2.

What changes in the global industry structure and competitive dynamics led France and other traditional producers to lose market share to challengers from Australia, US, and other New World countries in the late 20th century? Opening New Market New World wine companies are introducing innovations at every stage of the value chain. They have the people, expertise, technology and commitment to gain global preeminence. It has the competitive advantage to anticipate the market, influence consumer demand and build on our strategy of sustainable growth. New markets opened in the 18th century. Climate and soil allowed grape growing to flourish in the New World, together with this change is the increase in per capita annual consumption of wine in the New world countries. In the postwar era, demand for wine increased rapidly in the United States, Australia, and other New World producers. Challenging Production Norms Besides, the production norms are also change which favors the New World countries. On the back of the postwar economic boom, New World wine producers developed in an industry environment different from their European counterparts. First, suitable land was widely available and less expensive, allowing the growth of much more extensive vineyards. And unconstrained by tradition, New World producers also began to experiment with grape growing and winemaking technology. In Australia, controlled drip irrigation allowed expansion into marginal land and reduced vintage variability while irrigation was strictly forbidden in France under AOC regulations. The larger vineyards also allowed the use of specialized equipment such as mechanical harvesters and mechanical pruners which greatly reduced labor costs. Innovation also extended into viniculture where New World producers pursued techniques such as night harvesting to maximize grape sugars. Other experiments with fertilizers and pruning methods increased field and improved grape flavor. New World wine companies also broke many wine making traditions. Large estates usually had on-site labs to provide analysis helpful in making growing and harvest

decisions. In the 1990s, some experimented with a reverse osmosis technology to concentrate the juice, ensuring a deeper colored, richer tasting wine. The above and other innovations brought considerable economic impact to increase the competitiveness of the New World wine producers by cutting cost in a large extent. Reinventing the Marketing Model Beyond their experiments in growing and winemaking, New World producers also innovated in packaging and market. While the European targeted the huge basic wine market by selling the popular liter bottle of vin de table, the Australians developed the innovative wine-in-a-box package. Employing a collapsible plastic bad in a compact cardboard box with a dispensing spigot, it saves not only shipping costs but also storage costs. From their earliest experiences in the marketplace, New World producers learned the value of differentiating their products and making them more appealing to palates unaccustomed to wine. The other major change driven by New World companies occurred in distribution. Historically, fragmented producers and tight government regulations had created a long, multilevel value chain, with service in many of the links lacking either the scale or the expertise to operate efficiently. In contrast, the large New World wine companies typically controlled the full value chain, extracting margins at every level and retaining bargaining power with increasingly concentrated retailer. Also, this facilitates better quality control. The judgment of Paris Wine in the New World is of high quality, competitive, if not better than wine by the traditional producers. Wine in California won in blind tasting competition two times against wine in French. This proved the quality of New Worlds wine and increased its awareness in a large extent.