Global Wine Wars Case Study: Resource and Institution Analysis

This case study delves into the Global Wine Wars, analyzing the shift in the wine industry from traditional, regulated Old World producers to the innovative, market-oriented New World producers. It examines how countries like Australia leveraged technological advancements, favorable climates, and flexible regulations to gain a competitive edge over established players such as France and Italy. The analysis focuses on resource-based and institution-based views, highlighting the importance of innovation, distribution, and control over the value chain. The study contrasts the Old World's adherence to tradition and regulatory constraints with the New World's adaptability and market-driven approach, ultimately illustrating how newcomers can reshape industry dynamics and challenge incumbents. The case study provides insights into the strategic resources, capabilities, and institutional factors that contribute to success in the global wine market, emphasizing the importance of adapting to changing market demands and embracing technological advancements.

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Global Wine Wars
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Introduction:
The welcoming of the increasing policies, regulations and classifications within the wine
industry was done with the view of differentiating a particular product from the competitors.
However, it did not turn out to be favorable for traditional wine producers because within
decades of the introduction of the policies, the new regions, hereafter being called as the New
World started to produce wine with the use of new technological innovations (Anderson &
Nelgen, 2011). . Since the wine production of the new countries were not constrained by any
regulations, the wine produced in there became very popular Global demands of wine and its
consumption shifted from countries like Italy or France to Argentina, Australia or Chile.
This sudden shift not only generated huge loss to the old countries, but also took away
the old heritage. The new comers with the use of technology and new methods of industry
handling dominated the wine market, resulting in a Global Wine war.
The following paper will analyze the resource based and the industrial based view of the
new countries in order to gain an insight of how they have been able to capture their market with
their resources.
Resource Based View:
It is, however, a clear fact that the new countries primarily took advantage of the
regulatory constraint, the traditional view of industry and the embedded tradition of the old wine
countries in gaining an upper hand in the competition of producing and marketing wine. The
resource based view strategy can be defined as the observation and analyzing of the possession
of the strategic resources by an organization that will help the organization to develop the
competitive advantages against the rivals in the industry. The new world started to possess more

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beneficial organizational resources that eventually helped them in being the dominant factor in
the competition.
The resource based analysis of the major new worlds in the wine markets can be done in order
to understand their advanatages:
1. Australia:
The heart of Australian organizations are innovation. The most valuable and rare factor of
the resources are that they are innovative and thus have been able to separate themselves
against the traditional world. Australia for the first time made the use of Drip irrigation
which made the large vineyards to have more advantages in watering. They also
innovated the use of screw caps instead of Cork screws (Anderson & Aryal, 2015). The
tangible resources for their wine Industry, the human resource are however, a bit costly.
However, the intangible resource which is the large vineyards are present in plenty in the
area. Australia has also a strong and valuable distribution system that accounts for the
growth of the wine industry. They encouraged to a large extent the growing of the
industry in the growing territories. Australia also started the use of purging method and
the innovations in the fertilizers to ensure that the grapes and the sugar retain their flavor.
The VRIO analysis of the resources of Australia thus can be:
Valuable- the innovations that they use and the vineyards that they posses are valuable
and costly since those are some of the indigenous technological innovations of the
country. These technologies have helped the wine industry to flourish. The labor cost is
however high which may not be valuable to the industry since any country can train their
labors and utilize them at a lower cost.

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Rare- the technical innovations of the country are rare since the country specifically put
stress on innovation than any other country. The usage of mechanical pruning method
was rare in the wine market.
Imitable- it is hard to imitate the methods of the Australian wine industries since it is
costly and highly technological in nature.
Organization- the organizational building is strong and equipped with valuable resources.
2. United states:
The rising demand of wine in the United States accounts for the growth of the industry.
Moreover, the resources that they have in their possession was also an important factor
for the dominance. The large vineyards present in the country offers a great intangible
resource for the organizations. Innovation is also a core competencies in South America.
The existing domestic market potential of the country is very strong compared to the
other countries. The climate also adds up to the favorable condition for the market. The
export strategy of the country’s wine industry is leveraged with the technical
advancements. The efficient labor and the rich raw materials have made the South
American wines to be high in the value product and the high quality of the wine. The
country has a large open markets in the world that provides low barriers to entry for the
imported wines. Though the threat of competitors are high, the country maintains a good
technological advancement as well as a good supply chain system in order to curb down
the threat of competition. (Veseth, 2011)
What the Old Countries Lacked?
The old countries were reluctant in using the new technological advancements that took
the world into sway. The hostile climate of the old world prevented the companies to produce

