MSc BA Thesis Small Business & Entrepreneurship

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MSc BA Thesis

Small Business & Entrepreneurship

Research assignment for a high-end Stellenbosch private cellar

by Durk Zandberg 1542354 November 2012 43.469 words supervised by dr. C.H.M. Lutz

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Abstract

Small and medium sized firms in a highly competitive environment can often benefit from

cooperation, as can be witnessed from many sources in academics. Benefits can lie in the creation of scale economies by a cooperative of multiple smaller entities, and this is the topic of research. Made specific for a South African, high quality winery which aims to cater for the luxury wine market, possibilities to cooperate in order to improve export marketing performance are mapped. With literature research as well as qualitative case research, this thesis aims to analyze if cooperation is a relevant tool to improve the export marketing performance for the firm under research. With several cases of cooperation in the global wine industry, it is interesting to analyze why cooperation is no common practice in the higher end wine industry as of yet and hence, the point of departure in this research is to see how cooperation can help wineries to improve their export marketing

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Preface

It is remarkable how the section that is written as the very last is all but the first thing to encounter in a finished paper, not unlike this thesis. Nonetheless, it is the right place for the section, as first and foremost some words of thanks are in place for those who have contributed to the paper or otherwise have helped me in the process.

In no particular order, my gratitude is owed to:

 Dr. Clemens Lutz, for initiating the idea to perform research in context of this thesis in the South African wine industry, for the faith he voiced in me during the preparations and his guidance in completing the thesis;

 My loving girlfriend, for her putting up with my writing in nocturnal hours and undying trust;  My parents, for their trust and facilitation during my writing;

 Mr. Hans Vonk; for bringing me in touch with a great winery;

 Everybody at De Toren; for providing me a great experience of South Africa, for facilitating me in all my needs in my research and unbound amounts of coffee;

 Pierre and Elmien Botha; for being the best hosts and lovely people.

The thesis they have helped to establish looks into how cooperation between high end, small and medium sized South African wineries can help them to improve their export marketing performance. I hope it makes for an interesting and enjoyable read, and possibly that it will be of any kind of help to any party whom this research may concern.

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Introduction

The tradition of wine making stretches back over 7,000 years, having its first traces in the ancient Egypt. In this tradition, South Africa is a relatively young wine producing country, growing vines since Jan van Riebeeck became the first governor of the Cape in 1652. After Van Riebeeck was succeeded by Simon van der Stel in 1672, the conditions for making wine in the Cape were improved through the strict standards Van der Stel maintained to ensure wine quality. Thanks to the French (Huguenot) winemakers that were recruited to the Cape and Van der Stel's own wine estate Constantia, quality in the wines increased and the Stellenbosch and Paarl regions started to develop a reputation for fine wines.

In this tradition, the firm under research is a young wine estate, being established in 1994. Similar to the story of the soar in reputation of Constantia, the entrepreneur was able to develop the

reputation of the firm rapidly in their eighteen years of wine making. Currently, the firm produces a variety of wines, all of them well-received by international wine consumers. For example, the maiden vintage of the firm's Bordeaux-inspired blend was awarded 90 out of a possible 100 points by one of the world's most influential wine critics, Robert Parker, in 1999. Throughout the years, this label has consistently scored high ratings, which is exemplified by the latest score (92) in the May 2012 issue of Wine Spectator magazine.

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shift towards the higher quality, higher price segments has been witnessed by several main

contributors to international wine research (Banks and Overton, 2010). Being a relatively young and small firm from a "New World" wine country, the firm has limited marketing budget to initiate a focused marketing strategy to back up an increase in the price. Instead, until now the firm has paid significant attention to selecting experienced distributors with marketing knowledge on the target market and segments the firm aims at.

The firm has distributors in all parts of the world. Trade visits to the distributors are conducted when time and budget al.low for it and vice versa, the distributors pay regular visits to the firm under research. The firm aims at having only one distributor per geographical region (in most cases individual countries), offering "exclusivity" to them to distribute the wines. The distributors are responsible for the local marketing of the wines. If the firm would be able to provide additional budgets for marketing for the distributors, this would help sales. However, marketing budget is limited to 10% of turnover and does not amount to such an extent as to be able to provide additional budgets for all the targeted geographical markets.

