Wine Industry - France and Australia

A Comparative Analysis


Research Paper (postgraduate), 2009
73 Pages, Grade: A

Excerpt

Table of Content

1 Executive Summary

2 Introduction

3 Methodology
3.1.1 Methods
3.1.2 Theories/Approaches
3.1.3 Datacollection

4 Industry of Choice

5 Country Comparison
5.1 Macro-Economic Indicators
5.1.1 Demographic
5.1.1.1 Population
5.1.1.2 Population Growth
5.1.1.3 Population Composition
5.1.1.4 Employment Rate
5.1.1.5 Wages
5.1.2 Economic and Financial Systems
5.1.2.1 GDP
5.1.2.2 Inflation
5.1.2.3 Main Trading Partners
5.1.2.4 Imports
5.1.2.5 Exports
5.2 Historical Development
5.2.1 Early History & Development (until 1800)
5.2.2 Recent Historical developments (1800-present)
5.2.3 Highly relevant historical developments
5.3 Socio-Cultural Conditions
5.3.1 Cultural System
5.3.2 Political/ Government System
5.3.3 LegalSystem
5.3.4 Financial System
5.3.5 Social Security System
5.3.6 Labour Market System
5.3.6.1 Education
5.3.6.2 Training System - HRM
5.3.6.3 Industrial Relation System
5.3.7 Science and Technology system
5.3.8 Transnational Institutional Links
5.3.8.1 International agreements
5.3.8.2 Partner states
5.3.8.3 Foreign Trade Policies
5.3.8.4 Investment Climate
5.3.8.5 International Memberships
5.4 Market/ Industry Conditions
5.4.1 Economic Actors
5.4.1.1 Nature of Economic Actors
5.4.1.2 Nature of market organization
5.4.1.3 Nature of work coordination and control system
5.4.2 Competitive Industry Environment
5.4.2.1 Supply market conditions
5.4.2.2 Demand market conditions
5.4.2.3 Main players
5.4.2.4 New Entrants/ Substitute products
5.4.2.5 Level of competition
5.4.2.6 Future Outlook
5.5 Other Contextual Conditions
5.5.1 Environment
5.5.2 Infrastructure

6 Findings & Recommendations

7 Bibliography

Figures

Figure 1. Australia Inflation rate (consumer-prices)

Figure 2. France Inflation rate (consumer-prices)

Figure 3. France’s exports in 2006

Figure 4. Export intensity (% of firms exporting) by industry sector

Figure 5. Percentage of surveyed wine firms that export - by State

Figure 6. Wine map in France

Figure 7. The Australian political system

Figure 8. The perception of the situation by a winemaker, Region Bordeaux

Figure 9. Levels of Qualifications, 2006

Figure 10. Structure and governance of the French NIS

Figure 11. Australia Win Distribution

Figure 12. France Wine Distribution

Figure 13. Australia Wine Market Share

Figure 14. France Wine Market Share

Table 1. The natural growth in France

Table 2. The immigration in France

Table 3. Demographic development in France

Table 4. Demographic development in Australia

Table 5. Employment rates

Table 6. Employment rates in the agricultural sector

Table 7. Impact of inflation on a national level

Table 8. International export destinations of Australian wine

Table 9. Level of Qualifications in Wine Industry, 2006

Table 10. Apprentices and trainees

Table 11. Higher Education South Australia

1 Executive Summary

A country fact book is necessary in order to make a comparison between countries and industries, specifically focused on assessing, comparing and recommending the business opportunities and limitations for investments in certain industries in different countries. It studies and compares relevant conditions for foreign investors in specific countries and specific industries that need to make country comparative investment decisions. This country fact book analyzes, makes a comparison and gives recommendations concerning the wine industry in Australia and France. The comparative analysis and, subsequent, recommendations are aimed at foreign direct investors that are considering to invest in the wine industry of either Australia or France.

