...CASE REPORT: Global Wine Wars: New World Challenges Old (Harvard Business School Case # 9-303-056) NMI 1. How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop to support their exports? Where were they vulnerable? French wine makers also face challenges that are not internal to the industry. For instance, France lost market share in the United States due to informal boycotts in the wake of the Iraq war. The rise of the euro against other currencies, such as the 30% increase relative to the dollar in the last few years, has put French wines at a comparative cost disadvantage. But consensus among experts is that the primary threat to the French export market is internal to the industry: the inability of the appellation system to appeal to what is becoming a global way of understanding wines (Business Report, 2004). France is the largest overall producer of wine, at 5.3 billion liters of wine in 2001, 20% of world production. France has traditionally set the standard for quality wine as well as defining these standards. French viticulture laws mandates four levels of quality as 1) Appellation d’Origine Contrôlee (AOC) 2) vins délimite qualité supérieure (VDQS) 3) vins du pays and 4) vins du table. French wine makers also face challenges that are not internal to the industry. For instance, France lost market share in the United States due to informal boycotts...
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...Global and International Business Contexts – SM0269 W13012208 Jack Goddard Word Count: 3457 Table of Contents Introduction 3 Part 1: Porter's National Diamond Analysis 3 Part 2: Contemporary Management Issues 7 Part 3: Market Entry Strategy 11 Recommendation to the Board of Directors…………… ……………………………… ….13 Appendices 14 References 15 Introduction This report has been written by the Boston Consulting Group and uses Porter’s national diamond analysis model to evaluate the attractiveness of investment opportunities in the Tunisian wine industry. Also discussed are two key management issues that need to be taken into account before developing operations in Tunisia followed by recommendations on two strategies for entry into the Tunisian wine industry market. In terms of background to this report, it should be noted that the global market for wine industry is changing significantly with substantial differences in the structure of the wine industry around the world. For instance, there are 232,900 wine producers in France but the top 10 brands control only 4% of the market. In contrast, four firms control over 75% of the Australian wine market. Hence there is a marked difference in industry structure when comparing the “New World” producers (e.g. Australia, Chile, United States) to the “Old World” firms. These structural differences are driven by institutional...
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...The Wine Industry and Vincor Vincor International Inc. is in the business of selling premium wine to discerning wine drinkers. The company relies on its firm resources and capabilities from which it derives its distinctive competencies. These include the ability to produce market and distribute premium New World wines to a growing market of customers around the world. The total estimated world market is worth approximately $190 billion dollars (U.S.). Vincor’s strategy is based on its distinctive competencies (such as world renowned wine making experience, vineyard development and ownership, and the ice wine product/brand) and centres on an acquisition and takeover formula (sometimes with a joint venture component). The company believes that in a highly fragmented wine industry the only companies that are going to survive, grow and maintain a competitive advantage are those that can rationalize their cost structures, achieve economies of scale and control their distribution channels effectively. Synergies in marketing, sales forces, administration and other overhead factors can drive down per unit costs and make Vincor more efficient. By lowering its cost structure, Vincor can pass lower costs to consumers and gain market share in a global market place. Vincor has surmised that the best way to do this is expand, through a combination of equity and debt financing to take over competitors, whenever there is a good “strategic fit.” The industry in which Vincor operates...
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...Global Wine Wars 1. How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop? Where were they vulnerable? France had been producing wine for centuries and has been known for its premium wines. When the wine production was a labor intensive job they were able to create efficiencies in cultivation and increase farm outputs leading to a greater production and more profitable business. In the recent times the French wine industry worked in tangent with government regulations to differentiate their wines e.g. they categorized their wine yards into five different categories based on quality of wine produced. The government’s strict policies to control the quality of wine produced led to the AOC laws that defined rigid boundaries and rigid standards for vineyards and wineries. This worked as an advantage for the industry as it segmented the wine market making it easier to identify wines and also prompted confidence amongst the consumers that wine are of high quality. This allowed the process of choosing wines easier and helped the customers to sort through the complexity of the highly fragmented market. The French wines industry was vulnerable for several reasons, firstly the restrictions and rigid standards that signified quality for the industry also led to lack of innovation and efficiencies within the industry and left them unable to compete with new world...