Several issues exist for the firm under research. First, the firm individually has limited budget for marketing. A stronger position of the brand in the markets abroad is pursued, with the goal to command the higher price premiums needed for a low-volume winery to be competitive.

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Ample literature is available on how cooperatives of SMEs can overcome issues similar to the ones identified in the underlying case. Examples here are the work by Ghauri et al. (2003), who examine how networks can be used to overcome problems related to export marketing; as well as Oughton and Whittam (1997), who focus on cooperation among small firms in order to create economies of scale.

This thesis will aim at mapping possibilities to overcome the above issues, using the process approach defined by Ghauri et al. (2003) and refined by Tesfom et al. (2006) to create the benefits that were identified by Oughton and Whittam (1997). The main research question the thesis will strive to answer is "Which possibilities exist for small, high-end South African wineries to cooperate

with other wineries, in order to improve their export marketing performance?"

To be able to get a better understanding of the issues at hand and generate a broad base to answer the main research question, several sub-questions have been developed for the main question.

 On what areas can small firms cooperate in general and do these areas prove to be relevant for the small, high-quality wine industry in South Africa?

 What are the benefits of cooperation for small firms?

 What are the risks of cooperation between small firms and how can they be countered?  Is there a willingness among the small and medium sized wine firms to cooperate with

others?

 How can a cooperation be organized?

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Description of the industry

The global wine industry can be categorized in two 'worlds', as was already shortly elaborated on in the paragraph Target Market in the theoretical background. In this section, the segmentation will be taken further with special attention for South Africa's position in the global wine market as well as the position of the firm under research in the super premium and luxury segments.

The global wine industry: an introduction

Aylward (2005) has taken efforts to summarize the developments in the global wine industry over the past decades and highlight current trends. Starting off with a brief history which highlights the past 25 years, he states that the global wine industry has transformed rapidly on the areas of distribution, marketing and production. Marking the end of the Old World - European dominance in the global wine industry and spurring the development of New World wine making countries (Australia, Chile, New Zealand and the United States), four developments can be pinpointed (Aylward, 2005).

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New World producers or only the 'prestigious' Old World producers. By the time that the Old World producers realized that the threat posed by New World countries was serious, they had lost large shares of the market and New World countries Australia, Chile, New Zealand, South Africa and the United States all had developed a sustained presence, in the words of Aylward (2005).

Further developments recognized by Aylward (2005) are that since the end of the last century, mergers and strategic alliances have intensified. The factors that are believed to form the basis for this are the desire to acquire the most innovative wine making techniques, leading brands and thereby, market share. In this regard, alliances and mergers of several configurations (New-New, New-Old and Old-Old) have been witnessed, as well as both Old- and New World producers increasingly aiming to gain market share in both popular beverage(in Aylward's segmentation, reflected by 'basic' quality in Ponte's pyramid) segments as well as the icon segment. This, according to Aylward can be seen as globalization in the wine industry. This globalization leads to decreased distinction of the individual producing countries. He finally predicts that a renewed focus on localization will be needed to respond to the growing importance of brand identity and is especially important to small and medium sized wineries (which will be further elaborated on in the section "Cooperation").

The worlds of wine

More in-depth on the rise and current standing of New World wineries, Terheijden (2005) dedicated a dissertation on a comparison of the strategic management and marketing of wine between Old and New World wine producers. Terheijden recognizes and describes the same trends in globalization in the wine industry and the importance of localized branding as does Aylward (2005). The "success factors" of the New World were summarized as having a distinctive product, superior price/quality ratio, organized national marketing, being aware of possibilities on the area of technology and technique, branding and the suffocative legislative structure for producers in Old World countries (Terheijden, 2005).

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as a "brand" in the sense that it can communicate exclusivity, difference and quality. So rather than Old versus New worlds, Banks and Overton opt for a segmentation according to the forces that lead to integration, industrialization and homogenization for bulk production wines, as balanced by the forces that lead to expansion of the place-specificity and "artisanal" production of finer wines. Interestingly, it is noted that while large cooperatives and firms dominate production, there are many New World wineries that actually take a "small, high-quality" approach, with focus on artisanal winemaking and small scale production, which is contrary to the popular image of New world wineries being highly production volume driven.

