| Strategic Management
Section A
Jack Egan is managing director of Vin de Roscrea, an independent wine wholesaler based in a converted barn in rolling countryside outside of Roscrea, Tipperary. The company imports wines from all over the world and supplies them exclusively to hotels, restaurants and bars. Its trade business accounts for around 80% of sales with the remainder coming from corporate clients such as events organiser Partyfare – with which it has a 250,000euro a year contract – and individual private customers.
But now Egan, who only recently became sole owner of the business, wants to increase turnover and profits and the most likely route is to up sales to private customers. Without growth, turnover at the company is on course to reach 4.6million euro this year, up from just under 4million euro last year. Pre-tax profits were 162,000 euro. His turnover tarfget is 5million euro.
Stylish, urban and with an accent to suit, Egan embodies the type of well-educated connoisseur his company targets. It is an image that he has worked hard to develop. He left school at 16 for a career in hospitality, but a three-day stint working at a hotel in Dublin was enough to put him off. He turned instead of wine.
He co-founded Vin de Roscrea in 1991 with business partner Nial Munnelly. Appointed managing director in 1998, he soon realised that, with only 20% of the equity, he would have to buy out his partner if he wanted more control over how the business developed. The 1.5million euro deal was completed in December 2002. vin de Roscrea, he said, is missing a trick by not developing the private customer trade. None of the wines it supplies are available in supermarkets or off-licenses, so direct sales is a prime route for development.
“as the restaurant business is very fickle it would be healthy to have more private business,” said Egan. “But only in the niche we are in which is quality, not quantity.”
But it’s not as simple as it sounds. His forays into wine clubs have not worked, the web does not suit his high quality, low quantity image and he is worried that the company is too small to handle a sudden increase in orders.
“We have a website,” he added, “but it is really just a brochure.” Customers can currently order wine lists from the website and around 70 were requested and posted in the last four months, but none resulted in any orders. “The only way to make money through wine over the web seems to be by aping the retailers and going for high quantities but very low prices, but we don’t want to do that. Where the volume is, the margin isn’t. we have good margins and we work hard to stay in that top little niche.”
He started a wine club in conjunction with Celtic Football Club, but it wasn’t a success and the business lost money. “I thought we could tap into the loyalty of the fan base by offering a good selection of wines with special Celtic labels on them. We ran an advertisement every week in the match programme but it was a complete disaster,” he said.
Then there are the logistical problems. Egan is concerned that Vin de Roscrea does not have the infrastructure to deal with a large and sudden increase in private sales. Orders for a private customer currently average 500 euro with the bulk of the mainstay commercial clients ordering between 8,000 to 15,000 euro a year.
Around 10% of the client base is lost each year due to changes of management or restaurant owners and Egan sees expanding the geographical reach of the business as an obvious strategy to combat client turnover and grow the business organically.
This year the company expects to sell 960,000 bottles, mostly delivered within its core territory from Munster up to the Midlands and across to Dublin via a fleet of liveried, racing-green vans. Its six salesmen all operate out of Roscrea.
Egan accepts that it isn’t feasible to expect sales agents to work out of the office but he is unsure about employing field-based sales agents who will have little regular contact with headquarters, and so be hard to integrate into the company.
Recruitment is an on-going issue. The choice, says Egan, is whether to emply experienced sales people with limited knowledge of wine, or a wine expert with limited experience of selling. Staff retention, too, has been a problem and he has lost experienced sales people to competitors. To customer that, he has introduced an annual bonus scheme.
Egan is also worried that having more clients outside the region will have a negative impact on the quality of the service he can provide. Opening a second depot is one option, but it could be too costly.
“We are service led. We want to provide a good, personal service, a friendly voice on the phone and quick delivery. If we approach a hotel in Nenagh, a few miles down the road, and say we are based in Roscrea it’s a big attraction for them. If we go to Dublin and say we are from Vin de Roscrea in Tipperary, three counties away, it isn’t,” he said.
“There’s also a question of cost. Because we serve quite a tight area, distribution costs are low. Once we go much further a field they start to mount up.”
Diversification would be an ideal way for Vin de Roscrea to enhance its profile and strengthen its brand in both existing and new markets. Egan has considered buying a hotel, restaurant or shop which could be the headquarters of the wine selling business and also a direct outlet for selling the wine and raising the profile. But it is a move which might not be welcomed by clients in the vicinity who could see it as competition and consequently take their business elsewhere.
“There’s a risk that we’ll come a cropper,” said Egan. “On the other hand, the prospect of carrying on as we are for the next 15 years would bore me to tears.” It might be enough to drive him to drink.
Question 1
Using appropriate frameworks carry out an internal analysis for Vin de Roscrea.
Question 2
Using appropriate framework carry out an external environmental analysis for Vin de Roscrea
Question 3
Discuss the strategic options that Jack Egan is considering and identify what other options might be available to Vin de Roscrea.
Section B
Question 4
Do you feel social responsibility will have to be legislated in the future, or will companies choose to be more socially responsible to meet the expectations of customers and/or other stakeholders?
Question 5
Creating Competitive Advantage is fundamental to the organisations long term survival. Outline and discuss how an organisation can create sustainable competitive advantage. Please use examples in your answer?
Question 6
Contrast the market-positioning approach with the resources-based approach to strategic management
Question 7
Michael porter defines three generic strategy models: cost leadership, focus, and differentiation. Making use of examples, explain what is meant by each of these strategies, and discuss the circumstances under which cost leadership would clearly be a more appropriate strategy than differentiation.
Question 8
Refute the following statement: “The sole purpose of a business is to make a profit.”
Question 9
Using the Five Forces Model analyse an industry of your choice. Explain how this model can be used to analyse an industry’s attractiveness. Given your analysis, what would you recommend
(a) for a firm competing in this industry and
(b) for a firm thinking about entering this industry? Justify your recommendations.
please answers that questions. thanks
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