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Foundations of Managers MNG00720

1. Introduction
Introduction
In 1981 Andrew and Cynthia Hendry first established the Coopers Creek winery with the aim
of producing the very highest quality wines. During 1990 and 2004, Coopers Creek and New
Zealand wine industry experienced significant environment, industry and organisation change
resulting in shifting network arrangements to meet domestic and international demand. This
strategy allowed Andrew Hendry, the managing director, to consciously manage growth of
the company to retain the benefits of small size.
Background to coopers creek & New Zealand Wine industry
New Zealand economic growth remains strong in international markets, but also acts in
accordance with the limit of the variable size of grapes and currency fluctuations. Coopers
creek’s annual production was in the range of 900,000 litre, around 96,000 cases, and the
production at Coopers Creek was set up to produce in 25-30 tonnes batches. In 1982 Coopers
Creek became one of New Zealand’s more successful medium sized wineries by following a
strategy of resource leveraging via networks of co-operative relationships with other New
Zealand wine makers in the domestic and export markets. However, with increasing
globalisation of the wine industry, the changing nature of export markets, the early maturity
of the New Zealand industry and the constrained supply facing New Zealand wine makers,
Andrew Hendry was faced with the decision of how to position a smaller company for the
future. He had to decide whether the network-based strategies that served the company so
well continued to be appropriate under conditions of industry concentration, increasing
competition and emerging globalisation.

2. Critical Analysis & Issues


2.1 Managerial Issues
There are some issues facing the New Zealand wine industry, some critical challenges arising
from the global market and local responses to these. This was the gap between failing or
steady consumption and increased global production. Major issues for New Zealand

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Foundations of Managers MNG00720

producers would be managing the growth of processing facilities and the marketing and
promotional efforts which would be required. Overall demand was declining; demand in non-
traditional wine drinking regions was growing, especially for New World wine and high
quality single varietal wines, such as New Zealand Sauvignon Blanc. The New Zealand
industry was studying demand structures in its international markets and was planning in
order to control supply to maintain the price premiums it achieved from quality and
differentiation. This trend increased pressures to reduce margins to achieve or maintain retail
positioning. The New Zealand industry could expect increasingly fierce competition in its
target markets; with the risk that New Zealand’s Position as a quality niche producer could be
emulated and challenged by other new entrants. Due to the deficiency of planning that super
markets were emerging as a major buying force for the industry, although consumer demand
appeared to be fragmenting around new grape varietals and wine styles. The issue in the
organizing the changing nature of the UK wine guild in New Zealand coincided with a
change of staff in the London office and the perception that there were fewer attendees per
winery at organised tastings. The other main issue for Cooper’s creek and New Zealand wine
industry was control. Cooper creek and New Zealand wine industry faced the issue that
volume of grapes and exchange rate fluctuation that they cannot control and they cannot
control the weather because the grapes need special kind of weather.
Source: (Study guide, 2008)
In organisation there are mainly these types of issues e.g. planning, organising, leading,
controlling. These are follows as under:
2.2 Planning
Most business would not adopt a new business strategy, such as opening up a new office or
shop, without first doing some very careful planning. Planning helps to ensure that the
precious time, money and energy invested in any new strategy are not wasted. Without good
plans new ventures can easily go wrong, due to such things as poor timing, unreasonable
expectations or even adopting the wrong approach in the first place.
2.3 Organizing

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It comes after the planning phase; in this phase in organisation develop the structure to
implement the strategies. In this phase company determine the way where company will go
and operate.

2.4 Leading
The issue related to Leading if they cannot get the good Leader or Leadership. Leadership is
the ability to inspire confidence and support among the people who are needed to achieve
organisational goals.
(Chan & Maubourgne 1992)
2.5 Controlling
Control is one of the managerial functions like planning, organizing, staffing and directing. It
is an important function because it helps to check the errors and to take the corrective actions
so that deviation from standards are minimized and stated goals of the organization are
achieved in desired manner. There are some things which cannot be controlled by the
organisations.

