Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
THE CHILEAN WINE INDUSTRY
(Robert Kennedy College – Corporate Strategy Final Project)
1
Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
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Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
Contents
Executive Summary ........................................................................................................ 5
Overview and Geography of Chile .................................................................................. 5
History ............................................................................................................................. 6
Politics ............................................................................................................................. 6
Chile’s overall business environment .............................................................................. 6
Macroeconomic Policies and Institutions......................................................................... 7
National Diamond Including the Role of Government...................................................... 9
Factor Conditions: ...................................................................................................... 10
Context for Firm Strategy and Rivalry: ....................................................................... 12
Demand Conditions: .................................................................................................. 13
Related and Supporting Industries: ............................................................................ 14
Global Wine Industry ..................................................................................................... 14
History and Evolution of Chile’s Wine Industry .............................................................. 16
Chilean Wine Cluster..................................................................................................... 17
Wine Growing Regions of Chile ................................................................................. 18
Industry Cluster ............................................................................................................. 19
Industry Diamond ....................................................................................................... 20
Factor (input) Conditions ........................................................................................ 20
Demand ................................................................................................................. 21
Strategy and Rivalry ............................................................................................... 22
Supporting and Related Industries ......................................................................... 23
Identification of Strategic Issues Facing Chile ............................................................... 23
Business Innovation ................................................................................................... 25
Human Capital ........................................................................................................... 25
Science Connections to the Business Sector............................................................. 25
Governance ............................................................................................................... 26
Identification of Strategic Issues Facing the Chilean Wine Cluster ............................... 26
Marketing and Promotion ........................................................................................... 26
Innovation .................................................................................................................. 27
Internationalization ..................................................................................................... 27
Education and Training .............................................................................................. 28
Supply Issues............................................................................................................. 28
Chile policy recommendations ...................................................................................... 28
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Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
Business innovation ................................................................................................... 29
Human capital ............................................................................................................ 29
Science and science connections to the business sector .......................................... 30
Governance ............................................................................................................... 30
Chilean wine cluster policy recommendations ............................................................... 30
Marketing and promotion ........................................................................................... 30
Innovation .................................................................................................................. 31
Internationalization ..................................................................................................... 31
Education and training ............................................................................................... 31
Supply issues ............................................................................................................. 31
Conclusion .................................................................................................................... 32
Bibliography .................................................................................................................. 33
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Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
Executive Summary
Chile has been the South American success story given that it has profited from a
steady economic growth. Chile’s sound business environment boosted by a stable,
open and market oriented economy was able to attract many foreign investors. Factors
like a great geographical variety, strong macroeconomic policies well-developed
physical and administrative infrastructure, strong cooperation and various memberships
in trade and investment agreements with attractive tax policies and tariff liberalizations
contributed to Chile ranking 30th in the Global Competitiveness Index 2009-2010.
However, Chile's relative progress has slipped given that many of its peer countries
already perform better than Chile which fell two positions in its ranking since 2008-2009.
Chile finds itself in a decisive and risky point in its economic development. If Chile’s
economic stagnation continues and it fails to reactivate its growth by improving its
innovation performance, Chile risks being overtaken by other countries entering the
same markets and innovating faster and sink back into underdevelopment. The
challenge for Chile is to design and implement a package of extensive microeconomic
reforms in the areas of business innovation, human capital, science connections to the
business sector and overall governance. Given its small population and low domestic
demands, exports are key to growth. The country has to identify its competitive
advantages over its global competitors and also focus on increasing productivity and
innovation.
As most important and successful cluster of the country, the Chilean wine cluster has
managed an effective turnaround from domestic to export markets, enjoying a great
success in international markets with reliable and decent wines at reasonable prices.
However, Chile’s wine cluster needs to improve its international perception and
branding.
Marketing and promotion, innovation, internationalization, education and training and
supply issues are problem areas of the Chilean wine cluster which need to be
addressed by an open discussion and a collective effort of the cluster’s members.
Overview and Geography of Chile
Located in Southern South America, south of Peru and west of Bolivia and Argentina
the Republic of Chile is about 2,880 miles long. It is bordered by the Pacific Ocean in
the west and by the Andes mountains in the east. Chile occupies a land mass of
756,102 sq km, ranking 38 in the world in land mass. Chile’s population is estimated at
16,746,491, and has a growth rate of 0.856%.1 (CIA World Fact Book, 2010)
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Corporate Strategy
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Robert Kennedy College - Switzerland
History
Before coming under the Spanish sphere of influence in the 16th century, northern Chile
was under Inca rule while the indigenous Mapuche inhabited central and southern
Chile. Although Chile declared its independence in 1810, decisive victory over the
Spanish was not achieved until 1818. 2 (CIA World Fact Book, 2010)
In the 1879-83 war, Chile defeated Peru and Bolivia and won its present northern
regions. After a series of elected governments, a three-year-old Marxist government of
Salvador Allende was overthrown in 1973 by a military coup led by Augusto Pinochet,
who ruled until a freely elected President was installed in 1990. 3 (CIA World Fact Book, 2010)
Politics
Since the 1980s, economic policies contributed to steady growth, and have helped
secure the country's commitment to a democratic and representative government. Chile
increasingly assumed regional and international leadership roles befitting its status as a
stable, democratic nation. Following free elections in 1990 when President Augusto
Pinochet was defeated, Chile continued to enjoy steady growth in a more favorable
political climate.
According to the Global Competitive Index of 2009-2010, Chile is currently in transition
from the second to the third and final stage of its development. Chile is the only Latin
American and Caribbean country in the top 30 global performer.
Chile’s overall business environment
Chile has a stable, open, and market oriented economy that is recognized by:
•
•
•
•
high level of foreign trade
strong financial institutions
sound government macroeconomic policies
responsible leadership well regarded regionally and internationally
Its well-developed institutions with strong legal framework, efficient regulatory system,
and free trade agreements reduces risks and provides a favorable political and
economic climate making Chile attractive to investors worldwide.4 (Invest Chile website)
Foreign investments policies are liberal and open; they facilitate a variety of business
opportunities and activities to investors which in turn provides the needed capital and
technology for Chile’s economic development and growth. 5 (PWC website)
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Corporate Strategy
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Robert Kennedy College - Switzerland
Source: Invest Chile website 2008-2009
Macroeconomic Policies and Institutions
Chile is known for its strong macroeconomic policy system related to free trade
agreements, attractive tax policies, highly skilled human resources, education and
foreign language trainings, intellectual properties, and financial systems.
The Chilean Trade Commission, Ministry of Foreign Affairs, along with the Latin
American Integration Association (LAIA), and MERCUOSUR are greatly emphasizing
the importance of these agreements for competitiveness and economic growth. Chile is
also strong on attracting Foreign Direct Investment (FDI) and import competitions (rank
21- Global Competitive Ranking).
The government’s aim in Taxation Policy is to be neutral and in line with those countries
most interested in investing in Chile. 6 (PWC website) Chile has attractive tax policies such as
double taxation agreement with 19 countries. Taxes in Chile are the lowest in Latin
America and well below many European countries, making it attractive to investors. 7
(Chile’s website)
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Robert Kennedy College - Switzerland
Source: ISC HBS
Chile has well-developed Intellectual Property policies (Industrial Property Law,
Intellectual Property Law) with regulations concerning trademarks, industrial model
rights, copyrights, and patents. 8 (PWC website) In 2008, the government created the National
Industrial Property Institute to streamline Industrial Property Rights (IPR) procedures. 9
(Index of Economic Freedom website)
The bank system policies are facilitating its open economy. Its main bank is the Central
Bank. The banks have most of the technical advances, which link to international
information and operation systems. The pillars of its banking system are the commercial
banks (which offer the full range of banking services), and other financial institutions.
