Integrated Case Study Analysis On Spanish Vines

Statement of the problem

Discuss about Integrated Case Study Analysis On Spanish Vines?

The research study focuses on the solution to the problems related to Spanish vines. Spanish vines located in the Iberian Peninsula in Spain. The organization produces the most suitable variety of grapes for the production of wine.  The land occupied by Spain for the production of grapes extends over 2.9 million acres or 1.17 million hectares. Spanish vines are the third largest wine producing nation in the world after France and Italy. Spain ranks in the worlds in consumption of wine, as the Spanish people consume over 21.6 litres per person on an average. There are over 400 varieties of grapes available in Spain. The study sheds light on critical evaluation of the case study related to the business dealings of Spanish vines. It also focuses on decision taken to export wine to the Columbian markets. The SWOT analysis, PESTLE, Porter’s five forces model are also indulged to analyze the different aspects of the company in order to get a clear view of the strengths and to provide suitable recommendations for the weaknesses or problems faced by the company on the basis of the case study (Gerring, 2006).

The Spanish Vines at the very beginning of the initiatives taken to produce vines faced many difficulties. The first problem was related to the ownership of self-owned lands. At the very beginning, the company only had six employees so it is clear from the case study that they had limited capital. It was not possible to acquire or buy lands suitable for the production of grapes needed to produce the best quality wine. There were also problems associated with the company as it had less number of assets to show on the balance sheet. The company did not have the capacity to buy stock as required by them to expand the business. The second problem was that the company failed to attract the new generation buyers towards their products. The third problem was that the Columbian government raised the rate of VAT on high quality wine. This forced the general buyers to avoid this product, it affected the sales of Spanish Vines, and put a huge impact on the revenue earning of Spanish Vines.   

The company named Spanish Vines wanted to produce the finest vines anyone had ever tasted in the American continent. To serve this purpose the company started to export its wine in Columbia. The Columbian people liked the Spanish wine very much. The aim of the study is to critically analyse the decision taken by Josh Hackler to export the wine produced in their company to the American continent especially in Columbia. The objective of this study is to analyze the facts related to the lack of self-owned vineries. The objective of the study is to critically analyze the reason for not being able sale their products among the new generation were one of the main concerns of the company.  

Research aims and objectives

Josh Hackler as guided by one of Spanish friends named Javier established Spanish vines. The company was established in the year 2006. However, the actual functioning of the company began in the year 2009. Initially the company concentrated on producing wine in the home country and selling the wine in different parts of Spain. The Spanish Vines could produce the high quality grapes as they have a variety of grapes available in Spain. These grapes are exclusively used for the preparation of the best quality wine in Spain. The country produces 400 varieties of grapes. The grapes used for the production of red wine were Tempranillo, Garnacha and Monastrella.

The white wine was produced from the grapes named Albarino, Galicia, Palomino, Airen and Macabeo. The main regions where the wine was produced in Spain were Rioja and Ribera Del Duero. The climatic condition of Rioja was best suited for the production of grapes that helped to produce grapes that can provide the best quality vines. These wine brands had the reputation of the best quality vines in the entire after France and Italy. The Spanish vines were ranked third in the world because the land available in Spain was not so much fertile. It did not support the production of grapes of best quality in most parts of the agricultural lands. On the other hand, the quality of land required for the production of grapes in France and Italy were very fertile. That is why the wine produced in these countries was ranked among the top three brands in the world.

Hackler had a dream of exporting the wine produced in Spain to export to foreign countries. The Columbian citizens preferred Spanish vines and were ready to import the wine produced by Spanish Vines. The dream received a boost when the governing body of European countries related to the import and export of products announced that they would were reducing the rate of service taxes charged by them.

At the very beginning of the establishment of Spanish Vines, the company only had six employees. The sources for production of wine were received from the local markets. The company did not have the proper work force needed tom produce the wine. Therefore, they had to hire skilled labours from the local markets where labour hiring could be done by paying minimum money. The increase in production capacity and the expansion of the business were possible only through the export of the wine to countries located far away from the European continent.

Case brief; description of the situation

The company made proper allocations to perform the export activities. However, due the increase in the VAT rate of Columbia the citizens did not feel the urge to buy this brand anymore, as the citizens had to pay more money in comparison to the other variety of vines available there. The company found it difficult to continue its exports in Columbia as it failed to attract the new generation buyers. The new generation did not find it interesting enough to buy the better quality vines that were imported in Columbia. The existing brands in Columbia posed a great threat to Spanish Vines, as the prices of these vines were much lesser in comparison to the new brand. The Spanish brand faced a very sluggish phase after exporting their products in Columbia as a retailer of wine, instead of selling different brands that would have helped them to grab the attention of the customers in the Columbian wine markets. 

