Blue Ocean Yellow Tail

Patrick Viglianti

Blue Ocean Assignment

Watch Part A of Creating Blue Ocean Strategy in the US (Wine Industry).

Answer following Questions

1. How attractive is this industry?

An industry analysis using porters 5 forces can determine how attractive the industry is for both premium and budget wines. Barriers to entry exist in both the budget and premium wine industries. For both wines there are large capital requirements, high competition, and consolidating distributors restricting the ease of entry to the industry. The second of porters 5 forces, substitutes are also high for both types of wines. The US wine industry produces far more wine than it consumes, meaning substitutes like beer and liquor are more widely preferred in the United States. Buyer power, Porters 3rd force is also high for both premium and budget wines. As noted the number of distributors for wine is decreasing as consolidation occurs within the industry. The smaller number of distributors coupled with the intense competition makes buyer power (from the distributors POV) much higher. On the other hand, Supplier power seems to be low with budget wines, and even lower with premium wines at times. Grapes are widely available for large scale wineries to buy at affordable prices, and many smaller sized wineries can grow their own grapes, putting even less power in the hands of the suppliers of the grapes. Lastly, Porter’s 5th force competition is also very high in both sectors. The number of wineries has grown 24%in the last four years (2000-3000). There is plenty of competition among both premium and budget wines. After taking a look at Porters 5 forces industry analysis, its seems that the US wine industry isn’t all the attractive. The industry is highly competitive and requires large amounts of land and capitals to start up.

2. As an existing player in the industry, what should your strategy be?

Most existing players in the US wine industry focus on one of two models,...