Case Analysis: Chateau Marrgax

What I see going on here is that Chateau Marguax’s core competencies are built upon traditions which limit the company’s ability to innovate and evolve. Chateau Margaux’s core competency is its ability to produce superior quality wines sold at premium prices. While we have found success for many decades through traditional techniques and processes, the changing environment of the wine industry suggests that our traditions might not hold up for the years to come. Chateau Margaux relies on tradition for many aspects of the company including production, distribution, and brand management. As a producer of wine from the Bordeaux region, Chateau Marguax is known for its exceptional terroir. As our owner Corrine Mentzelopoulos puts it, “our first

Since Chateau Margaux’s founding we have employed the same approach to distribution simply because it’s “a time-honored tradition” (Beyersdorfer et al., 2007, p. 5). The issue is that we follow this tradition without even considering how merchant distribution systems limit our profitability and threaten our ability to evolve with a changing market. Because we exclusively follow the traditional merchant system, we’re not capturing all of the value that we could if Chateau Margaux handled distribution directly. The current distribution system allows the Bordeaux merchants to enjoy significant margins at the expense of the Chateau. Corrinne even said herself, “there is of course the margin that you leave on the table” when using merchant distribution channels. The merchant distribution system bounds Chateau Marguax even further when it comes to customer relations. Because we’re not involved in the distribution of our product, we have no idea who our customers are. Without knowledge regarding our customer base, we can’t market our products or reach a specific audience. The current distribution system prevents us from engaging customers and building a relationship with them, thus hindering our abilities to understand consumer preferences and incorporate them into future

New World producers such as California and Australia have larger vineyards, modern production techniques, large marketing budgets, and lower costs. As the New World vineyards become more popular, consumer expectations are shifting. Bordeaux wines are more complex and “difficult to decode,” while New World wines are much simpler and have a more immediate appeal (Beyersdorfer et al., 2007, p.7). Preferences of American customers are especially relevant for Chateau Marguax today as the U.S. now accounts for almost half of the total demand for premium