Sample Question & Answer On Global Strategy

French wines used to have a very strong competitive advantage in terms of sustainable differentiation that existed in Europe and the world in general for several centuries. The main idea of the AOC, which is responsible for the development of the French wine industry, was to put emphasis on the regional differentiation and to offer exclusive and superior wine at high prices in the export markets. There are 450 regions in France that specialize in wine production and consequently there are many sorts of grapes and types of wine.
Not all customers could afford to buy expensive French wine, but in the 2000s the wine manufacturers from the other countries started to sell wine at lower prices to the wider audience in the large stores and the French wines began to immediately fall behind their new competitors. Moreover, the customers’ tastes changed and they no longer wanted to pay a lot of money for the French wine when there were so many good quality substitutes. Therefore, failure to focus on the consumer demand and too much focus on the local production conditions resulted in the loss of the sustainable differentiation.
Australian wines became successful due to several reasons. First of all, wine consumption was growing in the UK and a lot of distribution channels such as large supermarkets contributed to the further growth. So wine became a mass-consumption product.
What is more, Australian wines had sufficient quality and there was not too much differentiation in terms of the year of production and location. As the result, the customers were not confused when they had to make a decision which Australian wine to buy. There was only differentiation related to the variety of grapes – Chardonnay, Shiraz, etc. In order to produce wine, the Australian wine companies could source grapes and for them it was very important to satisfy the large consumer demand in the UK by means of selling simplified wine products of good quality.
Nevertheless, these reasons for success are unsustainable, because the competition in the wine industry is rising and offering the low-priced wine may not be enough in order to attract the customers in the future. When the market becomes mature, the wine companies from the New World will have to think how to differentiate their products and which distinctive competencies need to be developed in order to stay competitive.
Strategy that Chamarre is applying in response to the challenge of the new wines may be characterized as timely and well-thought. OVS that owns the Chamarre brand would like to obtain simultaneously the cost and differentiation advantage. First and foremost, the company would like to reduce the price down to the price level at which the wines from the “New World” are sold.
Secondly, OVS would like to create a differentiation advantage selling Chamarre wine with superior value. Because it is a French company that has access to one of the best sorts of grapes in the world, it is possible to build up a strong brand that will be associated with France, but sold in the broad mass market and the price will be similar to the prices of the wines from the “New World”. So the company has some good chances to create the higher overall value than its competitors.
In conclusion, OVS’s approach may be applied by the other French companies that cannot sell their wine products due to the changed business environment. Simplifying the product range and making wine more universal may help to win back the market share that was lost in the 2000s with the popularization of the wine products from Australia, Chile, the USA and other countries.