Category: Wine

Introduction

The wine industry is one of the oldest industries in the world with a number of countries being that major players in the industry. One of the countries in which the wine industry has existed for a very long time is France. For a long time, France has been known to be one of the renowned nations in the production and consumption of wine.

This means that there are very many firms that produce wine in France. France has a large population that consumes wine thus this population acts as the first market for the wine sector or industry in the country. The government of France has been supporting the Wine sector for a long time due to the expansiveness, and thus influence of the industry to the economy of France. The government support has backed the sector from both internal and external economic pressure and threats (Jenster, 2008).

Over many years, the wine industry in France has been influenced the interests in English and the Dutch market. This happened before the French revolution. The ancient regions in France which have been known to produce wine include Alsace, Bordeaux, Burgundy, Loire Valley, Champagne, Languedoc and Rhone. France dominated the wine industry globally till near the end of the 20th century. However, the 21st century has brought about significant changes in the wine industry.

The global wine market has become significantly competitive. Other regions of Europe and the world have come in the industry and are giving France a cut throat competition. In Europe, Spain and Italy have joined wine producing countries in the world. Also, there are other recent wine produces like Australia, California – United States and a number of countries in the South American region (Wherry, 2011).

The wine sector in France started booming in the 19th century after the end of French revolution. The French Revolution brought about the rise in incidences of production of poor quality wine in France. This was because there was inadequate knowledge among the producers of wine in the country.

The technology that was being utilized in the processing of wine was poor. Therefore, investment was made in order to come up with improved technologies in wine production. Therefore, a wine processing technology known as “chaptalization” which entails the addition of sugar into wine to raise alcohol levels was developed. This was a turning point in the wine sector in France as this technology was further built on to better the industry.

By around 1850s, the wine industry had sky had attained voluminous growth. During the same time, the upper class commonly referred to as the bourgeoisie had emerged. This class formed part of the largest group of wine consumers. The bourgeoisie provided a big market for the wine sector. Many technological developments took place in the wine sector to better quality of wine. Towards the end of the 19th century, the government of France gave Louis Pasteur the task of studying the problems that were facing the wine industry.

Pasteur carried out research and established findings that revolutionized the science of winemaking in France. In his study, he discovered what caused wine spoilage and developed processes of eliminating wine spoilage. Also, the development of the French railway systems added to the betterment of the wine sector as it opened up more area for trading of the French wines. More regions became accessible (Anderson, 2004).

Wine is produced in different regions of France. France as a country produces approximately 60 million hectoliters of wine annually. The country has the second widest total vineyard area globally. The leading county in terms of the size of vineyard area in the world is Spain. France still leads the production of wine in the world.

It was only eliminated from the top spot in the year 2008 by Italy. The country produces a wide variety of wines. Expensive and high vined wines are produced and exported to other countries where they are consumed. Modest wines are also produced though they are mostly sold in the local market (Anderson, 2004).

France has different varieties of grape, and this is one of the factors that give this country a competitive advantage in the wine sector. These different varieties of grape include chardonnay, pinot noir, cabernet sauvignon, syrah, and sauvignon blanc. However, these varieties have been introduced and are now being cultivated in other countries.

The wine making practices that were only utilized in France have also been imported by other countries. This has been coupled with other pressures like the drop in the local consumption and the growth of wine industries in other countries within and outside Europe. This has put pressure on the wine sector and reduced the competitive advantage of this sector in the world market. The per capita wine consumption dropped by almost 20 percent in the 1900 decade.

This means that reliance on foreign markets remains to be the focus of wine producers in the country. France has been depending on the regional market for the sale of its wine. Therefore, the production of wine in other states within and without the European Union threatens the wine sector. Expensive wines have been fetching a lot of in some for the sector as most of the expensive wines find markets in the wealthy markets of Europe and the United States (Dougherty, 2011).

The wine sector is an important booster of the agricultural sector of France. Agriculture forms part of the important sectors in the economy of France. The main crops that are grown are sugar beets, barley, wheat, corn and potatoes and fruits. The fruits are utilized in the making of wine.

Therefore, the wine industry holds a big part of the local economy through the support of the horticultural sector. The wine sector provides employment to a relatively big number of people. Apart from this, the wine industry is a foreign exchange earner for the country by way of the payments that are made from the sale of wine in the international market. The wine sector boosts other industries in the country; therefore, its importance in the French economy is too open (Dougherty, 2011).

The wine sector in France has been coping well in the global wine industry. However, the competitive developments in the 21st century have affected innovation and the wine export opportunities for the country. However, the country is still ranked as the leading producer and in consumption of wine.

It is important to note that the gap at which it is leading is shrinking at an increasing rate. By the year 2007, France only had a 20 percent of the total world production while its consumption stood at 14 percent. More competition is likely to shrink its market more and force the country out of the international wine market. The wine exports are reducing while the local sales are also going down (Jordan, Zidda & Lockshin, 2007).

Strategy Exploration – Exporting, Differentiation and New Technology

Owing to the recent developments in the wine sector of France, a number of strategies have been adopted to streamline the sector. These strategies are differentiation, exporting and new technology. All the strategies aim at improving the competitiveness of a sector in the economy.

Differentiation, commonly known as product differentiation in economics and business studies can be defined as the approach that a firm in the industry adopts in order to develop and increase marketing of its unique goods for different segments of customers. This strategy works well where a firm has an upper hand when it comes to competitive advantage and the ability to sustain costly advertising campaigns.

Essentially, this is regarded as one of the marketing strategies. This strategy is also called market segmentation. Product differentiation simply means separating the products of a firm from those of competitor firms. The major objective of product differentiation in an industry is to boost the competitive advantage of the product in the market.

In other words, product differentiation increases the competitive advantage of products if it is properly applied by a firm in the industry or economy. In economics, well conducted product differentiation results in monopolistic competition. It eliminates perfect competition. There are there different types of product differentiation, which are simple, horizontal and vertical differentiation (Zanni, 2004).

