Gallo Winery

MUHAMMAD NOMAN BABAR YOUSUF MUHAMMAD AKMAL HUSSAIN KHAJA MUHAMMAD IMAD GHORI

History of the firm

Josephs vineyard Began small grape- producing company prohibition, govt allowed wine production for medicinal and religious Joseph Gallo, an Immigrant from italy, came to Modesto California

Dramatic Solution
Joseph left his young sons Responsibility and decision making After the death of parents, Probition was repealed sons decided to move from grape growing to wine producing two pamphlet on wine making $36000 in hand

Gallos dominant position

In 1930 and 1940s Eenest developed marketing sense Julio cultivate and refined Sold in bulk to bottlers In 1950s Gallo, Success with THUNDERBIRD (a high-alcohol and low-price)

But!
o Gutter image o Further tarnished by the POP-Wine (Boones Farm and Spannada wines in 1960 to 1970s)

Image
at that time started upgrade its image Maintain its market share and sales It began Premium table wines zinfandel,Sauvinon Blanc, Ruby cabernet and French Colombard

Vertically Integrated
Truking companies Own bottles Midcal Aluminum Company Distributors

Federal trade commission Took offense

Bartles & Jaymes Wine cooler

It had Extensive product line and Premium wines But didnt have snob appeal In 1984 , Gallo entered in wine cooler category(a carbonated drink with half white wine and half citrus juice)

NUMBER ONE POSITION

o Summer of 1986 with that initial $36000,some ingenuity, a little luck and a lot of spunk $1billion sales and earning of $50 million

Key executives
Ernest was president Polite , but blunt Market and distribute Julio was chairman of the board Farmer at heart Producing wine

Internal operations
Gallo was tightly held and secretive Few loyal senior ran the divisions and reported to Ernest 300 pages training manual Diana Kelleher said I never saw a profit and loss statement

Industry History and analysis

the wine cooler industry emerged three separate events were cited 1. Mixing Seven-u with wine 2. Thomas Steid formulated own wine cooler recipe 3. California cooler, Crete and Bewley o Refresher having batches of white wine and fruit juke

Coolers entry
Factors
1. 2. 3. 4. 5. Drunken driving laws MADD (Mother Against Drunk Driving) Fitness and health Legal drinking age Lobbying to remove liquor advertising from TV

Wine cooler industry to succeed

Taste Flavors Packaging Advertising marchandizing

competition
in first quarter of 1986, the world largest winery, brewery and distillery were vying for the top spot Cost of entry $10million just for advertising Estimated 60 to 65 million cases at end of 1987 More than 150 kinds of cooler were competing the top seven

TOP SEVEN
Wine coolers E & J. Gallo Winery California cooler Sun country White moutaint Calvin cooler Seagrams Golden Seagrams Premium Market shares (%) 22.1 18 13.1 12.4 8.3 6.9 5.5

Corporate strategy
Growth strategy:
They went for related diversification because distribution and other activities. Related diversification: Enter in new cooler industry Vertical integration: Forward and backward. Product development. Introduced premium wine to upgrade its image(ZINFANDEL,SAUVIGNON BLANC, RUBY CABERNET AND FRENCH COLOMBARD)

BUSINESS LEVEL STRATEGY

FOR WINERIES: Overall low cost(THUNDER BIRDS) Differentiation( extensive product line) FOR WINE COOLER: Focus strategy: differentiation through advertising and distribution.

FUNCTIONAL LEVEL STRATEGY

Skillful marketing & sales: Advertising etc! Extensive distribution Self supplier: ( Midcal aluminum, grapes production and trucking company CALIFORNIA )

Distinctive competencies
Advertising and distribution: Fictional character, Bartley and James, creative ads, used extensive wine distributor ship, separate sales force.

Question 2 1) THREAT OF NEW ENTRANTS

Entry barriers: Economies of scale. High favorable. Capital requirement high favorable. Access to distributionremove channel strict favorable. Govt policy legal age boundaries Unfavorable. Exit Barriers: these were low, thus attractive firm.

2)Rivalry among existing firms

Numbers of competitor of equal size: winery, brewery, distillery were vying for top spots thus unfavorable for industry. Rate of industry growth; it was high, 13% up to 1993. Thus favorable. Product or service characteristics: Specialty Vs commodity specialty product like wine cooler malt based, spirit based product- favorable for industry.

Amount of fixed cost: It was low thus favorable for Industry. Capacity increased by any firm: No capacity constraint thus favorable. Height of exit barrier: Exit barrier were low thus favorable.

3) POWER OF BUYER
Power of buyer was high thus unfavorable for the industry. Because. Alternate suppliers are plentiful because
product is standard or undifferentiated. Switching cost of changing supplier low. The purchased product is unimportant to the final quality or price of a buyers product or services and thus can be easily substituted without affecting the final product adversely

4) Power of supplier
Power of supplier was low thus favorable for industry. The supplier industry is not dominated by a few companies The product or service is not unique. Low switching cost Substitutes are available.

5) Threat of Substitute.
o It was high thus unfavorable for the industry. It was high because. Aggressiveness of substitute products in promotion Switching Cost low Perceived price/ value

QUESTION # 3
Fallowing are same steps which GALLOS has taken to consolidate its position. EXTENSIVE DISTRIBUTION:
It overcome power of buyer rivalry among existing firms threat of new entrants .

SKILLFUL ADVERTISING:
It over come threat of substitute.

VERTICAL INTEGRATION: it over come

power of both buyer & supplier

Question 4

 JAMES and BARTLEY giving a strong response to current and expected key success factor in industry environment.

Question 5

LIST OF OPPORTUNITIES AND THREATS

LIST OF STRENGTHS AND WEAKNESSES

Directional Policy Matrix

QUESTION 9
RECOMMENDETIOIN
They should extend their product line in wine cooler. They should try to create back up for themselves. They should decentralize their power because educated and able manager have not part in decision making They should unveil secrets to employees in order to motivate them.

THANK YOU!