Case Study Bodegas Torres Commerce Essay
Bodegas Torres is a Spanish wine factory created in 1870 by two brothers, Jaime and Miguel Torres. The company gave priority to quality and innovation. After the two brothers died, it was the turn of Miguel’s son, Juan, to run the company. He started to product brandies which was the first innovation of the company. In 1932, Miguel, Juan’s son, succeeded to his father after his death. With the help of his wife Margarita, Miguel worked hard to reduce his lack of experience regarding wine.
Since 1870, five generations of the Torres family were able to make a place among the wine world. The first modest operation, located near the Vilafrance Penedès appellation Penedès in Catalonia, has quickly made a name and reputation despite heavy events (phylloxera crisis, civil war). Subsequently, the Bodegua Torres took possession of other vineyards in the appellations of Conca de Barbera, Toro, Jumilla, Ribera del Duero, Priorat and more recently in Rioja. However, it was not until 1979 that Miguel Torres decides to acquire a small area of ​​100 hectares in the Curico Valley in Chile. Descendant of Jaime Torres, so he moved between the valleys of Colchagua and Maule, south of Santiago, becoming the first investor in Chile’s wine industry. Since then, the area has flourished and is now 445 hectares. Miguel Torres has also exported its wine to the United States, California, where he founded in 1986 Marimar Estates.. Marimar Torres, his sister, about her adventure in California where she managed the first Marimar Estate Vineyard in 1986. Over time, the small family business has turned into an empire, while still retaining its prestigious reputation and the exceptional quality of its products. Over the years, the company was rewarded at many times for its products like in 1979 (winner of the “Great Wine Marathon) or in 1991 (gold medal received for the Milmanda Wine). Every year, the company gets a medal for one of its products. The most recent one is in 2011 (Gold medal received for the De Casta 2010 at “Mondial du Rosé 2011”).
The Strategy of the company
The first strategy of the company was to sell high quality price at a high price because people associate quality with price. But over the years, the company tried to change this image and offered to its customers acceptable quality wine at a moderate price. It is obvious that Bodegas Torres is still producing high quality wine but you can find all the type of wine you want according to your budget. After having strengthen its position in Spain, the company went abroad and started to export its products in several countries. Products are characterized by a commitment to the family, the love of the vine and its fruit that has passed from generation to generation to become one of the most important wineries, which meant it became a company export represented in more than 140 countries. The first exports of the company date back to the ’40s, and have continued to grow since then. The group closed the year 2010 with a C. A. EUR 205 million, an increase of 11.5% compared to 2009. This result is mainly due to the increase in exports, which ranks the top wine producers exporting Spanish sparkling wine not alone in AOC. Torres exports represent 72% of sales. The latter increased to countries such as Finland, Canada, Norway and Russia. But the real breakthrough for the group occurred in China. After 30 years of commercial, wine sales to that country rose 40% in 2010. The group became the first company that distributes wine directly. China Torres charged in the last year 16.16 million EUR. As an example, the group sold under their brand of wine Mas La Plana, 1000 cases of 12 bottles in China, with a production of 10,000 cases.
In 1997, the company signed for the establishment of a Joint-Venture in China with the Zhangjiakou Great Wall Torres Winery Co. Ltd.
Torres group is also known for its innovations. The alcohol-free wine is one of its flagship products that perfectly matches the new fashion market for aesthetic and health, according to the Chairman of the group. The research department of the company is very active and successful. The company always tries to find better ways of production or new products that may be a good fit for new customers.
The structure of the company
The company Bodegas Torres has always tried to change its structure according to the market, the trend and changing environment. Managers always thought that each department had to be run by an expert” in his area. Many of the executives have started their career within the company which allow them to acquire a good experience of the products and the market. But the competition of the market is fierce and the company had to hire a more professional staff with university degrees. In order to adapt its management strategy, the company was restructured in 1991 with the aim of setting up responsibilities and level of hierarchy. But according to employees and executives, this restructuration was too confusing. After a meeting with all the executives, the company found out that there was a lack of communication between several departments and that some responsibilities were not clearly defined. To fix the situation, Bodegas Torres defined very clearly the different department which are the following ones:
The production department: wine production and in charge of the vineyard. The wine and the brandy are divided by sections of the production process. Each member of the team has a clear task.