The exporting strategy involves the assessment of the products as it appertains to their potentiality for export. Exporting strategies aims at helping a firm to enter and gain grounds in the international market. Exports expand the market for products and the competitive base of a firm.

New technologies are applied in either the business processing or production stages of products of a firm. When applied in the production process, new technologies do aim at raising the quality and the value of products in the market. When the product quality is improved by way of applying new technology, the products become more competitive in the market (Jordan, Zidda & Lockshin, 2007).

The various strategies may be used differently at a time; however, in certain instances, firms may decide to use various strategies concurrently. However, this depends with the intensity of the problem that is being solved by these strategies or the objectives of the firm that is applying the strategies.

More often, one strategy is applied. Nevertheless, the success of the strategy determines the employment of the proceeding strategy. The wine sector of France has applied all these strategies at different times. These strategies have been applied to increase the competitiveness of the sectors as a result of internal and external constraints that have been affecting the operation of the sector in the country.

New technology has for instance been applied from the earliest time of the industry with a lot of changes being made to enhance wine quality. Product differentiation has also been adopted by the wine industry and applied in different ways. The wine has been branded differently to make it distinctive from other wine products from Italy, Spain and other wine producers in the United States and the South American region.

Other aspects of product differentiation like packaging have also been employed by the French wine industry. With the shrinkage of the local market, the wine sector of France has been forced to develop export marketing strategy which will see it increase foreign sales that will be useful in offsetting the effect of the shrunken local market (Moulton & Lapsley, 2001).

Strategy Analysis: French Wine Sector

The different strategies that have been used in the improvement of the wine sector in the country have different effects on the different business groups in the wine industry.

Overall, these strategies have the primary aim of beating the competition in the wine market. As earlier explained, the exporting strategy has been the focus of the wine sector in France due to the witnessed decreasing rate of local consumption of wine. This strategy has aided in increasing the access of new brands into the international market thereby leading to stakeholder benefits.

The investors have benefited in different ways. The government of France and investors in the wine industry has been the major beneficiaries from the exporting strategies. The international business agreements that are established opens up the country to cross-country trading activities. These trading opportunities are taken up by investors who build on the opportunities presented to establish other trading activities.

On the other hand, the foreign business transactions, which serve as sources of foreign exchange, are crucial to the economy of a country. More foreign exchange earnings mean that the French economy will be stronger. Therefore, the wine industry is coming to Exporting strategies continues to support the wine sector of France that has been facing a stiff competition since the beginning of this decade (Jordan, Zidda & Lockshin, 2007).

Analysis of Competitive Strategies

Competition also exists between different wine producers in France. In the year 2010, private labeled wines continued to lead in sales. The privately labeled wines had a market share of 28 percent. In terms of sales in the chain stores like the hypermarkets and supermarkets, the brand accounted for almost 80 percent of sales in the same year. A similar trend was also seen in the year 2011. The high sales of the private labels are attributed to the value which customers attach to the private labeled products (Jordan, Zidda & Lockshin, 2007).

The wines that target niche consumers such as the young people, women and consumers who are more conscious with their health are the driving forces of innovation in the wine sector. Light wine versions are expected to feature considerably in the market. The production and supply of organic wines is also expected to rise. A large number of wine producers in France are turning into producing organic wine because of the changing customer preference.

The French government came up with a modernization plan to aid the sector and increase its competitiveness due to competition in the sector. The plan was unveiled in the year 2008. The aim of the plan was to bring down the complex regulations that blocked wine companies from effectively competing with other producers in the international arena. Players in the sector conquered with the content of the plan.

The plan was developed in line with the business reforms f the European Union. The plan allowed for the production of grape wine, as well as putting the year on the label of the wines. Also, cheaper wine making techniques have been adopted courtesy of the plan. The cheap wine production techniques are used in countries that compete with France in wine production. The categorized wine producers into three groups whish are Vignobles de France also known as wines of France.

This label replaced the Vin de table. Wines under this category carry both the year on the label and the variety of grapes uses in making it. The second category is Indication Geographique Protégée also known as Protected Geographical Region. This group replaced the Vin de pays. The last group is the Appellation d’Origine Protégée (Jean-Guillaume, 2009).

The plan had the objective of attaining originality in production and encouraging massive wine production. This plan has been adopted in the industry. Also, the government of France has had pressures to amend the law which bared the online marketing of wines. Online wine marketing is now legal, and many business analysts argue that this is the likely trend as we move into embracing information technology in easing commerce (Jean-Guillaume, 2009).

Some critiques have argued that the French wine industry is suffering from inadequate entrepreneurship. This problem has given room for external competition, which threatens the sector. From quite a long time, the young winemakers in France were not encouraged to invest in the industry. There has been little aggressiveness among the French businessmen. Many businessmen avoid taking risks and have shunned from investing in the wine industry.

This is contrary to what has been happening in the wine industry of other countries for instance Australia, which is now amongst the biggest competitors of France. Australia has been supporting investment and innovation which has resulted in massive investments in the industry by young investors. The French wine industry has worked on a conservative perspective which explains why it has been caught up by the emerging competitors in the wine industry (Jean-Guillaume, 2009).

If at all more players will continue to come into the global wine industry and the French government fails to revive the local wine market, the competition may grow stiffer causing negative effect on the whole wine industry in the country.

Conclusion

Form the discussion; it is can be concluded that the wine sector in France has been under some economic pressures. These pressures have mostly resulted from an accelerating trend of competition in the international wide industry. It is important to highlight the problems or crises that the sector is facing.

This will be critical in giving a clear understanding of how adopting business strategies have been critical in saving the sector from collapse. From the consumer pint of view, the producers are not producing cheap wine that will be affordable for them. Many factors lie behind this problem. The government has put up tough rules to govern the production of wine.

These rules have not been favoring the production of quality cheap wine. The French government has been in the limelight for failing to embrace the forces in the wine market. Nonetheless, the government has woken up to the challenge and has been nurturing plans that are helping to bail the industry. However, some of the measures have not solved the compelling issues in the industry.

