Diamond Estate Wines&Spirits Inc.-Individual Appendix- Binghui Wu - Ryerson University BUS 800

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Diamond Estate Wines & Spirits, Inc.: Growth Challenges in A Fragmented Industry Industry: Wineries, Wine and Distilled Alcoholic Beverage Production and Sales Industry Submitted To: Alison Kem... per, PhD Ted Rogers School of Management at Ryerson University BUS 800-031 Strategic Management Fall 2020 Thursday, October 22nd, 2020 Contents Appendix A: External Analysis.............................................................................................................................2 1. Porter’s Five Forces......................................................................................................................................2 2. The General Environment.............................................................................................................................3 3. Innovation and the Industry Life Cycle........................................................................................................6 4. Strategic Group Map.....................................................................................................................................6 Appendix B: Internal Analysis..............................................................................................................................7 5. Financial Analysis.........................................................................................................................................7 6. Competitive Advantage and VRIO...............................................................................................................9 7. Current and Generic Strategy......................................................................................................................12 8. Strategic Issue.............................................................................................................................................13 9. Reference....................................................................................................................................................14 1 Appendix A: External Analysis 1. Porter’s Five Forces 1.1 Threat of New Entrants (Weak) 1.1.1 A winery’s starting strongly relies on the significant investment for equipment, labours, lands, bottling suppliers, professional technology, and knowledge. (DIAMOND ESTATE WINES & SPIRITS,3) 1.1.2 Strict regulation and policies for the wines and alcohol beverage productions and sales increase new entrants’ complexity to start their business in the winery industry. 1.1.3 Regulation of government for the agricultural land usage and getting the permit of processing wine grapes also increases the boundary and causes difficulties for the wine industry’s new entrants. (DIAMOND ESTATE WINES & SPIRITS,3) 1.1.4 Impact: Low power of the new entrants would reduce the current wine producers’ and organizations’ threats and decrease the industry’s stress. As a result, it might positively affect the potential for profit and increase the industry’s attractiveness to some extent. 1.2 Buyer Power (Moderate to Strong) 1.2.1 Various factors such as price, the region of origin and brand reputation, etc. would influence wine purchasing decisions. (DIAMOND ESTATE WINES & SPIRITS,4) 1.2.2 Most wine purchasers rarely stuck at one or a few certain brands or wine types, which decrease the customer’s loyalty to bring threats for the industry competitions. (DIAMOND ESTATE WINES & SPIRITS,4) 1.2.3 The consumers’ behaviours to purchase wines may be influenced by their various needs due to consumer demographics, even for the consumers from the same demographics. It causes the whole wines industry’s challenge to track the customers’ likes and actual demands for the wines. 1.2.4 The wines industry and market are primarily driven by the high-frequency consumer, a huge group with a strong ability to purchase to bring many possibilities to earn profits and further develop the industry. 1.2.5 Impact: The strong power of buyer’s bargaining benefited from the vast diversity of the wines industry’s selections and their various needs for the wines, so it is hard for the wines brands or organizations to create relationships and maintain customer loyalty. Fortunately, the main drive group of consumers for the wines market emphasizes the wines’ quality and purchase experience rather than price. The strong purchasing power of the main consumers would positively bring up the industry’s profits, and it could be the most attractive aspect for the wine production industry. 1.3 Supplier Power (Moderate to Strong) 1.3.1 The first reason for the relatively strong power is that the grapes are the primary and necessary raw material of wines producing, and the wines’ quality strongly relies on the grape’s quality and categories. 1.3.2 The second reason is the grape’s quality heavily depends on the natural conditions, growth environment and the knowledge and experience of the head grower. Because of the harsh weather conditions, some particular hybrids are the main grape’ types to grown crosses in Canada, and the mid-value and premium wines could be made only by these certain grape’ types. (DIAMOND ESTATE WINES & SPIRITS,3) 1.3.3 Hand-picking could significantly guarantee the quality of the grapes but would cause more costs than mechanical harvesting. (DIAMOND ESTATE WINES & SPIRITS,4) 1.3.4 Impact: The strong power of suppliers in the wines produce industry determined by the unicity of raw material and strict conditions required for the raw material’s growth. Suppliers would take a dominant position for price bargaining of the raw material, which directly leads to the increase of cost in wines producing and negatively affect the profit of wines producers. However, some wineries 2 in Canada utilize self-sufficiency operate mode, which means growing their own gapes to produce the wines, control the cost and maximize the profit, which could reduce the power of the external suppliers for some reason. 1.4 Rivalry (Moderate to Strong) 1.4.1 External factors express those vast categories that cause consumers to have various options, hard to build connections and customer loyalty. (DIAMOND ESTATE WINES & SPIRITS,4) The rapid changes in customers’ needs also contribute to the competition that existed in the wines industry. 1.4.2 The competition in the internal wines industry may occur, such as the local wineries fighting for the high quality of raw material due to the low grape growth and high demand. 1.4.3 Strongly rely on imported wines also creates intense competition in the Canadian wines industry, and the local wineries would face challenges to develop their businesses. 1.4.4 Ice wines could be taken as unique products, and it is a great opportunity for the local wineries to develop their business and extend to the global markets. 1.4.5 Impact: Relatively intense competition existed in the external and internal wine produce industry would have huge negative impacts on the wine producers and organizations. It could be an aspect that might most decrease the attractiveness of the wine production industry. Optimizing the product portfolio and increasing the reputations and word of mouth are significant for the existing wineries or producers to enhance brand competitiveness in the wines production industry. 1.5 Threat of Substitute (Moderate) 1.5.1 The customer’s needs may satisfy by beers and any other types of liquors. 1.5.2 Legalizing cannabis in Canada also reduces the wine’s demands in the Canadian market, considering some advantages that could bring to customers by using cannabis rather than wine drinking. (DIAMOND ESTATE WINES & SPIRITS,2) 1.5.3 The desire to chasing a healthy lifestyle is one of the new triggers for consumers’ wine purchasing behaviours. (DIAMOND ESTATE WINES & SPIRITS,2) There are some health benefits of winedrinking also are unable to be replaced by cannabis. Taking wines as the symbol of status is another motivation for consumers to purchase wines, which could not be replaced by any other types of beers or alcoholic beverages. 1.5.4 Impact: The change in consumers’ purchase behaviour, such as switching from buying beers to wines, indicates that the wineries own great potential for development in the wine production industry’s further process and make the industry more attractive. It is not only because the consumers’ desire for wine drinking has been satisfied, but the consumers have gained a series of added values of wine drinking, such as socializing, showcasing the social status and health benefits. 2. The General Environment 2.1 Complementary Products/Services 2.1.1 The concern of what kind of foods would perfectly match the chosen wines would measure consumers’ wines purchasing. Various foods such as meats, fruits, and desserts and other food ingredients could be considered wines’ complementary products. (DIAMOND ESTATE WINES & SPIRITS,4) 2.1.2 Wine theme tourism is one of the complementary services which getting very popular in years. Consumers can learn relevant knowledge about the winemaking process, history, and how to pick the appropriate wines by consumers’ particular needs. (DIAMOND ESTATE WINES & SPIRITS,7) 2.1.3 Wines’ online sales and delivery service may be considered a little more complex and stricter than food delivery service due to legal controlling and wines sales in Canada. However, as another complimentary service, the conveniences brought from wines’ online sales and delivery service seem to cover its complex, especially un [Show More]

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