Statement of problem of the case study:

The case study on the Spanish Vines shows some problems faced by them according to (Bassey, 1999), are problems related to its sources of production of wine. The company had a very few assets and the inventory buying capacity of the company was very low. Spanish and vines failed to attract the new generation buyer’s towards their products. As they could not create the demand for Spanish vines in the minds of the potential, customers there were lesser opportunities for the company to thrive in the Columbian markets. Lastly, the increase in the rate of VAT for the imported commodities from the European continent made it even more difficult for these companies to participate in the market competition with the other brands available there. Relevant literature review:

The case study analysis will be done with the help of SWOT analysis, PESTLE, Porter’s five-force model, and other relevant tools required for achieving the objectives related to Spanish Vines.

As cited by Yin (2013), the strength of the Spanish Vines was that it was established in Spain this allowed them to get the best quality grapes for the preparation of vines. The weakness of the company was that it had less number of employees. The company did not have the land required for the cultivation of grapes for the production of wine. It had fewer assets and could not impress the potential customers because of their low turnovers shown in the balance sheets. The company got the opportunity to expand their business due to the reduction of the taxes required for paying the government for performing import and export activities.

Problem statement and plan of analysis

The main threat faced by Spanish Vines was that the potential customers were not ready to buy their products. This was because the Columbian government raised the rate of VAT on the commodities being exported in the wine markets.

According to Thomas (2011), the government of Columbia analyzed the fact that the European country wines were capturing the market. This would put the home brands under tremendous pressure. That is the reason, for the raise in the VAT rate of imported commodities from European countries. The wines from the European countries were contributing to the growth of the economy of France, Italy, and Spain as their products were earning foreign currencies. As the economic condition of the American continent is a stable one. A particular section of Columbia was ready to pay the price for buying the wines of the European nation s even after the raise in the price of the commodities.

However, most of the population avoided these wines owing to their high prices. The technology of Spanish Vines was not so much up graded in comparison to the other competitors in the Columbian market so they suffered from bulk production of wine and the market share of the company was low in the wine markets.

Research philosophy:

According to SiYin (2011), there are four elements attached with the research philosophy and these four elements are positivism, realism, interpretivism, and post-positivism. For this particular study, positivism has been chosen. Positivism is a theory based on the real phenomenon that helps to analyze the facts related to the topic. Here this philosophy would help in understanding the reason for the decision taken by the founder of Spanish Vines to expand the business over other nations across the globe.

Research paradigms:

Research paradigm is the analysis of the different phenomenon’s of a particular case with the help of models. According to Stake (2013), the young entrepreneur Josh Hackler first introduced the Spanish wine in Columbia. By 2008, the wine made in prepared in Spain managed to capture eight different markets in the United States of America. In 2012, the raise in the VAT rate of Columbia on European wines was eliminated after the European Union and the government of Columbia signed a treaty. This treaty once again boosted the selling of the European products in the markets of America. This time founder of Spanish Vines took into account the strategies needed to be kept in mind to avoid failure.

The focus was upon the advertising of the product in such a manner that the customer is going to accept the product. The second factor that was given importance was the price of the wine. This would help them to attract more customers that did not happen the very first time. This would allow Spanish Vines to offer better services to the citizens of America in order to increase the profitability of the business.

Research processes:

In this case study, the research is supposed to be done by applying the Deductive approach. The case study explains in detail the history of Spanish Vines and the entire journey of the Josh Hackler in establishing the business of selling wines that are originally produced in Europe. The deductive process helps to analyze the actions, plans, and strategies that have been initially utilized by the Spanish Vines in order to compete in the Columbian market at the very beginning. Later there was a change in the strategies adopted by the company to establish more branches in eight other new markets of America.

The treaty between the European Union and the government of Columbia helped Spanish Vines to re-establish their dominance in these markets. For achieving this purpose, they needed to rethink their old strategies and formulate new ones in order to capture the wine market of Columbia before any other European countries selling wine can capture it.

Research design:

In this section for analyzing the condition of Spanish Vines in the American wine markets, case study research has been undertaken. According to Johnson (2013), the research design comprises of exploratory, descriptive and explanatory approaches are utilized. The exploratory research is done on the problem that has not been clearly defined in the case study. In case of Spanish Vines, the Columbian government raised the VAT rate. The impact of this was not given clearly in the case study. The descriptive research helps to explain the responses received from the random customers. Here in the case study it has been explained that the customers are not ready to buy the wines of the European countries.

The explanatory research helps to provide analysis of the problems that has been clearly defined. Here in the case study, the problem related to lesser number of employees and the fewer number of assets have been clearly pointed out. This shows that the company requires more employees in order to support the orders given by the customers. The assets need to increase so that the balance sheet can attract more customers for Spanish Vines in the future.

