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Analysis of Harvard Business Review case study. UCBX Fall 2012.
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CHATEAU MARGAUXCASE STUDY
AGENDA
Introduction Situation Analysis Problem/Decision Statement Identification of Alternatives Critical Issues Analyses Recommendations
CHATEAU MARGAUX
MISSION STATEMENT
“A brilliantly consistent wine of stunning grace, richness and complexity”, often called the most seductive and elegant of all Bordeaux wines
Greatness comes from the perfect mix of four things:
A grand terroir The right grape Variety Climate High-quality human work
SITUATION AUDIT - HISTORY
Andre Mentzelopoulos purchased the chateau in 1977
Located in the Bordeaux region, which produces the most prestigious wines in France
Officially classified in 1855 as a “first growth” (one of only 5 in the Bordeaux region)
Andre died in 1980 and his daughter Corinne (then 27 years old) inherited the estate
SITUATION AUDIT - HISTORY
Corinne hired a new General Manager, Pontallier, who in time became one of the world’s best wine experts
They transformed Chateau Margaux from the worst to one of the best first growths
Mentzelopoulos period one of the biggest achievements in Bordeaux’s history
80 hectares devoted to vines for production of red wines
12 hectares devoted to vines for white wines
170 hectares to mind the forests and meadows for the 39 cattle that produced fertilizers for the vineyards
70 production people, 4 with administrative functions
SITUATION AUDIT – BUSINESS MODEL
SITUATION AUDIT – BUSINESS MODEL
Produced an average of 150,000 bottles per year of its first wine, Chateau Margaux
200,000 bottles of its second wine, Pavillion Rouge du Chateau Margaux (grapes used from discarded grapes of first wine)
33,000 bottles of its white wine, Pavillion Blanc du Chateau Margaux
10% of grape production sold in bulk to other wine merchants
SWOT ANALYSIS
StrengthsWell-established prestige brandHigh profit marginsDemand for first-growth wines is strong and growing
WeaknessesNo knowledge of customer baseMarketing is outsourced to Bordeaux wine merchantsNo capacity to increase production without weakening brand
OpportunitiesIncreasing demand worldwideNew type of customer: the luxury consumer in Asia and RussiaNew distribution channels, especially online sales
ThreatsFrench wines losing market share worldwideConnoisseurs tastes shifting towards different style of wine (heavy tannins) that aren't easily produced in Bordeaux
PROBLEM/DECISION STATEMENT
Should Château Margaux take over distribution from the Bordeaux merchants?
Should Château Margaux add new, less expensive wines to its portfolio?
Should Château Margaux build marketing and sales capacity?
PROBLEM/DECISION STATEMENT
CRITICAL ISSUES
• France is losing wine market share to “new world” countries, such as Australia, Argentina, South Africa and New Zealand
• Connoisseurs could shift their tastes to “new world wines”
• Watching some competitors expanding
• Company has no structure besides production. No Sales, no Marketing.
CRITICAL ISSUES• All sales are made through the same channel since 1800’s
• Expanding could jeopardize Chateau Margaux’s brand
• Limited production of 200,000 bottles per year and impossibility to expand it, due to strict regulations in Bordeaux
• Market could see Chateau Margaux purely as a luxury product
• No track of final customer base
• Competitors Lafite-Rothschild Mouton-Rothschild Chateau Latour Haut-Brion
IDENTIFICATION OF ALTERNATIVES
Take more control of distribution or partner with distributors to employ a loyalty program for current customers
Develop a marketing plan for a tourism business
Increase product line to meet other consumers’ demands
Status quo
ANALYSIS
CriteriaRelative Weights Control Distribution Develop Tourism
BusinessIncrease Product
LineStatus Quo
Market share loss to new world countries 0.2 4 3 3 3Very limited company's structure (no marketing or sales) 0.1 2 1 2 4Possible brand devaluation in case of expansion 0.4 3 3 1 5Limited sales channels 0.3 1 4 2 4
2.5 3.1 1.8 4.2
AlternativesChateau Margaux Summary Assesment
Relative Index
Con
trol
Dis
trib
u-ti
on
Develo
p
Tou
rism
B
usi
ness
Incre
ase
Pro
du
ct
Lin
e
Sta
tus
Qu
o
Alternatives
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
RECOMMENDATIONS
Status quo
1. Château Margaux's brand is one of their strongest assets; why dilute it?
2. The current distribution system works well
3. Company management is tradition-bound and not ready to innovate
4. Demand is growing without action from Château Margaux
WHAT REALLY HAPPENED