International Strategy Issues - Essay Example

International Strategy (Name) (Course) (Institution) (Instructor’s name) (Date) Introduction The three paradigms bases for strategic management decision-making framework; industry-based views, resource based views and institution-based views are vital to success of the company (Grant, 2005). They enable organizations to monitor internal and external trends and thereby implementing effectual strategies that add to the organization’s competitive edge while satisfying the goals and the objectives of all stakeholders (Sanchez & Heene, 2004). This report will analyze ways in which newcomers can change the rules of the competitive engagement in wine industry and seeks to answer how and if industry’s incumbents can effectively respond. Effect of resource based views and institution based views on strategy on the new and old world of wine industry The resource-based view of strategy is, founded on perception of an organization as a compilation of capabilities and the critical responsibility leadership plays in aligning the external environment within which an organization functions with its internal capabilities. This view, highlight the fundamental role the internal resource plays in achieving the set goals and objectives (Peteraf, 1993). The stiff competition within the new and old of wine industry is evident on their ideologies where the former believes in total accountability and dedication to innovation, the latter, takes the production of wine making as an art (Bartlett, 2003). A leadership that is willing to take risks and thereby incorporate innovative ideas and technology to improve production and marketing but at the same time preserve the quality of wines produced can be, associated with the gradual but steady enhancement and profitability for Australian wine producers and other new comers in global markets (Quelch & Bartlett, 2006). On the other hand, deep-rooted institutions and production practices, limiting policies, guidelines within the wine industry and multifaceted legislation within the domestic and the European Community structures, and systems have limited the ‘old time’ producers. The new comers have continued to effectively, capitalize on succeeding where the old world producers had failed (Priem & Butler, 2001). This included accessibility to appropriate land resource thus boosting mass production of vines, which resulted in increased quality and quantity of wines to meet the increased consumer demand which had shot from 2 liter consumption in the 1960’s to more than 20liters in the early 1990’s, in for example Australia (Wittwer, et al., 2009). The new world producers embraced innovation and creativity (Grant, 2005). as illustrated by continued use of modern technologies and methods such as controlled drip irrigation, which minimized variability of vintage and enabled producers to grow in new vine growing areas. This was, coupled with use of specialized tools such as motorized harvesters, vine pruners among others. In addition, the new world wine producers embraced night harvesting, this was, meant to improve the grape sugars. This was detrimental for old wine producing states such as France where irrigation was unlawful (Bartlett, 2003). Australian wine producers created trellis systems that enabled vineyard cultivation double the accustomed density, research and development on agricultural inputs such as fertilizers and vineyard cultivation methods helped improve capacity of production and enhancing the grape flavor. This type of vineyard cultivation differed greatly with that practiced in old wine states, which depended on the inconsistent maritime climates (Peng, 2008). Old wine states were, bound by entrenched views and ideologies about wine making and they prohibited and denounced new methods, which new world wine producers practiced. The new world producers took the initiative to invest in research and development such as establishment of wine labs to help boost cultivation, harvesting, processing, fermentation, flavoring, mixing juice concentrates, and ageing processes of wines (Anderson, 2004). The wines were aged and produced quickly in increased quantities and with higher quality similar or even surpassing, the old wine producers. Through resource-based view of strategy, new world producers were capable to use what they had to influence the mass market. Among such marketing strategies used included innovated designing and packaging of wines such as the ‘wine-in-a –box’ packaging, use of bottles, and use of collapsible plastic bag in a compact cardboard box with a dispensing spigot, the new world producers were able to save on transportation, storage and damage costs (Wittwer, et al., 2009). Introduction of product differentiation as a branding technique, new wine products to suit varying palates especially wines meant for unsophisticated palates made a leeway for new world producers (Quelch & Bartlett, 2006). Productions of wines for unsophisticated palates was unheard of in the old wine states and were wine production cultures that were frowned upon (Phillips, et al., 1994). By so doing, new world producers were able to optimally exploit the available resources and abilities that were valuable in outdoing its competitors, their production, packaging, marketing and supply processes and systems were rare and it was hard for competitors to easily imitate owing to stringent regulations and policies the old wine producers were under (Bartlett, 2003). Traditional and contemporary business in international business environments are, confronted by the influence of institutions. Institution based views of strategy are in form of formal and informal institutional structures. Institutions influence greatly on choices of entry, legal structures, piracy, foreign direct investment planning and organization and individual behavior and culture among other aspects of international commerce (Peng, 2008). Through institution-based views, old wine producers such as France underwent rigorous and stretchy supply chains in adherence to