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...In the beginning 3 Political influence in the Old World 3 A New World was born 4 Global Wine War 4 The battle of the US market 4 3. Theory & application to the case 5 Porter Outside-In Model 5 Porter Outside-In model & the Global Wine War 6 The Resource Based View Inside-Out Model 6 The Resource Based View Inside-Out Model & the Global Wine War 7 Innovations 7 Red Queen competition 7 4. Conclusion 8 References 9 2. Case analysis In the beginning The first niche market for premium wine was created by the European nobility in the middle ages. They started to compete based on the quality of wine. Until the late 18th century, the size European vineyards were small because they were fragmented by wars. In that time, the wine producers did not own the whole value chain, the producers bought the grapes from the local farmers. Here, the local wine was not exported because of poor roads, complex toll and tax systems which made it too expensive. Political influence in the Old World The late 18th century was dominated by innovations, which led to greater wine stability and longevity, distribution to distant markets and bottle aging of good vintages. The result was an increase of vineyards and production. Because of the growing economic and political importance of the wine industry, there was an increased political attention and with it laws and regulations to control the whole wine chain. For example, the Appellation d’Origin Controllée (AOC) law in France. Italy followed...
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...Describe the biophysical, ecological, economic and sociocultural factors that explain the nature, spatial patterns and future directions of a global economic activity you have studied INTRO The factors that explain the nature, special patters and future directions of viticulture include the biophysical, ecological, economic and socio-cultural factors. BIOPHYSICAL FACTORS The ideal temperature for growing grapes depends on the type of grape. For growing white grapes, ideally the temperature should be 19°C and for red grapes, 21°C. Reaching this ideal temperature is important because it is how the vine produces the sugar needed for plant growth, which influences the colour and flavour of the grape. The scientific reason for this temperature requirement is due to the enzymes involved in sugar production, and the ideal working temperature for these enzymes. Insolation refers to the level of solar radiation; this has an impact on the rate of photosynthesis and therefore affects the amount of plant growth. For this reason there is a certain longitude where grapes grow best. Aspect affects the amount of sunlight received on the vineyard. In the southern hemisphere north and west facing slopes are ideal as they receive more sunlight. Excessive wind results in grapes being damaged and vines become stressed, if there are strong winds it can break off shoots and cause damage which results poor growth and decreasing levels of photosynthesis. Vines generally require approximately 700mm...
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...EXECUTIVE SUMMARY BRL Hardy, an Australian wine company, is facing challenging decisions. CEO Millar and his group marketing and export manager want to follow a global strategy with global brands—Carson, responsible for Europe, including the important U.K market, prefers a multinational approach (or rather a transnational solution). In the long run, I consider a solely global approach a risky venture in wine industry. It is not possible to compare it with other industries producing mass products—wine consumers’ habits are usually in contradiction to global brands. But a possibility for changing habits some way may exist, enabling a potential for global brands—especially for capturing young consumers over a limited period of time. Some companies already proofed that global wine brands work—even if their success was not that great in terms of market share or time period. Therefore, I would suggest a “transnational” solution—a combination of a decentralized and centralized organization: to sell global brands (constantly adapting them to consumer needs) as long as they succeed and, simultaneously, to serve different markets according to their local needs. Moreover, the wine industry is dependent on differentiated sources all over the world to guarantee best possible security. It is important to create a strong strategy and vision first—clear, coherent and well communicated by the leader. Everybody within the company must understand it and commit himself to it as well. For effective...
