Wine War Essay
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1. How did the French become the dominant competitors in the increasingly global wine industry for centuries? What sources of competitive advantage were they able to develop to support their exports? Where were they vulnerable? The French were the dominant competitors in an increasing global market because they stuck to their guns per say. They believed in an old fashioned wine that was make like many of their ancestors had made years prior. Many consumers preferred the taste and elegance of a bottle of pure wine from a mother country.
To support their exports the French stuck by their plan of maintaining an old fashioned brand that was simplistic but full of quality. People who drank aged wine that came from France felt as if they were above normal society, in a class above the commoner. The report that French red wines helped with heart disease definitely did not hurt either. Where the French were vulnerable came in their marketing ability or lack thereof.
The French did not have the marketing skills or the ability to collect consumer knowledge like the rest of the competition; this is where their old ways got them in trouble.
The largest wine retailer TESCO wanted to work with more creative suppliers who could connect with the people. 2. How might the shift in currency exchange – in particular the high value of the Euro – in “Old World” mature markets impact the effect of selling into the US marketplace? What advice would you offer today to the French Minister of Agriculture in the face of this currency position and impact of “Old World” sources – such as Spain and Italy – who were selling at greatly reduced price points? The higher value of the Euro could definitely cause for the exported wine to have a higher price in the United States.
The “Old World” would face less profit if they were to adjust their price to the other markets or they would also face less profit if they did not adjust their costs because many people would be less inclined to purchase wine that was too expensive. Many people including myself do not mind spending a little money for a decent bottle of wine, but most of them already taste the same. I would explain to the minister that the same has to be done here in France, we need to produce the same quality but drop the price in order to compete in other markets, you do not have to be the cheapest but we need to be comparable with other competitors.
The style and presence alone of a bottle from the mother country will be purchased once or twice by an average consumer, but if it were too expensive there would be an alternative selection after that. 3. What changes in the global industry structure and competitive dynamics led France and other traditional producers (such as Spain) to lose market share to challengers from Australia, the US, and other “New World” countries in the late twentieth century?
The main advantage that many if not all “New World” countries had over the traditional powers was their innovation and willingness to get away from tradition. The “New World” producers took advantage of marketing and made sure they appealed to all classes in society. Wine retailers were infatuated with the idea of breaking away from the old ways and mass producing like they were in the “New World”. They really liked the idea of changing the bottle types to get away from the traditional cork bottles as well.