state guidelines and owing to disjointed line of productions. Traditionally, varied divisions and personnel with limited capacity and skills, in a bid to promote division of labor, carried out various wine production activities such as cultivation, pruning, harvesting, processing and supply. This contrasted to what new world producers did. They controlled supply chains, discarding overhead costs at every distribution level and thereby, maintaining and increasing supplier bargaining power (Pettigrew, et al., 2006). This ensured production and operational cost was, retained to the minimal while the quality of wine was, assured. The producers in old world states were limited in their production and wine making capacities and resources (Anderson, 2004). Although, they would have been, willing to transform their wine growing and wine making techniques, their national and European Economic Community regulations and legislations restricted them. For example, they would not make wines for unsophisticated palates and give them names such as Champagnes since it was illegal, which the new world producers were free to do as their labeling and branding techniques, to lure existing and potential customers (Bartlett, 2003). Additionally, use of wine labels using type of grapes used, that would later influence the taste and preference of wines by customers based on type of grape used greatly boosted sales for new world. The old world had to follow labeling regulations set based on a standard wine classifications and naming procedures (Hall, et al., 2002). Disjointed wine industry lacking in critical marketing elements such as labeling and branding by old wine producers had an impact of customers being unable to easily identify a wine product and recall it for repeat purchase (Kirsch, 2007). The dislodged wine classification was, coupled with consumer awareness that some old wine product lines did not offer value for money. The new world brought in variety of strong, reliable and identifiable brands that made customers and especially UK consumers identify with (Peng, 2008). France, the world largest wine producer had Le Piat as the sole brand in UK. Deep-rooted traditional wine culture and principles, government regulations and European Community’s strict laws and policies did not allow for growth and establishment of business aspects and mechanisms such as innovations, branding and marketing mixes necessary for international organizations and industry such as the wine industry (Bartlett, 2003). The new world producers such Australia used their home-based operational and market experience to venture into foreign markets such as UK, and pressed increased emphasis on growing and making wines which satisfied the needs, tastes, expectations, and preference of their customers (Pettigrew, et al., 2006). Such as Australia’s increased production of white wines over red wines. This included production of basic, fruit-flavored wines, which was profitable even in foreign markets as illustrated by Australian win of the six of the ten wine brands in UK. As vineyards in old world states became, further disjointed, majority of producers were used to competing using pricing strategies, they had inadequate expertise, resources, and the ability to effectively compete in a rapidly changing wine market environment (Hall, et al., 2002). They held too tight to the known, fearing to risk it all by venturing in what they had not specialized in, as stated by Paul, the chief winemaker at Chateau Margaux that they needed to focus on their field of experience and not stretch themselves too thin (Bartlett, 2003). The apparent minimal bargaining power of old world producers with retailers and losing touch of what the customer tastes and preferences were, added to the challenge to capture the international market (Quelch & Bartlett, 2006). Their distribution strategies were wanting, as the supply, chains were concentrated with bureaucracy and complex regulations. New world however, due to size and marketing expertise had high bargaining power with retailers (Kirsch, 2007). The new world producers alternatively took control of the supply chains by implementing adequate and efficient supply management frameworks, monitored and controlled the stages from wine production to wine consumption and utilizing their advanced home-based market shares as resources and experience to handle their export businesses (Hisrich, 2009). The old world is disadvantaged with diminishing home wine consumption, with deep held ideologies that do not favor product promotion and customer research (Unwin & Unwin, 1996). By controlling the supply chains, the new world producers were able to integrate higher costs benefits to their cost-effective production by circumventing increased wine handling stages, handling minimal inventories and thereby obtaining the middleman’s markup (Hall, et al., 2002). Taking advantage of global initiatives of free trade and elimination of trade tariffs, Australia was able to ship wine to UK similarly to tracking wine from France. Among techniques old world producers used to survive in the industry was forming joint ventures with the new world producers to boosts their marketing and branding portfolios (Pettigrew, et al., 2006). There is a greater need to alter cultural standards and review legal and economic government policies in the wine industry in Europe (Taber, 2007). Conclusion The wine industry is experiencing a shift from the old to new world producers where the latter focuses on innovation, creativity, learning customer trends and implementing production and operational marketing and distribution methods that minimizes costs and maximizes profitability. The former for the longest time, took wine making business as an art but due to institutional constraints has been unable to meet rising global wine demands despite their rich wine legacy. References Anderson, K. (2004). The world's wine markets: globalization at work. Melbourne: Edward Elgar Publishing. Bartlett, C.C. (2003). 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