Article

The International Competitiveness of the California Wine Industry

Wine production, sales, and consumption in the United States are growing. Competition in this growing market involves product differentiation. In the US wine industry, firms attempt to differentiate themselves in two main ways. First, in response to competition, both foreign and domestic, there are continuous changes to the product. In fact, the wine's chemistry may be little changed; the marketing and the tale surrounding the wine changes to modify consumer preferences toward the wine. Also, wineries may offer wine in different wine segments, thus changing the competitive forces on their brand. Many smaller wineries offer products that cater to those looking for a low-price wine and for those seeking a good value with excellent quality. This further differentiates the winery's product, allowing their competitive advantage to step to the foreground. Michael Porter (1985) speaks of "competitive advantage" as the way firms use their inherent advantages to compete. This is not necessarily in terms of costs, but how the firm adds value through specific functions. The way value-added activities are measured and compared to their competitors is through Porter’s value chain. This study involves a look at the US wine industry through some comparative statistics, and attempts to identify the nature of its competitive advantage. We claim that the quality perception is a major part of these advantages, especially in higher-priced segments. Throughout the paper, the nature of Chilean competition is discussed to give an insight as to Chile's ability, or lack thereof, to penetrate US wine markets.

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