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Preserve the Luxury or Extend the Brand

Azaria, Jess, Alex & Wendy
by

Wendy Nguyen

on 22 May 2014

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Transcript of Preserve the Luxury or Extend the Brand

Key Issues
The Company
Chateau de Vallois is a family owned prestigious wine-making estate with a long-term track record in quality and reputation. It was classified as a Premier Grand Cru Classe meaning First Growth in a ranking of Bordeaux wine estates which allowed the estate to place top tier prices on its wines.
Organisational Change
The process of an organisation alternating existing practices.
The Proposal
Enter the ‘affordable luxury’ market with a branded wine
Target average, younger people to buy regularly
Obtain greater flexibility
Be ahead of drinking trends
Gradual path for the younger generation
Buy land overseas and capitalise the brand (Californian Grapes)
Sell directly to customers e.g. online sales
Invest in new marketing and distribution channels
Approaches to Change
1. Resistance to change
Traditional VS Modern perspective
2. No thorough analysis or study done in implementing organisational change
3. Cost problems
4. Negociants and Distributors
5. Distortion of the Brand

Stakeholders
Change management process
1. Naive Approach
2. Planned Approach
3. Three-step model of change
4. Emergent Approach
Outcomes
Planning and Emergence
Management gains power to overcome resistance and implement change over time
Planned approach appropriate for new production in long term
Progress onto implementing emergent approach to enter 'affordable luxury' market
Difficult to manage areas of business such as staff anxieties, deep culture and resistant attitudes
Speed up process through:
Educating and communication
Participation and support
Negotiation and agreement
Triggers for change
PEST (
Political, Economic, Socio-cultural and Technological
)
External and internal
Internal (Cost, Family Pressure, Financial Losses, Profit Reduction)
External (Increased competition, technological development, industry in recession)
Preserve the Luxury
or Extend the Brand?

Gaspard de Sauveterre
Owner of Chateau de Vallois
Possesses 50% of the estate
Traditional perspective
Worried about business sustainability for future generations
Must make decision
Possesses 25% of the estate
Graduate of one of France's elite grandes ecoles (high ranking, private higher education institution) with an MBA
Newcomer
Modern perspective: proposer of change
Enter the 'affordable luxury' market
Sell directly to customers
Capitalise the brand
New marketing and distribution channels
Claire de Valhubert
Granddaughter of Gaspard
Francois de Sauveterre
CEO of Chateau de Vallois
Possesses 25% of the estate
In control of the day-to-day operations
Traditionalist perspective:
Worried about reputation and loss of exclusivity of brand
Does no want to sever relationship with negociants and distributors
Does not believe in investment of low quality, low-priced wine
High sense of tradition and family pride
Jean-Paul Oudineaux
Estate Manager
Worked 30 years for the estate
An agricultural engineer
Traditional Perspective:
Does not want to make wines with other grapes
Believes production of two wines is enough
Questions operations: who will make the wine?
Negociants
Merchants and dealers
Wholesalers who buy the wine from de Vallois
Sell and ship wine to distributors and importers
Reputation determine the price
Holds a good reputation with de Vallois
Purchases wine before bottling
Aids finance of production
Traditionalist perspective
Nature of the Organisation
Family Business
Dynamics both advantageous and challenging
Features:
1. A balance
2. Multifaceted continuity planning
3. Change is different
4. Inherited wealth can be intimidating
5. Business stability through non-family member support
6. Business strategy must integrate non-family members
7. Profit goals can be secondary
8. Long-terms cash flow perspectives
9. Based on principles of trust
Resistance to Change
Disruption to routines is not liked
People may fear job security
Change may disrupt social and informal ties
People may recognize that change may have a considerable effect upon them
Cost
Strength of old culture
Distortion of the brand
Force-field Analysis
Naive Approach
This approach manages change by focusing on implementing basic changes to the organisation’s framework and overlooks psychological issues. This approach to change is commonly visualised as simple building blocks.
Planned Approach
This approach can be visualised as an iceberg as it considers both, above the surface issues, such as the basic changes of practices in a business and below the surface issues, such as the physiological issues that are affected by change
Three-step model of change
The three-step model, proposed by Kurt Lewin (1947) included three crucial steps an organisation should implement for successful plan of change.
1. Unfreezing
2. Movement
3. Freezing
Emergent Approach
This approach is commonly associated with rivers as their currents can unexpectedly change which is similar to an organisation's plans being affected by external factors and not going as planned, therefore forcing companies to focus less on details
Expert's Opinions
Corinne Mentzelopoulos
Owner and CEO of Chateau Margaux
Against Chateau de Vallois embracing change

