BUS302 Entrepreneurship For the Macquarie Wine Company

An Entrepreneurial Venture - groups are to develop an entrepreneurial product or service that could be commercialised. The group is to assume it is seeking funding of $100,000.00 to add to the existing funds of $100,000.00 (which you saved or were loaned) and include a financial plan for the use of these funds for the first financial year. The product, service or process should be original and producible (i.e. no science fiction). 
The primary target market should be local, although secondary markets may be reached via the internet. Pricing, distribution and promotion strategies should reflect this.

 

To assist groups in managing their progress, pairs of students should be finalised by week 4 and advise the tutor of their chosen product or service and primary market for approval. 

Answer:

Background of the Business 

Australia has the biggest individual wine market in all over the word. The companies have growing business opportunities in wine market and that is the reason this is the good start-up business for the any entrepreneur. Australia import 95% of wine per year. The new business venture that will be processed by the entrepreneur is based on the wine manufacturing company. The name of the company will be Macquarie Wine Company. The company will be situated at the bank of the Macquarie River thus the name of the company will be Macquarie Wine Company. The quality of the wine is the main USP of the company. The sweetness, acidity, tannin, alcohol percentage and the body of the wine is unique and it will counted as one of the best company in Australia. The sales representatives of the company will be well-trained and they have good market knowledge as well. The company can beat the high profile international brands as the style and innovativeness in case of packaging and delivering the wine is unique and special. The company will have only local branches as the company has just started their business and they need to concentrate on the market acceleration The Company will enrich their business by the promotional activity and by delivering their logistic process strong. In case of the national and international brands of wines, the quality of the wine and their service facility is important and they are legally authorised by the Australian legislation. Latest market selling process and branding portfolio is important in that case and company will rise quickly in the Australian wine market. The manufacturing as well as the operational units will be situated in Melbourne. In the beginning the products will be sold solely in Australia and then depending upon the growth statistics, the firm will expand the sale of its products internationally.

Mission 

The mission of the company is to excel in their business and gain enough reputation that will help in achieving 3% market enhancement in one year. The mission of the company is also to develop their international market after a year by aligning with other companies in different nations and grab the initial market.

Product offering

The product offering of any firm caters to the briefing of the product and the types of the products that the firm is potentially planning to manufacture or produce (Waheed et al. 2018). The products offered by the company will be Dow’s Port, Marquis la de tour, Piaramimma, Ackerman, Vilarnau, Wise Guys, Mataora, Crossroads and Redman. All of these products will be manufactured, marketed and sold by Macquarie Wine Company all across Melbourne as well as other important cities in Australia. The firm will be producing different types and qualities of wine like Riesling, Pinot Noir, Chardonnay, Sauvignon blanc, Syrah, Merlot and Cabernet sauvignon. Further the firm will also be producing some authentic and customized qualities and types of wine which will exclusively be produced and will be available at only a few stores across the country.

Market Analysis

Market analysis of any industry or firm tends to study the market in which the firm will be operating. This pertains to the total existing size of the market and the value of the product in the market or the industry (Bogue, Collins and Troy 2016). It basically helps in analysing the different segments of the market and hence in determining the target market or target customer group for a particular firm. This is done essentially by understanding the demographics and tastes and preferences of the customer’s existing for the industry at the moment (Burns, Bush and Sinha 2014). Further, it pertains to the recognition of the different types and number of competitors already existing in the market and the potential entrants to the industry which might be potential sources of threat to the upcoming firm. To understand the patterns existing in the wine market in Australia and the economic condition of the industry the market analysis is carried out in this report with the help of industry analysis and competition analysis.

Industry analysis 

The wine industry in Australia currently is facing adverse conditions and hence is undergoing a downturn for a prolonged period of time now (Greene et al. 2018). This is because of a lot of reasons including the pattern of sales across the world and the variance of the same with the sales patterns in Australia (Li 2015). It is also increasing because of the changing demand patterns of the customers with the advent of so many options of liquors at comparatively cheaper costs. The brand value of the already existing biggest brands have also been adversely affected because of the poor quality of products and lack of the improvisation of options and quality of wine produced and provided within the country (Taylor and Taylor 2018). This economic downturn in the wine industry is also attributable to the lack of proper research and development to a large extent. Further, the phenomenon of weather fluctuations has also been considered an important reason behind the discrepancies in the total quantity demanded and the total quantity supplied. It is also being asserted that around 70% of the wine produced domestically within Australia is through uneconomic means (Wfa.org.au. 2018). It has also been reported that the wine industry in Australia will only be able to recover if the authorities in the country are able to formulate new methods of research and production which will be faster and easier if there are new firms in the market and through the building of an effective tax structure for this industry. The wine industry in Australia contributes around $40 billion annually to the economy in Australia. It has also been reported that the wine industry generates a total of around 172,736 full time and part time jobs in the country.

