Strategic Cost Management For Taylors Wines: Analysis And Opportunities Essay.

PESTEL Analysis and Porter's Five-Forces Model for Australian Wine Industry

Discuss about the Strategic Cost Management for Taylors Wines Case.

Taylors Wines was established in 1969 by Mitchell Taylor among other family members and are one of the largest family owned winery in Australia. Taylor’s Wines produce various products such as Cabernet Sauvignon and Shiraz (Grant et al., 2015). The company is located in the Clare Valley of South Australia and has been experiencing tremendous growth in revenue, scope, and size. For instance, the company’s operations have expanded to other international markets such as the U.S with operations in San Francisco and New York. The company majorly operates in the Australian wine industry that has over 2,400 winemaking firms that are in active service.

Thus, report analyses Taylors’ wines market strategies predominantly in the Australian wine industry. Furthermore, the report examines the external environment based on PESTEL and Porter’s five model analyses. Also, the report identifies Taylor’s wine dynamic capabilities, and then the company’s current position in the Industry and principal markets are examined thereof. Lastly, the report explores various opportunities and threats facing the Australian Wine Industry coupled with viable strategies that can help Taylor’s wine to sustain its competitive edge.

The Australia government have introduced restrictive drink driving rules to curb wine addiction. Also, the government has added volumetric alcohol tax (higher taxes for wine) further disrupting productions in the industry (Aylward, 2004). Furthermore, the government, in partnership with other social groups have introduced education curriculum to sensitize the Australian society on the effects of excessive alcohol consumption on personal health.     

Fluctuating exchange rates have in the past significantly disadvantaged most of the Australian producers. For example, the high value of Australian dollar has made the local wine's market to be attractive to imports especially the French champagne further increasing competitive intensity in the industry (Bruwer, 2002). The increase in disposable income among Australian households due to increasing per capita income have also encouraged wine consumption. 

Most Australians shows a strong preference for local products in the Australian Wines industry. Some people in Australia also view wine consumption as “sophisticated” and “fashionable” further propelling the increase in wine consumption (Chong, 2014). The increase societal concerns on the effects of wines and alcohol in the Australian society have further affected operations in the industry. The fluctuating climatic and weather patterns such as warmer average temperatures have significantly affected the growth of grapes in Australia (Galbreath, Charles, and Oczkowski, 2016). As such, most grape growers have resorted to irrigation farming to increase the volume of production further increasing water usage. 

Taylor's Wine Dynamic Capabilities

The threat posed by new entry into the Australian Wines industry is relatively small. This is because starting a winery does not require massive amount resources for initial capital investments. Besides, most of the wineries in the Australian Wines industry are subtle family-owned firms, and sell most of their products locally (Chong, 2014).

The threat of substitute products in the Australian Wines industry is high. This is because, in the Australian Wines industry, many substitute products can replace wine. For example, alcoholic and soft drinks such as coffee, tea, and fruit juices can all act as substitutes in different ways (Bruwer, 2002). Some of the imported products such as the French champagne can easily replace the Australian wines.

Because of many rivals (over 2,400 firms) in the Australian Wines industry, the probable consumers have great alternatives. This can be attributed to low switching cost associated with changing from one firm to another. As such, consumers in the industry can easily switch to cheaper brands that are of similar quality (Chong, 2014). Most Australian wine consumers are attracted to quality wine products that are relatively cheap further explaining the higher buyers’ bargaining power. Notably, firms in the Australian Wines industry must put more emphasis on sustaining low prices, high-quality products, and quality services.

The bargaining of suppliers in the Australian Wines industry is low. This can be attributed to the existence of many grape growers in Australia are contracted to major wineries (Grant et al., 2015). The high number of suppliers in the industry imply that grape growers must strive to retain their contractual relationship with the wineries. Also, the wineries can very quickly switch allegiance to other grape growers who have real contractual terms and higher quality products. 

Market competition

Market competition from local and international companies operating in the Australian Wines industry is very high. This is because there are approximately 2,400 businesses that are competing in the industry (Grant et al., 2015). These rivals include Taylor’s wines, Accolade, Private Label, McWilliams’s and Fine Wine brothers. Also, competition from other wine producing countries such as Chile, South Africa and Argentine who provide similar quality at relatively prices have further increased competitive rivalry in the industry.

