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.

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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