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This report introduces "Royal Crown Wines" Inc in front of the branch manager of ANZ Bank. It is presented by Mr. Parashor Ghosh the CEO and founder of "Royal Crown Wines" Inc, it is a new wine business in New Zealand amongst many wine businesses and vineyards in New Zealand. Royal Crown Wines Inc is a contemporary beverage company which makes world class wines and also plans to make the vineyards a unique tourist spot.
Our business will include exporting of the wine bottles to overseas where the target markets would be Canada, Australia, USA, Europe, China and India. As an added service to our niche clients we will also specialize in custom made cases according to orders from different companies and also from individuals who will have special orders for occasions like wedding, birthdays or private parties.
New Zealand had an estimated total revenue of $3.5 billion from the wine industry and its related sector in the year 2009 and it has experienced export growth of nearly 24% per year over the past twenty years, compared to just 5.9% growth for all merchandise exports in New Zealand.(NZIER, 2009). So it obviously attracts a lot of attention of the government and it is also a competitive business with 10 wine sector division in the country with almost 100 wineries inside each of them. (NZIER, 2009).
Keeping the statistics in mind our business will only target the niche market which will export high quality wines in Europe, USA and Canada with heavy emphasis on branding, advertising, research and development. It will have contemporary products like blended- flavoured wine, sparkling wine, chardonnay and rich organic wine. Our target is to take at least 5 % market share in the niche segment of the globe by the year 2015. Also there would be emphasis on the wine tourism of the vineyards where the company would have an in-built restaurant inside the vineyards where we will sell our own wine and recipe. Also features like hire-a-cycle to tour, amateur grape plucking etc would be available to the tourists who would come to visit the vineyards.
2) STRATEGIC FOUNDATIONS
2.1 VISION OF THE COMPANY
"In 2020 Royal Crown Wines (RCW) will become one of the most exclusive wine makers from New Zealand who will have its presence not in common wine racks but in the exclusive racks, and we want to make our product users feel "Royal" when they have our wines in their glasses. Our employees and associated staff are the part of our brand and their contribution would be considered the utmost in making our wines really "Royal" for the customers"
"RCW" visualizes the future in a very clear manner and to achieve this the company has already bought a running vineyard in the Mahurangi region which is just North of Auckland and where there are grape trees planted in it but the production will be started in the harvesting season as it will give more grapes and can do more production out of it. Our emphasis is on our efficient staff who are the pivotal point for making the wine from our vineyards and making it a consumable product yet unique in nature. Agriculturist and researchers would be working together in order to come out with innovative product and also enhance the quality of the grapes grown in the trees. Right from plucking of the grapes till the bottling every single thing will be taken the utmost care.
Our tourism portion of the business will be a prominent sector which will give us revenue when the wine production is not at its optimum. Our in-house restaurant will have the best choices of cuisine topped up with our unique range of wines. Different features like hire-a-cycle to tour, complimentary tasting of exclusive wines and great staff hospitability will be some of our selling features.
The mission statement for Royal Crown Wines Inc is a 4-tier mission statement which composes of the following:-
To be one of the most exclusive wine companies of New Zealand which will have a global coverage but which will use resources locally.
To make "RCW" a brand which will be associated with class and quality.
To be the employer of choice with happy employees as well as happy customers.
To contribute to the wine as well as tourism industry of New Zealand by becoming one of the best vineyards to visit, with full hospitable staff and unique facilities.
The above mission statement would be the laid foundations on which the company would function and to the best of capability will try to achieve the targets mentioned in the mission statement.
"RCW" Inc recognizes the sentiments of the customers and will always look after the quality of product with increased amount of accuracy in the product which will give a real different taste than any other similar product of its range. Also all the products will come in a state of the art-bottles which will add to the aesthetic value of the wines.
The tourism sector of the wine business also has to be taken good care , where people from different corners of the world might come to visit , so the in-built restaurants , the rest homes etc all has to be a world class experience for the customers and they should feel that they are getting what they are paying for. All the tourists will be treated royally and would be given complimentary wine tasting experience with our world class wines , small cars with guides , as well as freelance touring by hiring a cycle will be available to the customers.
To acquire a 5% share in the global niche market of wine drinkers.
To increase profit by 10% every year which will be in ratio to the percentage of market capture.
To expand the business nationally and make the distribution globally.
To investigate efficiency measures for protecting the grape trees as well as to protect the quality of wine
Taking intellectual property rights on any new invention on the range of wines the company would work on.
To take critique and suggestion of people for improving our tourism business and also the quality of our wines.
From the goals of the company it can be derived that the company wants an increase in the market share gradually and it wants to hold at least 5% of the global niche market of the total wine drinkers in the world under its brand umbrella in order to have constant profits. Accordingly the pricing of the product will change with time in lines with the inflation in the economy, the pricing also depends on the amount of cost it requires year to year to make a single bottle of unique wine which will cater to the niche population of wine drinkers.
