VINA SAN PEDRO (VSP) Harvard Case Solution & Analysis

Problem Statements

Matias Elton joined VSP as the President. He graduated in the United States soil grown foods importing industry from the Georgetown University. He was hired by VSP to develop the domestic market share of VSP in Chile by expanding quality to catch higher edge deals, extending fare deals, and accomplishing further economies of scale.

Once Elton joined the company, he quickly realized that the export market provides a much better opportunity for growth compared to the domestic market as VSP only holds 10.7% of the total market share of Chile. Chile's 15 million occupants expended just 211 million liters of wine every year or about 14.4 liters for every capita. Industry experts, notwithstanding, anticipated that utilization will build by 4% for every year to 239 million liters by 2001. In this way, the household business sector had not offered incredible open doors for development among wineries. This business sector was greatly value delicate, and creation got solidified among the biggest wineries that had the best economies of scale. Some more diminutive vineyards concentrated on delivering premium wines. Others sold shabby wines inside the exceptionally nearby "casual business sector," while still others were substance to offer their grape creation as crude material to the bigger produce. But the change of focus by Elton of VSP from local market to export market drove the domestic profitability negative.

The main problem was about what to charge for the product and how much to market it. As the Chilean market was more cost focused and less quality focused, VSP would charge 5% less than the other market leaders but a consumer research showed that the wines of VSP were  perceived to be of  lower quality compared to the leading competitors even though the range of wines that VSP produced were more than its competitors.

Elton had set the objective for the company to achieve 20% domestic market share in the cardboard carton market and 8% in the bottled wine market in the next 4 years as a net result VSP would be achieving a total domestic market share of 15%. This meant that VSP would need to increase 11 million liters of sales over the next five years but with the current decline in the domestic profitability; achievement of such a steep benchmark would be difficult for VSP.

On the other hand, targeting the export market meant that Elton would be opening VSP to potential currency exchange risk even though VSP had achieved recent success in the market.

Elton arranged his goals for the following few years but the current problems that VSP was facing raised few questions. How quick would it be advisable for him to push the development of the organization? Should he sit tight for the accomplishment of the late ventures in order to demonstrate ability or progress? In the event that he pushed into remote markets, where ought to that exertion be centered and with what items? The enormous concern was what may happen if the business sector kept on growing past desires. In the event that supply was low, VSP may be compelled to dispense creation among merchants and risk deliberately supported connections. Moreover, all the strategies implemented by Elton help VSP to achieve the Return on Capital Employed target set in order to evaluate the performance of VSP under the prospective of CCU.

Introduction to the Company

Viña San Pedro (VSP) was the third biggest winery in Chile, with offers of Ch$37 billion in 1998. Bonifacio Correa had planted the first vines with French stock in 1865 on the homestead in Molina that the family had possessed since 1701. For a long time, VSP wines reveled in a notoriety of being one of the finest in the nation and the vineyard stayed in the Correa family until 1941. New holders stretched the vineyard so that by 1994, 1,150 hectares were in generation; this made it the biggest single-site vineyard in the nation, but at that time it was notwithstanding, scarcely productive and survived principally by delivering reasonable wines for the residential business.

In 1994, CCU wanted to enhance its operations both in the universal and household markets. In October, it acquired a 48.4% enthusiasm towards Viña San Pedro as it was providing the perfect plant form to achieve what CCU desired. Throughout the initial couple of years of CCU control, administration concentrated on decreasing expenses, expanding appropriation, and expanding the nature of VSP wines. By 1995, obligation had been lessened by Ch$7.8 billion and Ch$864 million resources had been put into stretched limit for maturing wines In addition, Ch$178 million resources had been put into planting new vineyards for creating premium red wines. As a consequence of these included ventures, CCU's aggregate proprietorship position expanded to 51.2%...............................

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