Question

A) Provide a PESTLE Analysis for the firm

B) Provide a SWOT Analysis for the firm

Freemark Abbey Winery

Earlier in September, William Jaeger, a member of the partnership that owned Freemark Abbey Winery, had to make a decision:  should he harvest the Riesling grapes immediately or leave them on the vines despite an approaching storm?A storm just before harvest is usually detrimental, often ruining the crop.  A warm, light rain, however, will sometimes cause a beneficial mold, botrytis cinerea, to form on the grape skins.  The result is a luscious, complex, sweet wine, highly valued by connoisseurs.

The Winery

Freemark Abbey is located in St. Helena, California, in the northern Napa Valley.  The winery produces only premium wines from the best grape varieties.  Of the 25,000 cases of wine bottled each year (about the same as Chateau Lafite-Rothschild), most were Cabernet Sauvignon and Chardonnay.  About 1,000 cases of Riesling and 500 cases of Petite Syrah were also bottled.  (A case contains twelve 750-ml bottles.)

The Napa Valley extends for 30 miles, from Calistoga in the north to Napa in the south.  The average temperature decreases as one moves south, closer to San Francisco Bay and the cold ocean waters.  Freemark Abbey’s grapes come from an ideal climate in the central and southern parts of the valley.

Winemaking

Wine is produced when the fruit sugar, which is naturally present in the juice of grapes, is converted to yeast, through fermentation, into approximately equal molecular quantities of alcohol and carbon dioxide.  Sparkling wines excepted, the carbon dioxide is allowed to bubble up and dissipate.  The wine then ages in barrels for one or more years, until it is ready for bottling.

By various decisions during wine-making – for example, the type of wooden barrel used for aging – the vintner or winemaker influences the style of wine produced.  The style adopted by a particular winery depends mainly on the owners’ preferences, though it is influenced by marketing considerations.  Usually, as the grapes ripen, the sugar levels increase and the acidity levels decrease.  The winemaker tries to harvest the grapes when they have achieved the proper balance of sugar and acidity for the style of wine sought.  The ripening process is variable, however, and if the weather is not favorable, the proper balance might never occur.

Several different styles of Riesling (more accurately, Johannisberg Riesling) are on the market. If the grapes are harvested at 20% sugar, the wine is fermented “dry” (all the sugar is converted to alcohol and carbon dioxide) or “near dry.”  The resulting wine, at bout 10% alcohol, is light bodied.  If the grapes are harvested at 25% sugar, the winemaker can produce a wine with the same 10% alcohol but with 5% residual sugar; this wine is sweet and relatively full bodied.

A third and rare style results when almost-ripe Riesling grapes are attacked by the botrytismold.  The skins of the grapes become porous, allowing water to evaporate while the sugar remains.  Thus, the sugar concentration increases greatly, sometimes to 35% residual sugar, has extraordinary concentration, and the botrytisitself adds to the wine’s complexity.  Freemark Abbey had already produced a botrytisedRiesling from an earlier vintage.

Jaeger’s Decision Problem

From the weather reports, Jaeger concluded that there was a 50 – 50 chance that the rainstorm would hit the Napa Valley.  Since the storm had originated over the warm waters off Mexico, he thought there was a 40% chance that, if the storm did strike, it would lead to the development of the botrytismold.  If the botrytisdid not form, however, the rainwater, which would be absorbed into the grapes through the roots of the vines, would merely swell the berries by 5 – 10%, decreasing their concentration.  This would yield a thin wine that would sell wholesale for only about $2.00 per bottle, about $0.85 less than Jaeger could obtain by harvesting the not-quite-ripe grapes immediately and eliminating the risk. Freemark Abbey always had the option of not bottling a wine that was not up to standards.  It could sell the wine in bulk, or it could sell the grapes directly. These options would bring only half has much revenue, but would at least avoid damaging the winery’s reputation, which would be risked by bottling an inferior product.

If Jaeger decided not to harvest the grapes immediately in anticipation of the storm, and the storm did not strike, Jaeger would probably leave the grapes to ripen more fully. With luck, the grapes would reach 25% sugar, resulting in a wine selling for around $3.50 wholesale.  Even with less-favorable weather, the sugar levels would probably top 20%, yielding a lighter wine selling at around $3.00. Jaeger thought these possibilities were equally likely.  In the past, sugar levels occasionally failed to rise above 19%.  Moreover, while waiting for sugar levels to rise, the acidity levels must also be monitored.  When the acidity drops below about 0.7%, the grapes must be harvested whatever the sugar level.  If this happened, the wine would be priced at only about $2.50.  Jaeger felt that this even had only about a 0.2 probability.

The wholesale price for a botrytised Riesling would be about $8.00 per bottle.  Unfortunately, the same process that resulted in increased sugar concentration also caused a 30% reduction in the total juice.  The higher price was, therefore, partly offset by a reduction in quantity. Although fewer bottles would be produced, there would be essentially no savings in vinification costs.  The costs to the winery were about the same for each of the possible styles of wine and were small relative to the wholesale price.  

Answer 1

A) PESTLE Analysis

1. Political

• Change in Legislation and tax assessment consequences for the organization
• Pattern of guidelines and deregulation. Impacts of progress in business guidelines
• Other political factors liable to change for Freemark Abbey Winery.

2. Economical

• Impact of globalization on monetary condition
• Contemplation's on other monetary variables
• Position and current economy pattern

3. Socio-Cultural

• Change in populace development rate and age components, and its effects on association.
• Strict adherents and ways of life and its impacts on association
• Guidelines of wellbeing, instruction and social portability levels.

4. Technological

• Any new innovation that organization is utilizing
• Changes in infra-structure and its impacts on work process
• Access of contenders to the new innovations and its effect on their item improvement/better administrations.

5. Legal and Environmental

• Timescale of administrative change.
• Quality of property rights and law rules.

B. SWOT Analysis

1. Strengths

• Exercises of the organization superior to contenders.
• Exercises and assets market sees as the organization's quality.
• One of a kind selling suggestion of the organization.

2. Weaknesses

• Exercises that can be maintained a strategic distance from for Freemark Abbey Winery.
• Significant expense
• Decrease in Quantity

3. Opportunities

• Fascinating patterns of industry.
• Change in innovation and market techniques
• Changes in social examples and ways of life.

4. Threats

• Risk from changing advances
• Organization's confronting impediments.
• Item and administrations quality benchmarks