Wine Industry in Australia - Case Study Example

Wine Industry in Australia Name: Course: Tutor: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Problems 3 2.1 Weather Changes 3 2.2 Declining Market Supply 3 2.3 Appreciating Australian Dollar 4 2.4 Changing Market Preferences 5 3.0 Solutions 5 3.1 Social Access 5 3.2 Government Incentives 5 3.3 Industry Partnerships 6 3.4 Market Surveys 6 4.0 Recommendations 7 4.1 Government Incentives 7 4.2 Industry Relationships 7 4.3 Market Surveys 8 5.0 Conclusion 8 References 10 1.0 Introduction The Australian wine industry, despite its current growing rates has a wide range of challenges that if left unchecked would lead to an eventual industry failure. Therefore, this essay develops a critical focus on the various industry challenges with an iam of developing alternative solutions as well as offering strategic recoendations on approaches tooverceome and mitigates them. 2.0 Problems 2.1 Weather Changes One of the challenges affecting the Australian wine industry is drastic weather changes in the market of late. In this case, the challenge mainly targets and implicates on the industry farmers thus reducing on the overall supply reliability, For instance, in 2014, a hail affected the Queensland farmers when the grapes were nearing their maturity. Consequently, this led to low grapes supply, a virtue that fluctuates the demand and acquisition costs for thus fluctuating the Australian wine industry production costs (Onselen, 2010). Thus, this exposes he industry wine to increased competition from the Italian and French wine industries that have relatively stable production costs and raw products supply bases. As such, this challenge exposes the Australian wine industry to a collapse and competitive edge failure in the global market into the future in the event that the challenge remains un-mitigated. 2.2 Declining Market Supply Besides the weather related supply implications on the Australian market, statistics as Jones (2013) noted indicates that the wine industry supply base is declining by the year. In this regard, as of 2014, the industry supply farmers’ base had a $ 108 million a rapid decline from the 2004 vintage value of $ 224 million. As such, this illustrates a decreasing stimulation for suppliers to invest in the industry, exposing the wine manufacturers to the risk of a local raw materials supply challenge and the consequential global sourcing of such grapes, a move that could unnecessarily raise the already rising industry production costs. It is imperative that this declining supply base motivation and drive is addressed to overcome a likely supply base total collapse into the future. 2.3 Appreciating Australian Dollar Most of the wine manufacturers in Australia are multinational corporations in that the produced wine exceeds the Australian domestic wine market demands. Therefore, majority of them targets the international market platform. However, a stabilizing and appreciating dollar is derailing the industry development and success rates. As Choi and Papaioannou (2009, p.307) noted, unlike other developed nations whose currencies were greatly impacted in the post 2008 global financial crisis, the Australian dollar remained relatively stable, appreciating over the years since then. Consequently, this has increased the overall global prices for the Australian wine products. Therefore, this has led to high wine products costs against those of competitor industry such as France, Italy and Russia. Therefore, this essay establishes that unless the current market situation is corrected through strategic measures to reduce the market price for Australian wine products, the industry risks losing its market base to the competitor industries as mentioned above. 2.4 Changing Market Preferences Despite the traditional market dominance and influence imposed by the Australian wine industry in the traditional global wine market; this influence is waning with time. In this regard, the emergence of the new generation X and Y with diversified preferences in the market. As such, this has led to a preference and taste change in the favor of new wine manufacturers and sources such as Russia, whose wine industry is registered as one of the most highly growing economy (Rahman and Azhar, 2011, p.93). Therefore, in order to change the current mismatch between the Australian wine industry and market needs drastic changes should be developed and effected by the respective stakeholders. 3.0 Solutions 3.1 Social Access This is one of the strategic approaches through which the current industry supply challenge can be eliminated. In this regard, as already discussed under the problems review, a majority of the farmers have bailed out of the industry evidently because of the encountered losses driving them out of the business. As such, this essay argues that the Australian government should establish a social fund to support the farmers. As such, the farmers should be awarded a low cost insurance cover from which they can claim compensation on destroyed grape farms to allow for their perpetual supply role contribution to the industry wine manufacturers. 3.2 Government Incentives As discussed in the above analysis on the problems and challenges facing the Australian, a key challenge is the rising dollar value. In this regard, although conventionally agreed that the appreciating dollar is a result of changing global market dynamics and the failing of formerly global market leaders such as USA, the government has a role to protect the domestic industries. In this case, the federal government can offer incentives in terms of tax holidays as well as tax reductions as measure to reduce on the indirect costs in production (Benckendorff, Moscardo and Pendergast, 2010, p.82). Moreover, the incentives could also include offering support services to the grape farmers in the industry to reduce the direct supply production costs. 