GLOBALIZATION INFLUENCES IN CZECH WINE PRODUCTION # PROJEVY GLOBALIZACE V ODVĚTVÍ VINAŘSTVÍ V ČR. ŽUFAN, Pavel, PYŠNÝ, Tomáš.

Transcription

1 GLOBALIZATION INFLUENCES IN CZECH WINE PRODUCTION # PROJEVY GLOBALIZACE V ODVĚTVÍ VINAŘSTVÍ V ČR ŽUFAN, Pavel, PYŠNÝ, Tomáš Abstract Paper focuses on the Czech wine production industry and it analyzes the main influences of globalization taking effect in this industry. Theoretical basis of the paper is the concept of Yip (1995), based on which main effects of globalization are identified in Czech wine production including their possible projection into strategies of wine producers. Key words: Globalization, Wine production, Global Strategy, Interdependence, Economies of Scale. Abstrakt Příspěvek se zaměřuje na odvětví vinařství v ČR a rozebírá hlavní vlivy globalizace, které se v tomto odvětví projevují. Východiskem příspěvku je koncept G. Yipa (1995), na jehož základě jsou identifikovány hlavní projevy globalizačních vlivů v českém vinařství včetně jejich možného průmětu do strategií producentů vína. Klíčová slova: globalizace, vinařství, globální strategie, vzájemná závislost, úspory z rozsahu. Introduction Dynamic developments of current business environment not just on international, but also on national and regional levels are often referred to as globalization influences. Competition is currently understood a result of strategic manoeuvring amongst global and innovative competitors (Tichá, 2002). This manoeuvring and competing leads to protection or building new product or new market, formation of new sources of competitive advantage, or even to formation of new know-how. Market stability is attacked by short production cycles, short period of new products development, technological development, unexpected entries of new competitors, shifts of market characteristics, or even complete redefinitions of markets. Briefly said, market environment can be characterized by a growing dynamics, uncertainty, and a strong competitive rivalry. Globalization was chosen as the key focus of this paper, which examines its aspects and main drivers in wine production industry. Description of the main drivers, results and # The paper represents a part of results of solution of the research plan of FBE MUAF in Brno "Czech Economy in the Process of Integration and Globalisation, and Development of Agricultural Sector and the Sector of Services under the New Conditions of Integrated European Market" registred by the Ministry of Education of the Czech Republic under the number MSM

2 influences of globalization process in the wine production industry in the Czech Republic is a result of research the paper tries to summarize. Survey of literature Evaluation of globalization factors is a topical issue dealt with by a number of authors presenting numerous approaches to this topic. These often include the standard STEP analysis, Porter s diamond, etc. An interesting and innovative approach was presented by Yip (1995), which is shown in Fig. 1. Figure 1 - Main forces of globalization Source: Yip, 1995 This concept assumes that it is possible to identify main structural drivers of change forces with a potential to influence structure of a market, sector or an industry. It is also important to consider a combination of these effects, which should not be considered in isolation. This is, actually, a general rule for any approach to environmental influences and their analysis. Material and methods This paper tries to identify possible projections of influences identified by Yip (1995) in the Czech wine production industry, evaluate their applicability, and suggest their possible projections into business strategies of wine producers. The paper also includes suggestions of 742