Australia has a larger population; experiences accelerated growth and has a younger population than France which might be of importance to possible foreign direct investors. Another important macro-economic indicator to consider is that the wages in Australia are 10% less than in its French counterpart. The Australian wine industry has more growth potential and mass production becomes more important, the emphasis is on quantity with quality, while there are some smaller wineries in Australia that focus solely on the production of high quality wine, in line with this is the French wine industry that has throughout its history always been solely focused on the quality of the wine. In addition, France is mainly producing wine for the domestic market as opposed to Australia that is mainly an producing wine for the export and in recent years it has become Australia’s most commonly exported product. France has a lot of agriculture related education, in comparison to Australia where there are only a few schools dedicated to agriculture. The cultural aspects differ, but since both are western countries there are not a lot of differences. The economic actors in both countries tend to be similar. The competitive environment does offer some interesting differences.

Depending on what the focus of the foreign direct investor is we could recommend either country, if there the investor does not have a large starting investment we would recommend to start in France. France offers the best opportunities for a small winery that is mainly focused on the production of high quality wine, although it is common in France to produce the wine for the domestic market, there are some interesting export opportunities to be explored as well. If the investor has the ability to invest a large sum of money Australia would be the preferable country, since Australia offers the capability to create a large winery, we would suggest to produce wine here that would be suitable for mass consumption, because Australia does not have a large domestic wine market the Australian winery should be focused on exporting the wine.

2 Introduction

In which country would it be best to invest in, in terms of return on investmest, regarding the wine industry; France or Australia? Which is the better option: Greenfield or Brownfield?

What factors need to be considered?

This question is illustrating the goal and purpose of our fact book research. France is known for years for its good wine, and its traditionalistic view on production is widely known all over the world whereas Australia is part of the “newcomers”. The Australian wine was not very well known until the late 20th century (Wine in Australia. Foster's Group Limited. 2006). The country does not have a wine tradition but is more and more known for making high quality wine.

We will build our fact book around different aspects that will be in relation with the wine industry in both countries.

First of all figures and facts will be compared on a macro-economic view, where we will take a look at the country as a whole considering their demographic position, financial situation and economy.

Secondly we will focus on the historical developments of the wine industry; this will help us to understand more about the traditions and ways of working in the two countries. The social- cultural aspect will be treated in a third part. Culture will be identified and compared, as well as different institutions as for example the social security systems, the legal systems and financial systems, without forgetting the labour market systems. Fourthly, we will study the industry more in dept by identifying the nature of economic actors as well as the competitiveness within the industry.

After a thorough analysis of all the different aspects of our fact book we will come with a conclusion in which we will specify our advice for further investments in these two countries.

3 Methodology

The most important issue to consider before starting the methodology section of our Country Fact book is what actually defines methodology. After studying different definitions, descriptions and explanations of methodology we decided to view methodology as the body or system of principles, procedures, methods and rules applied within the scope of a particular discipline and the analysis of this body.

3.1.1 Methods

In order to decide on a method to compile our fact book we decided to focus on how and with which methods other renowned academic fact books were assembled. After this research our team decided conducting in-depth surveys and interview was important but for our particular industry and country comparison conducting these ourselves was not reachable. However, adequate and applicable in-depth surveys and interviews have been conducted which can be put to use in our Country Fact book. For our Country Fact book we decided that collecting data, information, facts and information from different sound academic articles, studies and other sound academic documents and references was applicable and relevant as well. Our focus was on collecting secondary data instead of primary data due to time constraints and due to the fact that adequate and sufficient information was at hand.

In short, this is an essential part of our methodology and is crucial in compiling and assembling our fact book. This method to compile our fact book is the basis of our Country Fact book.

