Murray Silverman
Professor of Management
College of Business
San Francisco State University
1600 Holloway Avenue
San Francisco, CA 94132
Phone: 415-338-7489
FAX: 415-338-0501
Email: msilver@sfsu.edu

 
Armand Gilinsky, Jr.
Associate Professor of Business Administration
Director, Wine Business Program
Sonoma State University
College of Business
Phone: 707-664-2709
Email: armand.gilinsky@sonoma.edu

 
Michael Guy, MBA
San Francisco State University
College of Business
Email: MGuy@ttsfo.com

 
Sally Baack
Assistant Professor of Management
San Francisco State University
College of Business
Phone: 415-338-6421
Email: sbaack@sfsu.edu

 
In January 1999, Michael Mondavi, the 55-year-old CEO of the Robert Mondavi Corporation (RMC) and son of its founder, Robert Mondavi, announced the reorganization of the company and the layoff of 4 percent of the workforce. RMC had experienced a shortfall in supplying its Woodbridge Chardonnay brand. Disgruntled distributors had begun substituting competing Chardonnay brands on retailers' shelves. Once Woodbridge production levels returned to normal, distributors remained reluctant to carry the brand, further reducing company sales. Subsequently, RMC’s stock was downgraded by Wall Street analysts, and its stock price fell nearly 60 percent. [Recent company financial data are shown in Exhibits 1-5].

At the same time that Michael Mondavi announced the layoffs in January 1999, senior management was completing the process of reconfiguring RMC’s future strategies. One camp argued for a return to the original vision, complaining that because RMC had been so busy focusing on launching new brands and pursuing international ventures, it had neglected its core domestic brands, which made up 90 percent of revenues. Another group of managers argued for continued diversification. After all, RMC had introduced three new brands in the previous year: two through global partnerships in Chile and Italy and one domestic brand. Many of the managers in this camp had been involved in orchestrating the development and launch of new brands in the domestic and global markets. Michael Mondavi was caught between the two camps.