Horizontal networks and collaborative marketing in the Tasmanian wine industry Gemma Roach, BBus (Hons) Submitted in fulfilment of the requirements for the degree of Doctor of Philosophy University of Tasmania December 2011
Declaration of originality This thesis contains no material which has been accepted for a degree or diploma by the University or any other institution, except by way of background information and duly acknowledged in the thesis, and to the best of the my knowledge and belief no material previously published or written by another person except where due acknowledgement is made in the text of the thesis, nor does the thesis contain any material that infringes copyright. Gemma Roach Date ii
Authority of access This thesis may be made available for loan. Copying and communication of any part of this thesis is prohibited for two years from the date this statement was signed. After that time limited copying and communication is permitted in accordance with the Copyright Act 1968. Gemma Roach Date iii
Abstract In the past thirty or so years, an increasing number of organisations have formed business-to-business relationships as an alternative to traditional market exchange. Much of the literature in this area focuses on the nature of dyadic relationships or vertical networks between heterogeneous businesses in a supply chain. Far less research has examined how competitors interact at a network level, and, more specifically, why these organisations would choose to engage in collaborative marketing. This thesis examines the nature of horizontal networks and collaborative marketing in the context of the Tasmanian wine industry. It uses network theory to explore the phenomena of interproducer relationships within a specific wine region of Australia. The research is guided by the following questions: why do Tasmanian wine producers join horizontal networks, what types of collaborative marketing do Tasmanian wine producers engage in within horizontal networks, and what factors affect collaborative marketing between Tasmanian wine producers in horizontal networks. Qualitative data were gathered via in-depth interviews with firstly, industry informants, and secondly, individual wine producing businesses. These data were supplemented with information drawn from websites, industry publications, and news sources. A key aim of the study was to explore how horizontal networks are perceived by Tasmanian wine producers, and to what extent these businesses engage in collaborative marketing. Analysis of the data revealed that there are three horizontal networks within the Tasmanian wine industry, which are all of a formal nature. While these networks share a similar purpose, there was divergence between how successful each network s attempts at collaborative marketing had been. Furthermore, certain horizontal networks in the industry boasted higher levels of member trust, commitment, mutual benefit, and camaraderie. These factors have led to differences in the way each network is perceived, and the benefits of collaboration each offers. Parallels between Tasmania s only statewide industry association and the state s largest sub-regional network, have resulted in some conflict and rivalry which, going forward, may restrict the implementation of collaborative marketing at a state-wide level. iv
Acknowledgements The last three and a half years have taken me on a very enjoyable and thought-provoking ride. Thankfully, the outcome of this journey has been the compilation of this thesis, which has only been possible through the support, assistance, and resources I have received. Firstly I would like to acknowledge my main supervisor, Dr John Byrom, who was so forthcoming with his time, assistance, and attention to detail. This relationship was duly complemented with the support and advice provided by my co-supervisor, Assoc/Prof Martin Grimmer, to whom I also express my gratitude. Together, John and Martin granted me a solid foundation to conduct my research, and offered me clear direction to develop both personally and academically. I am also indebted to many of my colleagues within the Faculty of Business, who provided me with a friendly office atmosphere and lots of advice and encouragement. In particular I would like to thank Dr Kim Lehman, Dr Stuart Crispin and Dr Megan Woods. Through sharing their wisdom, experience, and friendship, I was able to relieve many of the challenges I encountered. Sincere thanks must also go out to the group of passionate Tasmanian wine producers and industry informants who participated in my study. These generous people kindly gave up their time to share with me their opinions, experiences, and in many cases, their wine. Finally, I would like to thank my family and friends who have supported me throughout this entire experience. Special thanks go to my fiancé, Daniel, whose love and patience have enabled me to reach my goal of one day completing my doctorate in marketing. v
List of tables Table 2.1 The transactional versus relational approach to exchange 23 Table 2.2 Different inter-organisational structures 43 Table 2.3 A continuum of inter-organisational relationships 47 Table 2.4 The characteristics of formal and informal networks 59 Table 7.1 Characteristics of the wine producers interviewed 149 Table 7.2 Horizontal networks in the Tasmanian wine industry 153 vi
List of figures Figure 1.1 Tasmania s wine sub-regions 16 Figure 2.1 A model of the interaction approach 28 Figure 2.2 The nature of inter-organisational relationships 48 Figure 4.1 An exploratory framework for the thesis 82 Figure 4.2 A visual representation of cooperative arrangements 83 Figure 10.1 Conceptual framework: horizontal networks and collaborative marketing in the Tasmanian wine industry 281 vii
