The wine industry is one of the oldest industries in the world with a number of countries being that major players in the industry. One of the countries in which the wine industry has existed for a very long time is France. For a long time, France has been known to be one of the renowned nations in the production and consumption of wine.
This means that there are very many firms that produce wine in France. France has a large population that consumes wine thus this population acts as the first market for the wine sector or industry in the country. The government of France has been supporting the Wine sector for a long time due to the expansiveness, and thus influence of the industry to the economy of France. The government support has backed the sector from both internal and external economic pressure and threats (Jenster, 2008).
Over many years, the wine industry in France has been influenced the interests in English and the Dutch market. This happened before the French revolution. The ancient regions in France which have been known to produce wine include Alsace, Bordeaux, Burgundy, Loire Valley, Champagne, Languedoc and Rhone. France dominated the wine industry globally till near the end of the 20th century. However, the 21st century has brought about significant changes in the wine industry.
The global wine market has become significantly competitive. Other regions of Europe and the world have come in the industry and are giving France a cut throat competition. In Europe, Spain and Italy have joined wine producing countries in the world. Also, there are other recent wine produces like Australia, California – United States and a number of countries in the South American region (Wherry, 2011).
The wine sector in France started booming in the 19th century after the end of French revolution. The French Revolution brought about the rise in incidences of production of poor quality wine in France. This was because there was inadequate knowledge among the producers of wine in the country.
The technology that was being utilized in the processing of wine was poor. Therefore, investment was made in order to come up with improved technologies in wine production. Therefore, a wine processing technology known as “chaptalization” which entails the addition of sugar into wine to raise alcohol levels was developed. This was a turning point in the wine sector in France as this technology was further built on to better the industry.
By around 1850s, the wine industry had sky had attained voluminous growth. During the same time, the upper class commonly referred to as the bourgeoisie had emerged. This class formed part of the largest group of wine consumers. The bourgeoisie provided a big market for the wine sector. Many technological developments took place in the wine sector to better quality of wine. Towards the end of the 19th century, the government of France gave Louis Pasteur the task of studying the problems that were facing the wine industry.
Pasteur carried out research and established findings that revolutionized the science of winemaking in France. In his study, he discovered what caused wine spoilage and developed processes of eliminating wine spoilage. Also, the development of the French railway systems added to the betterment of the wine sector as it opened up more area for trading of the French wines. More regions became accessible (Anderson, 2004).
Wine is produced in different regions of France. France as a country produces approximately 60 million hectoliters of wine annually. The country has the second widest total vineyard area globally. The leading county in terms of the size of vineyard area in the world is Spain. France still leads the production of wine in the world.
It was only eliminated from the top spot in the year 2008 by Italy. The country produces a wide variety of wines. Expensive and high vined wines are produced and exported to other countries where they are consumed. Modest wines are also produced though they are mostly sold in the local market (Anderson, 2004).
France has different varieties of grape, and this is one of the factors that give this country a competitive advantage in the wine sector. These different varieties of grape include chardonnay, pinot noir, cabernet sauvignon, syrah, and sauvignon blanc. However, these varieties have been introduced and are now being cultivated in other countries.
The wine making practices that were only utilized in France have also been imported by other countries. This has been coupled with other pressures like the drop in the local consumption and the growth of wine industries in other countries within and outside Europe. This has put pressure on the wine sector and reduced the competitive advantage of this sector in the world market. The per capita wine consumption dropped by almost 20 percent in the 1900 decade.
This means that reliance on foreign markets remains to be the focus of wine producers in the country. France has been depending on the regional market for the sale of its wine. Therefore, the production of wine in other states within and without the European Union threatens the wine sector. Expensive wines have been fetching a lot of in some for the sector as most of the expensive wines find markets in the wealthy markets of Europe and the United States (Dougherty, 2011).
The wine sector is an important booster of the agricultural sector of France. Agriculture forms part of the important sectors in the economy of France. The main crops that are grown are sugar beets, barley, wheat, corn and potatoes and fruits. The fruits are utilized in the making of wine.
Therefore, the wine industry holds a big part of the local economy through the support of the horticultural sector. The wine sector provides employment to a relatively big number of people. Apart from this, the wine industry is a foreign exchange earner for the country by way of the payments that are made from the sale of wine in the international market. The wine sector boosts other industries in the country; therefore, its importance in the French economy is too open (Dougherty, 2011).
The wine sector in France has been coping well in the global wine industry. However, the competitive developments in the 21st century have affected innovation and the wine export opportunities for the country. However, the country is still ranked as the leading producer and in consumption of wine.
It is important to note that the gap at which it is leading is shrinking at an increasing rate. By the year 2007, France only had a 20 percent of the total world production while its consumption stood at 14 percent. More competition is likely to shrink its market more and force the country out of the international wine market. The wine exports are reducing while the local sales are also going down (Jordan, Zidda & Lockshin, 2007).
Strategy Exploration – Exporting, Differentiation and New Technology
Owing to the recent developments in the wine sector of France, a number of strategies have been adopted to streamline the sector. These strategies are differentiation, exporting and new technology. All the strategies aim at improving the competitiveness of a sector in the economy.
Differentiation, commonly known as product differentiation in economics and business studies can be defined as the approach that a firm in the industry adopts in order to develop and increase marketing of its unique goods for different segments of customers. This strategy works well where a firm has an upper hand when it comes to competitive advantage and the ability to sustain costly advertising campaigns.