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...Autumn 15 ROBERT MONDAVI WINE INDUSTRY Dougal POGET & Caroline MULHAUSER U N I V E R S I T Y O F A P P L I E D S C I E N C E -‐ G E N E V A H A U T E E C O L E D E G E S T I O N – G E N E V E Mondavi Wine Industry – Case Study Dougal Poget & Caroline Mulhauser TABLE DES MATIERES 1. Read, reflect on and analyze the company situation within the context of a changing wine industry. ................................................................................................................ 4 2. Think about an outline all of the external, internal, competitive, market, and consumer factors, changes and trends affecting Mondavi in their business model. 5 External factors: ......................................................................................................................................... 5 Internal factors (Integration level) ...................................................................................................... 5 Competition ..............................................
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...Nicole Terry MBA 810 Mondavi Case Study The Wine Industry - Old World versus New World The wine industry has evolved throughout history and no longer does the European “old world” market dominate the industry. More recently there has been a push from what has become known as “New World” wine manufacturers to capture more of the market share. As new companies enter into this market and the wine industry as a whole shifts the question remains, is the “New World” approach structurally stable enough to sustain growth and shift the industry from what we know as the traditional or “Old World” thinking? This case analysis will make a comparison between the “old and new world” within the wine industry and also use the five force model to analysis the structural soundness of the “new world” approach within the global wine industry. To compare the Old World to the New World in the wine industry it is best to look at the strengths and weaknesses of both segments. The Old World wine industry has years of experience to build on, an unique ability to cater to those who enjoy consuming wine that is handpicked, authentic to Europe and specific to certain regions. Strengths for the “old world” include first in industry with a consumer base already built up. Old World has no governmental regulations on the distribution process but government does play a role in the processing of their wine and this regulation creates a major weaknesses in comparison to the “new world”. The New...
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...Global Wine War 2009: New World versus Old Wine-making was originally considered an art, dominated by several European countries, mainly among the noble class competing against one another for the highest quality wines. Traditionally set in their ways, from the methods of planting to harvesting to marketing channels and their consumers. The old world winemakers were unprepared for what was ahead of them. As the new world began gaining ground, a rivalry arose between new and old world. The old world set on its traditional ways which had been in practice for centuries while the new world focused around maximization of crops and harvesting as well as marketing to the change in consumer preferences leaving the old world in awe as the new world took over and sales and imports with a shifting of pallets and an economic recession which it not only the consumers wallets but also the grower's vineyards a continuous battle for leaders in US imports emerged as the preference for premium wine increased leaving us out to dry with their high prices due to inherent domestic cost. How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop? Where were they vulnerable? France had been delivering wine for quite a long time and has been known for its premium wines. At the point when the wine creation was a work with serious...
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...Mondavi and the Wine Industry 1) Evaluate the structure of the global wine industry? How and why is that structure changing? What threats do these changes present for Robert Mondavi? The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there. The Old Market consumers are more sophisticated and price sensitive than those in the New World. The main sales channels are supermarkets and other off-premise locations in Europe, which will allow more buying power to consumers. Whereas, the variety of wine in the New World brings in differentiation in products, which leads to lower buying power. In terms of power of suppliers, Wineries in Europe is are not much exposed to the external force because they use grape mainly they produce for higher quality of wine. However, the makers in the New World depend on outsourcing to some extent. Therefore, the power of supplier is stronger in the New World. However, in terms of risks involved in the grape farming, the outsourcing can helps diversify the risks. In addition, the regulatory environment in Europe restricts the European wine makers to diverse its wine product portfolio...