3.1.2 Theories/ Approaches

The prime theory and the approaches that according to our group should be at the basis of our Country Fact book when comparing the chosen industry in these countries is discussed in this chapter. During the research and progress of Country Fact book our team compiled the theories and approaches that proved to be the most adequate and applicable for our comparison. In the cultural analysis part of the fact book our team used a well-known theory or model. The Hofstede-Bond Studies which is focused more on cultural dimensions for cross-cultural management research in comparison to the Trompenaars’ five relevant dimensions which was an option for the cultural analysis as well. The Hofstede-Bond Studies was used due the fact this theory deals with all the important elements of culture, this theory is also widely used in various academic articles because it is very valuable in making a comparison between France and Australia. In creating the fact book we also made use of the Porter’s Competitive Forces Model this theory is mainly used to determine the market situation and the influence it has on our particular industry, we decided to use this theory because this theory is a very conclusive theory that gives a clear explanation of the forces involved in the market.

To conclude, this element of the methodology is of high importance the Country Fact book due to it being the body of procedures and approaches used and analyzed in this paper.

3.1.3 Data collection

The first thing we need to know what data collection actually encompasses. According to us it is composed of collecting the statistics, content, data and information of which our Country Fact book will consist. In this case it would be best to collect the data on a random simple basis from sound academic articles and compare this data to other randomly selected data from sound academic references, because we also needed statistical data to for our fact book we made use of official government statistics. When collecting the data we always made sure that there were multiple sources confirming the information. This method of collecting data is according to us the best way to collect sound and applicable data. The documents, in-depth surveys, interviews, statistics, references and data should also be analyzed and scrutinized in order to discover the relevance, applicability and primarily accuracy and soundness of these documents and articles. Our group decided to focus on collecting and analyzing secondary data instead of collecting primary data ourselves.

All in all, the methodology part of the structure of this paper is of importance to our fact book. The methods to compile our fact book, theories and approaches to draw upon and methods of data collection and analysis, are the foundation of this paper and the body of the methodology that this fact book is composed of in order to make a country and industry comparison.

4 Industry of Choice

We chose to compare France and Australia in the wine sector since we all know that both countries are world wine producers. We took a look at some statistics (2004. Winebiz.com) and found out that in every top 10 of 2004 concerned with wine (except wine consumption) Australia and France are both present. So here we can see that it is something both countries have in common. Besides the found similarities there are also differences that we already know. Wine production has a much longer history and tradition in France than it does in Australia. Their ways of working are of course not the same. All these facts make our choice for the wine industry for us very interesting.

Several particular context conditions are important for our industry, namely for the production agriculture, labour market systems, cultural aspects and especially traditions and laws are also very important. If we talk about consumption we more have to look at the country’s culture. In the course of the paper other aspects such as imports and exports of both countries, legal and financial systems, as well as transportation and other factors will be reviewed and evaluated.

5 Country Comparison

5.1 Macro-Economic Indicators

5.1.1 Demographic

The demographic part regarding the macro-economic indicators informs about the population of a country or region. Not only population density, but also population growth, population composition and employment wages will be dealt with in this section.

5.1.1.1 Population

Population is measured mainly in habitants of a specific area/ country. In this case, the population of both Australia and France will be analyzed.

France:

The current population in France is estimated to be 61.88 million (Economist.com, 2009).

Australia:

The current population of Australia is estimated to be 20.4 million (Economist.com, 2009). Comparison:

As we can see France has a population about three times as large as Australia’s population.

5.1.1.2 Population Growth France:

When we talking about the growth there are two kinds of growth, the first is by natural growth due to birth the second source for growth is immigration.

First we will discuss the first source of growth the natural growth (Table 1):

Table 1. The natural growth in France

illustration not visible in this excerpt

Source 1 : Naissances et fécondité en 2008. Insee, estimations de population et statistiques de l'état civil. Champ, France. 2008 Source 2: Décès et mortalité en 2008. Insee, estimations de population et statistiques de l'état civil. Champ, France. 2008

The second source of population growth in France is immigration (Table 2):

Table 2. The immigration in France

illustration not visible in this excerpt

Source 1: Flux d'immigration permanente par motif. . Insee, estimations de population et statistiques de l'état civil. Champ, France. 2008

Source 2: Répartition de la population selon le lieu de naissance et la nationalité. Insee, estimations de population et statistiques de l'état civil. Champ, France. 2008

This results in a total growth of France’s population of 367,375.

