Global and International Business Contexts – Sm0269 Essay

The winery industry can be categorized into red and white wine segments. The red wine segment, measured by tonnage of varietals crushed, has grown at a compounded annual rate of 4.7% for 10 years from 1989 to 1998, and a year over year growth rate of 8.2% from 1998 to 1999. Judging by the strong growth rate experienced in the red wine segment, it is reasonable to conclude that the red wine segment is in the growth phase of the life cycle model. In addition, production of red wine varietals which are relatively unknown such as syrah and sangiovese nearly doubled in a year from 1998 to 1999. The white wine segment, however, is at the mature phase of its life cycle as the segment shrunk slightly by 0.42% from 1998 to 1999. Overall, the industry is still at the growth stage lead by growth in the red wine segment.

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.

Smaller firms such as the family run operations in Europe may not be able to realize these same cost efficiencies. Furthermore, grapes represent 50 to 70% of a winemakers COGS, thus the competition for sourcing high quality grape growers is quite high. Just as Mondavi does for 75% of its purchases, most premium wine makers enter into long-term contracts with growers to not only ensure that their demand is met but also to make sure that they receive grapes that are consistent in quality.

The dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.

How effectively do Canadian businesses and government engage together to promote a shared vision and agenda in the global business environment? Do Canadians strike an effective balance between private sector pursuit of global business and public sector support and enablement?

Wine production involves two parts of economic activity – viticulture and wine making in the winery. In the global context, wine production is dynamic due to the influence of globalization, technological advancements and extensive research. These have essentially influenced the nature, spatial patterns and the ecological dimensions of the wine industry.

The most important necessary inputs for the production of wine are grapes, bottles and labor. Concerning the grapes, there is an outstanding difference between the traditional wine producing countries for example in Europe (the south of France, Spain, Italy and Southeastern Europe) and big wine factories that operate as oligopolies like in the US and Australia. Due to the bond to traditions and the higher demand for quality in Europe most of the wineries here still stick to the original way of producing wine, including the growth of the grapes on the land around the winery, a so called vertical integration (which is often considered by producers where the supplier's price is too high or the offer is insufficient, in our case this trend results rather in traditional and cultural values than in financial ones). This eliminates the percentage of dependence on agricultural suppliers significantly, whereas concerning a big wine company the negotiation power of the supplier is quite high. These wine companies tend to have a low sensitivity towards the price they are charged, as grapes are a crucial component of wine production. However, in both cases the price of the grapes is always

Starting your own wine business is not the everyday business opportunity that everyone can simply jump into, because there are many aspects to consider in starting a winery. Conceivably the most fundamental problem an entrepreneur will face after expressing an interest in starting a new business or taking advantage of visible opportunity in an existing business or entirely new venture will be to conclude the feasibility study of the proposed venture and that study is simply the evaluation of a plan intended to determine the complexity in

Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.

How effectively do Canadian businesses and government engage together to promote a shared vision and agenda in the global business environment?

The United States wine industry is a 12 billion dollar industry and is composed of 7,000 wineries and around 1,800 different companies. The three major companies within the industry are Constellation brands, E&J Gallo, and The Wine Group Inc. The industry has made its way through the economic crisis at a better rate than some of the other U.S industries however in order for them to continue to see any type of growth it is important that they acknowledge their issues and find ways in which they can rectify them. The majority of the issues among the industry are problems that cannot be directly controlled by individual wine companies. Therefore it is imperative that wineries find away to use these issues to their

This industry has seen very limited growth since 1986. Based on Exhibit 4 (C-271, the total wine consumption in the US) and Exhibit 5 (C-271, per capita wine consumption in the US) the wine industry is in the maturity stage. It could

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national

Porter’s Diamond emerged as a model to explain why a nation can successfully achieve international success in a particular industry. In short, diamond model is a micro-analysis tool to identify core competitiveness of a nation and region. According to Porter in his book “The Competitive Advantage of Nations”, the theory begins from individual industries and competitors and builds up to the economy as a whole, where the outcome of struggles in individual industries will determined economy of the nation’s state and the way it progressed.

These factors can be set into five categories: Physical, HR, Knowledge, Infrastructure and Capital Resources (Karkkainen V., 2008). There are two types of factors consist of: basic factors and advanced factors. Basic factors contain labour, basic educational system, raw material and national resources. Advanced factors contain skilled labour, modern infrastructure and highly education. Example about how factor condition influences the global competitiveness of a country; Egypt government develop infrastructure in the last three years such as transport systems, communication, payment system, post and system used to transfer money. Egyptian telecom companies illustrate the diamond. It has a relatively high number of communication engineers per