining Power of Suppliers
The bargaining power of suppliers is very low due to the reason that the global market has
been a great supply of grapes from diverse province of the globe with low rates than they can
be formed in Australia. It increases the profit margin of Penfolds as well as able to control the
cost (Fleming, Rickards and Dowd, 2015).
SWOT Analysis
Strengths Weaknesses
 Great Brand Image in the market
 The exclusive approach of multi-
regional blending of vineyard
 Ensure a high standard of Quality
 Strong Marketing strategy
 Poor quality in the taste of cheap
wine segment.
 The not same catch in the premium
red wine
 Limited consumers
 High Price
Opportunities Threats

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 Expansion of business by introducing
white and sparkling wine
 Market expansion into China
 Increase in demand of wines
 High competitiveness in South
Australian region
 Treat of recession
 The threat of lowering the price due
to an oversupply of wine
Competitive Advantage of company
The main competitive advantage of the company is their distinctive approach of blending
multi-regional vineyard, means that the expansion of Penfolds wines of the blending of
diverse wines from diverse vineyards crossways South Australia that made them unique from
their competitors. They are delivering high quality of red wine with a different taste that helps
them to attract maximum consumers. The company also has a strong marketing strategy to
compete in the competitive market that helps the company to build their goodwill in the
market (Calkins, 2017). The company is always searching for new supply opportunities that
help in enhancing their supply chain in the market. The grapes used in the wine are multi-
regional as well as harvested from various vineyards that enhance the taste of their wines.
The company proves their innovative flairs by highlighting the learning capabilities of the
companies, whilst still holding true to the technique of winemaking that has worked so well
for nearly 200 years (Dunn, 2018).

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Generic Strategy of Porters
(Source: Nedelea, 2018)
Penfolds wine followed the strategy of Focused; it was not dispersed through all the
prospective feature of the marketplace, the design of the significance bend wanders from any
possible rivals. Penfolds mainly determined on the significance of innovation as well as
demarcation that assisted them in generating a novel marketplace and also shaped the demand
of their manufactured goods. The company focused on creating it inappropriate by making a
dive in significance for the consumer as well as making unchallenged marketplace rather than
focusing on beating the competition (Oczkowski, 2016). The company stimulated in
producing the wine that was associated with novelty in the cost, value, as well as utility.
Penfolds also determined in generating a space for new market by bring in new skills for
intake the wine, Penfolds alleged further than their existing confines so as to raise-out of their
rivalry by demanding themselves as well as through challenging their existing products. The
corporation also made efforts in converting the non-consumers of the wine to be the
consumers of their sallow trail wine by representing it as a collective drink. Therefore, the
company focus on both, the differentiation and low-cost strategy (Shane, Murad, and
Freeman, 2018).

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Ansoff Matrix
(Source: Professional Academy, 2018)
Marker Penetration
Penfolds has long pasted reputation for the high standard quality of red wine with a high
range of vintage red wine that is mainly popular among their consumers. The company uses
the unique style in blading the multi-regional vineyard as well as they invested so-called-star-
system to classify the vineyard as well as the grape quality of the vineyard that help them to
recognize the finest unify for a definite sort of premium wine.
Product Development
The company majorly collaborate with the local growers to create a new wine with their
effective produce. They wine have the prestige of Penfolds with local influences as well as
taste that made them unique in the market. The company strengthens the confidence of their
consumers by producing a product consumers resonate with.
Market Development

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The company has spread their roots at the global market with the highest market share in the
global market. They expand their business by using of web system as well as open their own
restaurants to serve wines that are the manner of developing the market.
Diversification
The company has not expanded their business in other sectors rather than they have
introduced a variety of products in the same sector i.e. wine. They have introduced innovative
flavor in the wine that made them unique. The diversification was timely as a diplomatic rift
between the Canberra as well as Beijing threatens to harm the treasures exports to China that
is considered a the major market (Galbreath, 2016).
Recommended Strategies
 Focus on Cost: the price of the Penfolds is high as a comparison to the other
competitors due to their high cost of production; therefore, the company should
majorly focus on the cost of their products to deliver the premium products at
reasonable price to compete in the competitive market.
 The low range products of Penfolds are compromised with their quality that creates
dissatisfaction among the consumers as well as gives chance to their competitors to
attract those consumers. Therefore, the company should focus on the quality of the
products of their lower range products to attract their consumers as well as enhance
goodwill in the global market.
 The company should strongly promote their quality wines in the lifestyle magazine or
in the magazines in the airlines of business class section. Moreover, they must try to
reduce the supply of premium as well as ultra-wines in the market to increase their
demand and made them not become a usual commodity.