Competition 

Due to the lack of proper research and development as per the changing demands of the customers, the wine industry as mentioned before is currently undergoing a prolonged downfall and so there is not much competition currently existing in the market (Morrison and Rabellotti 2017). The existing competition is not very strong in intensity as there are only a few strong brands existing in the wine markets in Australia. However, the few brands existing in the country have immensely high brand values and have been operating for many years now. These include Accolade Wines, Treasury Wine Estates, Australian Vintage and Yalumba. Hence, it s very important for the upcoming firm, that is, Macquarie Wine Company to completely diversify the types of wine produced and provide new qualities and types of wine with new tastes (Galbreath 2016). The firm will effectively have to install and use the best forms of technology including smart products and devices to understand the needs and the changing demand patterns of the customers to remain ahead of its few competitors.

Primary Target market

The Australian wine market for this firm will be the immediate local market within the boundaries of Australia for the first year as has been discussed before. Like the competitors, it is essential for this firm to first enter the local market and cater to the current trends and patterns of demands of the local customers. For this it is very essential for the firm to carry out extensive research and see which part of the population’s demands are being catered to the least by the already existing local wine producing firms in the country. Further, as the firm is new to the market and there is already a situation of existing downturn in the wine industry, the firm should keep the prices low to attract the customers from all economic cohorts within the country. The average price of each bottle will hence be kept below the average price existing for a wine bottle in the country. Demographically, the target market will consist of a cohort of customers whose age varies in between the youth and the old. The products of different types will vary in the composition so that individuals of all ages can consume the product without worrying about the health conditions and the firm will also try to produce healthy combinations of different types of wines to expand the target market. Reports assert that Australia is the thirty-ninth largest expensive country in terms of wine consumption. Hence, most inevitably the firm will target a higher level of income generating individuals as the target market for the next financial year. This will depend upon the sales and the revenue generation levels depending upon the initial target market this year.

Marketing

The most important step for a marketing plan is the marketing techniques and strategies used. It helps in explaining the product and the added features that are aligned to the entire marketing plan. This step consists of clearly mentioning the four factors of product, price, place and promotion. The subsequent part of the report focuses on identifying these elements with respect to the company under consideration which is Macquarie Wine Company.

1. a) Product –The product under consideration in this case as mentioned earlier is wine and different types of wine already existing and new customised versions so that the customers are provided with new products and their changing demand patterns are in turn catered to. The types of wine that will be manufactured and produced by the firm include Riesling, Pinot Noir, Chardonnay, Sauvignon blanc, Syrah, Merlot and Cabernet sauvignon and the products will be available under names of Dow’s Port, Marquis la de tour, Piaramimma, Ackerman, Vilarnau, Wise Guys, Mataora, Crossroads and Redman. The firm shall also produce further, personalized versions of wines. The wine produced and made available will be of authentic and high quality which will be available for consumption by individuals varying in the age group ranging from the youth to the old. Further, later on the (18 years to 81 years on an average) firm will also be producing specialised wine of a healthy composition.
2. b) Pricing

The average cost of bottled wine in Australia is currently at a level of around $21.59 for a 750 ml bottle. The prices of all bottles of wine produced by the firm will range in between $10 and $25 dollars depending on the quality of wine and the size of the bottle.  This will ensure broadening of the consumer base from the very beginning.

1. c) Distribution

The product will be manufactured particularly in Melbourne but will be distributed across all local markets of Australia for the first year. Following this the firm will try to expand to other countries around the world depending upon the response of the consumers in the first year.

1. d) Promotion

The promotional techniques used by the firm will mostly be digitalised using social media platforms. This will ensure that the firm is able to reach out to the maximum number of individuals in the target market and the cost incurred will also be substantially less compared to other methods of promotion (Appendix 2). For ensuring this, pages and online promotional events will be carried through the use of platforms like Facebook as well as Instagram (Appendix 2). The advertisement of the brand will also be done by providing discount options and partnering with ongoing events in different cities to make people aware of the upcoming brand.   

Financial Plan

Sources of Capital
Owners' Investment (name & % ownership)
Your name & % ownership	$       100,000
Other Investor	-
Other Investor	-
Other Investor	-
Total Investment	$       100,000
Bank Loans
Bank 1	$       100,000
Bank 2	-
Bank 3	-
Bank 4	-
Total Bank Loans	$       100,000
Other Loans
Source 1	$                    -
Source 2	-
Total Other Loans	$                    -
Summary Statement
Sources of Capital
Owners' and Other Investments	$       100,000
Bank Loans	100,000
Other Loans	-
Total Source of Funds	$       200,000
Startup Expenses
Bldgs / Real Estate	$         60,000
Leasehold Improvements	6,000
Capital Equipment	71,000
Location / Admin Expenses	9,500
Opening Inventory	-
Advertising / Promo Expenses	6,000
Other Expenses	50,000
Total Startup Expenses	$       602,500

 

