Strategic Cost Management Taylors Wines Case

Question: Discuss about the Strategic Cost Management for Taylors Wines Case. Answer: Introduction Taylors Wines was established in 1969 by Mitchell Taylor among other family members and are one of the largest family owned winery in Australia. Taylors Wines produce various products such as Cabernet Sauvignon and Shiraz (Grant et al., 2015). The company is located in the Clare Valley of South Australia and has been experiencing tremendous growth in revenue, scope, and size. For instance, the companys operations have expanded to other international markets such as the U.S with operations in San Francisco and New York. The company majorly operates in the Australian wine industry that has over 2,400 winemaking firms that are in active service. Thus, report analyses Taylors wines market strategies predominantly in the Australian wine industry. Furthermore, the report examines the external environment based on PESTEL and Porters five model analyses. Also, the report identifies Taylors wine dynamic capabilities, and then the companys current position in the Industry and principal markets are examined thereof. Lastly, the report explores various opportunities and threats facing the Australian Wine Industry coupled with viable strategies that can help Taylors wine to sustain its competitive edge. The Australia government have introduced restrictive drink driving rules to curb wine addiction. Also, the government has added volumetric alcohol tax (higher taxes for wine) further disrupting productions in the industry (Aylward, 2004). Furthermore, the government, in partnership with other social groups have introduced education curriculum to sensitize the Australian society on the effects of excessive alcohol consumption on personal health. Fluctuating exchange rates have in the past significantly disadvantaged most of the Australian producers. For example, the high value of Australian dollar has made the local wine's market to be attractive to imports especially the French champagne further increasing competitive intensity in the industry (Bruwer, 2002). The increase in disposable income among Australian households due to increasing per capita income have also encouraged wine consumption. Most Australians shows a strong preference for local products in the Australian Wines industry. Some people in Australia also view wine consumption as sophisticated and fashionable further propelling the increase in wine consumption (Chong, 2014). The increase societal concerns on the effects of wines and alcohol in the Australian society have further affected operations in the industry. The fluctuating climatic and weather patterns such as warmer average temperatures have significantly affected the growth of grapes in Australia (Galbreath, Charles, and Oczkowski, 2016). As such, most grape growers have resorted to irrigation farming to increase the volume of production further increasing water usage. The threat posed by new entry into the Australian Wines industry is relatively small. This is because starting a winery does not require massive amount resources for initial capital investments. Besides, most of the wineries in the Australian Wines industry are subtle family-owned firms, and sell most of their products locally (Chong, 2014). Threat of New Substitutes Products and Services The threat of substitute products in the Australian Wines industry is high. This is because, in the Australian Wines industry, many substitute products can replace wine. For example, alcoholic and soft drinks such as coffee, tea, and fruit juices can all act as substitutes in different ways (Bruwer, 2002). Some of the imported products such as the French champagne can easily replace the Australian wines. Because of many rivals (over 2,400 firms) in the Australian Wines industry, the probable consumers have great alternatives. This can be attributed to low switching cost associated with changing from one firm to another. As such, consumers in the industry can easily switch to cheaper brands that are of similar quality (Chong, 2014). Most Australian wine consumers are attracted to quality wine products that are relatively cheap further explaining the higher buyers bargaining power. Notably, firms in the Australian Wines industry must put more emphasis on sustaining low prices, high-quality products, and quality services. The bargaining power of suppliers The bargaining of suppliers in the Australian Wines industry is low. This can be attributed to the existence of many grape growers in Australia are contracted to major wineries (Grant et al., 2015). The high number of suppliers in the industry imply that grape growers must strive to retain their contractual relationship with the wineries. Also, the wineries can very quickly switch allegiance to other grape growers who have real contractual terms and higher quality products. Market competition Market competition from local and international companies operating in the Australian Wines industry is very high. This is because there are approximately 2,400 businesses that are competing in the industry (Grant et al., 2015). These rivals include Taylors wines, Accolade, Private Label, McWilliamss and Fine Wine brothers. Also, competition from other wine producing countries such as Chile, South Africa and Argentine who provide similar quality at relatively prices have further increased competitive rivalry in the industry. Taylors Wine capabilities One of the companys dynamic capabilities is the production of unique products such as Cabernet Sauvignon and Shiraz that are inherently considered to be the industrys best wines. This has given Taylors wine a unique competitive edge in the sector due to its continuous product innovation and development capacity (Aylward, Glynn, and Gibson, 2006). In fact, the company was recognized as a 5-star winery based on wine rating by James Halli-try. The evaluation identified the companys superior packaging production, marketing, and distribution processes as unique in the industry compared to those of market competitors. The company has sustained its production of quality branded wines winning it customer awards such as the 2011 Woolworths supplier of the year award in the alcohol category (Grant et al., 2015). The company also have superior domestic sales and marketing services due to their personalized customer services, and the ability to meet specific customer preferences. Taylors Wines current position in the Industry and identify the key markets it operates within Currently, Taylors Wine is also one of the largest Australias wine production and exporting companies in the world. Notably, Australian wine industry has an 8% control of the global market share of wine business (Grant et al., 2015). This can be attributed to the very low prices charged on Australian wines exported to other countries. Most of the countrys wines are exported to the UK, U.S, some parts of Europe, Canada and China which forms the companys key markets. Opportunities and threats for the Australian Wine Industry and Taylors Wines in particular Opportunities Increase in disposable income among Australian households Strong preference for local products Increased preference for quality branded wines Many grape growers Higher rating in the global wines industry Threats Increased government taxation Fluctuating climatic and weather patterns Fluctuating exchange rates Intense competitive rivalry Increased societal concerns on the effects of wines and alcohol Three viable strategies for Taylors Wines to make the leap from Good to Great.' Taylors Wines should consider implementing a cost leadership strategy in the Australian wines industry to sustain and enhance its competitive edge in the global and local wine's market. This is in response to the threat of intense competitive rivalry in the Australian wines industry. Taylors Wines should also concentrate on diversifying its wines products to satisfy various consumer preferences. This will necessitate increased product innovation and value addition through excellent packaging and preservation of its various products. Lastly, Taylors Wines should expand its operations to include various brands of non-alcohol products. This enable the company to comprehensively satisfy its diverse customers' preferences better and expand its market share. Reference Aylward, D. (2004) Innovationexport linkages within different cluster models: a case study from the Australian wine industry, Prometheus,22(4), pp.423-437. Aylward, D., Glynn, J. and Gibson, B. (2006) SME innovation within the Australian wine industry: A cluster analysis, Small Enterprise Research,14(1), pp.42-54. Bruwer, J. (2002) The importance and role of the winery cellar door in the Australian wine industry: some perspectives, Australian and New Zealand grapegrower and winemaker, (463), p.96. Chong, S. 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