Global Wine Wars

1857 Words Nov 4th, 2012 8 Pages
Historically, the French had been the dominant competitor in the global wine industry due to the low effect of the five forces of competition. The main barriers to entry that kept the threat of competitors low for the French were incumbency advantages, unequal access to distribution channels and restrictive government policies. This first barrier, incumbency advantages, can be explained by the domestic French Wine Industry in the late 18th to mid 19th century that was already supporting 1.5 million families for both the growing of grapes and other wine-related businesses. France already had a domestic market for the growth and cultivation of vineyards that was able to provide French producers with a steady supply of agricultural inputs. …show more content…
Old World producers were land locked in terms of growth. The majority of the land that was suitable to support grape growing was already cultivated. The division of land that began during the Napoleonic era created a high level of fragmentation in the market. Along with the tight government regulations, this caused a long, multilevel value chain which limited the speed to market and efficiency of the marketplace. Additionally, the French industry put a significant emphasis on the quality of the growing conditions or terroir. Since these conditions were outside the control of the wine producers, it was difficult to ensure the soil was healthy and prolific.
The fragmented nature of the industry also prevented consumers from making informed purchasing decisions. Consumers lacked the knowledge and industry expertise to make informed decisions when purchasing wine. With the development of the French wine classification systems, consumers were able to begin differentiating between wine producers were using as a marketing tool. This tool also became a significant vulnerability of the Industry. Although the classification system became a marketing tool, it was also a source of restriction for the wine makers. It limited the types of grapes they could use as well as growing and production procedures which would make it hard to react to consumer

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