Australia's Wine Industry: Collaboration & Learning as Causes of Competitive Success

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May 2000

Professor Ian Marsh, ANZSOG Chair of Public Management, University of Sydney, Brendan Shaw, AGSM, University of New South Wales

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Australia's Wine Industry (192 KB PDF)

No one can deny the global competitive success of the Australian wine industry, going from net importer to renowned exporter of high quality wines in just over a decade. But what are the ingredients of this success? Paradoxically, the ability to build premium global brands from formerly domestic commodity products has been the result of extensive collaboration among competitors in the industry.

Through deliberate strategic planning, the industry shifted orientation towards global markets, evidenced by a large number of firms participating in export markets. By harnessing knowledge within the industry, firms can embrace technical innovations in production, enabling them to respond quickly to changing tastes and demands from the diverse global market. While strategic collaboration has provided the framework for success, ongoing engagement as an industry of diverse competitors is required to sustain a competitive advantage.

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Key Points

The Australian wine industry has experienced remarkable change since the mid-1980s. In the mid 1980s, Australia exported 2% of total production and was a net importer of wine. Since this time, industry performance has been spectacular. Exports now total 32% of total production (compared to 17% for the major producers, France and Italy). Australia produces only 2% of world wine, but now holds 2.4% of the world wine market by volume and 3.5% by value.

Industry collaboration has facilitated, or contributed to, the industry's general engagement with international markets and reinforced its commitment to innovation. In the process, the wine industry has transformed itself. It has ceased to be composed solely of rivalrous, competitive firms. Fierce competitive rivalry between individual producers persists. But this has been supplemented by industry collaboration around matters of shared concern. The industry has raised its level of integration and is developing into a knowledge-driven cluster.

Natural advantages still count. But humanly created advantages predominate. These have been amplified through collaborative action. A combination of collaboration and competition has replaced solely competitive relationships. This combination has been decisive in sustained success.

Specifically the study address three questions:

What are the lessons for other business areas where similar international orientations need to be cultivated?
What are the lessons for other areas where the transforming application of knowledge and innovation is essential to growth and competitive success?
Can public policy contribute to these outcomes?

The Australian wine industry experience demonstrates conclusively the synergies that can be gained, and the energies that can be liberated, through a combination of collaboration and competition. It illustrates the challenge in sustaining collaboration - as a complement to, and facilitator of, competitive strengths amongst producers.

This experience has important lessons for other Australian sectors - and for government.

One possibility is for groups of firms to emulate the wine industry approach. Other clusters or industries could act in concert to enhance their own efforts at marketing, innovation and overall industry strategy.
Another possibility is for industry associations to act as change agents. They could help their member businesses identify the additional competitive synergies available through collaboration and put in place the mechanisms to allow firms to pursue joint endeavours and strategic alliances.
Finally, the wine industry also suggests a catalytic role for government in encouraging other sectors to collaborate, to identify new opportunities, and to enhance their own performance.

Well orchestrated collaboration offers a way to create an 'export culture.' It offers a way to identify shared economic interests and to overcome otherwise prohibitive transaction costs. It shows how clusters can ground their continued growth and success on distant markets and on innovation.

The approach adopted in the wine industry suggests a pattern for other Australian sectors. It shows how static commodity or production focused businesses might be renewed - through the synergies of association that enhance the competitive power of human creativity and ambition.

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