Barossa Winery Case

Barossa Winery CaseInternational Business Group workGroup 42013GROUP 4 BATCH 35 Pintu Mehar Roll 19;Senthil Kumar S Roll 29;Abhishek Nath Roll 21;Sagar Bamnote Roll 02;Satheesh Kumar K V Roll 12SPJIMR3/24/2013

1.0A brief on Barossa Winery Established in early 1960s by Mr. Rolf Mann in the Barossa Valley of South Australia. Consolidated position in Australian domestic Market of table wines- high quality premium table wines. Despite rapid growth in early 1980s, growth slowed down during the 1986-1987. Passive exporter as of now. Domestic sales at saturation levels (Growth stagnant at 2 %) Export Sales growing rapidly. Phenomenal growth on exports ( 42% Growth during 1987) Overall sales and profits are by and large flat. The company has good marketing skills as its strengths. Acceptance on the premium quality brands internationally. Has an established distribution system in the domestic front. Has a competitive advantage on bottled table wine markets .2.0Models on Internationalization Barossa winerys current activities on the domestic market and the foreign market were analysed and the following is observed.Market - U.K.Sales through 2 importers,Star Importers and Reid Company during the past 3 years.But order consistency is neither maintained nor assured,as one of the party has changed the source.Dependant fully on the importers as they have no source of getting orders from the foreign country.Star Importers purchased up to 10,000 cases of Barossa Wines. In 1985, Reid Company started buying and purchased 18,000 cases in 1987. Market - U.S.A.Contacts established among all the major importers ( six Nos ) of the countryExports booked through 4 of the major exporters. Considerable Sales established during the year through 4 importers during the year 1987. ( 400 - 4500 cases over the years with 9000 cases being sold in 1987)Market - CanadaExports established through sales agents since last 4 years.Sales of over 800 cases in Ontario and Alberta

Growing Market Rest of the world Exports through domestic exporters to New Zealand, Micronesiaand the Far EastThus.A totally diversified focus on the foreign markets by Barossa.

Various models have been applied based on the above, to evaluabvtae internationalison phase and is as given below.

3.0OCF ModelAs per OCF model, BW is having all ownership control facilities in domestic geographies whereas the exports are relied through other importers from foreign countries.Hence they are yet to move from Stage I as per the model. Even if they explore and consolidate into foreign markets, facilities need to be established so as to move into Stage II.INTERNATIONALISATION - OCF MODEL APPLIED TO BARROSSA WINERY

STAGESSTG 1STG IISTG IIISTG IV

DOMESTICFOREIGNDOMESTICFOREIGNDOMESTICFOREIGNDOMESTICFOREIGN

OWNERSHIP

CONTROL

FACILITIES

4.0 Functional Barrossas current exports are through the importers who are approaching the company based on the product awareness. Company as such has not established any distributor / agent in any of the foreign markets .Hence the model is not suitable for any analysis of the company.

5.0TCA Model

As the asset deployment is still limited within the domestic front and the limited exports are happening through the importers.They are in the LOW in asset specificity and Transactions are growing from LOW to HIGH

Frequency of TransactionsHighExternal (Distributor/Importer)Bilateral AgreementJoint VentureInternationalVertical IntegrationWholly Owned Subsidary

LowOne Off TransactionContractContractTurnkey Project

HighLowAsset Specificity 6.0SCALE -SCOPE-MODEL

SCALE:Thrust Matching of cost for both domestic and foreign market. Better price in foreign market. Good Brand Awareness. Growing Consumption in USA and UK . Good Economies of scale can be achieved Domestic market saturated Attractive growth of exports during 1985-86 period and 1986-87 period.Trigger Global acceptance on Barrossa Brands . Premium quality of Australian wines. Saturation of Australian domestic market. Favourable exchange rates - Export a more viable option. Matching Price in both domestic and foreign Markets Increased competition in the domestic market leading to price wars. Wide supply demand gap in foreign market like Canada, UK, USA

Qn No 2Major Triggers for Barossa Winery More favourable exchange rate, due to the sharp fall in Australian dollar against foreign currencies Excess Production capability of the Barossa Winery, which was much higher than the requirement in Australian Markets. Due to the growing awareness on the quality of Australian & Barossa winesProduct Favourability Glowing reports written by wine experts on the quality of the Barossa winery products created brand awareness in the other countries. Barossa had the finest grapes and the latest technology in producing world class wine quality. Barossa has been appreciated as one of the outstanding companies in terms of quality of wine produced with a series of labels by Industry analystsCompany Barossas production capability was much higher than the local Australian demand, thereby allowing for exporting Barossas products. Total of 480 million litres of wine was produced in Australia, and per capita consumption was a mere 21 litres during 1985-86, hence maximum was exported.Canada Market:- Attractive Market due to their undeveloped domestic wine industry 60% Increase in per capita Wine consumption within a period of 10 years In which 50% of the sales are imported wines. Also, the EU Grapes market (80% imports) is contaminated due to the Chernobyl nuclear incident in Ukraine in 1986 A chance of the import acceptance for Australian companies is high as the government selection committee may list at least 75 new wine brands.US Market:- It was very staggering Market for Wines. Table wines contributed about 65% of the overall wine sales. More opportunities for table wines as at present it contributed only 0.06% Availability of Numerous spirit agents specialized in product line to cover the entire country through distributors.UK Market:- Australian companies had only 2% of the table wine market. But the wine sales increased to 10 litres per capita in 1986. Earlier in 1981 & 1984 Barossa has already imported wines via two U.K. importers which provide better chance to enter to this market.

Qn No 3Best Internationalization framework for Barossa WineryIt is concluded that scale/scope model will be best suited in internalization of Barossa winery as it covers all the aspects in detail on each faces of global marketing. Some of the useful parameters are;1. Decision Making2. Triggers3. ThrustThey can co ordinate the marketing mix across countries and regions and go for global rationalization. This model provides insights keeping both long and shortterm perspective in mind.