Performance Measurement Analysis

Performance Measurement Analysis
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Institution
Changyu Pioneer Wine Company
Changyu Pioneer Wine Company is China’s biggest and oldest wine producer Inc. located in Shandong Province, Northern China. Zhang Bishi founded Changyu winery business in 1892. Changyu Pioneer Wine Co. is named after Zhang (Chang) the founder symbolizing Chinese trait of prosperity. Changyu Pioneer Wine Co. ranks 10th among the largest wine producing companies in the world with an annual average wine production of 9 million tones. Changyu has grown immensely in the production and marketing of sparkling and brandy wines, all aligned to the company’s goal of expanding its wine product range (Campbel & Lane, 2013).
While the position of China as a wine producing country is associated to Changyu Pioneer Co., the history of Chinese grape vines goes back to more than 4000 years ago. Archaeological studies carried by joint American-Chinese research institutes in 1995, revealed remains, and artifacts that alluded to the presence of winery activities in ancient years. The resources recovered included ancient pot artifacts and remnants of alcoholic drinks that included more grape related products than any other beverage. From that simple background of personal brewing when it came to the winery, China now boasts of massive export revenue when it comes to this business of wines.
China’s total wine production in 2004 was 370, 000 tonnes, a 15% increase from 2003 a year earlier. The total wine market grew by 58% between 1998 and 2004, and 68% between 2006 and 2013. Notable wine-producing regions in China include Yantai, Yibin Sichuan, Zhangjiakou Hebei, Taiyuan Shanxi, Beijing, Tonghua Jilin and Ningxia. The largest wine producing region among these regions is Yantai-Penglai, with over 145 wineries producing 40% of the total wine production in China. With reference to the ‘China Alcoholic Drinks Industry Association’, four domestic wineries represent 52.5 % of total wine production in China (Barney and Hesterly 2009) with Changyu, Great Wall, and Dynast being the top three respectively.
Changyu Wine operates in a mature environment with competition coming from Great Wall and Dynast wineries. This is an implication that modern marketing strategies have to be adopted to ensure success. Traditionally, Wine production companies in China focused on short-term productivity and the domestic market which has always been commendable to the high consumption level of wine in China. However, as competition became more intense with new entrants in the wine industry increasing rapidly new strategies in marketing, brand name and customer service became a necessity for the wine companies in China (Campbel & Lane, 2013). Under this context, this paper seeks to analyse Changyu Wine Company performance measures strategic choices, the performance measures alignment, quality tools, techniques, and standards used by the company in the in its performance measures alignment, the challenges the Changyu is facing in this area and the recommendation to address those challenges.
In the 1970s, the wine companies in China did not differentiate their products as the domestic market was not saturated (Campbel & Lane, 2013). However with competition intensified from 1980 onwards, Changyu formulated a strategy aimed at increasing its wine sales and margins because even growth via new sites in the local market became difficult. This strategy dubbed as the company’s performance measures strategic choices is diversification. Changyu formulated this strategy for its products, which consequently continued to differentiate its products and market choice from those of its competitors thereby creating a competitive edge over its market rivals.
Product Diversification (Brand)
Changyu Wine Company began implementation of this new, innovative strategy in the 1980s by aiming at differentiating its product line while maintaining performance of its traditional productivity measures. This strategy was driven by the increase in interest for premium-quality table wines emerged grew rapidly from the 1980s, where the demand for red wine rose significantly. The Wine Market council says that the increase could be linked to a research, which associated moderate wine drinking to health-related cardiovascular benefits (IBISWorld 2010). While initially there was no scientific backing of the same, the confirmation by most health related researches and scientific proof cemented the high demand of wine thus prompting restructuring in the winery business in general. It is worth noting that the rate of wine consumption in China was timely as Changyu Winery, which was previously been owned by the Yantai government, became privatized in 2004. The trend changes in both wine consumption and ownership of the company made Changyu to take a strategic brand re-positioning campaign against its competitors.
After privatization, the Changyu embarked on a pursuit to a diversification strategy to broaden its market niche and product line. Market diversification is the place where its wider product was modified in line with the new market opportunities imminent from its planned alliances. New products such as Changyu châteaux were manufactured to meet the existing market demands as well as to target the new market (Barney and Hesterly 2006). While at the beginning of its production, the chateaux was primarily associated with the high-end market, subsequent production of a pocket friendly brand of the same ensured more consumers were brought on board. Changyu achieved product diversification further by investing in production facilities to facilitate in the increase of production of chic wines under a wider array of labels.
Product diversification has helped Changyu, which originally was focusing on wine production and other wine related products, to expand into other areas such as the production of health care wines, production of Chinese herbs and processing of liquor and alcohol, import and export, packaging as well as glass and machine manufacturing. Currently, not only is Changyu a wine producing business but is also a Chinese resort endowed with sightseeing and where tourists from across the globe visit its wine cellars, taste wines, pick grapes as well as a popular venue for corporations and individuals to hold events and meetings. This is one the key element of the company’s competitive edge. Progressively, chateau is becoming a common venue for celebrities such as musicians, film stars as well as other businesspersons for holding wine-appreciation events and activities (Jenster & Yiting, 2008). Changyu has continuously diversified its wine products over the years. Changyu in partnership with Aurora Ice, biggest ice wine producer in Canada, produces ice wines in addition to its dry wines product. While this was not the original line of production of Changyu, the alliance has proved to be handy because the new product has not only diversified the product line of Changyu but they have been able to borrow other winery production techniques from Aurora Ice.
Changyu’s Weighted Scorecard Performance Measurement System
Changyu used a weighted scorecard-based performance measurement system to collect information on a range of performance measures at different levels of the company and at different frequencies. Changyu winery balanced scorecard along with its performance dimensions ("parameters"), organizational levels of measurement (e.g. store vs. corporate), performance measures and frequencies of measurement (e.g. quarterly vs. annual) are provided in Figure 1 below;
Financial PerspectiveParameter Measurement ...