Intellectual Contribution by Susan Cholette

Contribution Title

Globalization and the Emergence of New Business Models in the Wine Industry

Conference

2004 International Business and Economics Research Conference

Year

2004

Description

A paper written by Castaldi, R. along with myself, Cholette S. (second author) and Frederick, A.

This paper was presented at the conference (paper appears in refereed conference proceedings) and won "Best of Session." It is currently under consideration for publication in CIBER's peer-reviewed journal.

Complete Citation

The forces of globalization have dramatically altered the international competitive landscape of the wine industry. This paper analyzes four new business models that have recently emerged among major industry competitors. The wine industry is undergoing rapid and radical changes as the forces of globalization are changing the international competitive landscape of the industry. Worldwide consolidation is occurring at the winery, distributor and retail levels creating bigger and more powerful industry players, while an oversupply of grapes is eroding profit margins. As recently as 10 years ago, the industry was localized and fragmented which meant that wine producers in different countries were relatively insulated from each other, and most wine drinkers consumed domestic products. Today, consumers around the globe have the opportunity to purchase wine produced from virtually every region of the world and this has forged exciting new opportunities, along with formidable challenges to wineries worldwide. A major opportunity for wineries is the expansion of potential sales beyond their domestic markets due to decreasing international trade barriers and changing consumer behavior patterns. Major challenges include increased competition from strong foreign wineries, and retail pricing pressures due to industry overcapacity. For instance, exports now command greater than 25% of the US market revenue, almost double that of ten years ago. This new industry paradigm is changing how firms choose to compete. Based upon numerous interviews with industry executives, as well as a comprehensive review of trade and academic literature, this paper will identify and analyze four business models that have recently emerged as firms strive to create competitive advantages to confront the forces of globalization that are sweeping the industry.

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