The administrative and financial department: divided into smaller divisions like accounting, treasury and management control, this department is responsible for the control of investments, payments and more.
The human resources department: very important for the company, this department is in charge of training as well as payroll. This department aims at keeping the employee updated to new processes or more.
The organization and system department: created in 1993, this department has a role of control regarding processes and internal auditing.
The marketing department: divided into smaller divisions like sales, exports and public relations, this department is taking care of the company’s customers wherever they are in the world.
We can easily say that the company has been able to define a clear structure in order to ensure a better communication between departments.
The corporate culture
The company benefits from a strong corporate culture based on family values and has been transmitted from generation to generation and is very important for the well-being of the company. The corporate culture of the company can be summarize in several points:
A strong history: the company has been created in 1870 and is producing wine since then. So it has been more than two centuries that the Torres family has been working on the same products. Each member of the family has been an executive or a manager. Bodegas Torres went through many difficulties like the civil war but the company is still operating.
A culture of authenticity: like we said in the previous point, the company produces wine for the past two centuries. They can be called “expert” in wine producing. They developed their own process of production and care about the quality of their products. Everyone in the company share values of knowledge and quality.
The family experience: the Torres family is running the company since its creation. The management is based on these values. Everything is done to keep the family business on. Even if the company sets up objectives, communication and respect are two values that workers have to remember each day.
The social responsibility: respecting the environment is very important especially because their raw materials are seeds and earth. The company has developed its own label in order to show its customers that the family cares about the environment as well as its employees.
Bodegas’ key challenges
This part of the paper is about identifying the challenges or problems that the company may or will face in the future. With the increasing globalization of economic activities and the introduction of the European single market for the free movement of goods and services, employees and shareholders, business leaders, whether multinationals or exporters are increasingly faced with the demands of international management, which is necessarily accompanied intercultural management.
Multicultural Management and diversity
Bodegas Torres knows very well the notion of exportation and deals with it in a very efficient way. Usually speaking, when a company wants to develop its international business, it is often necessary to relocate its production, management and marketing. To do this, the company develops foreign subsidiaries, and the problem of cultural differences appear between the employees of the subsidiary, which are mostly native and parent, which is managed by nationals. The main difficulty encountered by these multinational companies is the harmonization of the various business practices. A subsidiary established abroad together different personalities, different language. It is essential to understand how management organizes in a subsidiary. The company has an entity in California, in China and in Chile which implies specificities in terms of values. In order to identify the differences, we will use the Hofstede model based of 4 criteria which are:
Power Distance: When it is high, it means, for H, the main characteristics following: the power is a social base, and the economic and social relations are marked by inequality and dependence.
Individualism versus Collectivism: Individualism, in contrast to the sense of community is marked by the importance of personal responsibility, individual initiative and respect for privacy, strictly distinguished professional life. Individual interests are privileged in the functioning of organizations.
Masculinity versus Femininity: Masculinity is characterized by the following: assertiveness, lack of modesty, the emphasis on success, money and external image, ambition and the desire for personal fulfillment. In opposition, femininity means in particular the emphasis on the relational harmony, rather than assertiveness: femininity is the search for consensus and harmony, the importance of human relationships.
Uncertainty Avoidance: It means the willingness to risk guarantee, which can be expressed by the elements following: anxiety of the future, fear of change and difference, preference for stable and rigid structures, and possibly for the gerontocracy, the concern establish procedures clear, precise and detailed to avoid hazards.
This criteria will be applied to Spain, United States and China in order to better understand the cultural differences which may help us to highlight management threats but also opportunities.
Spain
Power Distance: with a score of 57 points, the power distance is relatively high. It mean that the hierarchy is respected by workers and that it is permitted to get advantages if you have a high position. It is important for employees to get feedback from their boss in order to keep their motivation high.
Individualism versus collectivism: with a score of 51 points, it means that, contrary to its European colleagues, Spain is based on collectivism. Teamwork is really important for Spanish workers and almost natural. It is easier for them to be motivated when they work with other people as a team.