Wine diversity has been reserved through the categorization that was part of the government plan to modernize the wine sector. Nonetheless, quality improvement has not been done living the problem of reduction of local wine consumption unresolved. Furthermore, the least focus on quality may work against the French wine brands in the international market.

The three strategies borrowed by the wine firms in France have been very beneficial. Through the exporting strategy, small firms in other countries. Such companies have attained financial growth and expansion. When a firm opens up into the foreign market, the operations of the company will expand thereby leading to the growth of the sector under which the company lies.

When the French wine enters the entire market world including the Asian market as it the trend that is being observed, growth and development will be imminent for both the individual companies and the industry at large. Export growth means the growth in demand for the products. The industry is thus active in terms of continuous and increased production to meet the demand in the growing external market.

Product differentiation that has been going on has resulted in the production of different wine varieties. In addition to the new technologies aimed at improving the quality of these brands, the wine companies are recording increased sales both in the local and international market. The three categories of wines that were reached under the modernization plan are part of the differentiation strategy. Companies have become more diversified and produce different types of wines of different standards widening their market.

Differentiation has made the wine industry breach its culture of mostly producing expensive wine for the purpose of export. Companies are borrowing examples from the upcoming countries like Australia. These upcoming countries do not concentrate on producing expensive wine; they produce fairly cheap wine which is easily marketed as it is favored by its prices. Also, technology does not only feature in the production of wine.

The companies have pressured the French government which has been forced to amend the laws and allow for online marketing of wine products. Internet marketing helps companies in reaching a wide network of consumers or customers. Internet marketing, which is a component of e-commerce, is easing the marketing of wine and subsequent expansion of the wine market.

The French wine sector needs to keep improving on these strategies as the competition in the wine market is stiffening with more players coming in the industry. One thing that has not been emphasized by the industry is the restoration of the local market. There was a drastic fall in the quantity of local customers. Drop in local consumption of wine was significantly severe in during the financial crisis of 2008 to 2010. The local market has remained low from then.

This paper has given an insight into the wine industry. Through the paper, I have known the real economic forces and trends in the wine industry. I had only known France as the leading and dominant in the world wine industry. However, from doing this paper, I have gotten to know that the wine industry is a competitive industry just like other industries in the world.

Also, i have learnt that, at one point, France was overtaken by Italy in average wine production. Competition in business necessitates actions which have been taken by way of adopting business strategies. Some of the strategies are working well while others will have to be improved. The paper has also helped me to know the importance of different strategies and how they can benefit different stakeholders in business.

Business is in itself a process. There are different cycles in business. The business can perform well at some times due to favorable conditions. However, businesses will encounter challenges which will require strategies that will help to make the business to stand the challenges. This is where business strategies become significantly important. Business strategies are mostly developed at the beginning of programs and are adjusted according to the challenges that come in the process of doing business.

Business strategies give companies gives companies the framework of handling an issue or implementing a business program. The strategy establishes various steps and how these steps and actions will be coordinated so that the business goals are attained. Business strategies emphasize on the opportunities present in the external and internal business environment. Also, the threats that face the business from either within the company or from outside the company are highlighted in the strategies.

The business environment is not static. It keeps changing with the changes in business forces. As the external environment in business shifts due to changes in either the competitors or customers and or sociopolitical and technological changes, the business goes back to the board to draft a set of action that will help it adapt to the changes as these changes causes a changes in the way a business or company functions. The threats have to be eliminated, and a good environment cultivated. This is the chief aim of business strategies.

References

Anderson, K. (2004). The world’s wine markets: Globalization at work. Northampton, MA: Edward Elgar Pub.

Dougherty, P. H. (2011). Viticulture: The Geography of Wine. Berlin: Springer Verlag.

Jean-Guillaume, D. (2009). An Institutional Approach to French Wine Strategies: the Cahors Case: 4th Bacchus Interdisciplinary and International Wine Conference Dijon, 8-9-10 July 2009. Web.

Jenster, P.V. (2008). The business of wine: A global perspective. Copenhagen: Copenhagen Business School Press.

Jordan, R., Zidda, P. & Lockshin, L. (2007). Behind the Australian wine industry’s success: does environment matter? International Journal of Wine Business Research, Vol. 19 Iss: 1, pp.14 – 32.

Moulton, K.S. & Lapsley, J.T. (2001). Successful wine marketing. Gaithersburg, Md: Aspen Publishers.

Wherry, F.F. (2011). Culture of markets. S.l.: Polity Press.

Zanni, L. (2004). Leading firms and wine clusters: Understanding the evolution of the Tuscan wine business through an international comparative analysis. Milano: F. Angeli.

Evaluation of the Structure of the Global Wine Industry

The current structure of the global wine industry exists due to major and consistent changes that have occurred over the decades. Time brought in new investors and the industry changed enormously due to the consolidation of new competitors. Consequently, it is necessary to explore a few factors that led to such changes in the global wine industry.

The structure of the global wine industry has been constantly changing to reflect a more competitive and open business environment. One of the key factors pioneering the structural changes in the industry is the fact that interested parties learned the art of wine making. This was inevitable because Mondavi in his endeavour to promote wine drinking as a culture encouraged visitors to tour his winery and taste the new wines (Roberto 6). As a result, interested investors managed to get firsthand knowledge concerning the entire procedure.

Industry Analysis

A closer look at the industry in which Robert Mondavi runs business reveals two environments, each with different opportunities and challenges. These environments are the new world and the old world (Roberto 3). Although both sets of milieu provide opportunities for growth, the new world proved to be more promising in terms of acquiring a competitive edge. One of the outstanding factors that would make it more beneficial for Mondavi to operate within the new world is the fact that the environment emphasises on the use of machinery and technology. Although this would increase the cost of production, technology and automation would enable Mondavi to enhance the consistency and quality of wine produced (Roberto 2). Considering the echelons of competitiveness, the new world becomes recommendable if Mondavi is to maintain a brand that would traverse both domestic and global markets. Secondly, unlike the old world, the new world emphasises on consumer branding making it more attractive (Roberto 2). Consequently, Mondavi will experience increments in sales because consumers like to associate the flavour of wine with a particular variety of grapes rather than geographical location as deployed by the old world.