Data source:

As cited by Hancock (2015), the case study research for the current topic has been gathered from the researches done earlier on this topic. The data has also been collected from the journals that are relevant to the topic. As mentioned in the Teachers college Press the derision taken by the Spanish Vines to expand the business in the foreign countries. It shows that earlier due to lack of experience the company failed earlier, however, after the treaty was signed the wine company gained momentum in Columbia with respect to their business. 

SWOT Analysis             

The marketers use SWOT analysis to analyze the resources and capabilities of the firm, it also helps the firm to examine the opportunity and scope of future growth. In other words, SWOT analysis is a tool that is used to analyze the internal and external factors like strengths, weakness, opportunity and threat that are faced by an organization.

Strengths:

Spain is very popular for producing wine for years. As the Spanish regions are diverse in nature the quality of grapes and wines are so different that they cannot be clubbed into one single group.   Levenshus (2010) stated that Italian foods are incredible and they cannot be compared with anything because of their diversity. This is the same idea that applies to the Spanish wines.   Thus, the Spanish wines provide advantage to the consumers preferring diversity and value at the time when value is necessary.

Traditional in nature, exceptionally high quality and huge diversity is the proper explanation for an increasing trend in the popularity of Spanish wines in both local and global market.  This serves as an added advantage to the wine producers in Spain.

Another important strength of the Spanish wine industry is the favourable weather condition. The climate of Spain is so suitable for production of grapes and thereby allows the wine merchants to produce wine throughout the year.

Weaknesses:

The diverse nature of the Spanish wine is also a weakness of the company. It compels the industry to become a wine maker as well as an educator. It is due to the reason that, as the consumers may be unfamiliar with the variety in region and grape quality; the company may need to inform them about these facts.

Saba et al. (2010) opined that the production of wine in Spain is mainly concentrated in the small and generally, the wineries, which are family, owned. Due to this reason, they sometimes lack in the strategic framework. Sometimes, the industries may face problems in advertising and leveraging new productions, this will in turn restrict the Spanish wine industry to flourish in the international markets (Azadeh, Saberi & Seraj, 2010)..

Opportunity:

According to Brecklin et al. (2011), in Sweden, a very small amount of wine is produced every year while the per capita consumption of wine in Sweden is much higher. Due to this Sweden imports a huge amount of wine. However, Koroneos & Nanaki (2012) pointed out that the Swedish customers trust the Spanish wine hence the production of Spanish wines is increasing day by day.

Exporting wine in foreign market is now quite easier for the Spanish wine merchants. Presently, most of the alcoholic beverages can enter any country only if imported by a licensed importer. This allows the importers to choose between the competent partners.

Threats:

With the change in the global market structure, there is a potent presence of competition in the industry (Mazo et al. 2012). The potential competition in the market has led the Spanish wine merchants to incur certain loss.

PESTLE Analysis

The PESTEL analysis points out the political, economic, social, technological, legal and environmental factors that can affect the performance of the industry. The PESTEL analysis is a tool, which analyse the external environment of the organization.

Political Factors:

The establishment of anti-counterfeiting trade agreement has helped the Spanish wine industry to trade in the foreign market more effectively.

As stated by Calabrese et al. (2011), the prevalent commercial and infrastructural framework has helped the industry to flourish.

The political framework of the country helps to establish an excellent framework for international trade.

Economic Factors:

The presence of huge labour force is an obstacle for the industry. The problem is if the company employs adequate workforce it is quite evident that the wage will be lower. On the other hand, if an increase in wage is required there should be lesser workforce.

The economy has a significantly low rate of inflation, which helps the industry to grow further.

As being within the euro zone, it is easier for the country to export the products to the neighbour countries.

Social factors:

The social factors affecting the productivity of the Spanish wine industry is the age of the workforce. Aged persons constitute a huge portion of the workforce, which reduces the productivity of the industry in turn.

There are religious factors as well. As some religions are against alcohol, they protest against the industry.

Technological:

Presently, there is a significant increase in the research and development sector in Spain, which yields high quality products.

With the emergence of technology, there is an increasing trend in marketing the products online via internet or social networking websites.

The industries are well acquainted with the technological aspects and therefore use high end machineries and chemical formulas.

Legal:

Due to the presence of non-flexible labour laws within the country has made the production of the industry suffer from certain limitations.

The laws implemented by the European Union regarding alcohol consumption has lead the industry to suffer a decrease in the demand for alcoholic beverages.

Environmental:

The climate is always in favour of the Spanish wine industry. A diverse location and the stagnancy in weather have resulted in an effective production of the wine industry.

The industry has taken initiative to reduce the carbon footprint. This helped the industry to contribute in the sustainability of the environment.

Porter’s Five Force Analysis

Bargaining power of the suppliers:

The Spanish wine industry is following the backward integration strategy to control the bargaining power of the suppliers of grape. The industry has become successful in convincing the grape suppliers to sign long-term agreements.