The geographies of wine consumption are also changing (Banks and Overton, 2010). Western Europe accounted for 54% in 2008, yet a rapid growth in the Eastern European market, Asia and the African continent have been witnessed. The fastest growing markets in terms of consumption in 2008 were found to be Hong Kong, China and Russia. Taking the growing wine market in China as an example, it is found that high-quality and highly branded (and as a consequence, 'expensive') wine is being adopted as a way to showcase personal wealth, termed conspicuous consumption. Next to the wealthy high class citizens, the emerging middle class in these countries are increasingly appreciative of high quality wine. With regard to the geographies of production, Banks and Overton show that Western Europe still accounts for 47% of the global wine production, whereas the New World including Argentina, Australia, Chile, New Zealand, South Africa and the United States represent 27% of global production in 2008. The perceived trend is that "third world" countries (in terms of wine production) such as China and India are rapidly expanding vineyard size and reportedly account for an area double the size of New Zealand's vineyards. In their concluding remarks, Banks and Overton summarize their key points on the industry; (1) the bases for dividing the New and Old World of wine no longer hold up, the "characterizing" elements of each can be found in both the Old and New World; (2) the globalization trend predicts that interactions between the geographical regions will continue to expand and develop, leading to enhanced interlinkage (in the form of joint ventures, strategic alliances) between the traditional, new and third worlds; (3) the emergence of new classes of consumers in both the riches as well as middle classes in emerging countries, who replicate the consumption patterns of wine from the United States, United Kingdom and Australia. The

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The world of South African wine

A short history on the South African wine industry as described by Terheijden (2005) shows that since 1994, the "noble grape varieties" (Cabarnet Sauvignon, Merlot, Cabarnet Franc, Petit Verdot and Malbec) have been extensively planted to be better able to respond to the customer's demands. In 2005, South Africa had relatively few representatives in the "premium" segment of the market as a result of the fact that many small producers all offer a wide range of wines, even though it does have a strong representation in the "popular premium" segment. (Terheijden distinguishes between basic, popular premium, premium, super premium, ultra premium and icon segments). In the years

between 1991 and 2003, Terheijden found a growth of 77% in wine production in South Africa - impressive, even though compared to the percentages measured in Australia (200%) and Chile (160%) in the same periods this figure seems relatively low. Export of wine increased with 200%, more than Chile and the United States but less than Australia. In 2005, Terheijden found the most important export markets for South Africa to be the United Kingdom and the Netherlands. With regard to the style of the wines produced, he notes that South Africa is regarded as a "mix" between the Old and New world (later confirmed by what Banks and Overton concluded in 2010), since he finds that in the centuries of winemaking, South African producers have had a tendency to go along with traditions. Furthermore, South Africa has a wide range of terroirs and differences in climate, which leads to a large variety in the wines produced. Unique for South Africa is the Pinotage grape, a cross-breed of Pinot Noir and Cinsault. Even though Pinotage differentiates South Africa from other countries, the quality of Pinotage wines is often said to be inferior and as a result is suffering from a negative image (Terheijden, 2005).

The responsible institution for marketing and promoting South African wine is the "Wines of South Africa", WOSA in short. The South African wineries are mainly concentrated in the Western Cape in the areas of Stellenbosch, Paarl and Franschhoek. Other areas of origin in South Africa are Swartland, Constantia, Robertson, the Hemel-en-Aarde Valley and Worcester. Even though Terheijden finds that the image of South African wine in general is good, he pinpoints several weaknesses of the industry. The lack of strong brands in the premium segment, inconsistency in the total range of wines offered, the reputation of having "cheap" wines and the virtual absence on the US-market are perceived weaknesses. In order to develop, Terheijden (2005) concludes that South African wineries should optimize their branding strategy, which could be achieved by foreign investment or joint ventures among wineries.