Masculinity versus femininity: the score of 42 points means that companies and employees are not motivated by “competition, achievement and success” [1] . Children are taught to care about others and to always search for a consensus. It is important for Spanish managers to get feedback from its subordinates in order to make decisions and to improve the work environment.
Uncertainty avoidance: the score of 86 means that the country doesn’t like uncertainty. People like to have rules, and the changes lead to stress. It is important for Spanish people to respect rules because they work as a reference for every type of situation.
United States of America
Power Distance: with a score of 40 which can be considered as « low », United States is based on equal rights and freedom. Unlike Europe, the hierachy is the the same. Even if managers are weel-defined in the organization, they are always accessible. Feedbacks from bother managers and employees are important.
Individualism versus collectivism: with a high score of 91, we can easily say that the United States is an individualist country. It means that people have to work for themselves, care for themselves and also for relatives. There is no “we” in the American society but mainly “I”. In business, employees have to be reliable and autonomous.
Masculinity versus femininity: with a score of 62, the country can be seen as masculine. The main value that is taught in school and appreciated in business is “always go for the best” or “always try your best”. American people live to work because their life depend on it.
Uncertainty avoidance: with a score of 46, we can say that American people are not afraid of changes and may consider them as challenges. American workers like new idea and are opened to changes in their work environment.
China
Power Distance: with a score of 80, we can say that in China, inequalities are acceptable. Also, the notion of hierarchy is very strong which imply an important respect of superiors. Everyone should stay at is place and there is no room for initiatives.
Individualism versus collectivism: with a low score of 20, we can say that China is a strong collectivist country. People think a lot about others like colleagues or relatives and after they think about themselves. But the score also mean a weak commitment to the company they work for.
Masculinity versus femininity: with a score of 66, we can say that China is a masculine society. Work and success is really important and many people may sacrifice their families to get advancement in their work.
Uncertainty avoidance: with a low score of 30, Chinese people are used to uncertainty. One of the biggest one is the language which is full of ambiguities. Moreover, Chinese workers are very entrepreneurial which is a good asset for their country.
Bodegas Torres has entities in these countries are will face difficulties in the management. It is difficult to deal with different employees’ expectations, rules and feelings. Managers have to adapt their management strategies in order to get the best of their employees. The relationship between the employees and the company has to be strong in order to be successful. Each entities must follow Bodegas Torres’ values but adjust its way of doing things to the country.
Corporate culture and globalization
As we said before, Bodegas Torres benefits from a strong corporate culture. Basically, a corporate culture can be defined as the specific elements that explain the basics of how an entity works. It is, in a sense, a by-product of national culture and therefore a set of values​​, myths, rituals, taboos and symbols shared by the majority of employees. Corporate culture is a key variable to explain the daily life and the strategic choices made ​​by business.
The key challenge for the company here is whether staying a family business or going global.
A Family Business
Bodegas Torres has always been a family business. In terms of ownership it means that there is a focus on the interest of the company which is owned by the family. People are really passionate for the company and want to work hard to make it more successful. It implies, obviously, a high level of motivation. As a family business, the knowledge and secret know-hows can be highlighted and promoted in order to keep the brand image strong. Being a family business also means that profits are re-invested in the company and not given to shareholders or other stakeholders.
In terms of HR Management, we can say that a family business is focused on a good communication system and a higher level of motivation. Communication is very important and if people talk to the other as family members, it is easier to communication without fear of hurting someone or more. Moreover, people working for the family business have a better understanding of the background which generate a higher commitment. To finish with HR, a family business may answer several of the Maslow’s need’s theory.
Being a family business is also a benefit in terms of positioning. Bodegas Torres products are high quality and the brand image is strong because the family owns the vineyard. Over the years, the company won many awards and medals for its products and it may seem difficult for new employees to understand this culture. Regarding the finance, the situation of the company is good as it is and both in operating and financial activities. Moreover, expansion is compatible with a family management strategy. The company has all the key to keep its success up but there is also an opportunity to go global.
Going Global
There are a lot opportunities to go global for a business such as Bodegas Torres. If we analyze the strengths of the company we can see that its growth strategy was a success so far and that it financing situation in good. The company also created a marketing department which will allow the company to better understand the market and offer an appropriate answer to customers’ needs.