Threats Faced by Robert Mondavi

Robert Mondavi faced three categories of threats.

Competition and rivalry: The first appearance of this form of threat occurred when consolidation hit the wine industry. New world producers engaged in three types of acquisitions to counter Mondavi’s resilience and grip in the wine market (Roberto 3). Premium wineries purchased or merged with direct rivals, jug wine producers started acquiring premium wineries to take advantage of altering consumer tastes, and other alcoholic beverage firms diversified into the premium wine business (Roberto 4).

Capital related threats: Operating under the cover of the old world may have been a little friendly in terms of inputs required. However, Mondavi still operated within the parameters of a capital-intensive environment because of the need to acquire large pieces of land. The stability of the new world forced Mondavi to invest heavily in machinery and technology unearthing a new threat in the face of his faltering economy.

Marketing and distribution: Conventionally, Mondavi was in control of the channels used in distribution, selling much of his wine off-premise through supermarkets, wholesale price clubs, mass merchandisers, and liquor stores (Roberto 5). However, the intervention of the government delinked Mondavi from all established channels of distribution. This threatened his existing level of market command.

Entrance of Diageo, Foster’s, and Allied Domecq into the Premium Wine Business

There are two key reasons why the companies entered the premium wine business. Firstly, the stage had already been set and Mondavi had efficiently done the groundwork for other companies to thrive. The second and most important reason for their entry derives from the opportunity presented by premium wines in terms of the growing customer base – a loophole that Mondavi had failed to utilise. The demand for premium wines escalated consistently as well as the profit margins.

Diageo, Foster’s, and Allied Domecq all sought to use a similar strategy. Their strategy was to capitalise on the growing demand for premium wines using already existing brand names as dealers in alcoholic beverages through aggressive acquisition (Roberto 16). The strategy made a lot of sense because it immediately placed their wine in a position of authority concerning the already existing market share. Mondavi decided to affirm his authority in the market by engaging to focus on the organic growth of his premier brands (Roberto 16).

Strategic Alternatives for Mondavi and Recommendation

Mondavi deployed two instinctive strategies. He worked on the current positions of premium wines to ensure that the positions improved compared to other competing brands. In addition, Mondavi assigned competent personnel to manage each specific brand of premium wine. Nevertheless, an additional recommendation would suffice to keep the company afloat even in the toughest of challenges.

It is important for the management to keep a close watch on changing trends in the industry especially concerning competitive strategies used by rivals. For instance, the management should cease from overlooking a strategy as simple as aggressive acquisition by new market entrants. Although countering such stratagems with organic growth proved to be effective, it would have been more advantageous to consider using the same strategy to acquire the most competitive brands in the market as well.

Works Cited

Roberto, Michael. “Robert Mondavi and the Wine Industry.” Havard Business School 3.1 (2005): 1-32. Print.

Introduction

Demand and supply are important elements in determining the competitiveness of a business. The response to effects and changes by demand and supply determines the organizations’ competitive edge in business.

This paper will highlight the shifts in demand and supply that prevailed in the Global Wine-War between the new and the old wine case study.

Demand determinants in the Wine industry

During the middle time era, wine competition erupted between the Old (Italy, Spain, and France) and New wine producers (the United States, Australia, and Chile).

Some prevailing factors between the new and the old wine producers changed who purchased and what type of wine as desired by the consumers. The factors that affected the type of wine together with who purchased it were the following ones.

Tastes and preferences

The change of the quality and the type of wine greatly influenced the wine market for both old and new producers. From the case study, a blind-tasting activity was carried in France on wines (Bartlett, 2009).

The old producers’ wine dropped by 20% in the international consumption rates. Consumers preferred quality wine produced in the United States, hence high supply.

Due to preference and tastes in wine, there was a shift in the market demand for exports in the old producers’ wine. Therefore, the new producers’ wine was highly preferred by consumers. This aspect boosted he wine’s demand in the global market.

Technology

New world producers embraced new technology in grape growing. Drip irrigation systems were installed, thus reducing vintage variability. In addition, large vineyards used specialized equipments in grape growing that lowered the production cost. New wine producers were in a position to produce quality, cheap, and quantity wines.

In addition, the new producers had the best-preferred packaging and marketing (Bartlett, 2009). The Australians invented the “wine-in-a-box” package that became the most preferred as it saved costs and eased storage.

Additionally, the new producers replaced the cork stoppers with screw caps, which were more susceptible to spoilage, in case of defective corks

Unfortunately, the old wine producers were forbidden to use drip irrigation like in France under the AOC regulations (Bartlett, 2009). Their production was labor-intensive and more expensive as compared to the new wine producers. Therefore, the old wine producers incurred high production costs.

This factor granted the new producers competitiveness and high productivity in the wine production industry.

Cost of production

The new wine producers used highly efficient and novel innovations in their production process. The economic impact of all these innovations in the agricultural industry led to low costs of production.

According to Bartlett (2009), French costs per tonne were 74 % higher than Australian costs, while South American grape growing costs were much lower. The cost of a bottle of wine by the new producers was priced lower than that of the old producers. Consequently, the new producers’ wine was of high quality and cheap in pricing.

Therefore, the demand for the new producers’ wine was higher than that of the old producers (Bartlett, 2009).

Traditions and culture

Traditions and culture affected the demand for wine as depicted in the case study. The new producers incorporated labs for scientific analysis for better wine production. New producers produced a deep-colored and richer-tasting wine. On the contrary, the rules were different in France under the guidance of the AOC policies.

For the new producers, the innovation boosted their market demand in the industry. Unfortunately, Spain was faced with strict industry regulations and complex European Community regulations. The new producers took the advantage and came up with more innovations that out-competed the old producers.

For instance, the old producers used fragmented lands that were scarce, whereas the new producers used large estates with technology, and thus thy ended harvesting twice as their old counterparts. Subsequently, the demand for the new producers remained high and dominant in the wine industry.

Supply determinants in the wine industry

In respect to the case study on the global wine war, factors that affected supply were the following ones.

