Global Wine Wars - Assignment

Running Head: Global Wine Wars 1
Global Wine Wars-New World Challenges Old
Name
Institution

Global Wine Wars 2
Global Wine Wars-New World Challenges Old
Introduction
In the early 1990s, the global wine market experienced significant changes with the entry
of New World wine producing countries. The new industry players include countries such as
Australia, the United States, South Africa and Chile. On the other hand, the old wine countries
are France, Germany, Italy, and Spain among others. It worth pointing out that the New World
Companies took advantage of the existing institutional constraints, embedded traditions,
restrictive industry regulations and complex European Community legislations that faced their
Old Wine competitors to gain an upper hand in the production of wine. Consequently, over the
years through the use of resource-based as well as institution-based strategies, the New Wine
countries have gained international respect and a global market share in the wine industry.
Resource-based view of strategy
The resource based view strategy is a concept that suggests that the possession of
strategic resources by a n organization provides it with an opportunity to develop a competitive
advantage over its rivals (Jurevicious, 2013). To a large extent, New World producers possessed
capabilities and resources that permitted them to benefit from the changes in the global wine
market (Brown, 2007). Consequently, this proved disadvantageous to the Old World producers.
Opening of New Markets
Although the consumption of wine in the New World countries was very low at the
beginning, changing consumption patterns opened up new markets over time. For instance,
Australia had a predominant preference to beer due to its dominant British heritage and the hot
climate. Thus, wine was mostly consumed by immigrants from Old World countries. However,
with time, consumer preferences began to change, and people began to consume more wine
(“Global Wine Wars,” 2015). Likewise, in the USA pre-World War II era, wine was only sold in
to European immigrants. However, after the war, demand for wine started to rise dramatically in
the USA and Australia. In turn, this opened up new markets, allowing them to expand their
production. Although the Old World nations already had a demand for their wine, the growth in
total consumption in the world led to a growth in the demand for higher-quality wines (Saylor,

Global Wine Wars 3
n.d.). It is this boom in the quality and quantity of wine that posed a challenge to traditional wine
producing nations while offering a great opportunity to the New World countries.
Availability of land
New World countries had a wide access to readily available, suitable and fertile land to
grow their vineyards. In turn, this allowed them to grow significantly extensive vineyards
compared to their Old World Counterparts. Outstandingly, the average holding for vineyards in
the New World countries was approximately 158 hectares (“Global Wine Wars,” 2015). On the
other hand, the Old Wine vineyards were less than a hectare. As a result, the traditional wine
producers were constrained by their small sizes, something that significantly affected their
production capacity (Wernerfelt, 1984). On the other hand, the availability of arable land to
cultivate provided more opportunities for the New World producers to thrive.
Experimenting on New Technologies
The New World producers were also not shy on experimenting with new technologies in
both wine making and grape growing. For instance, Australia utilized drip irrigation, a technique
that reduced vintage variability and encouraged expansion into new growing territories (“Global
Wine Wars”, 2015). Furthermore, the new producers used specialized equipment in their
production. Specifically, they used mechanical pruners and harvesters. In addition, they adopted
the night harvesting technique to ensure the retention of grape sugars and flavor. Australia also
started experimenting with fertilizers and pruning methods to boost their yields. All these
improvements helped the new wine nations to improve their crop yield as well as the flavor. On
the other hand, Old World producers faced strict regulations that forbade the use of technology in
wine production. As a result, they could not adopt the new techniques to improve their grape
yield and flavor. In this regard, while the new technology provided an opportunity for the new
world, It created a significant threat to Old World wine producers such as France and Italy.
Favorable Climatic Conditions
The new world countries enjoyed sunny climates that allowed them to produce consistent
yields from one season to another. As such, their climate and soil allowed vineyards to flourish
(“Global Wine Wars”, 2015). In contrast, Old World countries experienced rainy maritime