Philippe Sereys de Rothschild
Vice Chairman of his family's estate
For Chateau de Vallois embracing change
AGAINST
Corinne Mentzelopoulos
Estates rich history and well-developed reputation being at risk of distortion
Estate has no experience in launching and capitalising a brand with a lower price point
Highly unaware of the mass-marketing segment of wine industries
Company will need to compromise their on time for the production of branded wine, potentially damaging their already existing wine
Recruiting new managers could divert the focus of the estate from the Chateau de Vallois, potentially distorting their brand
FOR
Phillipe Sereys de Rothschild
Believes organisations should seek new opportunities for success
Should proceed with caution
Keep exclusively branded wine independent to the new and more 'affordably' branded wine so as to preserve the organisation's reputation
Create two distinct business units within the organisation
Marketing strategy should emphasise the preservation of their brand
Implement direct marketing, helping the estate better understand the wine market and distribution methods
Boards of directors with a non-family majority so as to help resolve the conflicting biased perspectives towards change and create an effective business plan instead of having a simple agreeing and disagreeing approach towards the organisation's plan of change
Recommendations
Claire is inexperienced and should therefore let managers as well as a professional CEO take on the second branch whilst Claire remains in a more suitable role
The organisation should take on such as the previously suggested externally hired professionals, to help solve the issue and even receive further recommendations of possible alternatives
Either create their second 'affordable' brand as a completely different brand altogether, not associating its connection to the traditional 'exclusively' branded wine so as to not impact customer's view negatively and maintain their reputation
Create an even more exclusive and prestigious brand of their wine towards an even greater level of exclusivity, therefore positively impacting customers perspectives on Chateau de Vallois' image and maintaining their organisation's success
Need to understand why change is occurring
Consider current operations and necessary methods to carry out proposed change
Dissolve resistance and motivate engagement
Force-field analysis to provide focus
Present triggers to change, as benefits and support sustainable practice
Strategic Intervention
Senior management initiatives:
Business units communicating values and ideas
Change agent to manage proposal
Planned approach
- clearly defined business units
Separating tier levels of wine production, marketing and taking control of distribution
Maintain goodwill and reputation while growing consumer numbers
Emergent Approach
Adapting operations in secondary brand to grow business for the future
Open system organisations cannot always make predictions for the long term
Emergent approach
- Manage the unpredictable and uncontrollable factors that arise
Processual approach - active resistance within organisation
Systemic approach - interconnected system
Desired Outcomes
References
Beyersdorfer, D. & Dessain, V. 2011, ‘HBR case study: Preserve the luxury or extend the brand?’,
Harvard Business Review
, vol. 89, no. 1-2, pp.173-177.

Burnes, B. 2004, 'Kurt Lewin and the planned approach to change: A re-appraisal',
Journal Of Management Studies
, vol. 41, no. 6, pp. 977-1002.

King, D. & Lawley, S. 2013, ‘Changing the organization: Planning and emergence’, in
Organizational Behaviour
, Oxford University Press, United Kingdom, pp.337-370.

Richmond Sinnot & Delahunty Chartered Accountants 2010, ‘The unique nature of family businesses’,
The Profit Improver
, viewed 20 May 2014, <http://www.rsdadvisors.com.au/clientResources/newsletters/RichmondSinnott-Summer10-Low.pdf>
Create opportunities, develop strategies
Adapt effectively to environment
Cultivate strong business culture
Maintain longevity and sustainability
King, D. & Lawley, S. 2013, ‘Changing the organization: Planning and emergence’, in Organizational Behaviour, Oxford University Press, United Kingdom, pp.337-370.
Beyersdorfer, D. & Dessain, V. 2011, ‘HBR case study: Preserve the luxury or extend the brand?’, Harvard Business Review, vol. 89, no. 1-2, pp.173-177.
Expert Opinions
FOR
AGAINST
AGAINST
Corinne Mentzelopoulos

Philippe Sereys de Rothschild
(Owner and CEO of Chateau Margaux)

(Vice Chairman of his family's estate)
FOR
The estates reputation will be at risk
No experience in launching and capitalising a brand with a lower price point
Highly unaware of the mass-marketing segment of wine industries
Company will need to compromise their time for producing new brand, potentially damaging their already existing wine
Recruiting new managers could divert the focus of the estate from Chateau de Vallois.
Corinne Mentzelopoulos
Proceed with caution
Keep exclusively branded wine independent to the new brand.
Create two distinct business units within the organisation.
Their marketing strategy (for the exclusive brand) should emphasize the preservation of their brand.
Implement direct marketing, helping the estate better understand the wine market and distribution methods.
Full transcript