Case Analysis: Rjm Enterprises, Inc. – Romancing the Vine Essay Example

Adding to the financial complexity is McManis's reluctance to invest his entire livelihood in unproven technologies, which is a reasonable stance. The consultants have presented five options:

1. Continue growing grapes in the field and aim to market higher quality grapes to wineries in Northern California.

Competitive advantage can be achieved through the quality of grapes and high service levels. To provide juice to wineries, McManis should consider purchasing mobile crush machines for use in the field. However, in this situation, McManis would not be able to obtain Crushed grapes for lower quality wines, known as 'Vigorish' products. Alternatively, McManis could invest in a fully-functional onsite crushing ; storage facility. While this would mean losing field space, it would allow for the storage and aging of juice as needed. Additionally, McManis would also be able to capture the vigorish.

Purchase an existing facility to crush, ferment, and store the grapes. Although McManis would benefit from option 3, the site would require significant upgrades. Additionally, the transportation of grapes to the off-site facility would need to be addressed. Opt for becoming a fully integrated winery by developing a brand label. This option would be the most costly and would involve expenses for sales and marketing that the company currently does not have.

Question 2: How do you interpret the financial analysis conducted by the consultant? In general, the financial analysis presented by the consultants fulfills the expectations of most businesses seeking consultant assistance. They offer various scenarios as potential options for the owner to evaluate. However, there are a few criticisms I have regarding the financial analysis. Firstly, it lacks a recommendation, which is usually expected in financial consultations.

Additionally, the analysis undermines the importance of establishing a dependable customer base in the North Coast region.

The ROI analysis is based on the value added per ton, but it does not take into account the possibility of having no customers. The assumption is that the bank will finance the entire project without considering the high interest rates that would likely be charged due to increased risk. The financial analysis conveniently excludes the cost of consultants' time and energy, which could range from $10,000 to $25,000 depending on their involvement duration.

*Question 3: If you were McManis*, what would you do? If I were in McManis’ position, I would choose to purchase the mobile/field press proposed in option 2. This decision would facilitate conservative growth in the Northern California market while also allowing RJM to gain knowledge about the juicing/storage process.

By avoiding a significant financial investment, the company can maintain its attention on the excellence of its grapes. However, one drawback of this approach is the inability to attract customers who highly appreciate vigorish. Currently, McManisis is in a favorable strategic position. Despite a decline in wine consumption in general, label regulations allow wineries in Northern California to incorporate up to 25% of grapes from other regions into their production.

By allowing wineries to charge a higher price but with lower overall costs, McManis' product quality is a cheaper option for wineries trying to maintain their product image. Furthermore, McManis offers the advantage of transporting pre-crushed products, which is valuable for Northern CA customers who allocate a significant portion of their profits for marketing and sales. To ensure smooth communication and timely deliveries, McManis should consider partnering with

a local transporter of refrigerated wines. In terms of finances, the mobile/field press is the most practical choice, besides maintaining the current path. Even without vigorish, a 4000-ton chardonnay scenario can generate an annual return of $144,800 (representing an ROI of 18%), while a 12,000-ton total harvest scenario can yield $647,733 (with an ROI of 44%).

This will enable the company to maximize its grape acres without needing to learn new technologies. Additionally, it allows the company to concentrate on its core competency of cultivating high-quality grapes.