Technology

The new producers embraced high technology that boosted their quality, quantity, and efficient production. Evidently, the new producers’ wine was high in demand. On the contrary, the old producers’ wine was of low quality, and thus demand declined when the new producers’ wine gained more market acceptance.

The new producers wine kept high consistency in supply due to the good quality/price ratio, which was achieved through technology in production. Meanwhile, the French (old producers) tried to reduce the demand gap through frequent promotions, but they lacked the right knowledge and marketing skills.

Since their production cost was high, the price per bottle was higher than that of the new producers. In contrast, the new producers’ wine was of high quality and affordable, and thus it supplied high volumes to meet the demand.

Government regulations

The old producers faced a challenge arising from the government. For instance, the government set restrictions on the sugar content of the wine. In addition, the rules regarding the entire winemaking process were drafted in the AOC regulations.

The regulations hindered innovations and technology in the winemaking industry, which was embraced by the new producers to out-compete them in the production process. For the new producers, technology was a thriving tool through drip irrigation, thus making sweeter wine and fertilizer applications.

This aspect contributed to quality wine at a much lower costs that kept high demand for their wines in the market.

Production costs

With technology, the new producers incurred fewer costs in production as compared to the old producers. Moreover, the new producers’ prices were much lower with high quality wines. This aspect enabled the new producers’ wines to remain competitive and highly productive in the industry.

However, for the old producers, the production cost was relatively high, hence high prices. Unfortunately, the government forbade technology in irrigation and sugar content in winemaking, which lowered their demand and supply at the same time.

Analysis

The factors affecting demand in this case study include the consumers’ tastes and preferences, government policies, technology, the cost of production, culture, and traditions. These factors affected business entities in different dimensions. Similarly, the factors affecting supply included production costs, government policies, technology, and competition.

For any business entity to survive in the global competitive market, the management should incorporate a quick response mechanism system.

Conclusion

The wine industry has grown due to the competition that existed in its growth stages. A healthy competition contributes to high quality and affordable commodities as seen in the wine war case study. Assuming there was no competition in the wine business, the industry would not have gained popularity in the global market.

The competition in the wine industry led to many agricultural and packaging inventions, which are widely used in the contemporary times.

Reference

Bartlett, C. (2009). Global Wine War 2009: New World versus Old. Harvard Business Review. Web.

Industry Profile

The analyzed market sector is the wine industry in New Zealand. According to Euromonitor International (2020), in 2019, total volume sales increased by 1%, reaching 103 million litters. Concerning the sales performance of wine, the total volume growth within the last decade is 0.5% (Euromonitor International, 2020). The industry is marked by intense competition within several multinational companies and local wineries producing primal beverages and focusing on organic production (Euromonitor International, 2020). Firms compete on a global scale, prioritizing export in Asia and America.

At present, key customers are still represented by citizens as most of the wine is consumed by people in restaurants and bars. However, the COVID-19 pandemic has adjusted consumer behavior; people prefer to purchase beverages and drink them at home due to lockdowns (New Zealand Winegrowers, 2020). Moreover, as the industry is currently developing wine tourism, many customers are defined as enthusiasts, travellers, and specialists in agricultural and wine-producing (New Zealand Winegrowers, 2020). Competitors differentiate from one another mainly because of business approaches, such as affordable wine offers and various beverages; however, there is a common feature – sustainability initiatives.

Competitor Profiles

Complete a table of key competitors

Complete a Strategic Group Map

Summarising key aspects of the industry from

New Zealand’s wine industry is characterized by intense global competition and significant market actors. Reliable to industry structure, the leading organization remains Pernod Ricard Pacific Holding. The total volume share is characterized by an upward trend in 2019; therefore, it maintains its position in the wine industry (Euromonitor International, 2020). It keeps a strong position due to implementing several innovations in the wine industry, such as the launch of low-strength variants in 2019 (Euromonitor International, 2020). The other player is Lion – Beer, Wine & Spirits (NZ), retaining the second rank. The company defines its profit by a comprehensive product portfolio with mainstream brands and strong distribution (Euromonitor International, 2020). Kono case represents the niche wine winemakers, being a Māori iwi-owned beverage business (Our Story, n.d.). Their business model focuses on Māori heritage and following traditions (Emen, n.d.). Despite the growing number of shareholders and customers, such wine producers remain a small portion of New Zealand’s overall production (Emen, n.d.). Overall, the industry structure is prevailed by global companies, adapting its business in the New Zealand environment.

Concerning the main factors that affect the economic performance of the companies are sustainability and wine tourism. As long as most stakeholders recognize sustainability as an essential factor, the brand’s perception in society can be a positive and conscious vision (Baird et al., 2018). Thus, it leads to boosted sales and brand loyalty (Baird et al., 2018). After reviewing the market players’ multiple annual reports, it can be concluded that the large share of companies’ policies concerns environmental and agricultural initiatives.

Industry Analysis (Porter’s 5 Forces)

The New Zealand wine industry is fragmented, consisting of various actors. The threat of new entrants into the industry is medium as the impact of new applicants on profits in the sector is minimal (Hanson et al., 2017). However, the number of small niche wine producers is growing (Euromonitor International, 2020). The latter do not have an established supply chain network and reputation, so these new wineries’ threat is considered mediocre due to the insufficient wine-producing practices and the reputation (Euromonitor International, 2020).

The power of buyers intensifies competition due to the imposition of higher requirements for the quality of goods, for the level of service. Higher standards for the wine force manufacturers in the industry improve the quality of the product produced by increasing costs such as higher quality raw materials and, consequently, reducing their profit level (Lee-Jones, 2020). The bargaining power of suppliers is determined to be high in terms of the wine industry. According to the New Zealand Winegrowers (2020), it is determined that winegrape supply amounted to 4.57 million tons in 2020 while the total production of wines was 329 million. Therefore, there is a shortage of supply in winegrapes, showing that supplier’s bargaining power is high. The price of wine grapes grew from 2017 to 2020 due to a lack of supply (New Zealand Winegrowers, 2020). Overall, the bargaining power of suppliers for the New Zealand wine industry is robust.

