Diamond Estate's Individual Case Appendix.docx Helpful Unhelpful Ryerson University BUS 800

Case Analysis – Diamond Estate Industry - Wine Submitted to: Neil Wolff In partial fulfilment for the requirements for: BUS 800 Strategic Management October 21, 2020 Ryerson University APPENDIX – External An ...

Case Analysis – Diamond Estate Industry - Wine Submitted to: Neil Wolff In partial fulfilment for the requirements for: BUS 800 Strategic Management October 21, 2020 Ryerson University APPENDIX – External Analysis 1.1 Five Forces Industry Analysis 1.2 Threat of Entry (Moderate to high) 1.2.1.1 Barriers to entry in the wine industry is relatively moderate, however establishing a strong distribution channel poses as a large barrier for industry participants 1.2.1.2 Requires significant amount of investment to start a winery operation; for instance, nearly $1 million in wine-equipment, land, labour and grape-growing is generally necessary to develop a profitable winery business. Furthermore, initial investment of up to 22% required for wooden barrels which are typically used for aging wine (C-3) 1.2.1.3 Unit costs tend to be moderate, due to wineries taking advantage of economies of scale 1.2.1.4 In Canada, winery operations tend to be heavily regulated with LCBO altering prices as well as regulation of product content by VQA etc. (C-3) 1.2.1.5 Minimal switching costs for customers, as wine market competition driven by price, branding and quality (C-4) 1.3 Substitutes (Moderate) 1.3.1.1 In the wine industry, substitutes raise concerns due to wide variety of products in the market (C-4) 1.3.1.2 Substitutes such as beer, spirits and even cannabis products poses a significant threat in the industry 1.3.1.3 According to a 2016 statistic, sales of beer were approximately 47%, whereas, wine sales were nearly 32%. Despite that, many consumers were reported to switching from beer to wine due to seeking healthier options (C-2) 1.3.1.4 Due to the cultural associations with wine such being regarded as a status symbol, it may be problematic for many restaurants (C-4) 1.4 Supplier Power (Moderate) 1.4.1.1 Suppliers of grape and wine production have certainly been impacted by globalization 1.4.1.2 Most wineries tend to either produce their grapes for high quality wines or source grapes from producers; 1.4.1.3 Due to fluctuations of climates, wine products such as Ice Wines may only be produced in certain countries like Canada; therefore, independent suppliers hold a considerable amount of power and it remains a lucrative field (C-3) 1.5 Buyer Power (High) 1.5.1.1 Due to wide selection of alcoholic beverages, consumers have plenty of options to choose from 1.5.1.2 The intensity of competition among buyers in the wine industry, leads to suppliers to face pressures to lower prices 1.5.1.3 Retailers such as LCBO, hold a significant amount of power as wine sales and pricing is regulated (C-3)