It is true to postulate that market instability of the past centuries may have prefigured a rather new chapter of globalization, a situation where volatility is expected to stay constant (Kenny, 2009, 2). Even after the present recession shifts that are currently underlying oscillations or fluctuations in different sectors such as, commodity and currency rates, the advent of new and non-traditional entrants, and the continued rise in client demands will remain to shake traditional business and operational models for some years to come (Kenny, 2009, 2). Therefore, in order to be viable, a majority of companies will find themselves in a tough position if they have to remain strong in their different market standings (Kenny, 2009, 2). So, the big question that remains especially among the big multinational companies is, how can they react fast and nimbly to the shifting market environment without being caught up in knots? Important to note is that, in the present times, and knowledge era, the capability to change information into insight in reply to market undertakings is central to sustainability. As such, companies must reflect on ways to make their procedures more flexible (Kenny, 2009, 2).
In this regard, Margaux can sustain and grow its business in a number of ways. Research surveys conducted by scholars believe that organizational agility is crucial for business achievement or success. Therefore, it is important to agree that quick decision-making and implementation for Margaux are not only vital, but very crucial to a firm’s economical standing. Agility on the part of Margaux can be solely linked to profitable growth and sustainability. For example, undertaking a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) on the company, one will realize some of the business strengths of Margaux which include:
- A well-established prestige brand. Cementing this into the minds of the customers is vital to the growth of the firm. Margaux should ensure that its favorite brand that has been known by the customers for years is not compromised either by trying to lower the quality of the brand with a view of attracting more customers. Instead the company should ensure that it upholds its mission of producing a brilliant consistent wine of stunning grace.
- High profit margins. Though the profit margins of the firm might have dropped in the past years, the company still enjoys good profit margins in their current markets. Therefore, the company can think of introducing another quality brand into the market while maintaining higher standards of quality.
- Demand for fast growth wine is strong and growing. Margaux is standing on an environment where the demand for good quality wine is high and growing. Since the company has been renowned for producing a quality product, it should take advantage of the situation to grow and sustain itself.
Research studies steered by the Massachusetts Institute of Technology (MIT) advises that agile companies or organizations grow their revenue 37% faster and make 30% higher returns than non-agile firms (Kenny, 2009, 3).
Every individual involved in the retail distribution network from the manufacturer to the distributor to the retailer normally has prospects about his or her returns on investment (Gupta et.al, 2013, 2). And while a majority of the players may waver to make changes from a legacy distribution model for fear of compromising or conceding the desires of other stake holders, it is always good to set those worries sideways and develop and grow a “win-win-win” model of distribution (Gupta et.al, 2013, 2). The right distribution model will not only work for organized markets but also for other emerging companies with a kind of unorganized retail penetration.
In the case at hand, the Chateau management team is trying to figure if it can actually take more control of the distribution instead of leaving it to the Bordeaux wine merchants. Bordeaux wine merchants are known to specialize in distribution. Though this may be seen as one of the ways of restraining the prospective of higher profit margins for the company, Bordeaux wine merchants shield the company from suffering greater losses in the event of average vintage. Additionally, merchants really come in handy especially in terms of generating some excitement around the wines. Therefore, under the current system, the company should stop worrying about the issue of distribution or others matters such as, delivery and insurance. To top it all, the system is a tradition, the merchant system as an institution in Bordeaux benefits the community at large from the status quo.
Another critical concern for the company is if it can build marketing and sales capabilities on its own. First, marketing is not an undertaking that the company has engaged in over the years. However, engaging in marketing can prove to be really profitable for the company in the long run. If the product is of good quality it will definitely sell and get good reviews. On the other hand, marketing a first growth can prove to be challenging. If the company decides to engage in marketing at the current stage, they might be forced to change the package or the product labelling which is not only constrained by tough regulations but it is also a costly process.
Who is the target market, wine connoisseurs or the newly rich? The wine connoisseurs are the target market. Since France is losing the wine market share to countries for instance, South Africa and Argentina, the connoisseurs can shift their tastes to other new world wines. Corinne Mentzelopoulous, who took over the control of the estate from her father in the year 1980, is wondering whether a new lower-priced wine should be added to the portfolio. This will be a bad idea since the company’s competitors such as, Haute-Brion and Chateau Mouton-Rothschild have already produced and also distributed lower-priced wine to the mass market and achieved great economic success (Class notes, 2015, 5). Therefore, it is extremely challenging for Chateau Margaux to compete in the low-price wine market. In addition, the company has no ground experience in buying grapes, marketing or distribution.
Some of the alternative courses of action here could be:
- The company can ensure that it takes control of the distribution through partnering with distributors with the aim of employing a loyalty program for its customers.
- The company can also endeavor to increase the product line with the aim of meeting the demand of other consumers.
In conclusion, Chateau Margaux’s brand is in fact their strongest asset, therefore, they should not dilute it. Instead, they should be ready to innovate and modernize its management. Additionally, the current system of distribution works well. So, the bigger task remains with the company. Since there is growing demand, the company has no choice but to take action appropriately.
Class notes, 2015. A Dilemma of Luxury and Marketing: The Case of Château de Margaux.
Gupta A, et.al, 2013. Rethinking Consumer Product distribution. Available at: https://www.atkearney.com/documents/10192/2531098/Rethinking+Consumer+Product+Distribution+in+Developing+Countries.pdf/a5b82643-716e-4a07-a3d9-32d4a2aec170. (Accessed 21st January 2016)
Kenny Mike, 2009. Organizational agility: How business can survive and thrive in turbulent times: A report from the Economist Intelligence Unit. Available at: https://www.emc.com/collateral/leadership/organisational-agility-230309.pdf. (Accessed 21st January 2016)