Case Study on “Sula Vineyards” Strategic Management: Formulation, Implementation and Control
Introduction:
The case is on “Sula
Vineyards”, an Indian winery that began its operation in October 1998 carried
out by an entrepreneur Rajeev Samant. The case focuses on several strategic and
financing challenges faced during its operation in domestic market.
Rajeev Samant, Founder and CEO of Sula Vineyards, was born and raised in Mumbai, India. After schooling at Cathedral School, Mr. Samant gained admission to California’s prestigious Stanford University, from where he graduated with a Bachelor’s degree in Economics and also completed a Master’s degree in Engineering Management. After Stanford Mr. Samant worked at Oracle Corporation in Silicon Valley for two years, where he had the distinction of being the youngest manager in Oracle’s Finance Division, managing the Compensation group. In 1993 Mr. Samant decided to return to India to follow an entrepreneurial path.
Rajeev Samant, Founder and CEO of Sula Vineyards, was born and raised in Mumbai, India. After schooling at Cathedral School, Mr. Samant gained admission to California’s prestigious Stanford University, from where he graduated with a Bachelor’s degree in Economics and also completed a Master’s degree in Engineering Management. After Stanford Mr. Samant worked at Oracle Corporation in Silicon Valley for two years, where he had the distinction of being the youngest manager in Oracle’s Finance Division, managing the Compensation group. In 1993 Mr. Samant decided to return to India to follow an entrepreneurial path.
His first experiment
was agriculture and he tried all sorts of crops starting with mangos to roses
before settling on grapes. Now, just over a decade later, he runs Sula
Vineyards, the biggest winery in India. Along with the help of California wine
maker Kerry Damskey, Samant grew five acres of grape varieties; Sauvignon Blanc
and Chenin Blanc, under the brand “Sula Vineyard”. As India have no tradition
of wine making, they used new world techniques. (Sula Vineyards- When
opportunity overcomes challenge, 2011)
Actualities
in the case:
Sula’s early growth had
been financed by debt as well as a private equity infusion to supplement
insufficient internally generated cash flows. Securing new funds at a
reasonable cost could be critical to Sula’s continued independence and
ultimately determine its success in the marketplace for Indian wine. Additional
infusion of equity could decrease his share ownership and possibly lead to loss
of control, whereas taking on new debt would increase his financial risk with
lest future profits with unexpected cash flows. There has been a negative cash
flow from operations that occurred primarily by unfavorable cash flows from
inventories. The company also takes longer period to sell its inventory which
is time-consuming. Moreover, the biggest challenge was to grow the market for
Sula Vineyards as the brand was hardly heard and were more expensive than some
French wines sold in India. (Mochico, 2012) , (www.sulavineyards.com)
History
of Wines Production in India
Roughly, 38 wineries
are instantly working in the nation with an aggregate generation of 6.2 million
liters every year. Maharashtra is heading among the states with wineries of 5.4
million liter generation. Separated from this, 72,000 wine cases are foreign
chiefly by ITDC, Sansula, Brindco, E&j Gallo and other privately owned
businesses. At present 7, 62,000 wine cases are sold consistently. Eighty
percent of wine utilization in the nation is restricted in significant urban
communities, for example, Mumbai (39%), Delhi (23%), Bangalore (9%) and Goa
(9%). There is developing mindfulness about the wine as an item in the
residential business sector.
In year 2004 and 2005,
the Indian government made progressive decreases of extract obligation on
foreign wine. In 2006, limitations on the offer of wine in general stores were
lifted, empowering availability and interest for both local and foreign made
items.
Challenges
faces by Sula Vineyard
Sula Vineyard has to
face many problems during the production and have to make effective planning in
strategic and financial problems.
§ There
has been a negative cash flow from operations. Such negative cash flow happened
basically by unfavorable cash flow from inventories. There was additionally
issue in regards to stock offers which took longer period and was prolonged.
§ When
he began, India's wine making industry was very nearly non-existent. Sula
confronted bureaucratic and managerial obstructions at each phase of its
development. It took more than 2 years to acquire the essential permit to make
wine.
§ He
endeavored to enhance the nature of viticulture in India and has made
accessible root supplies of the significant grape varietals developed far and
wide.
§ Business
development doesn't come effortlessly or without hindrances. Exactly as Sula
was taking off, Samant's nearby market was severely influenced by the worldwide
monetary downturn as India was not yet a wine drinking country. Consequently,
it was hard time for Samant to make market for its residential item.
§ Loan
issues; Banks were not eager to loan as there was no track record. Along these
lines, Samant need to acquire from his loved ones.
§ Sula's
asset report appeared to need reinforcing. Organization development had
hitherto been financed through getting; banks were raising their voice in
regards to dangers they were taking.
§ Challenges
of Marketing; as Indian wine brand was scarcely heard and were excessively
costly than a portion of the French wines sold in India.
§ Other
difficulties could be getting whatever remains of the world to discover Sula
wines worthy
Recommendation
and Conclusion:
§ The
organization ought to concentrate on its operational deliberations in creation
of white wine and its better for the organization to import red wines as
creating red wines lead to abate stock turnover. Certain sorts of red wine take
more than three years to offer after the date of production along these lines
now is the right time expending.
§ There
has been a negative cash flow operations. Consequently, era of money surpluses
from operations is vital for Sula Vineyard.
§ The
organization ought to concentrate on its marketing division as the brand was
barely heard in the business sector.
§ Domestic
wine ought to be promoted instead of importing International wines. This will
help to raise certain percent of nation's economy.
§ Federal
and state government needs to put resources into Infrastructure like roads with
reliable source of electric force. There ought to be progressive diminishments
of extract obligation.
§ Promotional
exercises for wine utilization ought to be completed. Certain limited time
methodologies, for example, easing of tariff barriers for the wines, developing
awareness on health benefits of wine.
References:
Developing
Indians’ taste for wine
-http://www.ft.com/cms/s/0/477c27f0-04ab-11e1-91d9-00144feabdc0.html#axzz3BSqVwlcA
Segran,
G. (2009, October 6). Sula Vineyards: India's case for wine. Retrieved from
www.knowledge.insead.edu: knowledge.insead.edu/entrepreneurship-innovation/Sula-vineyards-india-case-for-wine-1414
Sula
Vineyards- When opportunity overcomes challenge. (2011, June 20). Retrieved
from www.imd.org: www.imd.org/news/Sula-Vineyards-and-the-Indian-wine-revolution.cfm
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