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The POLC cycle


Planning
Planning establishes objectives and
devises programs to achieve them
• Establish mission statement
• Determine specific objectives
• Select strategies
• Implement programs
• Review and evaluate

Controlling Organising
Keeping up standards Develops an organisational structure to
implement strategies
• Assess and monitor
performance • Determine the way the
business will operate
• Compare with set standards
• Choose taks to be done
• Identify variants
• Determine the input mix
• Take remedial action
• Assign tasks
• Delegate authority and
responsibility

Leading
Use of power or influence to get the best
out of workers
• Give clear directions
• Set the example
• Communicate
• Motivate

(Business studies, 2008)


The global wine industry is made up of two geographically located sets of players: the ‘old
World’ producers, comprising the traditional wine production and consumption areas of
Europe, and the ‘New World’, of the southern Hemisphere and the USA. There are six key
trends that are having a major influence on the global wine industry. There are:
Changing patterns of and increased production;
Shifting patterns of demand;
Increasing retail power;
Increasing competition between countries;
Increasing importance of branding;
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Changes to wine industry structure

Changing Pattern of and increased production


While globally wine production fell slightly during the 1990s, the production among the New
World wine producers increased over that period. At the same time, world time, world trade
in wine increased by 5 per cent year in terms of volume, with New World Wine Producers
share growing by 500 per cent (to 16 per cent by value) (Anderson, 2001).

Implications for New Zealand Industry


New Zealand Production area of 13,200 hectares in 2002 has grown by around 1,000 ha over
the last five years and is expected to increase to 18,000 ha in 2006 (Paminter, 2002), thus
increasing our wine production in the longer term. A major for the New Zealand producers
will be the associated growth of processing facilities and marketing and promotional efforts
which will be required.
Shifting Pattern of Demand
The world wine markets are undergoing major changes due to the shifts in consumer tastes.
Demand has also been falling during the 1990s. (Parminter, 2002), especially in traditional
wine consuming countries. This can be explained by health concerns and increased
competition from other beverages, both alcoholic and non-alcoholic.
Implication for New Zealand Industry
As a highly priced discretionary item, New Zealand wine exports are dependent on consumer
preferences and economic growth. However there is a risk that the growth in world premium
wine productions may overtake the growth in demand and the premium prices currently
obtained (Rabobank, 1999) could fall. This highlights the critical need for the New Zealand
industry to understand the demand structures in its targeted international markets and have
the ability to control supply to maintain price premiums. Whilst New Zealand wines are
highly regarded and can attract higher margins for quality and differentiation, this trend will
increase the pressure to reduce margins to achieve retail; positioning.
Increasing competition between Countries

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As international trade in wine has increased and, through WTO Rounds and such agreements
as Trade-Related Intellectual Property trade has been liberalised, new barriers have arisen as
competition has increased from new entrants.

Implications for New Zealand Industry


New Zealand companies, along with those in other countries that depend on exports markets,
must expect increasingly fierce competition in target markets, while the industry as a whole
must be vigilant concerning non-tariff barriers, and work with trade policy initiative to avert
these moves.
(Study guide, 2008)
(Foreign minister, 2008)

3 Problems, Challenges &


Opportunities
3.1 Problems
Coopers Creek and New Zealand wine industry, Wither Hill was accused of submitting a
smaller batch production under the same label of a different wine that was available for
public purchase. During the competition the wither Hill 2006 Marlborough sauvignon blanc
won a perfect five star rating but when compared to a supermarket purchased bottle of the
same label was found to be a different wine with varying degree of alcohol and sugar content.
There was a problem of having different wines potentially being sold under same label. And
the main problem was for the Coopers Creek & New Zealand wine industry the competition
from the domestic and international market. The domestic grape growers were also in the
competition they were also competes in wine industry. After that another problem was the
fluctuation in the New Zealand currency, fluctuation in the growth of grapes was the major
problems.
(New Zealand wine, 2006)
3.2 Challenges