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Kingdom are threefold: (1) intrinsics and packaging, (2) codified solutions to food safety and (3) logistics (Ponte, 2007). With the packaging, requirements to bottle size and weight, cork type, labels are meant. Intrinsics refer to the measurable aspects of the wine, such as amongst others sugar levels, acidity, sulphite content and alcohol volume. Furthermore, United Kingdom-retailers require consistency in intrinsics at the given price point, with a trend for improved quality and specificity on the intrinsics and packaging. For example, Ponte mentions that retailers are moving away from regular corks to the benefit of screwcaps. Both cooperatives and private labels were assessed by retailers according to certification of the British Retailer Consortium, as well as ISO9000/9001 and HACCP (Ponte, 2007). These requirements are regarded with mixed opinions; whereas several larger cooperatives see the requirements as beneficial to the general standard of South African wine, smaller firms think the "paperwork" to be overly burdening and tedious. The special policies and codes on social issues are thought to be "squeezing" producers - retailers want to offer "fair trade" wine but still require a high margin, which leaves the producers with low profits. With regard to the mentioned logistics, United Kingdom retailers see themselves increasingly as shelf-space providers, controlling more of the logistics by demanding a short lead-time for delivery. South African producers find it hard to exert influence over retailers, since the largest exporter with a market share of

between 12% and 14% in the United Kingdom (at the time of research) has no power over

distribution. Small wineries find it increasingly hard to gain and retain a listing with a United Kingdom retailer due to the high costs; listing fees are charged, fees for providing shelf-space have been found to be not uncommon, as well as mandatory provision of a marketing- and selling budget. In the United Kingdom, South Africa is seen as having too few "large" brands to drive growth in the market and the trend towards market-driven production makes that retailers have more say in which wines to buy and which ones to drop. Despite the perceived lack of power in the value chain, many South African producers still want to be listed in the United Kingdom as it represents an important market (Ponte, 2007).

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Ponte, is to attain visibility in the market. The market is characterized by personal relations and because of the mentioned fragmentation, it is important to develop these relations to avoid an image of opportunism. Brand recognition as a result from visibility is also part of the challenge and are to a larger extent than in Europe determined by endorsements and the likability of the estate owner and wine maker. Ponte notes that as of yet, South Africa is underrepresented in the United States and would need serious marketing effort to promote the image of South African wines in order to increase market share in this market.

Apart from academic literature, the annual John Platter guide is recognized as an authority in the wine industry. Every year, a new edition is published containing the most recent information on which are the best wineries, the best wines, which are recommended and general information on all the wineries in a certain country. As such, the Platter Guide can be seen as "endorsement" in the definition of Beverland (2004), Ponte (2007) and Goodman (2011). In this research, the 2012 edition has been used. The Platter Guide shows that South Africa currently holds the eighth position in the world by wine production volume, representing 3,7% of global production. Italy and France hold the first places, producing 17,9% and 17,1% respectively. The Platter Guide sees a prospect of reduction in volume produced by South Africa, as a consequence of the reduction in number of grape growers and overall decline in the number of wine cellars crushing grapes. The very small producers

(producing less than 100 tonnes) represent about 46% of the total South African production. White grape varieties still outstrip the reds, but throughout the years red varieties have been gaining ground on the whites, with a distribution of 56% white and 44% red in 2010 and 64% white versus 36% red in 2000. With regard to exports, the Platter Guide finds that 48,5% of the South African wine is exported, a decline in comparison to previous years, which is thought to represent the troubled global economy and the strength of the Rand. The most important markets noted by the Platter Guide 2012 are the same as the ones found by other contributors, being the United Kingdom, Sweden, Netherlands, Germany and Denmark and finally the United States (called "the holy grail of many exporters"). The Platter Guide goes on to describe the different wine making regions, districts and wards that exist in South Africa, which are plentiful. The guide is used to have criteria to select firms for the case research.

The world of high-end wineries

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authenticity it is able to forge, giving evidence from 26 case studies of luxury wine firms.

Authenticity, Beverland (2005) states, is a carefully forged image from a sincere story which consists of both industrial and rhetorical attributes. This sincerity can be achieved through the public avowal of hand crafted techniques, uniqueness, relationship to place, passion for wine production and the simultaneous disavowal of commercial motives, rational production methods and the use of modern marketing techniques (Beverland, 2005). In 2006, Beverland refines the image of authenticity further, stating that the attributes of authenticity can be both real and stylized versions of the truth.

Examples of firms that have attained a luxury, top-of-the-line status are ancient French chateaus, like Haut-Brion, Chateaux Margaux, Château Pétrus, Lafitte Rothschild and Latour.