The Labor Market policies and Labor Codes provide oversight and help to monitor labor,
relations, benefits, visa, and employment of alien issues. 10 (PWC website)
Institutions for Collaboration (IFCs) play an important part in an economy as they affect
the competitiveness of any nation. IFCs enable the exchange of information and
technology, and foster cooperation and coordination within and outside the country, and
clusters, which in turn can improve the overall business environment.
IFCs impact every pillar of the national diamond; they assist in the development and
operation of the infrastructure or improve cost/quality that affects the factor conditions.
With set policies and regulations, the productivity and competitiveness can be
strengthened (especially firm strategy and rivalry). In the related and supporting
industries, this can build trust and collaboration that can lead to lowering transaction
costs. IFCs can increase size and sophistication of demand of industrial buyers and
other consumers through these collaborations. 11 (Porter, 2008)
Chile is strong on collaboration and partnership, and this is one its major strengths.
Some of the major IFCs in Chile are shown in the table below:
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Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
CHILE'S INSTITUTIONS FOR COLLABORATION
The Chilean Trade Com m ission and Chilean
Ministry of Foreign Affairs ,
as a member of many associations (LAIA ,
M ERCOSUR , OECD , and NAFTA ) established free
trade no barriers policies w ith many countries
w orldw ide (source: Invest Chile website)
ProChile, along w ith some of these associations are
assisting in the development of the export process (to
establish and oversee the international business
relationships, exchange of goods and services; attracting
foreign investments). They also serve as a source for
market research (source: Wines of Chile website)
The Confederation for Production and Com m erce
(CPC) institution groups and represents the Chilean
The Chilean Econom ic Developm ent Agency created
business community (National Agriculture Society;
the Invest Chile program to provide local and foreign
National Chamber of Commerce, Services and Tourism;
investors w ith investment cost reduction by offering great
National Mining Society; Industrial Development Society;
financial incentives and investment services. (source:
Chilean Chamber of Construction; Association of Banks
Invest Chile website)
and Financial Institutions) for competitive business
collaboration (source: CPC website)
EuroChile is fostering economic, commercial, and
technological cooperation betw een institutions in Chile
and the EU through business ties (EuroChile website)
Chile is a member of the World Trade Organization
(WTO), the only global international organization dealing
w ith the rules of trade betw een nations. The goal is to
help producers of goods and services, exporters, and
importers conduct their business .(Source: WTO
website)
Chilean universities enjoy a w ide variety of academic
cooperation, collaboration, and exchange agreement, in Central Bank is an autonomous institution, responsible
fields like R&D, administration, science, sociology,
for ensuring the value of the currency remains stable and
sustainable development, education and humanities,
the normal functions of internal and external payments.
agriculture, political and social science, and public
(Source: Chileinfo website)
affairs. (source: Invest Chile website)
National Diamond Including the Role of Government
Chile’s strength rides on its great geography; strong macroeconomic policies; welldeveloped physical and administrative infrastructure; strong cooperation, and various
memberships in trade and investment agreements with attractive tax policies and tariff
liberalizations. These factors made Chile one of the world’s most competitive
economies. Chile ranked 30th on the Global Competitiveness Index 2009-2010 (fell 2
positions since 2008-2009); and has a $14,900 Gross Domestic Product (GDP) per
capita in 2008 - which is the highest in South America. 12 (World Bank competitive Report 2008-2009)
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Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
Early transition to a private pension system along with a well-developed banking
system; an agile capital market, and the growth of institutional investors (insurance
companies, investment, and mutual funds) contributed to Chile’s financial growth. These
elements allowed Chile’s financial infrastructure to lead fiscal progress in the region.13
(AFP Provida, HBS)
Chile ranked number one or had a strong position in the categories listed below.
Chile’s growth and innovation abilities have become competitive and successful with the
government’s involvement. There was a realization that to compete successfully, there
is a need to better align resources and skills, communication and information systems,
and that a better focus is needed to deploy those resources and skills. It is also
important to promote and encourage companies to invest and innovate.14 (Porter, 1998)
Government alone cannot create competitive industries, only companies can do that. In
this view the government’s role is to stimulate innovation, encourage change, motivate
and push companies to improve productivity in existing industries, and to compete in
more sophisticated industry segments. 15 (Porter, 1998)
Factor Conditions:
Chile is strong on macroeconomic fundamentals and policies with adequate government
agencies and institutions. Chile has a great variety of high quality business input such
as a well-developed physical infrastructure (ranks 30). For example, electric power
supplied under competitive conditions, or the telecommunication system had intense
local competition and it was among the most efficient and lowest priced around the
world. 16 (AFP Provida, HBS)
Additionally, the information (transparency), administrative (registration, permitting),
science and technology infrastructures, and more importantly capital availability added
to its strength. 17 (Porter, 1998)
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Corporate Strategy
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Robert Kennedy College - Switzerland
Globally, Chile ranks 26th in market efficiency and market liberalization; and is ranked
45th for domestic and market size. 18 (GCR 2009-2010) According to the World Bank, Chile
ranked second in Latin America and 40th in the world (from 181 participants) for “ease of
doing business” which includes the aspects of investing and starting a business and its
security. 19 (World Bank Competitiveness Report 2008-2009)
Source: Invest Chile website
Equally important is the role the government plays in encouraging sustained
investments in human skills and physical assets. 20 (Porter, 1998) Chile has a weakness in its
education system (primary education ranked 96th and higher education ranked 45th).
This is slowly improving by adding various trainings, specialized schools, and
universities. 21 (Porter, 1998)
The government has a significant role to improve the quality and quantity of its
education system. They focused on foreign language training and bilingual education
(Language Open Door Program) with emphasizing the importance of the English
language. Moreover, focusing on specialized programs, trainings, and research effort
with local and international universities for competitiveness and success is important.
Chile’s great geographical diversity (the driest desert in the world; southern glaciers, big
forests, numerous rivers, fertile valleys) divided in 3 climate zones, next to its efficient
and competitive transportation systems (deep-water ports, air links, road systems)
makes it a favorable business and tourist destination. 22 (Chile Info website) However, this
geographic diversity can also be a disadvantage due to national hazards such as
severe earthquakes, tsunamis or the 50 active volcanoes in Chile.
