Mondavi Case Study
The Wine Industry - Old World versus New World
The wine industry has evolved throughout history and no longer does the European “old world” market dominate the industry. More recently there has been a push from what has become known as “New World” wine manufacturers to capture more of the market share. As new companies enter into this market and the wine industry as a whole shifts the question remains, is the “New World” approach structurally stable enough to sustain growth and shift the industry from what we know as the traditional or “Old World” thinking? This case analysis will make a comparison between the “old and new world” within the ...view middle of the document...
To consider the structural attractiveness of the “new world” wine industry lets look at three aspects of the Five Force Model: Threats of Entry, Intensity of Rivalry, and Threats of Substitutes to get a better understanding. Looking at threats of entry the wine industry is a very “capital-intensive business”, with most of the cost for capital coming from acquiring land. The use of technology and automation is also an important tool within the “new world” structure and equipment can be expensive. High capital requirements and scarcity of undeveloped land can make it hard for new firms to enter the market with ease. Another threat to entry to consider but not as much within “new world” industry is restrictive government policy. Governmental regulation within “new world” countries is less restrictive regarding the processing and selling of wine. There is some restrictions within the US market regarding distribution of the wine which in some cases bans direct distribution.
The intensity of rivalry among the “old world” and “new world” and countries within those segments is high. The “new world” is competing through use of technology and with the ease of less regulation in comparison to the “old world” which sticks with tradition and a heavily regulated process. Also, the rivalry within the “new world” market among countries operating under the same restrictions and process is high as well. The “new world” structure also has more leading global wine firms within the top ten of market share (Exhibit 17). The US, Australia and South Africa are all competing for...