3 possible actions of wine producers in order to exploit the positive effects of globalization and prevent the negative ones. As far as this type of analysis cannot be based only on objective data and evaluations, and has to include a subjective judgement of the situation, discussion is joined with results. Due to the limited extent of the paper, a commentary is not added to all factors identified by Yip, but only to those considered important. Results and discussion Global Market Convergence Similar Customer Needs Markets worldwide increasingly converge. Preferences and needs of customer are becoming more similar, in some markets (e.g. soft drinks, personal computers, etc.). Even though there can be identified specific national traditions connected with wine in certain countries (e.g. consumer habits, preference of domestic production), there are some features, which are becoming more and more similar especially the use of distribution channels and their share on total sales. This can be seen in Czech wine production, where we can notice a slight shift from wines bought in supermarkets to buying wine in special wine shops (this shift is also related to the shift of quality demands of the customers) becoming very similar to the structure of consumption in other developed countries. As far as there is an apparent preference of domestic production, on the Czech wine market, it is also interesting to realize the share of domestic production on total consumption, which is lower than 50 % due to the limited area of vineyards (see Table 1 and Figure 1). Table 1 Development of domestic production and total wine consumption in the Czech Republic (CZSO) Season Indicator /02 /03 /04 /05 /06 Wine production [thous. hl] Wine consumption [thous. hl] Share of domestic production 36,3 6 % 31,1 3 % 35,0 0 % 34,5 5 % 25,7 6 % Global Customers In wine production industry we cannot speak about global customers as defined by Yip (1995), but we could see global customers as travelling customers with differentiated needs and preferences. These customers expect local specialties as they travel. Cost advantages Scale economies Economies of scale connected with globalization actually project into the fact that the Czech wine market is not large enough, so it does not make it very attractive for bigger groups. Their concentration on such a small market would probably not provide satisfactory results, and they rather use local distributors to market their wines. Country-specific costs Firms producing in the Czech Republic in comparison with other developed countries have lower labour costs, which can be seen as an advantage for possible exports of wine. As far as the production potential of the Czech Republic is limited by the EU regulations, this can not represent a major advantage for global competitors. 743

4 Figure 1 Wine production in the Czech Republic in (CZSO) Wine production Hectare yield Wine production Yield per hectare [t] / / / / / / / /06 Season 0 Government influence Trade policies Integration of the Czech Republic into the European Union simplified exports of Czech wines to European markets, which can be used as an advantage by Czech wine producers. Owing to the relatively low domestic production (satisfying only some 40 % of domestic demand see Table 1), though, they are not motivated to try to penetrate the more distant and also quite saturated markets in abroad. Simplification of imports, on the other hand, brought some changes to the market mostly connected with fears from strong foreign competition. But these fears are eliminated by a prevailing preference of domestic production by Czech consumers. The only specific influence of trade policy of government in the Czech wine production are the tax advantages for small producers, even though it is still considered quite low especially in comparison with neighbouring countries like Austria and Germany. Global competition Interdependence Global competition is becoming increasingly evident in many fields, not excluding the Czech wine production. Even though operation on global scale can deepen mutual interconnections between particular branches and operations, this cannot be seen as an important influence in Czech brewing. High exports/imports Foreign trade significantly influences the situation in the Czech wine production industry. As far as certain foreign brands of wine and especially certain (traditional and new ) winecountries have a very good image in the world markets, and wine imports are growing, this can be considered an important factor. 744

5 Conclusion Performed analysis suggests the key globalization influences to include similar customer needs and transferability of marketing, government trade policies, and growing imports. These can result in identification of similar demands of customers in various national markets, and thus exploitation of common features of marketing strategies, growing power of multinational wine producers and traders in particular markets based on scale economies, stable position of Czech wines in domestic market, and careful application of regulative measures of the government. Majority of global influences support the power of world wine brands and threaten the small wine producers in the Czech market. These, on the other hand, can build on specific customer demands, low product development costs, relative independence and customer preference of domestic product. References [1] TICHÁ, I. Analysis of Development of Approaches to Business Strategy. In Sborník vědeckých prací Firma a konkurenční prostředí. Brno: PEF MZLU v Brně, 2002, s ISBN [2] TOMŠÍK, P. Analýza vnějšího prostředí vinohradnicko-vinařského odvětví. In Sborník vědeckých prací Firma a konkurenční prostředí. Brno: PEF MZLU v Brně, 2002, s ISBN [3] YIP, G. S. Total Global Strategy: Managing for Worldwide Competitive Advantage. Engelwood Cliffs: Prentice Hall, 1995, 261 p. ISBN [4] ( ) [5] ( ) [6] ( ) Address of authors: doc. Ing. Pavel Žufan, Ph.D., Ing. Tomáš Pyšný Mendel University of Agriculture and Forestry in Brno Faculty of Business and Economics Zemědělská Brno Czech Republic manage@mendelu.cz 745