Chile’s proximity to other emerging markets such as Brazil, Peru, and Argentina and its
ranking in economic development help it to serve as a bridge between Latin America
and the rest of the world. Chile is well situated for services that require time-zone
dependent transaction as time difference between Chile and the US or Europe is only 05 hrs depending on the time of the year. 23 (Invest Chile website)
Chile is weak on foreign currency regulations, inflation (rank 72 - GCR), with a poor
public health system. Business costs of corruption, crime and money laundering
activities are high (ranks 80), moreover Chile is known as a transshipment country for
cocaine destined to Europe and the region. 24 (CIA Fact book) Chile lacks government policies
promoting improved energy efficiency. 25 (ECFEE website)
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Corporate Strategy
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Robert Kennedy College - Switzerland
BASIC FACTORS
STRENGTHS (+)
WEAKNESSES (-)
Gre at ge ography varie ty : the drie st de se rt in the world ; southe rn National haz ards (se ve re e arthquake s, 50 active
glacie rs, e xube rant fore sts,fast-flowing rive rs, fe rtile valle ys
volcano; tsunamis
divide d in 3 climate z one s
STRENGTHS (+)
FACTOR (INPUT) CONDITIONS
WEAKNESSES (-)
Strong on macroe conomic fundame ntals, policie s (ranks 19)
We ak skill base
Ease of doing busine ss
Fore ign curre ncy re gulations
Fre e dom of growth: 80% of Chile an e conomy is fre e (ranke d 11)
Inflation (ranks 72)
We ll de ve lope d physical infrastructure and strong administrative
infrastructure (ranks 30)
Financial marke ts be ne fit from e arly pe nsion re form (financial
marke t sophistication ranks 32)
Poor public he alth
Effe ctive gove rnme nt age ncie s, institutions
Transhipme nt country for cocaine de stine d for
Europe and the re gion; mone y launde ring
activitie s
Busine ss costs of corruption, crime and the ft
(ranks 80)
Good marke t e fficie ncy and e arly marke t libe raliz ation (ranks 26) Unsatisfactory quality e ducational syste m (slow
improve me nt) (primary e ducation ranks 96 and
highe r e ducation ranks 45)
Gove rnme nt focuse s on fore ign language training and bilingual
Lack of gove rnme nt policie s promoting
e ducation
improve d e ne rgy e fficie ncy
Strong in te le communication te chnology
Highly skille d Human Re source s
Favorable tourist de stinations (ski slope s, be ache s)
Innovation
Exce lle nt standard of living
Low productivity
Efficie nt and compe titive transportation syste ms
Low political risk
Acce ss to high quality busine ss input
Context for Firm Strategy and Rivalry:
Chile is strong on cooperation and memberships with various associations and institutes
to facilitate economic growth, cooperation, trade, and investment locally and
internationally. Chile has 57 free trade agreements worldwide, and they are strong on
attracting FDI and in the import competitions.26 (CIA Fact book)
Free Trade agreements allow companies in Chile to access 86% of the world’s GDP27
(Invest Chile Website) “Exports count for 40% of GDP, with commodities making up 75% of
total exports.28 (CIA Fact Book) Service exports such as maritime, non-business travel and
communication have increased steadily almost five-fold since 2008. 29 (Chile Info website)
The role of the government is to establish incentives for capital investments or
intellectual property protection to encourage productivity. One of these is tariff
liberalizations, and tax policies. As noted earlier, Chile has double-taxation agreements
with 19 other countries. Chile’s taxes are the lowest in Latin-America and well below
many European countries which provides an incentive for investments. 30 (Chile’s website)
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Corporate Strategy
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Chile’s economy is open to foreign and domestic competition, and this creates active
local, domestic, and international rivalry.
Chile has a leading or strong position in various clusters (mining, agriculture, wine,
forestry, fishing, tourism). However, intensity of local competition in different industries
and clusters is not strong enough. 31 (Porter, 2008)
CONTEXT FOR FIRM STRATEGY
AND RIVALRY
STRENGTHS (+)
WEAKNESSES (-)
Strong on cooperation and member
of various associations and cooperation
Lack of communication betw een
cooperation, and major industry
players
Incentives to encourage investments and productivity
Intensity of local competition
Free Trade Agreement (57 trade agreements)
Extent of market dominance
Strong on FDI attraction and import competitions (ranks 21) Lack of marketing strategy
Strong domestic competition in various clusters
Attractive tax policies w ith 19 countries
Active local, domestic, and international rivalry
Leading or strong positions in various clusters
Tariff liberalization
Openness to foreign and local competition
Demand Conditions:
Chile is known as a highly industrialized country. Manufacturing, agriculture, services,
and exports have greatly contributed to its GDP.
Source: Focus Economics
Chile’s advantage relies in its diverse industries and its home market demand for the
industries’ products and services. Chile’s industries range from copper, oil refineries,
foodstuff, fish processing, iron and steel, wood and wood products, textiles, fruits, paper
and pulp, chemicals and wine. With the trade agreements, the costs of imported goods
are lower which enables the industries to become more competitive nationally and
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Corporate Strategy
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Robert Kennedy College - Switzerland
internationally as the world market has opened up for them. The industries became
more export oriented. 32 (Focus Economics)
The unusual local demands in specialized segments that can serve nationally and
globally, along with relatively regulatory environment are some of the key factors of its
strengths.
However, for more competitiveness the government should emphasize a more effective
collaboration between the public and private sectors.
In general, industries are weak on extent of branding and marketing strategies. 33 (Porter,
2008)
STRENGTHS (+)
DEMAND CONDITIONS
WEAKNESSES (-)
Sophistication of local customers and needs: strict quality,
safety and environmental standards
Need a more effective collaboration betw een the public
and the private sector
Relatively advanced regulatory environment
Unusual local demand in specialized segments that can be
served nationally and globally
Extent of branding and marketing strategies
small internal market size
Overall local buyer sophistication
Related and Supporting Industries:
Chile’s economic competitiveness resides in the presence of clusters instead of isolated
firms. Clusters create synergy and improve competitiveness by firms working together
giving greater access to specialized suppliers, skills, and information. 34 (Porter, 2008)
This contributes to the availability of suppliers and supporting industries. As a result,
Chile has significant positions in a number of clusters such as mining, copper,
agriculture, and wine. Extent of collaboration among clusters is strong but cluster driven
diversification of the Chilean economy is weaker. Local supplier quantity is lower as it
could be. 35 (Porter, 2008)
RELATED AND
SUPPORTING INDUSTRIES
STRENGTHS (+)
WEAKNESSES (-)
Presence of clusters instead of isolated firms
Local supplier quantity
Low er level cluster-driven diversification of the Chilean
Availability suppliers and supporting industries economy
Significant positions in number of clusters
State of cluster development
Extent of collaboration among clusters
Global Wine Industry
With the 20 leading wine producers located in 10 different countries it reveals that the
wine industry is highly fragmented. In addition, the global wine industry is further broken
down into two categories: the “Old World” regions (France, Italy and Spain) and the
“New World” regions (Australia, Asia, U.S.A. and South America).36 (The Global Wine Industry)
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The global wine industry generated revenues of $213.8 billion in 2005. It is forecasted
that in 2010 the global production and consumption will generate revenues of $243.7
billion. 37 (The Global Wine Industry)
From 1999 to 2004 Chile wine exports increased from 239.1 million liters to 468.8
million liters. During the same period Italy exported 1,673, billion liters in 1999 and
1,538.6 billion in 2004 thus experiencing a decrease in exports.38 (The Global Wine Industry)
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Agricultural Products Cluster
Wine Subcluster
Export Value by Nation,
2007
As noted in the above table, Chile ranked 5th in the world in wine export value in 2007.