Concerning the power of substitutes, the data show that beer and ciders become customers’ favourable choices and the fastest-growing products within the alcohol industry. While the current year growth of wine estimates 0.5, the cider shows 6.0, reflecting 12.8% of the compound annual growth rate (CAGR) (Alcoholic Drinks in New Zealand, 2020). Beer figures are 1.4 of the current year’s growth and 1% of CAGR (Alcoholic Drinks in New Zealand, 2020). Thus, beer and ciders are highly threatened to wine as a substitute (Alcoholic Drinks in New Zealand, 2020). Concerning competitive rivalry, the New Zealand market is characterized by the winemakers owned by TNC, such as Pernod Ricard (Euromonitor International, 2020). At the same time, the number of small niche actors is increasing with the product quality as a market advantage.

Driving Forces (From PEST+/PESTLE)

Choose the most influential 2-3 trends, and use these to form a driving forces analysis: The first influential trend is the growing interest in organic wine production. According to Organic Winegrowing (n.d.), grapes grown without chemicals provide organic wines with a brighter taste, more nutrients and fewer sulphites. The organic status is assigned only to those vineyards located in an ecologically clean area with soil free from chemicals (Organic Winegrowing, n.d.). It is allowed to use only natural fertilizers such as the remains of cut weeds, ash (Organic Winegrowing, n.d.). New Zealand is prosperous in organic and biodynamic winemaking and aims to produce all wines produced in this way by 2025. Such a trend reflects the green initiatives and society’s values on ecological preservation and a healthy lifestyle.

Another trend that affects the wine industry significantly is wine tourism. According to New Zealand Winegrowers (2020), such activity is prioritized by multiple country’s wineries. Such trips include “cellar door visits, restaurants, winery and vineyard tours, and accommodation” (New Zealand Winegrowers, 2020, p. 8). Whereas it benefits the wineries in terms of economic performance, it is part of its government policy to attract funds and capital; the Sale and Supply of Alcohol Act should support wine tourism. In COVID-19 circumstances, the investments are the same as in 2019 (Impact of COVID-19, n. d.). The forecasts claim that wine tourism will be at the same level in the short-term in 2022 (Impact of COVID-19, n. d.). Therefore, the trend may be advantageous for all stakeholders and adjust the wine industry, bringing more clients worldwide after opening borders.

Strategic Issues: Opportunities & Threats

Opportunities

Regarding competitor profiles, almost all the new wine production is performed by multinational beverage businesses such as Pernod Ricard (Lee-Jones, 2020). Due to the COVID-19 pandemic outbreak outcomes, the internal policy has resulted in the delay of new plantings in 2020 (Lee-Jones, 2020). Thus, the active market actors are limited, which allows the government to persist with such policies until the situation is stable (Lee-Jones, 2020). The possible opportunity that in 2021, improved grapevine farming would lead to a greater overall average yield per hectare (Lee-Jones, 2020). According to Lee-Jones, 2020, New Zealand wine exporters emphasize high-quality and high-price point production. Consequently, it presents more chances to increase the export rate and achieve profits.

Another strategic issue is ecological intentions; the industry should consider effective production in terms of fertilizers. According to New Zealand Winegrowers (2020), almost all New Zealand vineyards are certified by Sustainable Winegrowing New Zealand (SWNZ) (Baird et al., 2018). The SWNZ program is built on guidelines issued by the Organization for Vine and Wine International (OIV) (Baird et al., 2018). It provides models of best practice ecology in vineyards and wineries (Baird et al., 2018). The standards cover biodiversity, air, water, soil, energy, plant protection, waste management and social engagement (Baird et al., 2018). Compliance with standards will help the wine industry to maintain its reputation.

Threats

Despite several valuable points, there are also risks mainly connected with the pandemic consequences. For instance, as the wine industry in New Zealand intends to export its production and the consumer demand abroad is growing, the uncertainty in 2020 has affected wine consumption among the citizens (Lee-Jones, 2020). It has shifted towards purchasing beverages at supermarkets and off-license premises to drink at home. Therefore clients’ spending on dining out are reduced (Lee-Jones, 2020). As part of the wineries offer their productions only in the restaurant and bar, they should change the strategy to meet stakeholders’ expectations, selling wine to wineries with supermarkets and off-license supply channels (Lee-Jones, 2020). Hence, the companies need to reconsider their selling policies.

Another threat is the declining wine tourism business in New Zealand due to the COVID-19 pandemic outbreak. The country’s border may remain closed for most of 2021 (New Zealand Winegrowers, 2020). As nearly 800 thousand cellar door guests visited New Zealand in 2019, the decreased number might lead to the industry’s economic failure. Nevertheless, the winemakers suggested developing a new online marketplace to sell premium wines directly to overseas buyers (New Zealand Winegrowers, 2020). This initiative may enhance business in the international market as other states are interested in limited-production wines.

References

Alcoholic Drinks in New Zealand (2020). Passport. Web.

Baird, T., Hall, C. M., & Castka, P. (2018). New Zealand winegrowers attitudes and behaviours towards wine tourism and sustainable winegrowing. Sustainability, 10(3), 797.

Constellation Brand. (2020). Annual Report.

Emen, J. (n.d.). New Zealand’s First Māori-Owned and -Operated Winery Has Global Distribution and a 500-Year Plan. VinePair.

Euromonitor International. (2020). Wine in New Zealand: Country report. Web.

Hanson, D., Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic Management: Competitiveness and Globalisation (6^th ed.). Cengage.

Impact of COVID-19 on Wine Tourism of New Zealand (n.d.). WineTourism.Com.

Kono NZ LP (2020). Dun & Bradstreet. Web.

Lee-Jones, D. (2020). New Zealand Wine Sector Report 2020. United States Department of Agriculture.

Lion – Beer, Wine & Spirits (2020). Dun & Bradstreet. Web.

Ministry for the Environment. (2019). Environment Aotearoa 2019 Summary.