Australia:

Here again we will discuss both sources of growth.

First, the source of growth, natural growth:

Australia in comparison to France does not provide us with exact numbers of births and deaths they only provide us with total natural growth, the same goes for immigration.

illustration not visible in this excerpt

This results in a total growth of Australia’s population of 359 000

Comparison:

We can conclude from the numbers presented here that the population of Australia in comparison to that of France is experiencing an accelerated growth.

5.1.1.3 Population Composition

When we are looking at the composition of the population of a certain country there are many things you could divide the population into, for the use of our research we have decided to look at the demographics of the country and also to look at the difference between males and females (Table 3 and Table 4).

illustration not visible in this excerpt

Comparison:

If we look at the demographics we can see that Australia has a younger population then France.

5.1.1.4 Employment Rate

When we look at the employment rates we specifically wanted to look whether there was a lot of the population involved in the agricultural sector because this sector includes the wine industry (Table 5 and Table 6).

Table 5. Employment rates

illustration not visible in this excerpt

Source: Population de 15 ans ou plus selon la catégorie socioprofessionnelle. Insee, estimations de population et statistiques de_ľ

Table 6. Employment rates in the agricultural sector

illustration not visible in this excerpt

Comparison:

If we compare the unemployment rates of France and Australia we can conclude that in Australia there is less unemployment; looking at the agricultural sector we can see that the amount of workers in this sector is almost equal in both countries.

5.1.1.5 Wages France

Concerning the wages we have decided to only look at the salary that is used in our industry. Average Net. Year salary: €17 064, (Population de 15 ans ou plus selon la catégorie socioprofessionnelle. Insee, estimations de population et statistiques de l'état civil. Champ, France. 2008)

Australia

Here again we only looked at the salary for the persons currently employed in the agricultural sector.

Average Net. Year salary: € 15.670,-

(Australian Bureau of Statistics. Employee Earnings and Hours, Australia. May 2006)

Comparison:

If we compare these numbers we can see that the average employee in Australia gets about 10% less salary than its French counterpart, therefore it might be preferable for a new company to start up in Australia rather than in France.

5.1.2 Economic and Financial Systems

Economic and financial systems define the very essence of any macro-economic indicator analysis. Before analysing the following sub-sections of both countries, a short introduction dealing with historical and current issues follows.

France has exercised extensive government ownership and intervention in the past to what originally was an economy based and relying on market mechanisms. The leaders and officials of this country still remain positive towards a sort of capitalism where social equity is sustained by the adoption of certain laws, policies and spending, which all reduce the ‘impact of free markets on public health and welfare’ (CIA World Fact Book, France).

The financial crisis hit France hard, so that GDP growth dropped to 0.7%, the lowest for decades. France plans to fight back by injecting more capital to the banking sector in the near future and therefore compensate fort he loses in 2008/ 2009. Due to this plan, France’s government deficit will increase even more, most likely moving above the European Union standard ceiling of 3% GDP. France also has an incredibly huge tax burden with 50% of its GDP. Tourism is quite big in France, the most visited country in the world, with over 75 million tourists; over 1/3 of this country’s income derives from tourism alone.

Australia, although far away from the rest of the Western world has been experiencing some quite strong GDP on par growth over the last decade. Australia’s government has adopted a variety of new reforms that has pushed Australia to where it is today in economic terms.