In terms of opportunities, the wine market is changing. In 2011, the United States has become the largest consumer of wine in the world ahead of Italy and France, according to a study conducted for Vinexpo Asia Pacific, the exhibition of wine and spirits to be held from May 29 to 31 in Hong Kong. The United States is in first place in the volume consumed (28 million hectoliters to 311.3 million cases of 12 bottles), with an expected growth of around 10% between 2011 and 2015, according to the study conducted in partnership with ISWR the British cabinet. The market is changing a people tend to see wine in a different way and not as a French specificity anymore.
The company’s new structure enables an internationalization because other companies like competitors are working the same way. The efficiency is higher because all tasks and responsibilities are well defined. Moreover, the R&D department is a competitive advantage that the company must use in order to launch new products on the market on a regular basis.
Bodegas Torres is facing a choice that will affect its structure and future. The company has to analyze both opportunities in order to make the right decision. We can consider that both choices are opportunities.
Intercultural Management and Motivation
Motivation is the set of factors determining the action and behavior of an individual to achieve a goal or perform an activity. It is the combination of all the reasons conscious or unconscious, collective and individual, that encourage the individual to act in a team. This is one of the challenges of the managerial function. In our case, the problem is how to motivation people if they don’t have the same drivers. It is important first to analyze the needs of employees wherever they are from. For that we can use the Maslow’s theory. It offers a systematic approach to the needs of the working man and prioritizes different levels in a pyramid. Maslow believed that human behavior is dictated by the needs, man is instinctive, biological and fundamental. Five groups of needs are distinguished: physiological needs, the need for safety, ,the need for social, the need for esteem, the need of self-actualization. According to the country, people will give a different priority to the needs.
It is the role of managers to understand this dimension.
Beside Maslow’s work, we can find that Herzberg also worked on the motivation. He connects the motivation and satisfaction at work and uses a common assumption in all theories of need: the unfulfilled need is motivation. Herzberg distinguish two kinds of needs: those that are common to all living beings and those that are specific to humans. Only the latter are a source of motivation, hygiene needs, as soon they are fulfilled they reduce dissatisfaction and are therefore more motivating. Some examples of hygiene needs would be supervision, inter-personal relations, money, status or security. According to this theory,
Bodegas Torres should be design a specific management strategy for overseas in order to create a safe and good work environment.
Another important point, which is common to all countries is how the work is rewarded. The same rewards do not seem to motivate the same way. Everyone has a clear idea of what constitutes a just reward for his work. It determines what is right by comparing it brings (qualification, effort, experience) and it receives (status, salary) that others provide and receive. When he feels inequality (more or less) between the contributions from its rewards and of those to whom he compares himself, he tries to reduce because it produces a feeling of frustration or guilt either.
Every country has its own system of reward and managers should be careful to equity.
For example in the united states which is an individualist society, the reward won’t be the same as in Spain which is a collectivist country.
Recommendations
Regarding our analysis, we have few recommendations for Bodegas Torres in order to deal with the globalization and its effects.
Analyzing every culture they work with.
The Hofstede model is really useful to understand the different cultures around the world. Understanding a culture helps to understand people you work with. It is important to for managers to understand a culture so he can behave in a proper way and don’t do any mistake that could lead to a conflict. People don’t react the same way depending on the country and a new management strategy has to be designed in order to lead teams in an efficient way.
Keeping the family business
Many companies try to go global because they see opportunities of growth and reduced costs. But higher costs are not systemically bad. The family business of the Torres family is profitable and its financial situation is healthy contrary to many other firms who rely on debts. Moreover, the brand image which is highly appreciated and well-known will suffer from an over-internationalization.
Creating a motivating work environment by analyzing needs in every country
A motivating work environment is a competitive advantage over competitors. If employees are motivated and committed to the company, their work will be better and the company will benefit from it. In order to do so, managers and executives must analyze the needs of employees and try to link them to the company’s objectives.
Gathering people around ethic and values
The better way to gather people is to make them share specific values or even a corporate culture. Employees must put their differences aside and focus on the common culture. The company may use the history of the Torres family as an example.