The industry in this segment is characterized by a high number of competitors. The Wine Spectator 2011 top 100 list for example shows a summation of a hundred wines from all over the world, of which about 30 fall in the higher price category. In the earlier mentioned Platter's South African Wines 2012, each winery is indexed and rated with stars on a scale of one to five, the higher-end wineries usually scoring higher and in many cases this quality is reflected in the price. However, some of the wines in the list are fairly affordable, being priced only at "premium" level. In the words of the owner of the firm under research, there are probably thousands of wines of the highest possible quality globally. It is the reputation for the highest quality that counts, says the entrepreneur. As has been described through the work of Terheijden (2005), individual players in the market have limited to no bargaining power over buyers. Instead, interactions are to a large extent based on building long-term relationships. Threat for substitutes seems to be low: consumers of high-end wines are expected to continue buying these wines, as it is a product on its own.

Cooperation in the South African wine industry

Several examples of large cooperatives can be found in the wine industry, all having the

characteristic of cooperative branding or being part of an "umbrella" firm, e.g. Distell, Pernod Ricard, Constellation Brands, Meridian or Vinimark. Some examples of wineries represented by smaller firms do exist as well, in what is characterized by more "loose" contracts between the winery and the representative, an approach practiced by the firm Robinson & Sinclair. As was already mentioned, several wards and valleys have their own promotional bodies to raise awareness about their

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Theoretical background

The issues presented in the introduction find their bases in several scientific fields. In order to provide context to the theory in this research, the industry was described in the previous section. In this section, theory on cooperation between SMEs will be presented. Next, the research will focus on the targeted market using wine-business specific literature. Third, export marketing literature will be presented. Fourth, supply chain literature will be applied to analyze the relationship of wineries with their distributors in the target market. Finally, marketing and brand management literature will be applied to have the ability to review the brand value of the firm and the possibilities to develop the brand equity. The theoretical background will conclude with an integration of the discussed

literature, emphasizing the relevance of the highlights from the literature for the research, and will be visualized with a Conceptual Model.

Cooperation

Numerous authors have contributed to literature on cooperation between small and medium sized firms. In this paragraph, several of them will be presented to frame the assumed possibility for cooperation among high end wineries as a point of departure for the research.

In 1997, Oughton and Whittam published a state-of-the art article on competition and cooperation between small and medium sized firms. They used several industries to exemplify the importance of cooperation over input activities between small and medium sized firms to attain economies of scale and thereby being able to compete with the larger, dominant players in the market. Three types of scale economies can be attained: (1) pecuniary or competitive external economies, (2) technological or exogenous external economies and (3) collective external economies. In industries which are characterized by a large number of smaller firms, the product market is likely to be competitive, but firms may be below the optimum size to attain economies of scale in production and may experience difficulties in areas such as finance and marketing. Oughton and Whittam argue that productive efficiency will not be realized as a result of these issues. Due to the skewed nature in firm size of many industries, the smaller firms are argued to be at a disadvantage vis-à-vis their larger counterparts and therefore, Oughton and Whittam continue to argue that through cooperation, small firms can attain economies of scale in the areas of Research- and Technology Development, finance, training, marketing, export promotion and advertising. Scale economies through

cooperation on the area of advertising and marketing can have two sources: (1) economies of scale may result from lower prices paid for advertising messages by large volume buyers and (2)

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of its impact on potential buyers of the advertised product. Access to these scale economies may be attained by pooling of resources to buy the advertising time/space "en bloc", with the then available time and space divided between the cooperating firms. Alternatively, producers in an industry may establish a general product image and then advertise individually to exploit the general image. According to Oughton and Whittam, the decision to either cooperate or not can be explained by using Game Theory and will be further elaborated upon in the paragraph where risks involved in cooperation are discussed, later in this section. Oughton and Whittam (1997) contribute to this research by listing the possibility to take a cooperative approach in the industry to compete with dominant domestic players, as well as the international competition.