Chile was second only to Australia in the so called “New World” wine producer. 39 (Cluster
Competitiveness Project, Harvard Business School)
History and Evolution of Chile’s Wine Industry
Chile’s wine industry has roots dating back to 1551 when a Spanish conqueror made
wine at a location about 500 kilometers north of where Santiago is now located. Chile
became the first Latin American country to produce wine even preceding Mexico and
Peru. 40 (Corfo Invest Chile) Initially made for use in religious ceremonies in the 18th and 19th
century, wealthy wine producing families made wine to imitate French Chateau type
wines. Grapes and technology was imported from France. 41 (Visser) The outbreak of the
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Phyllorexa1 in Europe at the end of the19th century stimulated the export of quality
wines. 42 (Visser)
In the 20th century there was a reduction in wine production in large part attributed to the
policies related to import-substitution policies which did not support export. Wine
makers relied on a small domestic market. In the 1980s political changes and national
legislation as well as the domestic and international wine market led to the increase of
planted surface for wine production.43 (Visser)
Chile finds itself at a crossroad in its evolution. According to industry experts it needs to
solidify its presence in the UK market, traditionally its biggest market. According to Ben
Gordon UK export manager for Carolina Wine Brands; “margin squeezing is a big
concern”. Wine is often seen as “just another aisle on the weekly shop where promotion
is king”. Gordon further comments that “romanticists in the trade have to face the fact
that while we all know wine is a fantastic product; it’s just another number on a
spreadsheet alongside shampoo at head office”. 44 (Harper Wines and Spirits)
Today Chile’s wine producing area is divided into 12 regions and sub-regions. Chilean
vineyards are located between the 29° and 40°latitude south. The Chilean wine industry
is expanding and being explored particularly on the slopes of the Andes Mountains. A
soil that is known to be nutrient poor and subjected to a greater range of temperatures
produces a wine with a higher concentration of fruit. The need and desire to produce
better wines in new zones are literally taking the Chilean wine industry to new heights.
45 (Corfo Invest Chile) Chile’s wine regions benefit from an ideal Terroir2 with a temperate
climate and hot dry summers.46 (Corfo Invest Chile)
Export demands over the years have led to the expansion of the industry. Chile has
doubled its wine producing area from 56,004 hectares in 1996 to 116,792 hectares in
2006.47 (Catastro Viticola Nacional 2006) In 2006, 88,325 hectares were devoted to the culture of red
wine grapes, and 28,467 hectares to white wines.48 (Corfo Invest Chile)
Chilean Wine Cluster
Chile’s rank in the world of wine production is 11th in surface area (2006-117,000 ha)
area, 10th in world production with 828 MM liters (2007 figure) and 5th for wine exports.49
1 PHYLLOXERA, small, sap-eating, greenish insect of the genus Phyllorexa, closely related to the aphid. Phyllorexa feed on leaves
and roots, and many species produce galls on deciduous trees. Their life cycle is complex; one species is known to pass throu gh
21 different stages. Most notorious of the group is the grape Phyllorexa, Phyllorexa vitifoliae, native to E North America. The
species has winged and wingless generations, the former causing galls on grape leaves and the latter feeding on the roots,
causing nodules and eventually killing the vine. The grape Phyllorexa came close to destroying the wine in dustry of France after
its accidental introduction in about 1860; grafting of susceptible European vines onto resistant North American root stock sa ved
the European vineyards. Phyllorexa are classified in the phylum Arthropoda, class Insecta, and order Hom optera, family
Phylloxeridae. (The Columbia Encyclopaedia, Sixth Edition 2004)
2 The French Wine Guide describes Terroir as” a group of vineyards (or even vines) from the same region, belonging to a specific appellation, and sharing the
same type of soil, weather conditions, grapes and wine making savoir-faire, which contribute to give its specific personality to the wine”.
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There are 12 wine growing regions within Chile sub-divided into valleys. As
noted below the chart the wine growing regions of Chile are mainly located in the center
of the country. Future vineyards expansions on the slopes of the Andes are being
explored.
(Corfo Invest Chile)
Moreover, the Chilean wine industry structure is broken down as follows:
•
•
•
•
•
•
300 wine companies, wineries
13,947 vineyards
451 cellars, winemaking and bottling and labeling establishments
30 industrial wineries with advance technologies
25 medium and small-scale wineries with advanced technologies
25 medium and small-scale traditional wineries 47 (Corfo Invest Chile)
Wine Growing Regions of Chile
Source: Invest Chile
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Industry Cluster
The Chilean wine industry cluster includes a variety of supporting material and service
providers.
Diagram from Utrecht University-A Chilean Wine Cluster
Source:
The diagram above clearly demonstrates the reliance on foreign technology and
suppliers for the wine making equipment, barrels, tanks, corks, caps, fertilizer and
pesticides and irrigation technology. Those are likely areas offering business
opportunities for investors.
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Invest Chile (CORFO) identified key sectors in the wine sector that offer investment
opportunities they are:50 (CORFO Invest Chile)
Agronomy
•
Development of precision agriculture
Production
•
Investment in construction of winery boutiques
Auxiliary industry
•
Leasing of equipment for Harvesting
•
•
•
Wine tourism
Distribution of environmentallly friendly
organic fertilizers and biopesticides
Printing and label design
Automation of wine process
49 (Bike & Wine tour)
Industry Diamond
Factor (input) Conditions
Administrative Infrastructure
As noted earlier Chile enjoys a good reputation as a country where it is relatively easy
to start and establish a business and this is in favor for the wine industry.
Physical infrastructure
Chile enjoys a good world ranking in the areas of air transportation and port facilities.51
(GCR)
Information Infrastructure
Chile’s wine industry benefits a number of agencies and institutions for collaboration as
noted on page 7. Moreover, the wine cluster benefits from organizations such as Vinas
de Chile, Chilevid, corporation Chilena del Vino, Nuevos Mundos.
Human Capital
This key aspect of the industry needs further development. It has been recognized and
suggested that the R&D institutions noted in Annex 4, continue to work together to
coordinate and integrate training and education efforts at the various levels of the labor
force with both a short and long term focus on industry development.52 (Visser)
An economic analysis is needed to determine the optimal mix of competition and cooperation between firms and other actors in the cluster. This would assist in formulating
“community arguments”. 53 (Visser)
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Vulnerabilities
The recent earthquakes have caused some damage to the physical infrastructure of the
some Chilean wine producers. Losses are estimated at $250 million or 12.9 percent of
the 2009 production. 54 (Bloomberg) Notwithstanding the damages caused by the earthquake
the current supply is believed to be sufficient to maintain export sales. 55 (Bloomberg)
Research and Development
Wines of Chile took the initiative in creating a center of R&D in cooperation with the
Catholic University. All members of Wines of Chile make a fixed contribution to help
sustain the development of a unique Chilean wine technology. It is a long term project
and it remains too early to assess the results.56 (Visser)
Despite being described as technologically up-to-date Chile still remains dependent on
foreign investors and suppliers. For example it remains dependent on Portugal for corks
and caps. It needs to import stainless steel components from Italy, Australia and
Germany. Moreover, it relies on France and the United States for oak barrels. 57 (Visser)
Factor (input) Conditions
Strengths (+)
Weaknesses (-)
Natural resources
Workforce
Infrastructure
 Admin
 Physical
 Institutions for
collaboration
Education and training.
Vulnerability to natural
disasters active volcanoes
and Earthquakes.
