Only the strong can survive and develop, which is one common law in every aspect of the world. In the wine industry, “new world” challenges the “old world” and gradually takes the better position in the competitive market. This paper recognizes the reasons as advantaged internal resources and institution factors of the “new world” wine producers. For giving specific analysis, resources-based view of strategy and institutions-based view of strategy would be first stated and then combing them together with the wine case.
As a result, case approach and qualitative analysis would be two main reasoning methods of this paper. With these two main methods, the real situation would be disclosed how the “New World” gets the opportunities to change the industry and threat to the “Old World” in the wine industry.
2.0 Resources-based view of strategy
2.1 Theory of the resources-based view of strategy
The research about resources-based view of strategy can be traced back to the middle of 20th century, while the first one called it as resources-based view is Birger Wernerfelt, who wrote an article with the headline—A Resource-Based View of the Firm in 1984.
Since then, as one part of the strategic management, resource-based view of strategy came into this world and got so many studies from different aspects.
In fact, one company is composed of different types of resources, such as the unique company culture and human resource, the famous brand and the fixed assets, the cash flow and other kinds of capitals. Just the combination of these different resources makes the company get the special profitability, so what is resource? According to Daft’s description, companies’ resources include all assets, capabilities, organizational processes, company attributes, company’s business information and all the other things that is owned and controlled by the company (Daft, 1983).
Different from Daft, Amit and Schoemake believes resources and capabilities are different; resources can be traded and non-specific, while capabilities are the special and specific things of the company, it supports company’s development through utilizing the resource of the company, production process and management process are all the specific capabilities of the company (Amit and Schoemake, 1993).
No matter for which definition about the resource, in the resources-based view of strategy, the resource or the resource and capabilities are the basis of company’s competitive advantage. Only with the valuable, sustained and non-mobile resources, company can develop and grow sustained in a long time.
2.2 Comparing the resources-based view of strategy in the new world and old world of the wine industry
In the wine industry, there are two types of resources those must be considered for company getting the competitive advantage in the market: tangible and intangible, tangible resources includes grapes—the raw material of making the wine; the attracting and special packing—the last step to show the wine out in the market and also one important promotional method; while intangible resources include the wine-brewing technology—the key factor of producing the first level wine; brand—the image of the product in the market. This paper chooses the grapes and brand as two cases to state the resource advantage situations of “New World” comparing with the “Old World” of the wine industry.
First it is about the grapes’ comparing between “Old World” and “New World” wine producers. Grape is the raw material to produce the wine. Grape’s wine determines the wine’s quality, which finally determines the market’s direction. In the “Old World”, for a long time, vineyards of planting grapes became smaller and smaller since the war, inheritance or trading. With limited land, small grape farmers have no choice besides selling grapes to local wine makers or vintner. This means wine producers and grape farmers usually are not the same people or organization, which produces the supervising blank area about the grape’s quality. What is more, in the “Old World”, grapes are always priced on weight, which directly produced the farmers give no concern about the grapes’ flavor—one key factor of the wine’s quality. But in the “New World” of the wine industry, the grapes over there have three aspects of advantage. Climate and soil are the natural advantage; for example the average holding for a vineyard among “New World” wine producers in the early 1990s was 158 hectares; what is more, the sunny climates and high temperature variety between day and night makes the grapes’ more flavor. Planting technology is another advantage of the “New World” wine producers in the raw materials’ getting. Controlled drip irrigation has been widely spread in Australia, which not only can reduce the vintage variability, but also can allow grape being expanded into new growing regions, while this technology is strictly forbidden in France under AOC regulations.
Then it is about the brand. With long time persisting in the quality and service supplying, great contributing, brand can have its own effect and image in the market (Jeroen, et al, 2010). This is the same in the wine industry. From the time aspect to read the “New World” and “Old World” wine producers, it might be recognized as the “Old World” would take advantage since its long history in this industry; while the situation is not so optimistic for them, since the extreme fragmentation situation of the “Old World” wine producers makes them have not the volume to persist and exploit one branding strategy. But the “New World” wine producers paid more attention on this area. It can be said that it is also the “New World” wine producers who made branding come to be one routine part of the wine industry. For example, Penfords, one Australian wine maker, built a hierarchy of brands in a short time.
With the above two paragraphs’ analysis, it can be found that both in tangible and intangible resource aspect, “New World” wine producers stay before the “Old World” wine producers. As the internal and key competitive factors, “Old World” wine producers fails.