| Abstract: |
The purposes of this paper are (1) to examine driving forces and key success
factors related to the increasing globalization of the wine industry, and (2)
to analyze the current competitive advantage positions of four Old and five
New World wine producing countries. Each country will be profiled using key
industry data and analyzed regarding their national capabilities to address
five key success factors that contribute to their national competitive
advantage position. The countries fall into three groups with respect to their
national comparative competitive advantage position. The group with the
strongest competitive position includes United States, Australia, and Chile.
Australia and Chile both have small populations that provide for a tiny
domestic market with little potential for growth. However they are very well
positioned to produce and export wine with their adaptive, large-scale
producers and their great lure for foreign investments, providing them with a
position of a strong competitive advantage. With respect to production, cost
structures suggest Australia and Chile may be better positioned that the US.
However, economies of scale and economies of scope in marketing offer an
advantage to the US because it is a populous and affluent nation. While the US
wine market is already significantly larger than Australia and Chile, it has
even more potential to expand. The group of countries with moderate
competitive advantages includes Italy, Spain, Argentina and South Africa.
Lingering economic concerns and disadvantages of scale prevent Argentina from
being ranked as competitively as neighboring Chile. Likewise, South Africa has
strong marketing economies of scale and moderate production economies of
scale, but currently domestic unrest has diminished its attraction for foreign
investment and ability to expand its home market. In the Old World, Spain and
Italy are hampered by decreased consumption rates and weak economies of scale
in production. However, on the positive side, they have shown promise in their
ability to adapt to an increasingly internationalized marketplace and to
attract foreign investment. The countries with the weakest competitive
advantage positions in the global wine industry are two traditional
strongholds of wine production in the Old World: France and Germany. While
they have large domestic markets, there is little opportunity for further
growth. The concentration of production into small wineries, scarce land and
labor, complex labeling practices and inability to leverage new production,
and marketing techniques does not bode well for effective competition in a
global market place. Nor does either country hold much potential for
attracting foreign investment, save for some traditionally undervalued areas
of France, like Languedoc. In conclusion, it is clear that the New World
countries are currently positioned better to capitalize on the opportunities
created through industry globalization and other current driving forces. Italy
and Spain emerge as the best positioned Old World nations. This competitive
advantage scenario should be a wake-up call to many wine producing countries.
Indeed, some Old World countries have begun efforts to better adapt to
industry-wide improvements in production and marketing practices. However, it
is clear that many nations need to increase support that will encourage
production and marketing innovations to improve their competitive advantage
position to help local wineries succeed in the changing and increasingly
competitive wine marketplace. |