Innovation
R&D
Lack of coordination between
IFC
Demand
Over the past 20 years wine exports have increased in both volume and value. In the
1990s a growing demand emerged for New World and Chilean wines. This attracted
new comers to the Chilean wine industry.58 (Visser) From 1995 to 2007 the volume of
exports increased 373% and the value of the wine exported increased 591%, from US$
181 million to US$ 1,256 million. Moreover, during the same period the mean average
of a liter of wine increased 46%. Concha y Toro reported strong sales growth of 12% for
2009. This growth is the result of an increase of 11% in export sales and 7% increase in
domestic sales. Chile domestic wine consumption peaked in 1982 with a per capita
consumption of 52 liters per year. In 1994 this fell to 13 liters per capita. This has since
increased to 16 liters for several years. The forecast is for an increasing growth in the
domestic market.59 (Chile Food and Drink Report) One domestic aspect that impacts demand is the
lack of sophistication of the Chilean wine consumer who seems to favor wine in a box.
This domestic trend could very well guide the Chilean wine producers to curtail
innovation and creativity.
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Strengths (+)
Forecasted increase in
consumption.
Robert Kennedy College - Switzerland
Demand
Weaknesses (-)
Increase in beer consumption
Maintaining demand
Stagnant domestic market
Lack of sophistication
Strategy and Rivalry
The competition within the Chilean wine cluster is assessed as healthy even to the point
of being described as largely “sanguine” This environment is conducive to improving the
cluster.
A number of experts have commented that the quality of governance is causing a
bottleneck preventing the Chilean wine industry from reaching its full potential.
According to experts there is a lack of trust within the Chilean wine community. As an
example the rivalry between two industry groups carried over to the point that it was
made clear that they prefer to listen to foreigners when attending industry seminars than
listen to each other.60 (Visser)
Notwithstanding the spirit of cooperation there is the phenomenon of “free-riding” where
several wineries prefer to adopt a “wait, see and copy attitude” rather than taking part
into joint efforts.61 (Visser)
One area the Chilean wine industry needs to address is the perception that Chilean
wine is not as sophisticated or prestigious and is identified more as a “table wine”. A
panel of wine experts was convened to discuss future strategy for the Chilean wine
industry. Top UK wine importers stated that Chilean wines and branding are too similar;
this often leads to the “public not being aware of what is out there”. Blind tests were
conducted and surprisingly Chilean wines were well liked and often picked as the best
tasting. 62 (Harpers Wines and Spirits-Chile supplement)
The wine producers' community feels that investments in wine innovation and valueadding are needed for further growth. There is also recognition within the Chilean wine
stakeholders that in order to grow they need to increase their share of the UK market.
On a similar note Christian Lopez, managing director of Concha y Toro UK stated that
he wants the UK wine industry to move away from its reliance on price promotion and
add value to wine not devalue it by deep price cutting. He further believes that Chile is
in a good position to accomplish this.63 (Harper Wines and Spirits-Chile supplement)
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Strategy & Rivalry
Strengths (+)
Weaknesses (-)
Strong regional competition
Joint venture Errazuriz / Mondavi
FDI and Joint Ventures
Governance and trust
Regional differentiation.
European market
Improve branding.
Beer consumption.
Dearth of value label.
Premium wine not recognized.
Marketing in restaurant sector.
Lack of cooperation
Supporting and Related Industries
The emergence of a strong wine tourism segment during the past five years has led to
an increasing number of wineries developing that aspect of that business and attracting
discerning tourists with high disposable incomes. The Chilean wine industry seems to
be responding well to this new opportunity and demand by expanding its offerings. 64
(Harper Wines and Spirits-Chile supplement) The Chilean wine industry also benefits from an adjacent
strong agricultural sector.
Supporting and Related
Strengths (+)
Weaknesses (-)
Wine tourism
Agriculture
Some dependence on import
of sophisticated and high tech
equipment for production.
Lack of Seed capital.
Identification of Strategic Issues Facing Chile
Although Chile has been the Latin American success story with its stable
macroeconomic environment, its relative progress has slipped65 (cf. Porter, 2008:4). As noted
earlier, several weaknesses affect Chile’s national diamond. Weaknesses in any one of
the determinants of the national diamond will constrain a country’s and an industry’s
potential for advancement and upgrading66 (cf. Porter, 2008:182).Their effect on Chile’s
competitiveness can be summed up in one word: economic stagnation. Crawford et al.
(2010:3)67 identify Chile’s urgent need for higher levels of economic growth as the
country’s critical policy concern. Since 1998, Chile’s growth rates have been only half of
the 7.1% achieved from 1984-1997 (cf. ibid.).
Import substitution was abandoned in the 1970s and replaced by growth through export
of natural resources which led to Chiles economic boost from 1985-1997 (Crawford et
al., 2010: 13). This further increased Chile’s already strong position in copper mining
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and led to growth in fishing, aquaculture, fruit, wine and other food sectors of the
Chilean economy (cf. ibid.). Organizations like CORFO (Chilean Economic
Development Agency) and Fundación Chile provided financing and encouraged
technology transfer (cf. ibid.). While imported technologies were adopted, there were no
noteworthy efforts to develop domestic knowledge and learning capabilities regarding
the unbundling, understanding and further development of these technologies on the
part of the Chilean companies, universities, institutes and the Chilean state (cf. ibid.).
Chile’s economic upturn was sustained by the reallocation of resources from traditional
industries to sectors of natural resources, while imported technologies increased the
productivity of companies in the booming sectors. Most of the “intra firm productivity
gain was realized through rationalization and downsizing rather than through
expansion”68 (Crawford et al., 2010:13). Given that fast growing countries normally display an
increasing diversity of exports (cf. ibid.), the same would have been expected during Chile’s
growth phase.
The opposite was true: Chile’s diversification came to a halt by 1995 due to a lack of
diversification promoting links between Chile’s growing resource-based industries and
other industries outside the export growth development (cf. ibid.). This is why despite Chile’s
strong position in various clusters (cf. Context for Firm Strategy and Rivalry page 12); it
still misses out on the development and intensity of local competition in these and other
clusters and industries. As stated by Michael Porter: “One competitive industry helps to
create another in a mutually reinforcing process” (1998:183). Chile’s competitive
industries not only failed to promote other Chilean industries, but they limited
themselves to harvesting the gains, without even trying to invest in knowledge and
development of the physical and human capital essential to sustaining an internationally
strong competitive position69 (cf. Crawford et al., 2010: 13). This brings us back to the already
mentioned weaknesses of factor conditions (weak skill base, unsatisfactory education
system).
Many of Chile’s global peers are catching up or already performing better while new low
cost producers (Argentina, South Africa) are threatening Chile’s market share for wine.70
(cf. Crawford et al., 2010: 3) So what exactly are the key issues causing Chile’s economy to stagnate
at a time when Chile should be strengthening existing industries and diversifying into
new ones?
On the one hand we have a low and falling productivity, on the other – and this is the
core problem – the lack of innovation in Chilean companies. Innovation and not
operational effectiveness is at the center of strategic action: “Companies achieve
competitive advantage through acts of innovation; they approach innovation in its
broadest sense, including both new technologies and new ways of doing things”71 (Porter,
1998: 163). What’s more: Once competitive advantage through innovation is achieved, it can
only be sustained through ongoing and relentless improvement72 (Porter, 1998:164)
Chile’s economic growth has stopped because of a failure to use innovation to sustain
growth in productivity and output.