Bargaining power of the customers:

The market structure of the Spain has almost remained unchanged and therefore the buyers power is unchanged. As the buyers possessed more power because of  wide variety of products, they are still enjoying the power.

Entry of new potential competitors:

According to Schrödle et al. (2011), there is a significant increase in the level of competition in the Spain wine industry. There is a number of increasing wineries, which are owned by the multinational companies. However, Hartemink et al. (2011) argued that these companies have steady cash flow and achieve competitive advantage very easily.  Again, in order to get an uninterrupted supply of grapes sometimes suppliers are paid with lump sum of cash.

Rivalry between the competing firms

Rivalry among the competing firms can be considered as the strongest among all the five forces. As there are significant number of wineries in Spain, the companies within the Spanish vines is always faced with competition from the rivals.

Development of substitute commodities:

A lot of alcoholic and non alcoholic beverages are available out there. These are beer, whiskey etc. Shi et al. (2012) suggested that most of the times people think that the closest substitute of wines are beers. However, Mendes et al. (2012) argued that these products are more like complementary rather than substitute as each of the products are characterized by its unique features. Thus, the Spanish vines can enjoy the production of wine and achieve competitive advantage in the market in a very near future.

Porter’s Generic Strategy:

The Porter’s generic strategy for Spanish Vines is briefly evaluated as follows:

 Cost leadership strategy:

Since the company has been facing difficulties in entering into the Columbian market, the company could think of reducing the costs of vines for greater customer attraction. This, in turn, would lead to increased profitability of the organisations (Hancock & Algozzine, 2015). In addition, the reduction in costs would also help the company to increase repeat purchases, thereby, improving the profitability of the business.

Costs focus strategy:

Since the Columbian government has made it difficult for the global organisations to enter into the market, therefore, it is essential for the organisation to target a particular segment of customers. It is crucial to analyse the trends and demands of the customers by making an effective research and development team (Thomas, 2015). However, as argued by Gerring (2006), the formation of research and development team would result in increased working capital cost of the organisation.

Differentiation and focus strategy:

The company could think of designing its products and services in a manner to enjoy competitive advantage over its competitors. In order to achieve this, the organisation needs to provide higher quality vines to its customers by applying effective promotional techniques (Saba et al. 2010). On the other hand, Azadeh, Saberi & Seraj (2010) argued that the higher VAT and tax rates while entering into a foreign market could degrade the quality of products and services. Moreover, the identification of the potential customers could also help the organisation to increase its sales by developing a loyal customer base.

Value Chain Analysis:

The value chain analysis of Spanish Vines is briefly elaborated as follows:

Order Taking:

After setting up its unit, the organisation could set up customer relationship management to provide solutions and queries top the questions of the customers. This would help the organisation to gather an insight about the behaviours and attitudes of the customers (Breckling et al. 2011). However, as argued by Koroneos & Nanaki (2012), the company needs to incur additional cost on training it employees to handle the queries of the customers. In addition, the strategy of taking orders and providing delivery to the customers could help in increasing the market share of the organisation.

Specification:

The company could think of launching specified vine items in the Columbian market, as the government has laid stringent governmental rules and regulations on the global organisations. The introduction of specified items would help the organisation to design effective strategy for setting the prices of its products (Mazo et al. 2012). On the contrary, Calabrese et al. (2011) argued that the higher VAT and tax rates could result in lower profitability for the concerned organisation.

Scheduling:

The organisation needs to schedule its tasks and activities effectively for operating in the Columbian market. The tasks include identification and availability of resources, obtaining the right suppliers and analysing the governmental trends. This would help the organisation to maintain its productivity level even after paying high tax and VAT rates (Schrödle et al. 2011). On the contrary, López-Fresno (2010) argued that it is necessary for the organisation to hire an efficient project manager to supervise the tasks and activities before re-launching its business operations.

Thomas (2015) cited that the Spanish Vines could have survived the difficult situations if they would have had a partnership with some other company of the European continent. The partners are essential for any business for every business. If there had been a partner associated with the Spanish Vines then they would have been able to survive the adverse situations that rose in Columbia. The partners help to share the risks and the asset as well as the business increases in the most feasible way possible.

The case study shows the different business stages and the problems faced by Spanish Vines. The company needs to concentrate on the increase of assets. This will help them to raise funds during odd situations they are facing a difficult situations. The balance sheet will improve and as a result will allow them to attract shareholders towards their business in the future.

Conclusion:

The case study provides the challenges faced by Spanish Vines in different stages of the business. The company needs to adopt new policies and formulate new strategies to improve the sale of their products in the American markets. This will help them to increase the company to increase the market share as well as the revenue earned by the company. 

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