3.3 Industry Partnerships Besides relying on the government o develop systems and strategies to resolve the existing industry challenges, the industry stakeholders can also take an active role in seeking these solutions. In this regard, this essay asserts that one of the approaches through which the stakeholders can reduce the rising production costs actively is through the development of strategic alliances, both domestic and international. In this case, while as domestic alliances would ensure a stable supply base to guarantee production continuity, international strategic alliances would enable the organisations reduce distribution costs thus enhancing the reduction of overall direct and indirect costs that are ailing the Australian Wines industry on the international platform. 3.4 Market Surveys An additionally noted challenge and problem in the Australian wine industry is a changing global trend. In this case, the changing preferences and tastes are changing form the traditional wine flavors to new desires. Therefore, in order for the Australian industry to develop and manufacture wine products that match and align with the changing global market needs as an approach to increase market competitiveness. 4.0 Recommendations Based on the developed solutions in this essay, the analysis applies and adopts three of the established solutions for implementation including government incentives, market surveys and industry relationships. 4.1 Government Incentives One of the key recommendations offered in this report is through government incentives to stimulate investment interest and reduce the cost of production. In this case, the Australian government should develop an inquiry to strategically evaluate the legal and economic challenges facing the wine industry. As such Fischer and Hartmann (2010, p.220) stated, any legal challenges established such as the lack of social access to insurance and other facilities by the Australian grape farmers should be corrected and relevant policies established. On the other hand, all the established economic issues should be strategically evaluated to establish areas in which the government can offer help such as tax holidays and cuts as maybe established to reduce on the cost of production. Moreover, the government should offer the industry the required financial support such as credit and loans as well as technical support to the stakeholders as a long term industry development approach. 4.2 Industry Relationships An additional approach to counter the current challenges is through the use market based researches. In this case, organisations should develop strategic alliances both backward and forward integration relationships. On one hand, a backward relationship with the industry suppliers would motivate the suppliers to increase their production supplies. In this regard, the support should be both financial and technical to guarantee quality of the supplied market raw materials. On the other hand, the organization should develop and establish market distribution in the market, with international market distributors. Consequently, the established relationships would support the reduction of market supply costs as well as increase overall market reputation and control (Hoskisson and Hoskisson, 2008, p.186). Therefore, this essay argues that with the introduction of strategic domestic and international alliances would position the industry in a strategic position for overall market needs. 4.3 Market Surveys Finally, the evaluation essay recommends that the Australian wine industry should establish market surveys in the market. In this case, the market surveys should be developed with a consumer orientation. In this regard, this would include the change of the production process in the wines industry form the current push based approach to a pull based demand approach. In this case, the industry should re-orient its demand generation form the market needs and surveys. Therefore, instead of developing and manufacturing products and consequently marketing them to the consumers, such industries should rely on surveys to manufacture only the required wine products (Sands, 2003, p.28). Consequently, this would enable the industry overcome the challenge of taste and preference changes with changing global market changes. 5.0 Conclusion In summary, this evaluation essay offers a review on the challenges facing the Australian wine industry such as declining supply base, rising production costs, and changing global preferences. However, the essay, of the discussed alternative solutions, argues and recommends the inclusion of market surveys, increased government incentives as well as the establishment of strategic market alliances in the market. As such, the essay concludes that with the implementation of the proposed recommendations the ailing Australian wine industry will be revamped. References Benckendorff, P., Moscardo, G., & Pendergast, D., 2010, Tourism and generation Y, CAB International, Cambridge, MA Choi, J. J., & Papaioannou, M. G., 2009, Credit, currency, or derivatives: Instruments of global financial stability or crisis?, Emerald, Bingley. Fischer, C., & Hartmann, M., 2010, Agri-food chain relationships. Wallingford, Oxfordshire, UK: CABI. Hoskisson, R. E., & Hoskisson, R. E., 2008, Competing for advantage, Thomson/South-Western, Mason, OH. Jones, N., 2013, World of Wines: A few issues facing the Australian wine industry this year, Ruidiso News. [Online] Available at < http://www.ruidosonews.com/ruidoso-news/ci_25340699/world-wines-few-issues-facing-australian-wine-industry> [Accessed December 11, 2014]. Onselen, P., 2010, Wine Industry Losing Ground. [Online] Available at < http://www.theaustralian.com.au/business/if-wine-industrs-a-loser-sour-grapers-wont-help/story-e6frg8zx-1225940911501?nk=a47c088cc38fab02350a14bfa766bf7a> [Accessed December 11, 2014]. Rahman, S. & Azhar, S. 2011, "Xpressions of generation Y: perceptions of the mobile phone service industry in Pakistan", Asia Pacific Journal of Marketing and Logistics, vol. 23, no. 1, pp. 91-107. Sands, M. 2003, "Integrating the Web and e-mail into a push-pull strategy", Qualitative Market Research, vol. 6, no. 1, pp. 27-37 Read More