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Chile is at a decisive and risky point in its economic development. If Chile keeps
standing still and fails to reactivate its growth, which will depend on significantly
improving its innovation performance73 (cf. Crawford et al., 2010:12), not only will it be overtaken by
other countries entering the same markets and innovating faster than Chile, but it will
also sink back into underdevelopment because national income per head will decline in
relative terms (cf. ibid.). The challenge for Chile is to design and implement a package of
extensive microeconomic reforms: a task that is far more difficult than implementation of
macro reforms given that effects can take a long time to set in, implementation cuts
across ministerial responsibilities, and “aspects of reform affect perceptions of the
political and social compact that has governed Chile in past decades”74 (Crawford et al., 2010:13).
The following aspects need to be addressed if Chile is to react accordingly to
stagnation.
Business Innovation
Missing links between companies and the research and development system hinder
innovation.75 (cf. Crawford et al., 2010: 13). Company spending on research and development has
been in constant decline since 2002. In addition, “few research-capable people work in
business” and “Chile’s ICT intensity is also very low by international comparison, limiting
the ability of industry both to gather intelligence and to modernize” (ibid.). Technological
progress is not implemented in a way involving constant knowledge upgrade and the
development of human and physical capital needed for product innovation and
improvements in productivity76 (cf. Crawford et al., 2010: 14).
Human Capital
Human capital is a precondition for innovation. As noted earlier, Chile has an
unsatisfactory education system. According to Crawford et al. (2010: 14) 37% of Chile’s
potential student body is illiterate while “only 2% reach levels of education that would
qualify them to be ‘knowledge workers’ able to assimilate and develop knowledge
needed for technological innovation”. A small proportion of Chileans study abroad, this,
further disconnects Chile’s already minor professional elite from the international avantgarde in knowledge and technology (cf. ibid.).
Science Connections to the Business Sector
Although better than most Latin American countries, Chile’s scientific productivity
remains low in international comparison77 (cf. Crawford et al., 2010 14). Scientific spending tends to
basic research resulting from Chile’s scientific elite controlling funding allocation in a
biased way while at the same time there’s a low level of demand and indication of
needs from the business sector and other social actors (cf. ibid.). The deficient collaboration
between Chile’s public and private sectors (see page 13, Demand Conditions) is
exemplified by Chile’s government financing most of research and development which
is carried out in universities with few connections to the business sector 78 (cf. Crawford et al., 2010:
14).
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Governance
Organizational problems are limiting Chile’s competitiveness and innovation. According
to Crawford et al. (2010:15) there is a lack of coordination in infrastructure development.
There is also an absence of mechanisms for setting strategic priorities in the training
and innovation areas.
Identification of Strategic Issues Facing the Chilean Wine Cluster
Chile’s wine industry managed an effective turnaround from domestic to export markets.
The wine cluster has become the Chilean success story per se. The increase in exports
has been sustained by enhanced sales of bottled wine. Unit sale prices have increased
until 1999.79 (Visser) However, there’s a recent trend towards stabilization and even
downturn of unit sale prices while excess supply in the world market puts further
pressure on sales of bottled wines 80(Heijbroek and Rubio, 2003).
Chile’s wine enjoyed a great success in international markets with reliable and decent
wines at reasonable prices. However, Chile’s wine gains are now turning into limitations
and even problems. According to Ted Sandbach from the Oxford Wine Company in
Witney, UK, the problem of the Chilean wine cluster is that there are too many similar
types of wines as well as brands (Chile, Harpers Wine & Spirit Trades Review, 2009:
16). “I don’t think the public is aware of what else is out there, because it’s all mainly
single grape varieties – there are very few blends.”
Trying to get consumers to trade up in Chilean wine is tricky” (ibid.). If competitors develop
more innovative approaches to the global wine market with better content and branding,
Chile’s wines are in danger of becoming ordinary in the consumers’ perceptions given
that there is too little distinction amongst the wines. Looking at export data 81 (Chile, Harpers
Wine & Spirit Trades Review, 2009: 6), there are two contradictory developments regarding the success
of Chile’s wines abroad: Export volumes are generally rising (up 7.3% year on year to
July 2009) with Chile’s top two markets US and UK both displaying considerable
upturns in volume (70% up in the US and 16% in the UK) (ibid.). However, average prices
are sliding at the same time as exports are rising, especially with regard to the UK
market. The average per case price fell by 5.2% in the year to July 2009 82(Chile, Harpers Wine &
Spirit Trades Review, 2009: 6).
Evert-Jan Visser identified five problematic areas in the Chilean wine cluster. In order of
importance they are: marketing and promotion, innovation, internationalization, and
education and training 83 (Visser, 2004: 30-32).
Marketing and Promotion
Chile’s wine producing image is changing. Future growth is possible only if Chile better
brands itself as a wine producer. This may even require the introduction of a national
symbol (like the kangaroo in Australia) 84 (Visser, 2004: 30).
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According to Visser (2004: 30-31) Chile’s wine industry risks being grounded in the
lower segments of the markets. A low-cost strategy alone is not the solution to the
problem of sustaining competitiveness on global grounds. What Chile’s wine industry
needs is to introduce products aimed at the super and ultra premium market segments
in order to penetrate them (cf. ibid.). “The question is how to combine a low-cost strategy of
some wineries and high-end market focused strategies of other wineries, considering
the image effects of the former for the latter” 85(Visser, 2004: 31). This set of problems can only
be addressed by starting a discussion within the industry about a constructive strategy
for the whole Chilean wine cluster and the optimal mix of competition and co-operation
which enables low-end and high-end market orientation to co-exist without undermining
efforts on both sides of the community.
Most Chilean wines are actually 90% organic but according to Michael Cox from Wines
of Chile, the Chilean winemakers don’t go the last hurdle “because it is expensive, it
takes quite a long time to set up, there is no global certification, and lastly, because they
are not going to get premium for it”. 86 (Chile, Harpers Wine & Spirit Trades Review, 2009: 19).
Innovation
Differentiation away or at least complementing oak-based processing is most important
when it comes to the innovation issue of Chilean wines (cf. ibid.). Differentiation also means
increasing variety and quality of the Chilean wines (that is reduce irrigation according to
Kate Thal (Green & Blue Wines, London, Chile, Harpers Wine & Spirit Trades Review,
2009: 19)).87 (Chile, Harpers Wine & Spirit Trades Review, 2009: 19).
Hence, Chile is to improve the quality and consistency of wines which requires a more
effective diffusion of know-how, better control of daily operations and short-term
problems, the optimization of the vinification process, promoting an environmentally
clean production while information technology is needed to upgrade monitoring and
control and sophisticated logistic and organizational issues have to be addresses as
well 88(Visser, 2004: 31). A collective approach is needed here given that for “differentiation, it
will be necessary to develop new technology in Chile, so as to reduce dependence on
technology imported from and made by competitors (e. g. France, Italy, Spain, Portugal,
Germany, and most recently Australia) 89(Visser, 2004: 31) .
The Chilean wine industry lead by Concha y Toro is taking steps to innovate in water
management strategies. The winery will measure its “Corporate Water Footprint” to use
water in a more efficient and sustainable manner. This methodology has been
developed by the “Water Footprint Network” (WFN). This new initiative will identify Chile
as a pioneer in this socially responsible emerging trend 90 (Economy Environment & Conservation) .These
initiatives will likely lead to additional growth and development in the Chilean wine
cluster.
