Wine Simulation

Starshine "2012"

A. What are the strategic justifications, both offensive and defensive for a merger or acquisition in

the US wine industry?

Ø Offensive

Consolidation and Globalization: the presence of numerous small producers and foreign

low cost competition creates an opportunity for large firms to minimize their

competition by acquisition or mergers thus gaining market leadership. Also, when a

firm is large and its failure has the potential to negatively affect the value of the dollar,

they are more likely to receive federal bail-outs thus prolonging the going concern.

Synergies: It is important because it will reduce production cost and guarantee

economies of scale thus making it more viable to compete with the lower costs foreign

imports.

Ø Defensive

Stock prices: because lower cost wines are available on the market, it presents a threat

for reduction in sales of local wines, thus, affecting the stock price and general revenue.

Interest rates: Once the Net profit margin drops, a firm becomes less attractive to banks

and other investors and therefore makes it harder to negotiate favorable interest rates

on loans.

What primary advantages did your company (role) bring to the table?

The advantages that Starshine had brought to the table for BELVINO are:

Distribution network: Starshine possesses superior distribution networks that will offer

Belvino the opportunity to expand its market reach both locally and internationally.

Effective marketing strategy: Starshine possesses greater marketing and advertising

techniques which can be beneficial to Belvino through product awareness.

Starshine "2012"

Increase in revenue and savings: The combined effect of the marketing and distribution

advantage would have positive spin offs on sales and final revenues as there will be

greater synergy and savings.

The advantages that Starshine had brought to the table for INTERNATIONAL BEVERAGE are:

A