No matter for which definition about the resource, in the resources-based view of strategy, the resource or the resource and capabilities are the basis of company’s competitive advantage. Only with the valuable, sustained and non-mobile resources, company can develop and grow sustained in a long time.
2.2 Comparing the resources-based view of strategy in the new world and old world of the wine industry
In the wine industry, there are two types of resources those must be considered for company getting the competitive advantage in the market: tangible and intangible, tangible resources includes grapes---the raw material of making the wine; the attracting and special packing---the last step to show the wine out in the market and also one important promotional method; while intangible resources include the wine-brewing technology---the key factor of producing the first level wine; brand---the image of the product in the market. This paper chooses the grapes and brand as two cases to state the resource advantage situations of “New World” comparing with the “Old World” of the wine industry.
First it is about the grapes’ comparing between “Old World” and “New World” wine producers. Grape is the raw material to produce the wine. Grape’s wine determines the wine’s quality, which finally determines the market’s direction. In the “Old World”, for a long time, vineyards of planting grapes became smaller and smaller since the war, inheritance or trading. With limited land, small grape farmers have no choice besides selling grapes to local wine makers or vintner. This means wine producers and grape farmers usually are not the same people or organization, which produces the supervising blank area about the grape’s quality. What is more, in the “Old World”, grapes are always priced on weight, which directly produced the farmers give no concern about the grapes’ flavor---one key factor of the wine’s quality. But in the “New World” of the wine industry, the grapes over there have three aspects of advantage. Climate and soil are the natural advantage; for example the average holding for a vineyard among “New World” wine producers in the early 1990s was 158 hectares; what is more, the sunny climates and high temperature variety between day and night makes the grapes’ more flavor. Planting technology is another advantage of the “New World” wine producers in the raw materials’ getting. Controlled drip irrigation has been widely spread in Australia, which not only can reduce the vintage variability, but also can allow grape being expanded into new growing regions, while this technology is strictly forbidden in France under AOC regulations.
Then it is about the brand. With long time persisting in the quality and service supplying, great contributing, brand can have its own effect and image in the market (Jeroen, et al, 2010). This is the same in the wine industry. From the time aspect to read the “New World” and “Old World” wine producers, it might be recognized as the “Old World” would take advantage since its long history in this industry; while the situation is not so optimistic for them, since the extreme fragmentation situation of the “Old World” wine producers makes them have not the volume to persist and exploit one branding strategy. But the “New World” wine producers paid more attention on this area. It can be said that it is also the “New World” wine producers who made branding come to be one routine part of the wine industry. For example, Penfords, one Australian wine maker, built a hierarchy of brands in a short time.
With the above two paragraphs’ analysis, it can be found that both in tangible and intangible resource aspect, “New World” wine producers stay before the “Old World” wine producers. As the internal and key competitive factors, “Old World” wine producers fails.
3.0 Institutions-based view of strategy
3.1 Theory illustration about the Institutions-based view of strategy
Mike Peng believes “institutions are the role of the game---both formal and informal” (Mike, 2002). So if the company wants to invest into new regions or countries, it must carefully study the games over there, especially the unwritten or informal one. Institutions include so many aspects, from the culture, legal, consumers’ sentiment to the political, economic and so many other aspects. Before Mike Peng, in 1990, North stated that institution is the humanly designed for constraining the human interaction; and for Scott, institution is the structure and activities for guaranteeing the social behavior (Mike, et al, 2008). No matter how, institution-based view of strategy emphasized the strong and great function of institution.
3.2 Comparing the institutions-based view of strategy in the new world and old world in the wine industry
From the “Old World” monopolizing the wine market to the present “New World” challenging the “Old World”, institution also plays an important role, which proves institution is not only the game in the investing situation, but also fits for the new comers’ challenging situation. This paper will analyze the institution’s great function in the wine industry basing on discussing about the unwritten forms, the regulations and legal of the government etc.
For the “Old World” wine producers, since the long time development, the wine’s shortcoming and strong points has been widely and deep grasped by human being. For maximizing its contribution to the society and minimizing its threats to the outside world, the government has issued so many regulations, sometimes even laws to constraint it and control it, for example the Judgement of Paris 1976, the AOC laws etc. In one aspect, these regulations limit the shortcoming part of the wine; in the other aspect, they also constraint the wine industry’s development in their market. Differently in the “New World”, as one new industry, there are not too many regulations to control them, which indirectly promotes the wine industry’s development.
Time is changing; society also changes and human being’s opinion and choice toward the same thing would also change. This is obvious and easily seen in the wine industry, which means customers’ demand and preference might be changed from the wine’s flavor to the wine’s packing. All of these are informal institutions for this industry’s growing. “Old World” did not notice about it and still insist on the traditional principles; while “New World” wine producers did do enough homework about it. So in this area, “New World” wine producers also take the competitive advantage.
4.0 Conclusion
Summing up all the above statements, it is known that comparing with the “Old World” wine producers of France, Italy, Germany and Spain, the wine producers of the “West World”, like Australia, Chile, South Africa do have the competitive advantages in the raw resources---grapes’ getting, in the high technologies’ utilizing, in the legal and government’s supporting etc. This means both in the resource and institution two aspects, “Old World” wine producers are constrained, which directly produced the present market situation and in 2001, France was substituted by Australia in the Great Britain market as the No.1 Wine Exporter.
5.0 Reference
Amit, R., Schoemaker, P.J.H. (1993). Strategic assets and organizational rent. Strategic Management Journal. Vol.14, No.1, P33-P46
Wernerfelt Birger. (1984). A Resource-Based View of The Firm. Strategic Management Journal. Vol.5, No.2, P171-P180
Daft, L.R. (1983). Organizational Thery and Designs. West Publication Company.
Mike W. Peng. (2002). Towards an Institution-based view of business strategy. Asia Pacific Journal of Management. Vol.19, No.2, P251-P267
Mike W. Peng, Dennis Y.L. Wang, Yi Jiang. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business. Vol.39, No.5, P920-P936
Jeroen Kraaijenbrink, J.C. Spender, Aard J. Groen. (2010). The resource-based View: A Review and Assessment of Its Critiques. Journal of Management. Vol.36, No.1, P349-P372
