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Freemark Abbey Winery - Case Study Example

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Freemark Abbey Winery

Hence, Freemark Abbey Winery might be better off harvesting immediately before the storm and eliminating the risk of the rain spoiling the grapes. The not-so-ripe grapes could yield wine that sells for $2.85 per bottle. If Jaeger decided to harvest later and the storm did not strike, there is a high chance that the acidity of the grapes would not fall below about 0.7 percent. In this case, the resulting wines would still sell at a higher price than wine produced from the not-so-ripe grapes harvested now, regardless of what the weather condition is like. However, there is a slight chance that the acidity of the of the grapes would drop below about 0.7, in which case the resulting wine would sell at a slightly lower price of $2.50 per bottle.
To make this decision, a decision tree, Michael Porter's (1997) five forces analysis, and SWOT analysis are used to aid in the decision making process. Both five forces analysis and SWOT analysis reveal that Freemark Abbey Winery should pursue a differentiation strategy. From the decision tree in Appendix 1, it can be seen that there are 3 possible decision alternatives and 7 possible outcomes. The first possible decision alternative is to harvest after the storm and sell thin wine should the storm strike and the botrytis mold not form. The second possible decision alternative is to harvest after the storm and sell the wine in bulk should the storm strike and the botrytis mold not form. The third possible decision alternative is to harvest immediately. The first decision alternative has the highest expected revenue per bottle of wine but is inconsistent with a differentiation strategy. The second decision alternative yields the next higher level of expected revenue and is consistent with a differentiation strategy. The third decision alternative yields the least revenue and at the same time is inconsistent with a differentiation strategy. However, the third decision alternative is the least risky.

Prioritizing the criteria, it is felt that the revenue and differentiation criteria are more important. Hence, it is recommended that Freemark Abbey harvest the grapes later. Should the storm strike and the botrytis mold not form, it is recommended that Freemark Abbey sell the wine in bulk or the grapes directly. Both the expected value and the rollback analyses yield the same recommendation.

2. DECISION PROBLEM
Should the grapes be harvested immediately or after the storm If Jaeger waited after the storm, there are some chances of a warm, light rain, which will result in the formation of botrytis mold yielding the botrytised Riesling. The quantity is 30 percent lower than the normal wine but it sells for $8 per bottle. However, a storm just before the harvest is more likely to produce rain-soaked berries, yielding a thin wine that would sell wholesale for only about $2.00 per bottle and costing Freemark Abbey Winery its reputation. It could sell the wine in bulk or sell the grapes directly to preserve its reputation but these options would bring only half as much revenue, which is the second decision problem. Hence, Freemark Abbey Winery might be better off harvesting immediately before the storm and eliminating the risk of the rain spoiling the grapes. The not-so-ripe grapes could yield wine that sells for $2.85 per bottle. ...Show more

Summary

Should the grapes be harvested immediately or after the storm If Jaeger waited after the storm, there are some chances of a warm, light rain, which will result in the formation of botrytis mold yielding the botrytised Riesling. The quantity is 30 percent lower than the normal wine but it sells for $8 per bottle…
Author : schinnerstone
Freemark Abbey Winery essay example
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