Table of contents Declaration of originality Authority of access Abstract Acknowledgements List of tables List of figures ii iii iv v vi vii CHAPTER ONE Introduction to the thesis 1.1 Introduction 1 1.2 Background to the research problem 1 1.3 Research context 6 1.3.1 Australia s wine industry 7 1.3.2 Tasmania s wine industry 12 1.4 Research questions and significance of the study 16 1.5 Thesis structure 19 1.6 Chapter summary 21 CHAPTER TWO Inter-organisational relationships and network theory 2.1 Introduction 22 2.2 Industrial markets and paradigm shifts 22 2.3 A new wave of thinking: the interaction approach 25 2.3.1 The Activity-Resource-Actor (ARA) model 27 2.4 A contemporary view of competition 30 2.5 The social dimension of inter-organisational relationships 33 2.6 Inter-organisational relationships and business networks 35 2.6.1 Networks, alliances and clusters 40 2.7 The nature of interaction within business networks 44 2.8 Classifying different network forms 49 2.8.1 Vertical and horizontal networks 49 2.8.2 Formal and informal networks 54 2.9 Chapter summary 60 viii
CHAPTER THREE Network relationships 3.1 Introduction 61 3.2 Factors that enhance network relationships 61 3.2.1 Social bonds and social activity 62 3.2.2 Inter-organisational trust 64 3.2.3 Commitment 67 3.2.4 Mutual benefit and reciprocity 71 3.2.5 Communication 72 3.2.6 Leadership 73 3.3 Chapter summary 74 CHAPTER FOUR Collaborative marketing and horizontal networks 4.1 Introduction 76 4.2 SMEs and the benefits of networking 76 4.3 Defining collaborative marketing 80 4.4 Collaborative marketing and horizontal networks 84 4.5 Why firms join business networks 91 4.6 Why business networks sometimes fail 93 4.7 Chapter summary 98 CHAPTER FIVE Wine marketing and wine networks 5.1 Introduction 100 5.2 Wine marketing and the nature of the wine product 100 5.3 Collaboration in the Australian wine industry 104 5.4 Wine networks 106 5.4.1 Relationships between wine producers 107 5.4.2 Collaboration between the wine and tourism industries 113 5.4.3 Collaborative marketing between wine producers 116 5.4.4 Vertical wine networks 118 5.5 Literature review summary 119 CHAPTER SIX Methodology 6.1 Introduction 121 6.2 Research philosophy 121 ix
6.3 Research design 123 6.3.1 Qualitative research 124 6.3.2 Sampling strategy 125 6.4 Data collection 128 6.4.1 Stage one: interviews with industry informants 129 6.4.2 Stage one continued: industry documentation and secondary data 130 6.4.3 Stage two: in-depth interviews with wine producers 131 ` 6.4.3.1 The interview schedule 132 6.5 Data analysis 135 6.5.1 Data reduction 136 6.5.2 Data display 138 6.5.3 Conclusion drawing and verification 138 6.6 Reliability and validity of the research findings 140 6.6.1 Reliability 140 6.6.2 Validity 141 6.7 Ethical considerations 142 6.8 Limitations of the methodology 144 6.9 Chapter summary 146 CHAPTER SEVEN Findings and discussion part one 7.1 Introduction 147 7.2 Tasmanian wine producers involved in the study 147 7.3 Horizontal networks in the Tasmanian wine industry 152 7.3.1 Wine Industry Tasmania (WIT) 154 7.3.2 The Tamar Valley Wine Route (TVWR) 156 7.3.3 WineSouth 157 7.3.4 Informal networks and past industry associations 158 7.4 Horizontal networks and the nature of interaction 163 7.5 Why Tasmanian wine producers join horizontal networks 165 7.5.1 Commercial motivations 167 7.5.2 Social motivations 171 7.5.3 Strategic motivations 175 7.6 The benefits of horizontal networking 180 7.7 Chapter summary 189 x
CHAPTER EIGHT Findings and discussion part two 8.1 Introduction 190 8.2 Collaborative marketing in the Tasmanian wine industry 190 8.2.1 Promotion 193 8.2.1.1 Annual wine route publications 193 8.2.1.2 Wine industry events, festivals, and trade shows 196 8.2.1.3 Advertising, sponsorship and public relations 200 8.2.1.4 Word-of-mouth referrals between wine producers 202 8.2.2 Product benchmarking 205 8.2.3 Product bundling 207 8.2.4 Regional branding 208 8.2.5 Distribution 210 8.2.6 Pricing 211 8.3 Chapter summary 212 CHAPTER NINE Findings and discussion part three 9.1 Introduction 214 9.2 Enhancing collaborative marketing in horizontal networks 214 9.2.1 Critical mass and geographic proximity 215 9.2.2 Producer diversity 220 9.2.3 Formal governance and transparency 224 9.2.4 Frequent and open communication 229 9.2.5 Leadership and network champions 231 9.2.6 Government involvement and support 235 9.2.7 Producer contribution and commitment 237 9.2.8 Trust and respect 246 9.2.9 Social interaction and support 250 9.3 Factors that inhibit collaborative marketing in horizontal networks 255 9.3.1 Financial cost 255 9.3.2 Inter-network conflict 258 9.3.3 Intra-network divisions 264 9.3.4 Time and human resources 267 9.4 Chapter summary 269 xi
CHAPTER TEN Conclusion 10.1 Introduction 271 10.2 Conclusions to the research questions 271 10.2.1 Research question one 272 10.2.2 Research question two 274 10.2.3 Research question three 276 10.3 Contributions to theory 282 10.4 Implications for practice 284 10.5 Research limitations 287 10.6 Further research 289 10.7 Final statement 291 REFERENCES 292 APPENDICES Appendix A Information sheets for wine producers 325 Appendix B Information sheet for industry informants 329 Appendix C Interview schedule for industry informants 331 Appendix D Industry related events attended 332 Appendix E Interview schedule for wine producers 333 Appendix F List of tree nodes from QSR NVivo 335 Appendix G Event photos and network materials 337 xii