Similarly other goals set by the company like expansion of the business is obviously a point which every company looks at. The company will target to expand more regionally and nationally rather than globally. The distribution of the wine bottles will be globally though.
Making patented products is another area which the company will be severely working on as it would give a major break in the industry and once a product is patented the company can charge royalty on the patent or sub-let the patent to other companies who wants to use the patented items in collaboration with their product.
3.) MACRO ENVIRONMENTAL SCAN
3.1 POLITICAL ENVIRONMENT
The political environment of the country plays an important role in the wine industry. The government changes and amendments in the policies and procedures for the food and beverage industry will have direct effect on the wine industry. For example the government is currently supporting the wine industry in order to preserve the eco systems study assesses winegrowing environmental impact on the eco system such as wine residue content, water quality, the air quality and agricultural landscapes changes are minimal and in fact it is helping in bio diversity and sustaining the environment. While researchers say producing grapes, winegrowers can manage land in ways that might conflict in the proper functioning of ecosystems, including excessive use of pesticides and fungicides that leach to groundwater and can become residues in wine, or problems like emissions of CO2 that pollutes the climate, risk of chemicals leaching from wooden posts to groundwater, These impacts are not typically reflected in the winegrowers' income and therefore, this is a minor consideration as far as the government is concerned with the environment. (Baskaran, Cullen & Colombo, 2010)
Similarly the wine equalisation tax (WET) is a value-based tax paid on certain dealings with wine sold in Australia. This tax is charged under the Australian tax legislation. These dealings include wholesale sales and untaxed wine sold by retail. For untaxed wine sold by retail, WET is charged on a notional wholesale selling price. The current rate of the WET is 29% of the wholesale value. (Inland Revenue.org, 2010). Again the recent wine acts of 2003 which came into force on 2004 , is administered by the New Zealand Food Safety Authority , the implementation of the wine act (NZFSA, 2009) made certain criteria's for the wine industry which was solely in the purpose to protect the public health the criteria's were as follows :
set standards for identity, truth in labelling, and the safety of wine
minimise and manage the risks to human health arising from the making of wine and to ensure compliance with wine standards
facilitate the entry of wine into overseas markets by providing the controls and mechanisms needed to give and safeguard official assurances issued for the purpose of enabling entry into those markets
enable the setting of export eligibility requirements to safeguard the reputation of New Zealand wine in overseas markets
promote consultation with industry organisations on the regulation of the industry, as an aid to fostering efficiency and growth
Enable levies to be imposed on winemakers for payment to entities representing their interests for the funding of industry-good activities.
Hence with the advent of changing environment and changing rules of the government the wine industry business certainly gets affected by the changing pattern of laws and regulation, hence "SSG" Inc. is also going to get affected with the changing rules and regulation of the government and with the change in political scenario.
It might affect the export numbers of wines, the sale inside the country itself the production by the company and also the employee -employer acts and relationships. Some broader aspect of the companies are also affected like the protection of the brand image, composition of wines if it is under the current regulation or not etc.
Hence the political framework looks suitable for the current scenario for SSG Inc. to enter the market and can gain advantage as the company strives to create only quality products so the regulations related to quality and brand image will be favourable in terms with the governmental policies but on the other hand the requirements for exporting of wines might change in the long run and the laws might become more stringent , so the company has to be well prepared for back-up plans in these scenarios.
The economical change around the globe is surely a factor which can affect the production and the sale of the wines nationally and globally. The exchange rates of the New Zealand currency as well as the fluctuation of the US dollar in the global market will be a factor by which the company would be affected. Also the inflation rate of the countries to which the wines are getting exported will be a major factor for consideration as long as the revenue of the company is considered.
For example if the US dollar goes up against the NZ dollars while making the sale agreements or exporting the wines to other countries then it will be a gain for the company but if the New Zealand dollar goes up and the US dollar goes down that is if the currency market turns vice-versa then it would be a loss for the company while exporting the wines to other countries.
Since the wines would be marketed as luxury items , there might be scenarios like the recent recession in the United States and in many parts around the globe which will affect the sales figures tremendously.
The societal factors are influential for the choice of market entry for our company. For example our company will not at all think of entering countries like Saudi Arabia or Kuwait where there is prohibition of alcohol consumption by people due to religious reasons but we can see United Arab Emirates particularly Dubai in order to sell our wines as there would be people with purchasing power in order to buy our wines.
As mentioned in the earlier portions of the report we would look into the countries like Canada, Australia, USA and some European nations. Canada and Australia are pre dominantly wine consuming nations due to their cultural and societal reasons and they also have the purchasing power, so it holds a good market for our wines to sell and the similar reasons goes for USA. We will also look into the markets of Europe because people would like to spend on a nice bottle of wine on special occasion which is part of the traditional values of the society. A small percentage of the emerging markets like India and China are also targeted for long run set-ups.