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vintage wine. They also lacked in the technological know hows about creating a favorable
factory temperature where the wines could be made and preserved. The new wine countries did
not restricted the experimentations on techniques not only upon the farming, but also extended
those innovations in wine making as well (Anderson & Wittwer, 2015). The new products
became more enthusiastic and flavourful. This was of higher benefits than the oak barrens used
by the old world countries. The sticking back t their traditional mode of wine making not only
restricted these countries to have a far reaching and sustainable market, but they also lost in the
race of creating more tasty wines and wine production process. The huge restrictions that
prevented them in using technologies in farming affected the growth of their vineyards as well.
Institution Based Strategy:
The institution based view strategy is referred to the process of analyzing the “dynamic
interactions between the organizations and considers how strategic choices driven by the industry
choices and capabilities of the organizations as well as the formal or informal constraints affects
the competitiveness of a producer.” (Smart, 2019). The new world producers of the wine
industry was provided with a variety of the opportunities as well as some of the potential threats
to grow in their market. The contrast between the formal and the informal mode of environment
in the process of wine productions. While this produced a scope of opportunity for the new
countries it posed a threat to the old worlds. The traditional and formal industry environment
restricted the whole world in creating a dynamic and evolving industry that can remain relevant
in the face of changing market demand. One of the major hindrances for the old worlds were the
traditional distribution patter that restricted the open market. This did not allow the wines from
the old countries to have a mass recognition. The tight governmental policies and regulations
also posed treat in the importing and exporting of raw materials and the produced product. The

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fragmented producers created a long multi level value chain that made the whole process a
competitive one. It was different entities that performed the processing and growing of wines, the
making of wine, the distribution and marketing. As a result of this there was no unity and each
entity lacked an overall expertise and scale to function efficiently (Tang, Tchetchik & Cohen,
2015).. In comparison to that the new world countries had an upper hand because they have a
control over their value chains. The whole process was an integrated one which made them able
to extracts margins of profit at more or less every level, yet maintaining their bargaining power
(Anderson & Pinilla, 2018). . Since the handling of the total process was an integrated one, it
ensured the high quality of the final product. The handling of products by the intimidators in the
old world countries created a compromise of the quality of the end product. The technical
innovations and operations made by the new world producers gave them an added competitive
advantage over their old world counterparts who had restrictions on the institutional factors. The
wine testing competition held in 1976 prove those notions wrong that undermined innovative
approaches in improving the quality of wine. The new world shifted their focus to quality as
there was a rising demand of high quality wines. Moreover with the rising of the new trend of
having the choice between red wine and white wine the rankings of the chief global companies
underwent new changes as the new producers with their technological advancement was able to
thrive in the fluctuations.
Conclusion:
It is thus proved that any new comers in an industry can change the whole scenario by
taking the conditions in their favor if the resources are used wisely. With the changing demands
of the markets, it is also necessary for the industries to adopt the technical changes and the
innovations in order to make them relevant in the business.

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Reference List:
Anderson, K., & Aryal, N. R. (2015). Growth and cycles in Australia’s wine industry: A
statistical compendium, 1843 to 2013. University of Adelaide Press.
Anderson, K., & Nelgen, S. (2011). Global wine markets, 1961 to 2009: a statistical
compendium. University of Adelaide Press.
Anderson, K., & Pinilla, V. (Eds.). (2018). Wine's Evolving Globalization. Cambridge
University Press.
Anderson, K., & Wittwer, G. (2015). Asia's evolving role in global wine markets. China
Economic Review, 35, 1-14.
Smart, R. (2019). Climate Change: Misunderstanding carbon emissions in the wine industry... at
our peril... Australian and New Zealand Grapegrower and Winemaker, (664), 44.
Tang, V. C. M., Tchetchik, A., & Cohen, E. (2015). Perception of wine labels by Hong Kong
Chinese consumers. Wine Economics and Policy, 4(1), 12-21.
Veseth, M. (2011). Wine wars: The curse of the blue nun, the miracle of two buck chuck, and the
revenge of the terroirists. Rowman & Littlefield Publishers.
Bibliography:
Bartlett, C. A., Cornebise, J., & McLean, A. N. (2003). Global wine wars: New world challenges
Old (A). Harvard Business School Publishing.