KTIMA SPIROPOULOU

1. KTIMA SPIROPOULOU Analyzing the strategic position – Risk Analysis

2. History – Identity - Products Analyzingthe external environment External Analysis Analyzing recourses & capabilities Internal Analysis Evaluation of current strategy Scenarios - risk analysis

3. History- Identity Founded in 1987 A purely family business Production, bottling and sales of wine Some Bulk Sales (Χύμα κρασί) and in wine-skin packages Private vineyards in Mantinea~650m altitude, 88 acre Private vineyards in Nemea ~400m altitude, 40 acre Main Production: Moschofilero - Agiorgitiko 1993: Entry into Biological products market 2005: Strategic Business partnership with Karoulias Berry & Bross For distribution of products in Greece and United Kingdom

4. Products (Super Premium) 4

5. Products (Premium) 5

6. Products (Popular Premium) 6

7. External Analysis The Industry Broader environment Competitive forces Competitors – strategic groups Market segmentation Critical Success Factors

8. The industry (1) Few companies with large scale of production Many small local producers Wine Cooperatives : handle 40% production Private wineries: 60% production Many suppliers – vineyard producers Growing exporting activities

9. The industry (2) Increase of imports from : Argentina, Chile, S.Africa Emerging EU Countries (Romania, Bulgaria...) Intense competition Entry of multinational companies with large - dominant distribution networks Seasonal wine consumption Climate changes favors substitutes

10. Political Technological Economic Wine industry Socio-cultural b) PEST analysis

11. PEST (1)

12. PEST (2)

13. c) Five Forces Analysis Potential Entrants Distribution channels Threat of entry HIGH Competitive Rivalry Buyers Suppliers HIGH Bargaining Power Bargaining Power LOW MEDIUM MEDIUM Substitutes Threat of substitutes

14. Along two dimensions Low / High in biological products Low / High in range of products or markets Select the ones in the same group with Ktima Spyropoulou d) Competitors analysis

15. Competitors analysis

16. e) Market segmentation

17. f) Critical or Key Success Factors (KSF)

18. Attractiveness of the industry is moderate Low growth rates Intense competitive pressures Opportunities for biological and high quality products Mainly in W. Europe Depends on biological products’ penetration speed Trend towards healthy diet Conclusions (1)

19. Expected increase of external pressures –industry restructure Alliances, entry of MNEs Probable pressures in profit margins. Need for active strategies Alliances, distribution network expansion, entry in new segments, activities, etc. Conclusions (2)

20. Resources & Capabilities Distinctive Competences Internal Analysis

21. a) Unique Resources & Capabilities

22. b) Distinctive Competences 5

23. All vineyards are “DIO” (ΔΗΩ) and Swiss “Delinat” certified Products Wide range of unique cultivations with superb quality Awards Dorkas 1999, Guter Wein at Berliner Weinfuehrer 2003 Dorkas 2001, Silver medal at Decanter Tournament Oxilos 2004, Silver Medal at the Zurich International Tournament Distinctive Competences 23

24. Growth rate: 2,5% ROE: 10% High existing short term bank loans Liquidity ratio: 0,85 Financial position

25. Appraisal of Organizational Capabilities Reputation – Specialized personnel • Brands / reputation • Management • Know-How • Financial position • Human Resources • Specialized Personnel • Marketing • Public Relations • Building • IT • Vineyards • Cost of service • Finances High performance Dedicated personnel 1 6 9 3 5 8 2 Mean performance 11 IT 12 10 13 4 7 Finance - Marketing Low performance Low importance High importance

26. Internal analysis conclusions There are unique / distinctive assets & capabilities reputation (name, brands, certifications) specialized knowledge relations But rather weak on costs and precarious financial position moderate financial returns and growth over borrowed, liquidity problems Weak marketing …

27. Summarizing: SWOT Analysis

28. Stakeholder analysis Family – owners Employees Customers Suppliers Local communities Banks – financial institutes Governments – international bodies

29. Interest and Power of Stakeholders Near Future Owners, Banks: Key players, want adequate returns on investments , need to be satisfied High Community, Employees High interest, manage relationships, keep them informed POWER Government, Institutions Passive, low effort Suppliers Attempt to satisfy vineyard producers, alternative outlets Low High Low INTEREST

30. STRATEGY ANALYSIS MOST ANALYSIS Evaluation of existing strategy Scenario Analysis

31. a) MOST Analysis - Vision “Our vision is for Domaine Spiropoulos to be the most successful and well-known boutique winery of Peloponnesus, in Greece and abroad, and that it becomes a model for the industrial food production units in Greece and Europe”Our values include: Honesty and integrity Passion and creativity in all expressions of our work, as well as our lives Absolute respect and protection for the environment Innovation

32. MOSTAnalysis – Mission To serve our end customers, offering products and services that fulfill their demands, ensuring that: Our customers always receives totally safe products, in the best available quality Innovative use of technology in all stages of the value chain Respect to the environment and gradual transition to biological products Satisfy our personnel by rewarding their efforts and securing their work places

33. MOST Analysis – Objectives Continuous growth & recognition, in international markets apart from the Greek market Presence and active participation in policy formation for the future of wine and food industry in Greece and the European Union Create long-term value for our employees and the community within which we operate, as well as for our stakeholders Preserve a satisfied, loyal, well trained, well rewarded and motivated personnel, that will work under totally healthy and safe conditions.