The technological factors determines the machinery and the processes in which we make our wines exclusive. A considerable amount of our allocated budget would be towards the research and development of the wines, which will actually enhance the quality of wines. With the advent of newer processes and newer technology the need of working capital would also differ because more sophisticated technology would also involve greater amount of cost. The technology and the vinification process will be under controlled measures. If there would be technical errors in the process of making wines that is yeast fermentation etc it will in turn destroy the end-product and since our company would only sell to the targeted niche segment hence any fault on technological process will result in a huge loss for the company.
There are many legal rules and regulation for production of wine and export and imports of wine to and from different countries with New Zealand. Particularly wine production in New Zealand has certain rules and regulation where there is a certain quality to be maintained by the wine producing company and other rules and regulation stated by the Wine Act 2003 (NZFSA, 2009) which is stated in the Political Environment section (3.1). Also the rules and regulation impacts a lot in the export of our wines to other countries, for example if the company see's India as an emerging wine drinking country because of its gradual societal change and also due to law change in the import of alcoholic drinks in India where there has been a recent reduction on the export duty of alcoholic beverages (Indian Wine Academy, 2009) but the exemption was not there for wines. Hence the company still see India as an emerging market where the rules would soon be changed and wine import would be much easier in the long run. On the other hand the rules for Canada and USA are not that stringent and it is easy to export wines from New Zealand to these countries but in the long run they might tighten the laws and there might be a gradual shift of target markets from that of the established to that of the emerging.
There are certain environmental factors which are to be kept in mind as long as the wine growing is concerned. The use of pesticides and fungicides have to be in a controlled measure ,also the measures by the Government for bio-diversity is an important factor which gives the wine industry an edge over other industries in New Zealand , and problems like emissions of CO2 that pollutes the climate, risk of chemicals leaching from wooden posts to groundwater etc are controlled in the wine industry business and it helps in boost of the industry giving the wineries a certain level of Government support . (Baskaran, Cullen & Colombo, 2010)
As far the climatic part of the environment is concerned, New Zealand has the proper soil and atmosphere to grow grape trees, it also has the proper infrastructure to give the industry the right kind of framework but with the advent of environmental issues like global warming , the company has to have proper measures and also have to spread the awareness by being socially responsible.
Amongst the other generic wines our company will also deal with organic wine which itself supports the bio-diversity and will in turn support the environment .Organic wines are rich in nutrition as well as making it a unique selling product.
MICRO ENVIRONMENTAL SCAN
This section of the report analyzes on the Micro scan of the customer base inside the country of New Zealand. There is a considerable amount of wine drinkers inside New Zealand and it is predominantly a wine drinking country because of its societal, climatic and religious reasons.
However due to many wineries producing varieties of wine inside the country ,there will be a less percentage of customers in the local market to buy our wines because the retail price of the wines that our companies would make will be on the higher side as we would try to enter the niche market who prefers quality over quantity. Although there are people in New Zealand who has the purchasing power to buy quality goods at a higher price than the average but the number of these people are few. Usually the buying behaviour in New Zealand is more towards mediocre quality wines which can be bought in a lot of quantity.
So the company looks into the local market and predicts to only have a 0.5% coverage amongst all wine drinkers in New Zealand. The assumption is made on the current trend in the market where people still buy quality goods with high price when there are special occasions like Christmas or Easter etc.
The competition is intense in New Zealand for an emerging wine producing company. There are 10 major wine producing districts in New Zealand with a total number of 643 wineries in the country according to the statistics on 2009. (Wines of Nz.com., 2009) . As stated earlier the company has already bought a running vineyard in the North Auckland region of Maharungi, which is a good position to grow grape trees with mild undulated landscape and good soil and sunshine to grow all type of grapes. It gives an edge over some wineries and it is also in close proximity to the commercial hub of Auckland , hence making the distribution cost a little lower.
But the major competitors in this segment are many and they are as follows :-
The following competitive analysis is done on region basis with one of the best wineries located in those regions
MARLBOROUGH REGION :-
Is known for its quality, and the famous brand "Montana" comes from the Brancott Vineyards in the Marlborough Region. Following are some of the famous wineries in that region :-
Marlborough Grape Producers Ltd
HAWKES BAY :-
This is also a wine producing region located in the east coast of basin of the country. The wineries here are famous for producing for chardonnays, cabernet sauvignons, syrahs, and merlots. Some of the famous wineries are below :-
Mission Estate Winery
Te Mata Estate
Craggy Range Winery
It has almost more than 100 wineries to choose from and is a very competitive market for vineyards. Although it has many but not all of them have huge National and International presence. It is known for its boutique style vineyards with products like Bordeaux Style Reds. Some of the famous wineries are :-
Villa Maria Winery
There are also other major regions for wine-making in Gisbourne, Nelson, Canterbury etc. Where there are many wineries in fragments.
