IntroductionBasic economic theories have always given three key sources of wealth or competitive advantage for stakeholders in business economics: land and natural resources, capital, and labour (Amit, 1993). The optimal combination of these three assets provides sustainable competitive development across nations and societies (Arie De Geus, 1997). During majority of human being history land i. e. tangible asset is considered as primary factor of economic dominance. Further capital (i. e. tangible asset) and labour (i. e. intangible asset) enhanced their positioning in economic development post 20th century till knowledge era (Barney, 1991).
This might hold true in the case of global wine market dynamics. Is it the case that tangible and intangible assets have enhanced competitive dynamics of the global wine marketspace in past decades? Our research note focuses on understanding and analysing he changing economic dynamics in global wine marketspace for past 10-15 decades i. e. change in market share from traditional wine producing nations such as France, Italy and Spain to niche entrants such as Australia and United States. The case will further analyse the primary elements causing the change in industry dynamics and sustainable competitive advantage between traditional and niche wine producing nations.
Resource based ViewTraditionally France, Italy and Spain have controlled dominant market positioning in global wine segment (18th-early 20th century). The early mover advantage and optimal optimisation of tangible and intangible assets have enhanced core competency on long-term basis of European wine producers such as France, Italy and Spain. Before 1966 French, Italian and Spanish wine stakeholders created value propositions for B2C and B2B customer base such as high quality standards, skilled labour force, strong regional and national distribution networks (consolidated value chain) across the globe along with favourable governmental regulations (wine treated as national pride in France and Germany).
Thus resource based competitive advantage analysis of traditional wine producing nations before 1966 stood as follows: Source: Prahalad & Hamel (1990)The change in macro economic conditions and negligence by national governments such as French, German and Italian offered scenario for new entrants such as United States and Australia into global wine marketspace. Skewed supply-demand, changing consumer preference in traditional wine markets related to consumption, purchasing power parity etc and non-favourable asset mix (higher labour cost, low net margins for manufacturers due to taxation etc) called for change in industry dynamics and competitive index across global wine marketspace.
Although niche wine producing nations such as Australia and United States were active but lacked scalability. Favourable macro economic and intrinsic asset mix enhanced their sustainable competitive advantage post 1966. Thus resource based competitive advantage analysis of new wine producing nations after 1966 stood as follows: Thus it could be seen from the above initial analysis related to intrinsic factors or resource based competitive advantage for traditional and new wine producing nations that micro and macro economic elements combination offers sustainable development on long-term basis.
Aligning tangible and intangible assets with macro economic factors such as consumer demand and preference have seen new entrants such as Australia and United States take away market share of global wine segment from traditional dominant powers such as France, Italy and Spain. In the next section we would be analysing the changing market dynamics and bargaining power index for traditional and new wine producing nations to enhance reliability of the research note.