34. MOST – Strategy “Differentiation strategy in the production of innovative products, focused on target groups that want high-quality wines and are willing to pay higher – but reasonable – prices”

35. MOST –Tactics Continuously acquisition of new vineyards in the areas of Mantinea and Nemea, in order to have total control over the cultivation process and secure the Name of Origin of our products Biological cultivation in every new vineyard, aiming at every new wine produced to be product of biological tillage Expansion in foreign markets, approaching not only Greeks of Diaspora, but also experienced foreign wine distributors.

36. MOST Analysis – some confusion Objectives are not for the business performance , nore quantified some are general or peripheral (e.g. participation in policy formation) Other would belong to mission, e.g. createlong-termvalueforemployeesandthecommunity Strategy is rather “hybrid” Tactics not adequately developed, some would better be in objectives, e.g. expansion in foreign markets

37. b) Evaluation of the Existing Strategy (1) Fit with external environment?YES but Slowness in the exploitation of biological products Examine opportunities for broadening alliances Matching with resources & capabilities?YES but Further strengthening of know-how / specialists Exploitation brand name Fulfilling expectations? Probably NOT Low financial performance and growth rate

38. Evaluation of the Existing Strategy (2) Internal inconsistencies in MOST? Some statements don’t fit with the quality / culture of the firm (e.g. bulk sales (χύμα κρασί) may dilute competitive advantage) Is the risk acceptable/reasonable for the benefit expected? Probably NOT, too much risk for the relatively low current performance Higher growth rates are required

39. c) Risk analysis with scenarios Two scenarios:… alternative views of the future… defined by external environment variables, not by company decisions Scenarios (importantvariablesPEST / 5 forces) Business as usual - trends • Deterioration • Pessimistic Views of the World

40. Risk Analysis: Factors (PEST, 5 forces..) with high uncertainty (risk) and significant impact 1: Low 5: High

41. Two scenarios of Wine sector development A. “Good wines” (καλά κρασιά) Relatively stable GDPgrowth rate –per capita income Increasing demand for biological products Easier certifications Gradual entrance of competitors from 3rd World countries The substitute drinks’ market share remain constant B. “Last year’s sour grapes” (περσινά ξινά σταφύλια) Slowdown of economy, GDP growth rate - per capita income Delayed expansion of biological products The certification continues being difficult Competitors from third countries increase fast The substitute drinks’ market share increases

42. Impact on the wine sectorA. “Good wines”B.“Last year’s sour grapes” Increasing demand of wines with Name of Origin Substantial increase in the demand for biological products Profit margin remains reasonable for quality wines Strategic alliances increase Multinationals expand, takeover of local competitors Limited increase in the demand of wines with Name of Origin Lower growth rate in the demand for biological products Intense competition from entry of new quality products with low cost Compression of profit margins

43. Company’s responses A. “Good wines”B.“Last year’s sour grapes” Quality improvements restraining the cost Expansion in biological products market Personnel training, development specialized technologies Expansion in international markets Strategic alliances with international players for global distribution Focus on traditional wines with Name of Origin Gradual - attentive entry in biological products market Cost reduction, limitation of investments Limited expansion, only in related activities Consider acquiring local firms under crisis

44. Strategy robustness: Estimates of Return on own capital for every scenario (indicative) ROE 25% ROE of best competitors (Scen. Α) 20% Sen. Α 15% 10% Sen. Β ROE of best competitors (Scen. B) 5% years 1 2 3 4 5 6 7 ROE : Return on Equity

45. Risk evaluation using scenarios The expected low profitability limits the growth potential, even under scenario A Difficulty in financing development The major competitors (mostly multinationals) have an advantage due to higher ROE, or lower cost of capital (WACC) Under scenario B the firm will experience losses for at least 3 years Despite the low probability of scenario B occurrence, the risk is not acceptable It’s difficult to withstand losses for many years Conclusion:The current strategy is not working. A new strategy must be designed

46. Future directions (1) In both cases, the firm faces non desirable financial results Should there be a new strategy to approach and serve a lower income target group? promoting lower quality wine but still superior in comparison with competitors’, delivered in wine-skin packages, under a new brand name, to avoid previous failing attempt 46

47. Future directions (2) Should it enter other gourmet products? such as cheese, sausages etc. and attempt to offer packages (snacks with wine) in an attempt to diversify? Should it deliver products through alternative more targeted distribution channels? E.g. gourmet restaurants 47

48. Questions ?