Given the scenario above it makes it very difficult to start a wine business, but if there is competition in the market that means there are scope for the product to sell given the product is either a product for mass marketing or for the niche.
As our mission statement states, that our wines would be made only for exclusive racks , that means we are targeting the niche market with more emphasis on research and development of the wines .If we look into the competitive part of our business there are only a few companies who produces wine with expensive retail price , most of the products are medium priced. Hence uniqueness is what we seek in our product to price it accordingly so that once we start selling into the market people will know that the range of wines from "Royal Crown Wines" are different in taste and unique in nature, and they would be willing to pay the price for it. These are the competitive advantage strategies which the company would apply apparently when it enters the market.
4.3 SWOT ANALYSIS
It will be a unique product.
Government is encouraging wine production.
The chosen region has the right kind of soil and bio-diversity in order to grow varieties of grapes.
Heavily dependent on the research and development of the product.
Depends on whether the product can be marketed as a unique product.
Heavy reliance on brand image making.
Export market is increasing day by day.
Wine is becoming a favoured niche product in the emerging markets.
Not all wine companies produce uniquely crafted wine in state of the art bottles.
Competition is immense inside the country.
There are other wineries who thinks in the same line of strategy
Price wars with other similar kind of wine producing companies.
The supplies required in this type of businesses are mainly the seeds which are to be sown for the trees, the proper manure, pesticides and fungicides for the already grown up trees, chemicals and natural water and lastly the bottling.
The seeds can be recycled from the trees which already bears the grapes and new seeds can be brought from other countries importing it into the country through authorized seed importers.
The bottling would be outsourced and contracted to another company who would do the bottling and labelling for all the wines that would be made by "Royal Crown Wines".
There is requirement of machineries for research purposes, these supplies are capital expenditure and is not for continuous orders.
Lastly, the need for human capital is the most, where skilled people to work in the vineyards would be a regular requirement.
KEY STRATEGIC ISSUES
The Key Strategic issues for " Royal Crown Wines" for being successful in the long run would be as follows :-
5.1 UNIQUE PRODUCT
The foremost strategy by our company would be to make unique quality wines where the product will come in different flavours and would taste substantially different than the other wines which are available in the market. There would be concept wines like sparkling dry wine (carbonated) flavoured with lime. Then all the wines would come in a nice bottle which would have an emblem like a gold crown and would come in nice glass bottles with carvings in it.
5.2 PERSONALIZED SERVICES
There would be personalized services for priority customers who would like a range of wine cases, and the company will make it custom made, according to the customer orders . The cases would come in nice designs and with assorted range if the customer want in that way .
5.3 BY-PRODUCT USES
The recycling of the by-products of the grape is also another sector the company would be looking at, where the extracts of grape seed produces large amount of oxygen related radical compounds like ethanol, methanol or acetone which can be made in a powdered form and will give great nutritional value and given that it can be sold for medicinal purposes to other companies or as a direct vendor. (Yilmaz & Toledo, 2004). It can generate when there is stop-gap in the production of wines.
5.4 WINE TOURISM
The tourism sector is another section which the company will be looking forward to. Our vineyards would have special restaurants, inside them where we will also serve our world class wines complimentary with the food free of charge. Tourists, who wants to buy our wines will get the wines at a discounted rate. The tourism sector of the vineries acts as a backup revenue generation for working capital when the production is not at its optimum.
5.5 EMPHASIS ON RESEARCH- DEVELOPMENT AND PROPRIETARY RIGHTS
The company would emphasize highly on the research and development of the wines that are being produced in our wineries and also would do patent if we come out with any product which would be unique in nature. Also there would be procedures to sub-let some of our patents (not the patent of the most premium wine, but the second category wines) with a charge of royalty to other companies.
5.6 RETENTION OF EMPLOYEES AND CUSTOMERS
The company would have concrete human resource policies, where the employees should feel secure in the work environment. The employees would be given bonuses on the basis of the company profits as well as well structured salary. The company believes that happy employees will drive the company performance by giving high quality output also resulting in customer satisfaction.
For the retention of customers, there would be segregation of customers. There would be three categories of customers and they are as follows :-
Freelance Customer - These are customers who are like flying customers who might buy our wines once in a while and their behaviour is unpredictable.
Approachable Customers- These are customers who buy our wines once in a while but has a pattern in buying, these customers can be approached in order to upgrade in our products and become a priority customer.
Priority Customer- These are the handful of customers who will give us orders for cases, and they have a regular pattern in buying. These customers will be given a "Royalty Card" in order for them to use it for purchasing the wines at discounted rate , putting up special orders and also to use it for wine tourism purposes.