New Zealand Winegrowers. (2020). Annual Report. Web.

Organic Winegrowing (n.d.). New Zealand Wine.

Our Story (n.d.). Kono.

Pernod Ricard. (2020). Annual Report.

Treasury Wine Estates. (2020). Annual Report.

One look at the Yayi jia ritual wine vessel and it is already apparent that such an object is more inclined for use by the upper class of Chinese society. The reasoning behind such a statement is due to the relatively large size of the object (roughly the same proportions as a man’s chest) and that it was made of solid bronze.

Considering that the working class of Chinese society focused more on practicality and functionality rather than ostentatious displays of wealth for mere decoration, it is more than likely that the Yayi jia belonged to a rich household¹. For example, in the painting “Life along the River” by Zhang Zeduan and the animated version created for the 2010 Shanghai Expo in China, the lives of everyday people in Chinese society can be seen with various depictions of people drinking and enjoying themselves².

In no instance throughout the entire painting, which is one of the most acclaimed vessels of Chinese artwork in the world, is the Yayi jia ritual wine vessel seen. When people were depicted as eating and drinking, their jar of choice seemed to closer to that of the amphorae of ancient Greece rather than the large and hugely elaborate Yayi jia.

This is further proof that the item was most likely used as a means of depicting wealth and was utilized primarily as a household decoration or during funerals since its size makes it impractical as a method of actually serving everyday liquids that people would drink. The association of luxury goods with wealth and prestige is actually nothing new and is seen throughout many examples within past and present day Chinese society³.

Utilizing impractical objects as a method of showing off wealth and prestige is seen in many cultures and, as such, it is not surprising to see such an example exemplified in historic Chinese society. It is based on this example that I have come to the conclusion that historical Chinese society is dominated by the influence of popular culture (in this case showing wealth and prestige) with many believing that in order to fit in or be popular there is a distinct need to look the part.

This particular assumption is exemplified by the Yayi jia ritual wine vessel since it is an impractical method of serving drinks. The trend in purchasing luxury goods to look the part is a practice that is unlikely to be going away anytime soon. Up till today, such a practice continues to be prevalent within China.

After doing a brief skim through various articles on Chinese history and culture, I have come to the conclusion that one of the belief systems within China during the time of the Shang dynasty when the Yayi jia was created was that people who look the part and act the part were more likely to be given more opportunities than a person who chooses to base their look on what they perceive as an adequate dress code for their social and financial class⁴.

The ostentatious nature of the Yayi jia is meant as a method of showing that a family is wealthy enough that they can afford to waste money on useless depictions of wealth. This creates an impression on visitors which results in greater levels of prestige which, more likely than not, would create more opportunities for them in the future.

It is due to reasons such as this that luxury brands and external trappings of wealth within various cultures around the world from thousands of years in the past till the present have continued to thrive the way they do. They represent an aspect of society that people want to attain in order to show success and be judged as being successful.

While this may indicate that human society itself has a streak of vanity, this is not far from the truth when taking into account the fact that throughout history, the classes of society have been distinguished not by accomplishments but rather by their appearance wherein the peasantry, the middle class and the upper class itself have been distinguished by the manner in which they dressed or what sort of possessions they had within their home.

Fully Identify the Object

The Yayi jia is a ritual wine vessel that was made sometime during the Shang dynasty in China (roughly during 1600 – 1050 BCE). Its overall size is roughly the same as that of a man’s chest and its original purpose was as a type wine vessel that was used during ritual ceremonies at the time. This can be related to funeral practices, celebrations and other such events that include the consumption of alcohol.

The surface of the vessel is covered in motifs that have been etched into the oxidized metallic surface and have long since faded away. Overall, the artefact itself is quite interesting and says a lot about the practices and rituals that took place within China during this particular period of time.

What is impressive about this wine vessel is that despite the base which seems out of balance and fragile, the entire artefact actually stays steady. On the other hand, it cannot be stated that there is balance in the creation of the work since the shapes on the surface seem to be haphazardly added here and there along with hard geometric lines. Such a distinction though may just be due to time removing the original details of the vessel itself.

Visual Examination

When first examining art, one must take into account each art’s inherent theme and message in order to understand the stylistic justifications that went into the usage of colour, shapes, contours and lines in the art itself.

While the metal work itself is far from the quality of the old masters of Ming dynasty art work, it does bring out a certain emotional response as the dragon head motif on the handle is probably meant to connote some sort of awe since dragon symbols were permitted by use on personal belongings only by important members of Chinese society at the time.

The vessel itself was most likely painted or emphasized in some way as it can be seen through the use of relatively thin lines, its slightly open composition in terms of the scarcity within the work and its emphasis on the accurate usage of lighting in the vessel itself. This means that it was either minimalist in design or had some form of outer decoration that wore away over time.

The entire bronze sculpture seems to exude a feeling of artifice wherein through its use of curving straight lines any form of actual emotional connection established with viewers is lost. The art work feels too “modern” (i.e. it lacks any of the beauty seen in Ming dynasty vases) and too “artificial” in the sense that it has lost its artistry by trying to appeal to too many audiences (the overall appearance does not seem all that unique).

While there are various colours utilized in the work (though this could just be the result of age affecting the vessel over time resulting in a distortion of its overall appearance), they feel flat, dead and lack any form of actual liveliness. While it may be true that the work itself may have been created through some use of bronze working, this just further emphasizes its divergence from other types of Chinese art that I am used to that usually portray a sense of delicateness to the vessel.

In fact, in terms of the overall balance and texture of the vessel it just seems too “clean” in the sense that it feels far too planned out, that the realism that can be captured in the moment is not there at all.

While it may be true that its utilization of space and contours is efficient, therein lies the problem wherein the wine vessel seems too “perfect” in the sense that it lacks any divergent emotion from the artist and merely looks like a vessel that can be created within a few hours by a bronze worker.

While there are many interpretations of what can be called “art”, the fact remains that I know what I like and this bronze work diverges from everything that I would actually call “likable” art. On the other hand, from a more positive perspective the use of light and shadows lends the bronze work a surreal realistic quality wherein the dragon head handle seems almost lifelike.