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New Zealand wine producers faced big challenges in the few years that the exports volume
was doubled with static consumption and worldwide supply. The main challenge is for the
Coopers creek that the investment in processing capacity and market development will be
needed over the next four years to handle the increase in production. Contract prices are
expected to fall slightly in the medium term as production volumes increase and exports
prices fall. Due to static consumption and oversupply, the challenge for New Zealand
producers will be to maintain both their wine’s reputation for quality and the prices they
currently receive. UK is the largest market for cooper’s creek & New Zealand Wine market
has allowed UK importers to reduce prices for New Zealand wines. This is the real challenge
for the Cooper’s Creek because of global competition wine industry. The real challenge for
the Coopers Creek and the wine industry’s future will be determined by how successful it is
in investment in terms of marketing, branding and promotional strategies. The New Zealand
industry could expect increasingly fierce competition in its target markets; with the risk that
New Zealand’s position as a quality niche producer could be emulated and challenged by
other new entrants.
Source: (study guide, 2008)
Source :( Maf.govt.nz, 2008)
3.3 Opportunities
The opportunities for the Coopers Creek and New Zealand wine industry is to go into the
Asian market. It already enters into the Singapore market. Asian market had not been a strong
focus for Coopers Creek so Coopers Creek can go for the Asian market to gain the market
share. In other parts of European market Andrew had explored a number of opportunities. In
2004 Coopers Creek was the biggest New Zealand market in Canada then Coopers Creek can
more concentrate on the Canadian market because it can fully control the Liquor market.
Source: (Study guide, 2008)

4 Alternative Solutions
There are some solutions for Coopers Creek to gain the competitive advantage and to gain
the market share. Coopers Creek can focus on the export strategy with collaborative and
individual efforts. Coopers Creek should concentrate on the wine quality because there are
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some problems which they sell different wine under same label. They can try Total quality
management. With this they can differentiate their product according to the cost and with
quality. If they concentrate on the Total quality management then they can easily compete
other domestic competitive. First Cooper Creek should slowly take over the New Zealand
market and regularly they concentrate their other foreign market such as Canada, UK, US,
and All other European market. Coopers Creek should have to fully control over their supply
chain. If they look at their supply chain management then they can be remain independent in
the market to gain the share and profit. Coopers Creek should consider the entire thing to
build a good relationship with their customer and suppliers. Due to remain in market as
independent, Coopers Creek can build a strong brand image in the consumer mind with good
quality products.

5 Recommendations for Future


5.1 Future
The New Zealand wine industry, despite entering early maturity, remained constrained by
issues of supply. Whilst the cost of new land for grape planting is rising and more previously
marginal land became economic to grow on. Overseas investors were welcomed by the
industry, so long as New Zealand’s distinctive and competitive advantage were not
compromised. According to Andrew Hendry, “Self-funded, relationship-based approach to
growth achieved good fit with the nature of the New Zealand industry, namely, the strong
reliance on scarce resources in an annual basis”.
5.2 Recommendation
With the local industry showing signs of concentration, I think Andrew Hendry and Coopers
Creek haveto focus on the building relationship with other domestic producers. To gain the
advantage Coopers Creek and Andrew Hendry has to begin seeking collaborative
arrangements with overseas producers given the nature of the wine industry globally. And
due to the company as Coopers Creek, it has to remain independently, retain the benefits of
small size and still they can achieve exceptional return in the changing environment. As a
wine industry Coopers Creek the overseas investors were welcomed.

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Conclusion
In my opinion, Coopers Creek have problems and some challenges in the wine industry. They
have problems in the UK market and also in the domestic market with grape growers but they
can fix the problems with the focused export strategy and with the collaborative
arrangements with overseas producers. I recommend that the company should collaborative
arrangement with overseas producers to gain the market share and they should look at the
total quality management that they can build strong brand image.

References:
Parminter, I. (2002). Situation and Outlook for New Zealand Agriculture and Forestry
(SONZAF): Wine, New Zealand Ministry of Agriculture and Forestry,
http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/sonzaf/2002. 2002.

Rabobank, I. (1999). The world wine business. Utrecht, Rabobank International: 86.
www.foreignminister.gov.au/speeches/2001/131101_fa_wine.html
Coopers Creek 2008, Market, [online]. Available at
www.cooperscreek.co.nz/market [viewed on 10 nov.]

Mag 2008, Mafnet, [online]. Available at www.maf,govt.nz/mafnet [viewed on 10


Nov 2008.

HSC 2008, CSU. EDU, [online]. Available at www.hsc.csu.edu.au/business [viewed


on 10 Nov 2008]

Leadership book

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