Wine War 2009

Bonny Doon Vineyards, a successful winery business based in Santa Cruz, California, has grown from selling 5,000 cases of wine a year in 1981 to 200,000 cases a year in 1999. To keep growing and be more profitable, the business must choose amongst three possible strategic directions. The first strategy is to start importing wines from Europe into the United States. The second alternative is branching into a retail outlet for unusual wines of great value, accompanied by a high level of service. Lastly, the business’ D.E.W.N could be expanded to include wines not made by the company itself but by other wineries that follow the same values and philosophy.

The assignment for this week was to write a paper based on the case Global Wine War 2009: New World versus Old. We experienced that it was an interesting case considering both Porter’s five forces model and Resource-Based theory, because they give two different perspectives of competitive advantage: Outside in and Inside out. Besides that we could have a closer look at innovations and what they mean for the competitiveness in the world wine market. In this paper we make an effort in explaining what the main aspects

The Old Market consumers are more sophisticated and price sensitive than those in the New World. The main sales channels

The premium wine segment is quite concentrated with high barriers to entry making mergers and acquisitions a strong and prevalent growth strategy. With industry analysts forecasting the demand for premium wine to grow at 8% to 10% per year, many former non-rivals are now becoming a threat. Jug wine producers are entering the premium market and beer and spirit producers

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.

These are the ‘new world’ producers which are generally located in the Southern Hemisphere. Australia, Argentina, South Africa and the US have growing wine industries and are taking a large percentage of the global market share from old producing nations.

The buyer’s power within the wine industry varies between different places in the world. There are for example strategic differences between Europe and the “New World”. The “New World” includes countries like the US, Australia, Chile and South Africa. In Europe there is a big competition

Retailers. The current trend, further than the wine market, is clearly the concentration of the “off-premises” retailers. The well known Wal-Mart and others became very large retailers, concentrating as well high bargaining leverage. For example, Costco is currently the largest wine retailer in the U.S.

a.Around 870 BCE, a grand party was thrown to display the wealth of a king, Ashurnasirpal, for a new capital in Nimrud in the Mesopotamia region. During this time, the king showed off exactly just how rich the new empire was by making available 10,000 jars of beer, and 10,000 skins of wine, and at that time wine was 10 times as expensive as beer. Not only was skins imported, but some were made from his own vines, thus starting the craze of wine in that area.

These countries never were taught how to develop industry on their own. Although industrialized countries left behind the railroads, ports, and infrastructure they built during the time period of New Imperialism, they took the most valuable and practically irrecoverable resources. They also began monopolies over these countries because they cut off the ability of these poor countries to buy products from other industrialized countries. Consequently, Europeans also impaired themselves as self-sufficiency declined. For example, Germany “saw the cost of her food imports multiply roughly four times in this period,” even though the prices did not rise greatly overall.

The relatively small lot size which divides the old world into many distinct regions is a crippling handicap. If the smaller wine lots were able to coalesce into cooperatives, they would be able to market more efficiently due to increased resources. Also, despite the originality of the Old World wines, perhaps a break with traditional methods could increase the marketability with the fresh generation Y market.

Through heavily exporting to U.K and U.S, MontGras segmented and exposed to some of the top wine consumers in the world

For the New World, there is no heavy history and heritage; there are less experience bondage and concepts constraints. The legal philosophy restrictions are almost non-existent. Therefore, in the new world wine development, people are more creative and accept the spirit of the new things. Mechanical picking machines, peeling machines, thermostatic stainless steel fermentation

table wine grew 22 percent, while over the same period inroads made by wine imports

The report first delivers a background of market attractiveness and uncontrollable macro-economic factors relevant to market entry such as the political and economic climate, socio-cultural, legal, environmental and technological factors that may effect and influence the international marketing practices of the organisation in entering the Chinese Wine Market.