Startup Expenses
Buildings / Real Estate
Purchase	$                       20,000
Construction	$                       20,000
Remodeling	$                       20,000
Other	-
Total Buildings and R / E	$                       60,000
Leasehold Improvements
Item 1	$                         1,500
Item 2	$                         1,500
Item 3	$                         1,500
Item 4	$                         1,500
Total L / H Improvements	$                         6,000
Capital Equipment List
Furniture	$                       20,000
Equipment	$                       20,000
Fixtures	$                         1,000
Machinery	$                       25,000
Other	$                         5,000
Total Capital Equipment	$                       71,000
Location and Admin Expenses
Rental	$                                  -
Utility Deposits	3,500
Legal and Accounting Fees	2,500
Prepaid Insurance	1,500
Pre-opening Salaries	1,500
Other	500
Total Location and Admin Expenses	$                         9,500
Opening Inventory
Category 1	$                         1,500
Category 2	$                         2,500
Category 3	$                         2,560
Category 4	$                         1,500
Category 5	$                         1,500
Total Inventory	$                         9,560
Advertising and Promotional Expenses
Advertising	$                         1,500
Signage	$                         1,500
Printing	$                         1,500
Travel & Entertainment	$                         1,500
Other / Additional categories	-
Total Adv and Promo expenses	$                         6,000
Payroll and payroll taxes
Expense 1	$                       25,000
Expense 2	25,000
Total Payroll and payroll taxes	$                       50,000

 

Break even

 

Fixed Expenses
Bldgs / Real Estate	$                   60,000
Leasehold Improvements	6,000
Capital Equipment	71,000
Location / Admin Expenses	9,500
Opening Inventory	-
Advertising / Promo Expenses	6,000
Other Expenses	50,000
Total Fixed Expenses	$                 202,500
	Variable Expenses
Inventory or Materials	0.0
Direct labor (includes payroll taxes)	0.0
Other expenses	0.0
Other expenses	0.0
Salaries (includes payroll taxes)	0.0
Supplies	0.0
Total Variable Expenses	0%
Breakeven Sales level   =	202500

 

 

Profit and loss

			Year 1
	Gross revenue		$3,563,000
	Cost of goods sold		$175,000
	Gross margin		$3,388,000
	Other revenue [source]		$0
	Interest income		$0
	Total revenue		$3,388,000
Operating expenses
	Sales and marketing		$6,000
	Payroll and payroll taxes		$50,000
	Depreciation		$27,400
	Maintenance, repair, and overhaul		$0
	Total operating expenses		$83,400
Operating income			$3,304,600
	Interest expense on long-term debt		$0
Operating income before other items			$3,304,600
	Loss (gain) on sale of assets		$0
	Other unusual expenses (income)		$0
Earnings before taxes			$3,304,600
Taxes on income		30%	$991,380
Net income (loss)			$2,313,220

Critical risks 

The risks related to the initiation and market entrance in the wine industry in Australia is high as the market is undergoing a very slow transition from the incessant periods of economic down fall. However, if the pricing and promotional techniques mentioned herein are used and implemented the risks can be avoided up to a large extent (Woodfield and Husted 2017). Further, the absence of a lot of competition in the wine industry is also an added advantage of the critical risks. The only risk existing is catering to the strict tax system existing in the country. However, proper usage of resources through effective channelizing and reinvestment of earned profits can help in avoiding this risk as well.

References

Bogue, J., Collins, O. and Troy, A.J., 2016. Market analysis and concept development of functional foods. In Developing new functional food and nutraceutical products (pp. 29-45).

Bruwer, J., Lockshin, L., Saliba, A. and Hirche, M., 2015. The cellar door as a catalyst for wine consumption and multiplier of sales in the Australian wine market.

Burns, A.C., Bush, R.F. and Sinha, N., 2014. Marketing research (Vol. 7). Harlow: Pearson.

Crabb, A., 2016. Wine export: Impact of the'Brexit'on Australian wine exports. Wine & Viticulture Journal, 31(3), p.73.

Galbreath, J., 2016. Exploratory study of climate change innovations in wine regions in Australia. Regional Studies, 50(11), pp.1903-1918.

Godoy, J. and Téllez, D., 2017. Mission Power and Firm Financial Performance.

Greene, R., Gibson, R., Fogarty, P., Strong, C., Grant, C. and Freudenberger, D., 2018. Aeolian dust in vineyard soils in Australia and New Zealand: how their properties may influence wine quality. Insights on the paradigms applied for mineral exploration in deeply weathered landscapes.

Johnson, T.E. and Bastian, S.E., 2015. A fine wine instrument–an alternative for segmenting the Australian wine market. International Journal of Wine Business Research, 27(3), pp.182-202.

Morrison, A. and Rabellotti, R., 2017. Gradual catch up and enduring leadership in the global wine industry. Research Policy, 46(2), pp.417-430.

Taylor, S. and Taylor, M., 2018. The Aroma of Opportunity: The Potential of Wine Geographical Indications in the Comprehensive Economic Cooperation Agreement.

Waheed, A., Khan, S.Z., Arshad, S., Rafique, K. and Laeeq, M., 2018. How Market Orientation Helps to Gain Competitive Advantages in New Product Offering. IJAMEE.

Wfa.org.au. (2018). WFA - Winemakers' Federation of Australia. [online] Available at: https://www.wfa.org.au/ [Accessed 17 Sep. 2018].

Woodfield, P. and Husted, K., 2017. Intergenerational knowledge sharing in family firms: Case-based evidence from the New Zealand wine industry. Journal of Family Business Strategy, 8(1), pp.57-69.