Internationalization
The challenge for the Chilean wine cluster is to move from the traditional markets in
Europe and the US to the emerging markets like East-Asia and Russia. This while
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moving into the premium market segments and gaining further insight into consumer
and importers behavior may require the biggest collective effort from the Chilean wine
cluster 91 (Visser, 2004: 32) .
Education and Training
Training needs to be addressed by management. Chilean oenologists have the
advantages of already possessing general agricultural knowledge and have also the
opportunity of gaining experience and expertise abroad and bringing it back home. But
they still miss out on relevant industrial and chemical knowledge 92 (Visser, 2004: 32). The field
workers need training. This is evident during the harvest, when inexperienced workers
are hired. This situation is unacceptable since 80% of the quality of wine is being
determined at the level of field workers. Visser holds that improving the above situation
is clearly a collective task (cf. ibid.).
Supply Issues
It’s not easy to get hold of interesting Chilean wines 93 (cf. Chile, Harpers Wine & Spirit Trades Review, 2009: 18).
A lack of self-confidence seems to be at the core of this problem. Michael Cox from
Wines of Chile identifies some resistance in the supply chain and obstacles, based on
confidence: “The average supplier approaching the average top-end independent
seems to lack confidence about offering you what we know you can and will sell” 94 (Chile,
Harpers Wine & Spirit Trades Review, 2009: 18).
Chileans seem to be rather reserved people who tend to be too modest and hide their
light under a bushel (cf. ibid.). Building up confidence is decisive for the Chilean wine cluster
in order to market more aggressively and expand their international outreach. Getting
more Chilean winemakers to spread the word about the quality, variety and strength of
Chilean wines is one point on the strategy agenda of the Chilean wine cluster. Another
is taking international wine merchants over to Chile, since tradesmen who have visited
Chile are easily persuaded by Chile’s great potential and often comment on the
innovative buzz coming from Chile’s new wine regions 95 (Chile, Harpers Wine & Spirit Trades Review, 2009: 10).
Finally, tourism and wine tourism boost and upgrade with further marketing and
branding investments to promote the brand Chile are important activators of the
international success of the Chilean wine cluster.
Chile policy recommendations
Chile needs to overcome its economic stagnation and return to sustained real GDP
growth. Chile also needs to define a short, medium and long term economic strategy.
Given its small population and low domestic demands, exports are key to growth. The
country has to identify its competitive advantages over its global competitors and also
focus on increasing productivity and innovation.
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Chile’s overall business environment has several unique competitive aspects, and it has
developed a lot of strength in terms of the national diamond that have made the
difference in its economic performance. There are also weaknesses, which have led to
slower GDP growth. The economic strategy needs to translate weaknesses into
strengths.
This must be seen as a national effort and everyone must be involved: the Chilean
government must embrace the economic strategy and act as a real leader, the FDIs, the
teaching and research institutions have also an important role but the private sector will
be determinant in its success.
As stated on page 25, several weaknesses in Chile’s national diamond have a very
strong impact in the country development, they are as follows:
Business innovation
Business innovation is the “seed” for industry improvement and growth. The human
capital competences level is the main input, so its enhancement is dependent on the
overall improvement in human capital. Cultural and attitude changes must take place. It
is better to lead in change and innovation than to follow. Access to specialized training
in strategic and innovation management is essential.
Other important factors that need attention are:
•
•
•
•
•
Creation of research centers and the linkages between them, universities and industry;
Intellectual property development;
Seed capital institutions development;
Tax benefits and regulatory terms that incentive companies R&D investment;
Access to international research centers, information databases and fairs.
Government has an essential role in defining policies and incentives to improve
innovation but the private sector makes it happen.
Human capital
Chile must designate education and training as a national priority and invest the
appropriate resources to achieve international standards, and improve its productivity
and competitive position. The education system must be more exigent and must
achieve international standards, from primary schools to PHDs, in all areas, from
science to management. Exchange agreements with foreign educational institution
should be concluded. The strategy’s two objectives should be to improve literacy levels
and better prepare the workforce to support the clusters strategies. Incentives should be
provided for professional development to improve competences and productivity. This
change can only occur in the medium to long term range. Given this, Chile needs to
take action without delay to compensate the loss of more than a decade.
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Science and science connections to the business sector
Chile must study the model that is implemented in other countries, like Japan, Germany
or Switzerland, leaders in innovation in the Global Competitive Index of 2009-2010, and
see what adaptations should be made to implement those models in Chile with good
results.
Better links between universities, research centers and companies need to be
established and maintained. The ensuing flow of information needs to be both ways, so
that regardless of the source of ideas generated, they are shared amongst all
stakeholders and transformed in business.
Governance
Chile government needs to create an inventory of all wine industry stakeholders and
undertake an analysis to avoid duplications and identify the gaps to better align them
with the strategies and priorities. Every institution must know its role, objectives to
whom to report and with whom to co-operate.
Moreover, a marketing strategy and plan showcasing Chile’s brand and its competitive
advantages to foreign markets should be developed and executed. Perhaps Chile
should imitate Australia and adopt a national symbol such as a volcano, a unique
characteristic of the country.
Chilean wine cluster policy recommendations
Although Chile holds a strong global position in the wine industry, as noted in the first
chapter of this work, competitors are gaining on Chile and impacting its wine cluster. An
analysis has identified: marketing and promotion, innovation, internationalization,
education and training and supply issues as problem areas.96 (Visser, 2004: 30-32).
To overcome these problems the Chilean wine industry must “sit together” and define
their global strategy. The “hesitation to cooperate” and the “wait, see and copy attitude”
must end. 97(Visser, 2004: 30-32) The existing Institutions for Collaboration like Vinas de Chile,
Chilevid, corporation Chilena del Vino, Nuevos Mundos, ProChile and others must sit
together and define the vision for the Chilean Wine cluster for the next decade. Only
when they come together will they have the vigor to compete in the global market and
experience overall growth.
Marketing and promotion
A marketing strategy and plan showcasing Chile’s brand and its competitive advantages
to foreign markets should be developed and executed.
A marketing plan must be developed with the identification of the market segments and
products for each market aligned with the cluster vision. A product/market differentiation
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and positioning would help Chile to expand in the super and ultra premium market
segments. The marketing campaign should focus the world renowned enologists inviting
them to visit the “model” vineyards and wine processing facilities. Last but not least the
wine tourism industry should be included in this marketing campaign.
Innovation
Innovation in wine industry products and processes can be better achieved if
improvements are also made in other areas impacting the wine cluster. To better
compete globally, wine industry stakeholders need to invest in R&D and devote
particular attention to adding diversification and value to the wine industry value chain.
The creation of national awards recognizing quality and innovation in the industry value
chain will enhance the overall visibility of the industry.
Internationalization
The success of the wine cluster is dependent on increased exports due to the limited
domestic market. All wine industry stakeholders need to come together to “sell” Chilean
wines. For example, Pro Chile agency has a vital role to play in achieving this objective.
Education and training
The education and training program of Chile’s wine industry needs to target the three
key levels of the workforce; the management, oenologist/production managers and field
workers.
The creation of management studies and specific training courses in strategic and
international management are indispensable to promote the ideal mix between
competition and co-operation, essential to internationalization.
Specific industrial and chemical training is essential to improve oenologist, production
and management knowledge that will allow the improvement of quality and
differentiation of the wine, but also the development of healthy and environmentally
clean products.