Essentially, this is regarded as one of the marketing strategies. This strategy is also called market segmentation. Product differentiation simply means separating the products of a firm from those of competitor firms. The major objective of product differentiation in an industry is to boost the competitive advantage of the product in the market.
In other words, product differentiation increases the competitive advantage of products if it is properly applied by a firm in the industry or economy. In economics, well conducted product differentiation results in monopolistic competition. It eliminates perfect competition. There are there different types of product differentiation, which are simple, horizontal and vertical differentiation (Zanni, 2004).
The exporting strategy involves the assessment of the products as it appertains to their potentiality for export. Exporting strategies aims at helping a firm to enter and gain grounds in the international market. Exports expand the market for products and the competitive base of a firm.
New technologies are applied in either the business processing or production stages of products of a firm. When applied in the production process, new technologies do aim at raising the quality and the value of products in the market. When the product quality is improved by way of applying new technology, the products become more competitive in the market (Jordan, Zidda & Lockshin, 2007).
The various strategies may be used differently at a time; however, in certain instances, firms may decide to use various strategies concurrently. However, this depends with the intensity of the problem that is being solved by these strategies or the objectives of the firm that is applying the strategies.
More often, one strategy is applied. Nevertheless, the success of the strategy determines the employment of the proceeding strategy. The wine sector of France has applied all these strategies at different times. These strategies have been applied to increase the competitiveness of the sectors as a result of internal and external constraints that have been affecting the operation of the sector in the country.
New technology has for instance been applied from the earliest time of the industry with a lot of changes being made to enhance wine quality. Product differentiation has also been adopted by the wine industry and applied in different ways. The wine has been branded differently to make it distinctive from other wine products from Italy, Spain and other wine producers in the United States and the South American region.
Other aspects of product differentiation like packaging have also been employed by the French wine industry. With the shrinkage of the local market, the wine sector of France has been forced to develop export marketing strategy which will see it increase foreign sales that will be useful in offsetting the effect of the shrunken local market (Moulton & Lapsley, 2001).
Strategy Analysis: French Wine Sector
(Impact on )Strategy
CustomersThere are different types or brands of wine produced in France. France Produces high quality wine which is suits the customers in the foreign market. The quality of wine that is mostly consumed at the local market is of medium quality. Also, there will be price differences that come with each developed wine brands. Therefore, they are attracting customers of different income bases.The different brands in which the wine is offered gives an opportunity to customers in the foreign market to enjoy the variation and differences min tastes of wine. There is a likelihood of increase in the number of customers in the foreign market.Innovation in the wine industry, through the introduction of new technologies, has resulted to the development of new tastes and variations in wine products. Therefore, the number of customers has also risen. Technology has a positive impact especially so when it turns out positive on products.
EmployeesWhen the export strategy succeeds, the employees will get an assurance of being sustained in the industry. With increased exports, there will be increments in income for the company. Therefore, the workers will get an increment in wages which will better their economic conditions and motivate them.Differentiation has a direct effect on employees. When the industry diversifies its production and distribution process, this results in an increased number of employees. There will be structural changes that come with differentiation which will have a short-term effect on the employees as the program picks up. However, the employees will get benefits as the program picks up.The new technology is leading to the production of different brands of wine. New brands of wines mean that the market will expand the meaning that more jobs will be created, and the current employees will be remunerated.
CommunityThere will be different types of wines available for the community. Increase in wine exports has encouraged wine tourism, which will better the community.Wine sector differentiation offers the community with employment activities as differentiation creates more diversification and thus more job opportunities.Community development results from improved technologies and improved productivity. Innovation will lead to the growth of the wine sector. This will benefit the community directly through offering employment opportunities. Also, it will have indirect benefits through corporate social responsibility activities of the firms in the sector.
GovernmentIncreasing exports are helping the government of France to advance international business relations with other countries through bilateral and multilateral trade agreements. It opens up the country to increased trading activities.Differentiation has been the source of business diversification that has led to the development of tourism and hotel industry. This is because most French wine accompanies meals. The government uses wine as the major tourism feature.Support of research and development in order to innovate results in industrial growth meaning that the government will directly gain from industrial growth. More jobs will be created for the citizens and the government will garner more taxes from the industry.
AlliancesFrance is cooperating with other wine companies in other countries. This will help the country to gain new techniques of production and improve its access into the foreign market. This also improves its reputation in the international market.Alliances are part of the facets f the differentiation strategy.A business alliance, which is part of business partnership, helps in the development of technology and production invention and innovation. His s helping in the bettering of products in the industry.
CompetitorsNew competitors have come into the wine industry. These competitors are Italy, Spain and other countries in South America for instance Chile. In order to overcome the competition, France has chosen to adopt differentiation strategies that help to maintain their products in the international wine market and maintain a good share of the wine market in the international market.The competition that has developed in the global wine market has necessitated the rebranding of products to and increased promotion of the French wines both at the local and in the international market. Wine firms in France are adopting all measures that will see them maintain the status and sales of their products in the now competitive wine market.As part of the efforts of fighting competition, new brands are developed through research and development thereby helping to raise the competitive levels of the French wine industry.
InvestorsThe whole process of the wine sector improvement gives an opportunity to investors in the agricultural sector of France. This sector produces raw materials that are used in the making of wine. The export of wine products into the international market results in other business deals giving a chance to both foreign and local investors. Investors in the industry directly benefits from the export of wine.This opens a window for investors in the wine and related sectors.More income is generated as a result of new technologies, more income to the investors thus more investments.