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...Global Wine Wars 2009: New World versus Old World Executive Summary The concept of wine-making was originally an art dominated by several European countries, mainly amongst the noble class, competing against one another for the highest quality wines. Traditionally set in their ways, from their methods of planting, to harvesting, to marketing channels and their consumers, the “Old World” wine-makers were unprepared for what was ahead of them as the “New World” growers joined in the struggle to appeal to the tastes of their consumers. As the New World began gaining ground, a rivalry arose between the New and Old Worlds - the Old World set on its traditional ways which had been in practice for centuries, while the New World focused around maximization of crops and harvesting, as well as marketing to the changing consumer preferences - leaving the Old World in awe as the New World took over in sales and imports. With a shifting of palates and an economic recession which hit not only the consumers’ wallets, but also the growers’ vineyards, a continuous battle for leader in U.S. imports emerged as the preference for premium wines increased, leaving the U.S. out to dry with their high prices due to inherent domestic costs. Meanwhile, Australia and France were able to tap into the premium and super premium markets, respectively. Since Australia had already taken charge of U.S. imports in the middle segment with their Yellow Tail brand, their entrance into the premium market...
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...“Wine has been with us since the beginning of civilization. It is the temperate, civilized, sacred and romantic mealtime beverage”- Robert Mondavi 6000 B.C- is the time when, Mesopotamians first began to produce Wine. Since then Wine is playing an important role as enjoyable, romantic and authentic beverage for the people of all the classes. As the centuries passed, Europeans introduced their Wine making techniques to the rest of the world including America, Australia and South Africa. 1966- To become the first winery in California to produce premium Wine brands that would compete with the other premium wine brands of the world, Robert Mondavi founded the RMC Winery. With the clear strategy of gaining high reputation in premium wine segment, RMC at very inception align its business plan with its competitive strategy. As to produce limited quantity of super to ultra premium wines using high quality grapes, this helps them to build diversified brand portfolio particularly in price points and niches premium Wine market. Again as a part of their competitive strategy RMC lead the Wine industry in several process innovation and operational improvements including gentle grape handling, cold fermentation, stainless steel fermentation tanks and Oak barrel aging. In 1972 Los Angeles Times recognized RMC’s Cabernet Sauvignon as the best Wine produced in California. At marketing front to stimulate demand, RMC took some notable steps like Tours of Winery, Training sessions at fine restaurants...
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...How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop to support their exports? Where were they vulnerable? “By the Christian era, wine became part of the liturgical services, and monasteries planted vines and built wineries. By the Middle Ages, the European nobility began planting vineyards as a mark of prestige, competing with one another in the quality of wine served at their tables – the first niche market for premium wine.” The French were the dominant competitors in an increasing global market because they believed in the same old tradition that brought so many of their ancestors’ success years prior. Many consumers preferred the taste and sophistication of a bottle of pure wine from a native land. To support their exports the French stuck by their plan of maintaining an old fashioned brand that was simplistic but full of quality. Consumers who drank aged wine originating from France considered themselves above normal society, in a class above the commoner. A medical publication supporting that French red wines helped promote low rates of heart disease certainly did not hurt either. French wine producers had several sources of competitive advantage beginning with their geographic and climatic features. This played significant role with France at the center of European culture with suitable climate and soil condition for harvesting grape, leading to first-mover...
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...Schultz Wines Limited: Pre-seen Information Examination Case Study: What type of organization is Schultz Wines Limited? Schultz Wines Limited was established in 1840’s by one of the founding winemaking families of Barossa Valley in South Australia who had migrated from Germany. The company was listed on the Australian Stock Exchange in 1996 and operates from a single site located in Barossa Valley. The company’s current Managing Director, Fred Schultz, is a fifth generation winemaker, a direct descendent of original Schultz family, and the company maintains the tradition of being an independent family wine company with premium brands, despite being a publicly listed company. What industry, product segments/markets does Schultz Wines Limited operate in? Schultz Wines Limited is the 7th largest company in the Australian Winemaking Industry and competes in key export markets in North America, Europe and Asia. Core activities cover grape growing and procurement, harvesting, crushing (includes crushing for other wineries), storage and fermentation of grapes and distribution to local & international markets, having vertically integrated, Schultz Wines has had its own vineyard and produce 20 per cent of its grapes requirements. Schultz Wines does not bottle its wines. They are bottled by a nearby bottler that also packs them ready for distribution to various markets. Schultz Wines operate in all three major product segments: Table wines (includes Red & White varieties)...
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