The creation of a pool of field workers with specific harvest training that will be hired
when necessary is essential to guaranty the quality of the wine.
Supply issues
The wine cluster is very dependent on foreign technology. This area should receive
special attention because developments will reduce dependence on other important
countries in the wine industry and will improve differentiation and quality, but also, will
make Chile grow in terms of value added.
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Conclusion
Chile has big challenges ahead. National commitment is essential. The investment in
education and training will improve the country performance in innovation and
productivity that will have a huge impact on the country’s real GDP grow. This new
growth will be much more sustainable and long term because it’s based on the
development and upgrading of national competences.
Once again, as its economic history has proven, Chile will have the capacity to
overcome the difficulties and problems, and not only be the successful story of Latin
America, but also fight for the world leadership in some cluster industries, like it has
done in its wine industry.
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2 Ibid (CIA Fact book)
3 Ibid (CIA Fact book)
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6 Ibid
7 THIS IS CHILE. [online] Chile’s official website. Available from:
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18 KLAUS SCHWAB. GLOBAL COMPETITIVENESS REPORT 2009-2010
20 THE WORLD BANK [online] Chile. Available from:
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/CHILEEXTN/0,,
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20 . MICHAEL E. PORTER (1998). On competition. Harvard Business School Press,
Boston, MA (Chapter 6, pg. 187)
21 . MICHAEL E. PORTER (2008) Chile’s Competitiveness: Facing the Demands of a
New Era. (Harvard Business School)
22 CHILE INFO [online] Chile Facts and Figures. Available from:
http://www.chileinfo.com/conocechile.php [accessed 25 April 2010]
23 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages [accessed 25
April 2010]
24 CIA The World Fact book. [online] Chile. Available from:
https://www.cia.gov/library/publications/the-world-factbook/geos/ci.html [accessed 25
April 2010]
34
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(Final Project July 2010)
Robert Kennedy College - Switzerland
25 EXPORT COUNCIL FOR ENERGY EFFICIENCY [online] Market Assessment of
Chile. Available from: http://www.ecee.org/pubs/assess/chile/Chile1.htm [accessed 25
April 2010]
26 CIA The World Fact book. [online] Chile. Available from:
https://www.cia.gov/library/publications/the-world-factbook/geos/ci.html [accessed 25
April 2010]
27 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages [accessed 25
April 2010]
28 CIA The World Fact book. [online] Chile. Available from:
https://www.cia.gov/library/publications/the-world-factbook/geos/ci.html [accessed 25
April 2010]
29 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages [accessed 25
April 2010]
30 THIS IS CHILE. [online] Chile’s official website. Available from:
http://www.thisischile.cl/Doing-Business.aspx?Eje=Negocios&idioma=2 [accessed 25
April 2010]
31 MICHAEL E. PORTER (2008) Chile’s Competitiveness: Facing the Demands of a
New Era. (Harvard Business School)
32 FOCUS ECONOMICS. [online] Available from :http://www.focuseconomics.com/en_UK/countries_regions/latinamerica/chile/data.php) [accessed 25
April 2010]
33 MICHAEL E. PORTER (2008) Chile’s Competitiveness: Facing the Demands of a
New Era. (Harvard Business School)
34 MICHAEL E. PORTER (1998). On competition. Harvard Business School Press,
Boston, MA
35 MICHAEL E. PORTER (2008) Chile’s Competitiveness: Facing the Demands of a
New Era. (Harvard Business School) Harvard Business School Press, Boston, MA
36 The Global Wine Industry, http://www.duke.edu/web/soc142/team5/regions.html
37 Ibid
35
Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
38 Ibid
39 Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for
Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project
Director. Underlying data drawn from the UN Commodity Trade Statistics Database and
the IMF BOP statistics.
40 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
41 Visser, E-J. (Ed.). A Chilean wine cluster. Utrecht : Utrecht University.
42 Visser, E-J. (Ed.). A Chilean wine cluster. Utrecht : Utrecht University
43 Visser, E-J. (Ed.). A Chilean wine cluster. Utrecht : Utrecht University
44 Harper Wine and Spirits, Chile supplement. October 2009.
45 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
46 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
47 Catastro Viticola Nacional 2006
48 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
49 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
50 INVESTCHILE / CORFO. [online] Chiles Competitive Advantages. Available from:
http://www.investchile.com/agri-food_cluster_forum/chiles_comparative_advantages
51 KLAUS SCHWAB. GLOBAL COMPETITIVENESS REPORT 2009-2010
52 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
53 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
36
Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
54 Bloomberg, Chile Quake Rocks its Booming Wine Industry. John Mariani
55 Bloomberg, Chile Quake Rocks its Booming Wine Industry. John Mariani
56 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
57 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
58 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
59 Chile Food & Drink Report - Q2 2010. (2010, April). Chile Food & Drink Report, 176. Retrieved May 16, 2010, from ABI/INFORM Trade & Industry. (Document
ID: 1989359121). (page 7)
60 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
61 Ibid
62 Harpers Wine and Spirits-Chile supplement. October 2009
63 Ibid
64 Ibid
65 Porter
66 Ibid
67 Crawford, M. et al. (2010) Evaluation Report of National Innovation Strategy for
Competitiveness, Chile. International Evaluation Panel.
http://www.cnic.cl/media/users/3/181868/files/18144/Reporte_PANEL.pdf [accessed 21
June 2010].
68 Ibid
69 Ibid
37
Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
70 Ibid
71 Porter
72 Ibid
73 Crawford, M. et al. (2010) Evaluation Report of National Innovation Strategy for
Competitiveness, Chile. International Evaluation Panel.
http://www.cnic.cl/media/users/3/181868/files/18144/Reporte_PANEL.pdf [accessed 21
June 2010].
74 Ibid
75 Ibid
76 Ibid
77 Crawford, M. et al. (2010) Evaluation Report of National Innovation Strategy for
Competitiveness, Chile. International Evaluation Panel.
http://www.cnic.cl/media/users/3/181868/files/18144/Reporte_PANEL.pdf [accessed 21
June 2010].
78 Ibid
79 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
80 Heijbroek and Rubio, 2003
81 Harpers Wine and Spirits-Chile supplement October 2009
82 Ibid
83 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
84 Ibid
85 Ibid
38
Corporate Strategy
(Final Project July 2010)
Robert Kennedy College - Switzerland
86 Harpers Wine and Spirits-Chile supplement October 2009
87 Ibid
88 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
89 Ibid
90 Vina Concha y Toro S.A.; Alliance with Water Footprint Network and Fundacion
Chile: Concha y Toro, First Winery in the World to Measure its Water
Footprint. (2010, May). Ecology, Environment & Conservation p,891. Retrieved June
18, 2010, from Research Library. (Document ID: 2031379481).
91 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
92 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
93 Harpers Wine and Spirits-Chile supplement October 2009
94 Harpers Wine and Spirits-Chile supplement October 2009
95 Harpers Wine and Spirits-Chile supplement October 2009
96 Visser, E.-J. (2004) A Chilean Wine Cluster? Governance and Upgrading in the
Phase of Internationalization. Santiago de Chile: United Nations Publication.
http://www.eclac.cl/publicaciones/xml/8/20498/LCL2138.pdf [accessed 21 June 2010].
97 Ibid
39