This is surprising when taking into consideration the rather minimalist perspective the bronze worker utilizes wherein the surface of the wine vessel is nothing more than a series of striated and curved lines that have faded over time.

The most striking and realistic feature is the face of the dragon on the handle where the use of lines, slightly raised ears and the use of a distinct curve to emphasize a mouth on the left most portion of the handle while emphasizing the ears on the top side creates an almost lifelike like realistic effect where the subject within seems to have been paused momentarily in a stitch in time.

In fact, when examining the rest of the wine vessel it can be see that the most painstaking detail applied to it was concentrated on the surface with the rest of the subject’s body being akin to a sparse outline.

This particular facet of the work itself could be considered purposeful on the part of the artist as he attempts to concentrate the perception of the viewer directly on the face of wine vessel and bring about the fanciful introspection of wondering what the various symbols on the jar mean and, as a result, causes the viewer to come closer to the object for a better look.

Overall, the use of lines in this particular vessel is dominated by either thin line outlines as seen in a majority of the work or faded curled lines utilized to create some effect that has long since faded. The one dominating colour in this artwork is the colour green as seen directly in the middle of the work which is evidence of considerable levels of oxidation which lends credence to the authenticity of the vessel.

Aspects of Civilization and Cultural Development

Just by viewing the Yayi jia itself, it becomes obvious that it represents not only the advanced nature of the field of bronze metalwork during this particular time period within ancient Chinese civilization but it also represents how important iconography was to the ancient Chinese people since the vessel itself is rife with various faded icons that used to cover its surface.

Influence of Previous Civilizations

It must be noted that the Yayi jia is not unique in the sense that it is the only example of its kind, such an assumption is fallacious since that the iconography of the Yayi jia (i.e. the dragon head motif) was featured prominently in various other artwork from ancient China hundreds of years before its creation.

Rather, a far more accurate statement would be that the Yayi jia from the Shang dynasty is merely one of the largest and most well known example of its kind (i.e. a ritual wine vessel) and is a representation of hundreds of years of ancient Chinese tradition in which the dragon was known as a guardian of tombs, temples and a representation of an aspect of their society.

Related to Artwork within the Same Civilization

It is quite interesting to note that the Yayi jia has several stylistic elements which were quite prominent within this particular period of ancient Chinese civilization. For instance, the same dragon theme often was utilized on a variety of dragon statues on temples.

In the case of the Yayi jia, it can be stated that the overall shape of the body is somewhat dragon like in nature with the tripod like formation at the bottom looking almost like legs. In fact, it can even be said that the Yayi jia is nothing more than an older and smaller version of its counterparts seen in a variety of ancient Chinese tombs and temples.

My Thoughts on the Work

Art is completely subject to interpretation however in this particular case I would have to say that in my opinion, while the bronze sculpture does look overly intricate, it lacks a sufficient “pull” so to speak in that it does not capture the attention as much as other vessels within the area.

While it is interesting to look at, the use of rusted colours of the sculpture actually makes it rather forgettable since it makes itself seem rather subdued and not eye-catching or memorable. Further examination of the vessel reveals that the sterile green colour of the sculpture and the use of geometric shapes with a hardness and sharpness not found in nature is in fact intentional which gives it a nice contrast to the overly natural shapes in the background.

Overall Impact

In terms of its impact on me, I would have to say that I was not significantly affected in the least due to the fact that the sculpture seems overly subdued when it could have had a greater impact if the colour was different instead of the rust colour it had.

As such, while the work is being featured by a museum, I would still say that it lacks the necessary impact necessary to continue to attract visitors, however, art is completely subject to interpretation with others having a different interpretation of the sculpture itself. I do have to admit though that its vivid nature and the way it stood in stark contrast to its surrounding environment makes one think of the nature of man and how he stands in contrast to nature.

While I do not disparage the work of the artist, it definitely seems subdued and less eye-catching as compared to the various examples of Ming Dynasty art that I have seen. It is based on my impression of the vessel that I definitely agree that it belongs in a museum and that its worth as a vessel of art is in its ability to create a deep contrast between the artificial nature of humanity and the shapes of the natural world.

How does your object fit into a broad historical context?

An examination of the work of various Chinese sculptures during the Shang dynasty reveals a continuing theme in most of the metal work which often incorporates unique animal forms. These forms are usually skeletal in appearance yet when hit with the light at a certain angle they show a unique representation of an animal from China’s natural environment or mythologies.

From a broad historical context, the vessel actually represents the excesses of the Chinese upper class at the time since the ostentatious nature of the wine vessel far outpaces its overall level of practicality since it is far too big and heavy to act as a conventional drinking receptacle.

Illustration of Object

Example of Yayi jia ritual wine vessel as seen in Mysteries of Ancient China⁵

Bibliography

Childs-Johnson, Elizabeth. The Meaning of the Graph YI and its Implications for Shang Belief and Art. London: Saffron Books, 2008.

Ebrey, Patricia. Chinese Civilization: A Sourcebook. New York: Free Press, 1993.

Ledderose, Lothar. Ten Thousand Things: Module and Mass Production in Chinese Art. New Jersey: Princeton University Press, 2000.

Rawson, Jessica. Mysteries of Ancient China: New Discoveries from the Early Dynasties. New York: Braziller, 1996.

Footnotes

¹ Elizabeth Childs-Johnson, The Meaning of the Graph Yi and its Implications for Shang Belief and Art (London: Saffron Books, 2008), 33

2 Patricia Ebrey, Chinese Civilization: A Sourcebook (New York: Free Press, 1993), 11

³ Jessica Rawson, Mysteries of Ancient China: New Discoveries from the Early Dynasties (New York: Braziller, 1996), 5-6

⁴ Lothar Ledderose, Ten Thousand Things: Module and Mass Production in Chinese Art (New Jersey: Princeton University Press, 2000), 1-4

⁵ Jessica Rawson, Mysteries of Ancient China: New Discoveries from the Early Dynasties (New York: Braziller, 1996), 5-6