To ensure the long run competitive viability of the Robert Mondavi Corporation (RMC), the company must focus on generating additional revenue and implementing cost controls. The strategy RMC should pursue is comprised of developing new product channel to capture the growing demand for wine, backward integrating grape supplies to better control costs, and renegotiating joint venture agreements to improve operational efficiencies.
RMC must develop new product channels to capture the growing global demand for wine. We recommend further penetrating existing international markets for RMC wine while expanding accessibility to new territories. To achieve this initiative, we advocate RMC allocate 20-30% of its annual advertising budget to print and broadcast ads in RMC’s top five international markets: Canada, Switzerland, Japan, Germany, and the U.K. To supplement this initiative, we recommend forming agreements with key international airlines in order to be the exclusive provider of wines for first and business class passengers. Contracts with Japan Airlines (Japan), Lufthansa (Germany), and British Airways (U.K.) will further familiarize customers with RMC wines in the company’s top international markets. Exclusivity agreements on Cathay Pacific (China), Air China (China), and Emirates Airlines (Dubai) will expand product awareness of RMC wines to millions of new consumers. Selectively serving RMC wines in premium class cabins will reinforce the high quality brand image of the company.
The threat of increased global competition requires that RMC not only reduce its operational costs, but also maintain its profit margins. RMC must take steps to protect its profits margins by controlling its supplier costs. We recommend a backward integration strategy, in which RMC acquires an additional 350 plantable acres (enough to produce 11,000 tons of grapes) in the Central Valley of California. Doing so will increase the percentage of internally sourced grapes for...