M IV

Nidhi Patel

MBA06091 A 24/08/2021

Advanced Competitive Strategy

Prof. Prarthan Desai

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Ans.1

Threats to Entry:

1. Threat of new entrants:

Premium wine industry has high barriers to entry due to capital expenditure to enter the
market is high. The grapes required for such wines are being produced by selected vineyards and
in small, fragmented areas. Although, the entrants have an alternative to procure grapes from
different growers at competitive rates, which provide them the opportunity for entering into the
industry.
The equipment required is also available at affordable costs.

The economies of scale are tough to realize for entry level players that makes this business an
unattractive one. This marks the threat of latest entrants as low. The marketing consists of either
operating with distributors that are low in range, however have high market dominance (high
risk) or the entrant have to be compelled to keep company with still that might have a tasting
space that might herald a lot of customers (high capital expenditure). each of those comes with
low margins that create this business appearance less appealing and that sets the threat of latest
entrants as low. Overall the threat of latest entrants is moderate to moderately low.

Bargaining Power of Suppliers:

Most premium players majorly have their own vineyards, because of that they management the
availability of grapes. This highlights a higher negotiation power of suppliers. The players that
lack their in-hand vineyards have suppliers that are growers. The growers could face some issues
for his or her cultivation because of unfavorable setting, rainfalls, illness threat because of that
offer are often affected. However, these potentialities aren't that frequent that highlights a higher
negotiation power of the provider.

Bargaining Power of Customers:

As represented within the case, the wine business within the U.S.A. could be a value driven
business wherever value incorporates a high correlation with the shopping for preference of
shoppers that shows a high negotiation power of patrons. In the premium phase, customers are
usually shopping for premium wines for special occasions like gifting it to others, special
moments, celebration and parties that create this business as low in terms of negotiation power of
patrons. Also, the quantity of players were high within the premium phase that provides
customers with countless value choices and style preferences. This makes the negotiation power
of patrons high. The shift prices for patrons are negligible within the premium phase that shows a
high negotiation power of patrons.

Threat of Substitutes:

Substitute product are alcoholic product like brewage, rum, vodka, gin that a distinct targeted
audience. this may not have an effect on the wine customers as their preference doesn't match the
substitutes that shows a coffee threat of substitute.

Rivalry among existing competitors:

Premium wine has completely different recognition for various occasions like parties, gifts,
celebrations. This recognition can't be matched by alternative competition product like strong
drink or rum that shows a coffee threat of substitute Premium players within the wine business
specialize in quality of the wine instead of the competition with the present players that shows a
coffee threat of group action among existing product. The players are charging as per their
quality within the premium phase and not as per the competition evaluation that additionally
shows a coffee threat of group action among existing product. Also, most players within the
premium phase are operative during this phase for the expertise and even to realize economies of
scale that showcase a coffee threat of group action among existing product. 

Q.3. Analyze potential threats to sustainability of Sandlands’ competitive advantage.

Ans.
Potential threats to sustainability are as under:
1. Imitation
2. Substitution
3. Holdup

Imitation :

 Market players are mainly working in value segment, premium segment and luxury
segment. Large players are focusing on value segment whereas small players are more
focusing on premium segment. Value segment has higher market share (80%). It also
provides more profit due to large market size.
 Sandlands is operating in premium segment. Its price in 2017 for California brand is $39
to $79 and of contra costa country brand is between $69 to $79. (exhibit 13). Its price is
comparatively higher than the competitors as mentioned in exhibit 13. So, price is not an
advantage for company over others.
 Sandlords is operating in old wine which is less attractive segment. It gives lower yield
such as 1 to 2 tons per acre, it also needs more cost to grow and harvest vine. It is also not
appropriate for use of modern farming equipment. As a result, there is lesser number of
growers. So, It is operating in niche segment which makes it less susceptible to imitation.
 Most winemakers manipulate the taste of over ripe grapes to produce desired flavors. But
Sanlords don’t do this. It is providing good quality wine with more unique and balanced
flavors. This contribute to willingness to pay.
 He is using different grapes, different farming methods, and no intervention in wine
making process. Apart from this they have good relationship with growers. With help of
his good relations with growers he can get best raw material that is grapes. It contributes
to the taste of wine as the type of grape, climate and terroir is important for wine. This is
competitive advantage of the company. It makes it difficult to imitate for others.
Substitution :

 Beverage market contains of non-alcoholic and alcoholic beverage segments. Alcoholic

segment contains beer which accounts to 50%, distilled spirits such as vodka, rum and
gin which accounts to 35% and wine that accounts for 15% only. So, comparative share
of wine is lesser. Among wine drinkers, high frequency drinkers forms over 80% of
consumption. There are chances of substitution by other products like beer, vodka, rum
etc.
 As per wine product segments, market is divided in to Value segment and premium
segment. Premium segment costs more than $10 per bottle. 80% of volume is of value
segment. Sanlords is operating in Premium segment. There are chances of customers
moving from premium to value segment.

Holdup :

 Company distributes 75% of wine directly to customers and 25% through distributors
(small to mid-sized). He is also using social media t market his products. Reaching
directly to customers is more profitable.
 Holding up chances are higher in distributor channel on which company is not more
dependent.
 In distributors there are 5 players which are controlling 50% part. Small wineries are
dealing with small distributors. But company is not at greater risk of holdup due to lesser
dependency on them.