One of the company’s dynamic capabilities is the production of unique products such as Cabernet Sauvignon and Shiraz that are inherently considered to be the industry’s best wines. This has given Taylor’s wine a unique competitive edge in the sector due to its continuous product innovation and development capacity (Aylward, Glynn, and Gibson, 2006). In fact, the company was recognized as a 5-star winery based on wine rating by James Halli-try. The evaluation identified the company’s superior packaging production, marketing, and distribution processes as unique in the industry compared to those of market competitors.

Taylor's Wine's Market Position and Key Markets

The company has sustained its production of quality branded wines winning it customer awards such as the 2011 Woolworths supplier of the year award in the alcohol category (Grant et al., 2015). The company also have superior domestic sales and marketing services due to their personalized customer services, and the ability to meet specific customer preferences.

Taylors Wine’s current position in the Industry and identify the key markets it operates within

Currently, Taylors Wine is also one of the largest Australia’s wine production and exporting companies in the world. Notably, Australian wine industry has an 8% control of the global market share of wine business (Grant et al., 2015). This can be attributed to the very low prices charged on Australian wines exported to other countries. Most of the country’s wines are exported to the UK, U.S, some parts of Europe, Canada and China which forms the company’s key markets. 

Opportunities and threats for the Australian Wine Industry and Taylors Wine’s in particular

Opportunities

• Increase in disposable income among Australian households
• Strong preference for local products
• Increased preference for quality branded wines
• Many grape growers
• Higher rating in the global wines industry

Threats

• Increased government taxation
• Fluctuating climatic and weather patterns
• Fluctuating exchange rates
• Intense competitive rivalry
• Increased societal concerns on the effects of wines and alcohol

Three viable strategies for Taylors Wines to make the leap from ‘Good’ to ‘Great.'

Taylors Wines should consider implementing a cost leadership strategy in the Australian wines industry to sustain and enhance its competitive edge in the global and local wine's market. This is in response to the threat of intense competitive rivalry in the Australian wines industry.

Taylors Wines should also concentrate on diversifying its wines products to satisfy various consumer preferences. This will necessitate increased product innovation and value addition through excellent packaging and preservation of its various products.

Lastly, Taylors Wines should expand its operations to include various brands of non-alcohol products. This enable the company to comprehensively satisfy its diverse customers' preferences better and expand its market share.

Reference

Aylward, D. (2004) ‘Innovation–export linkages within different cluster models: a case study from the Australian wine industry,’ Prometheus, 22(4), pp.423-437.

Aylward, D., Glynn, J. and Gibson, B. (2006) ‘SME innovation within the Australian wine industry: A cluster analysis,’ Small Enterprise Research, 14(1), pp.42-54.

Bruwer, J. (2002) ‘The importance and role of the winery cellar door in the Australian wine industry: some perspectives,’ Australian and New Zealand grapegrower and winemaker, (463), p.96.

Chong, S. (2014) ‘Business process management for SMEs: an exploratory study of implementation factors for the Australian wine industry,’ Journal of Information Systems and Small Business, 1(1-2), pp.41-58.

Galbreath, J., Charles, D. and Oczkowski, E. (2016) ‘The drivers of climate change innovations: evidence from the Australian wine industry,’ Journal of Business Ethics, 135(2), pp.217-231.

Golicic, S.L., Golicic, S.L., Flint, D.J., Flint, D.J., Signori, P. and Signori, P. (2017) ‘Building business sustainability through resilience in the wine industry,’ International Journal of Wine Business Research, 29(1), pp.74-97.

Grant, B., Mounter, S., Fleming, E., Griffith, G. and Villano, R. (2015) ‘The Australian wine industry at the crossroads: A comparison of performance across major wine-exporting countries in 2000,’ Australasian Journal of Regional Studies, 21(1), p.3.

Hussain, M., Cholette, S. and Castaldi, R.M. (2008) ‘An analysis of globalization forces in the wine industry: implications and recommendations for wineries,’ Journal of Global Marketing, 21(1), pp.33-47.