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 In order to gain the market share, the company should focus on diversification of
business as well as must attempt to obtain a competitor which has an impressive
standing amid the segment of inexpensive wines. Through such way, they can able to
gain more knowledge about their segments as well as other segments with targeting
huge market at the global level.
Conclusion
From the above, it can be concluded that the Wine industry is one of the cream industry that
gives huge earning to their firm. Such industry has spread at a wider level that increases
competition for the firms. Australia has a huge market of the wine industry in which one of
the leading company Penfolds also enjoys their business in such a market. The company is
known for their wine. They cater a variety of wines to their consumers that attract maximum
consumers in the market. However, Penfolds faces competition in the market due to their
high price of the products. The company needs to cope up from such challenges that made
them succeed in such a market. They need to focus on their marketing strategies as well as
need to control their cost to lead in the market. Penfolds also need to enter in new business
for the expansion of their growth in the global market.

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References
Calkins, T. (2017) Penfolds. Kellogg School of Management Cases, 42(55), pp.1-7.
Christ, K.L., Burritt, R.L. and Varsei, M. (2017) Coopetition as a potential strategy for
corporate sustainability. Business Strategy and the Environment, 26(7), pp.1029-1040.
Costello, M., Smith, R. and Lane, L. (2018) Australian Wine Labels: Terroir without
Terror. Gastronomica: The Journal of Critical Food Studies, 18(3), pp.54-65.
Croidieu, G., Rüling, C.C. and Boutinot, A. (2016) How do creative genres emerge? The case
of the Australian wine industry. Journal of Business Research, 69(7), pp.2334-2342.
Dunn, M. (2018) Wine: Fakery by the bottle. Proctor, The, 38(8), p.49.
Dunn, M. (2018) Wine: Tawny and friends make a comeback. Proctor, The, 38(1), p.57.
Fleming, A., Rickards, L. and Dowd, A.M. (2015) Understanding convergence and
divergence in the framing of climate change responses: An analysis of two wine
companies. Environmental Science & Policy, 51, pp.202-214.
Flores, S.S. (2018) What is sustainability in the wine world? A cross-country analysis of wine
sustainability frameworks. Journal of Cleaner Production, 172, pp.2301-2312.
Galbreath, J. (2016) Exploratory study of climate change innovations in wine regions in
Australia. Regional Studies, 50(11), pp.1903-1918.
Nedelea, A. (2018) Porters Generic Strategies [Online] Retrieved from:
https://www.researchgate.net/figure/Porters-generic-strategies_fig1_260845056[Accessed on
19/01/19]

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Oczkowski, E. (2016) Analysing Firm‐level Price Effects for Differentiated Products: The
Case of Australian Wine Producers. Australian Economic Papers, 55(1), pp.43-62.
Professional Academy. (2018) MARKETING THEORIES - EXPLAINING THE ANSOFF
MATRIX [Online]. Retrieved from: https://www.professionalacademy.com/blogs-and-
advice/marketing-theories---explaining-the-ansoff-matrix- [Accessed on 19/01/19]
Shane, E., Murad, M.W. and Freeman, S. (2018) Factors influencing price premiums of
Australian wine in the UK market. International Journal of Wine Business Research, 30(1),
pp.96-116.
Varsei, M. and Polyakovskiy, S. (2017) Sustainable supply chain network design: A case of
the wine industry in Australia. Omega, 66, pp.236-247.
Zhijing, Y., Shavandi, A., Harrison, R. and Bekhit, A.E.D.A. (2018) Characterization of
Phenolic Compounds in Wine Lees. Antioxidants, 7(4), p.48.