Due to French history and tradition it was possible to gain a strong image in regard to vinery and example, which can be highlighted might be the invention of Champaign. The experience of France as a quality wine producer going back to the middle ages can be regarded as a source of competitive advantage. Another source is the strong wine culture in France creating a positive image for customers. The wine industry by itself is a very important economic factor in France, in the mid 18th century the wine industry accounted for 17% of the overall industry. As a consequence, in 1855 the government classified wine yard into five different levels of quality. This helped the consumers to identify the best possible wines and was unique at the time, which created sustained competitive advantage. Simultaneously, the introduction of mass production of bottles and use of cork stoppers facilitated the former difficult distribution of French wine to foreign markets. The “phylloxera” insect destroyed almost all French wine yards in the late 19th century, giving the first opportunity for New World ( US, Chile and Australia) wines to rise. Due to the complex protection system of French wines, quality was an issue in the production of wine as for example irrigation systems under the “AOC”-label are prohibited while in the New World there were no limits toward innovations. What changes in the global industry structure and competitive dynamics led France and other traditional producers to lose market share to challengers from Australia, united States, and other New World countries in the late twentieth century?
There were important developments in the global wine industry that lead to shifts in market share of old world producers to new world producers. First, demand changed severely starting in the late 19th century. Consumption in traditional wine consuming nations like France and Italy decreased significantly. This was mainly due to changing drinking preferences...
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