Low inflation and strong relations to its main trading partners, especially China, are also indicators of this vast expansion that has been taking place over the last 20 years. In particular agricultural products, raw materials, in combination with high export prices have been a great deal of help in stabilizing the country’s economy recently. has an enviable, strong economy with a per capita GDP on par with the four dominant West European economies. Emphasis on reforms, low inflation, a housing market boom, and growing ties with China have been key factors over the course of the economy's 17 solid years of expansion. Robust business and consumer confidence and high export prices for raw materials and agricultural products fuelled the economy in recent years, particularly in mining states. Nowadays Australia is facing new challenges, including a labour market that is not growing fast enough, import demand and infrastructure problems, all leading to an increase in inflation due to reduced exports in 2008. As many other countries throughout the world, Australia has been experiencing liquidity issues, which proved to be a huge disadvantage for banks since the entire economy relies mostly on international wholesale markets for funding. Although all these are factors that have contributed to Australia’s constrained growth in the last year and also this year, the country is better off than many other European countries. ‘The government plans to counter slowing growth in 2009 with fiscal stimulus efforts.‘

5.1.2.1 GDP

When considering the Gross National Product of both France and Australia special attention has to be paid to the fact that almost same numbers exist, of course France has around three times as many inhabitants (61.6m) as Australia (20.4), therefore France’s GDP (2,097b) is much higher than the GDP of Australia (824.9m), but when looking at the GDP per head (US$; purchasing power parity) Australia (39,500) is almost on the same line as France (32,700). This means that although France’s GDP is higher, this is only because of its population; in comparison with Australia this means that both countries are developed countries with each citizen earning almost the same amount in both countries, whereby Australia is actually better off considering the individual citizen.

As can be expected France’s real GDP growth rate (0.9) is much lower than Australia’s (2.5), which is anticipatory because France’s economy has been around much longer than Australia and has also had more influence on the world market for a much longer time than the country ‘down-under’. Why this is will be dealt with in the second part of chapter 5, the historical development, but will not be addressed for now.

(CIA World Fact Book, 2008)

5.1.2.2 Inflation

In terms of inflation, France and Australia have different numbers to show for, with France having an inflation rate of 1.5% and Australia with a rate of 3% (Figure 1).

Australia

illustration not visible in this excerpt

Figure 1. Australia Inflation rate (consumer-prices)

CIA World Fact Book (May 18, 2008)

When looking at the development of inflation in the last five to six years it can be seen in the figure above that inflation was quite stable from 2003 to 2006, but increased by 40.74% in one year alone to 3.8%, the highest in 16 years officials noticed, after 2007 it fell, not very dramatically to 3% in 2008.

Why this is might be explained by a quote from Bloomberg.com, a financial site also reporting on news in the financial sector worldwide:

Rising food and energy costs drove the acceleration in inflation, as they have in economies from France to China. (Bioomberg.com, 2007)

This shows that although Australia is indeed ‘far away’ from the rest of the Western World, it does not mean that it is either shielded against the financial crisis, or inhibited from R&D, just because of its location.

France

illustration not visible in this excerpt

Figure 2. France Inflation rate (consumer-prices).

CIA World Fact Book (May 18, 2008)

As can be seen in this table, the inflation rate of France has not changed much over the past five to six years, with one exception in 2005 when inflation rate increased to 2.3%

Since inflation is always mentioned when macro-economic indicators are listed, the focus shifts away from the problem to mere data reporting. What consequences does an increase in inflation bring along? Also, how severe are these consequences if inflation would indeed rise substantially in a particular country.

[...]

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Details

Title
Wine Industry - France and Australia
Subtitle
A Comparative Analysis
College
University of Groningen
Course
Comparative Country Studies
Grade
A
Authors
Year
2009
Pages
73
Catalog Number
V182605
ISBN (eBook)
9783656071990
ISBN (Book)
9783656071310
File size
1704 KB
Language
English
Tags
wine, industry, france, australia, comparative, analysis
Quote paper
MSc. Jon Gruda (Author)Jordy de Vries (Author)Tomas Marsman (Author), 2009, Wine Industry - France and Australia, Munich, GRIN Verlag, https://www.grin.com/document/182605

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