Taking a case study approach, Beverland (2000) looked into the factors uncertainty and opportunity as determinants for strategic alliances. In terms of Oughton and Whittam (1997), the opportunity existing would lie in the pooling of resources to create joint value. Beverland (2000) then argues that in a highly competitive market characterized by high uncertainty about future actions of competitors, firms may engage in strategic alliances to respond to this environmental uncertainty. The strategic alliances in Beverland's case are aimed at the identification and exploitation of new opportunities to exploit on the areas of acquiring new technology and skills, expand research capabilities and develop new lines of business. Beverland (2000) finds the motivation to form an alliance can fall in one of the following categories: (1) reduced uncertainty and complexity, (2) access to new markets, (3)

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the motivations to form strategic alliances, showing a large extent of overlap with the areas to cooperate on identified by Oughton and Whittam (1997). The identified motivations in Beverland (2000) are reduced uncertainty and complexity, access to new markets, reduction in costs, development of a joint product offering and finally to share expertise.

Ghauri, Lutz and Tesfom (2003) have taken efforts to identify the export marketing problems of manufacturing firms in developing countries. In their 2006 article, Tesfom, Lutz and Ghauri build on the theory and extend their model, which is aimed at determining whether a small firm's export marketing strategy should be either individual or cooperative. This model is visualized in Figure 1. Tesfom et al. (2006) identify several factors that influence this determination - these will be

presented in the "Export Marketing" heading in this research, as well as applied in the case research as defining the issues at play which lead to the decision to cooperate or to 'go-it-alone'. Tesfom et al. (2006) conclude their paper with that to overcome the issues related to export marketing for these small firms, horizontal and vertical cooperation between these firms would be instrumental. Even though the article is written out of a perspective of an underdeveloped, developing country, the statements concerning overcoming barriers on the areas of market management, human resource and financial barriers show overlap with the factors described by Oughton and Whittam (1997) (Tesfom et al., 2006).

Figure 1 - Tesfom et al. (2006)

Next, Aylward (2004) contributes to the theoretical background for the research with his research on innovation and export links between both developed and "embryonic" wine clusters. He uses

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emergence of the New World wine industries over the past decades. Aylward (2004) argues that the desire to export abroad and to expand existing markets triggered a more systemic organization of firms in wine growing regions. Lower end "embryonic" wine clusters are characterized by a loosely knit group of firms, some associated suppliers, local industry associations, some related agricultural firms, technical education providers and growers. At the other end of the scale, the highly developed cluster is characterized by cohesive integration of suppliers, wine makers, growers, marketers, a raft of related industries and the national research, funding, regulatory, education and infrastructure bodies that help provide the framework within which these firms compete and cooperate so

effectively. In this definition, Aylward states that South African wine clusters can be considered more embryonic. An interesting finding in Aylward's work is that 64% of the surveyed firms in the South Australian (highly developed) cluster conveyed that they had been involved in a collaboration for the purpose of marketing, research or 'other innovative activities'. Thus, he provides more bases in the theory that cooperation between firms can lead to improved performance as a result of joint marketing efforts. In conclusion, "clusters" can be seen as entities where a number of firms provide synergy to each other, where South African clusters can be seen as underdeveloped (Aylward, 2004). In 2005, Aylward builds further on his research on clusters in the wine industry. He describes a convergence of strategies of both "Old World" and "New World" producers, both pursuing the same target markets and using strategic alliances to be able to get access to the price points in which the other parties are competing. He sees this convergence as a result of globalization in the wine industry, but also recognizes a new trend focused on localized branding as the new distinguishing factor in the global wine landscape. In this new configuration of the global wine industry, an enhanced role for small and medium sized wineries is recognized by Aylward. In the emerging landscape, technology transfer, branding and the implications of mergers and alliances will continue to shape the new configuration (Aylward, 2005).

A link between cooperation and branding is made by Beverland in 2007. A new type of cooperation is described, moving from a farm centered approach towards a market centered approach, in which the participants are better able to capture the equity of intangible assets such as brands. Beverland (2007) provides evidence that cooperatives with a strategically diverse nature can lead to long-term brand positioning, as long as there is a supportive governance structure in place. The market

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as the "Pinotage Association", in order to brand individual firms under a cooperative umbrella (Froud, 2011).

Now the potential areas for cooperation have been described, some issues that can emerge in cooperative settings will be presented. The issues presented are coupled with solutions or ways to counter them. As is widely known, free riding is a common issue in cooperation among firms, and the fear for free riding may prevent interested parties to actually engage in cooperation. Oughton and Whittam (1997) cover the free riding issue in the lines of Game Theory. The pay-offs from cooperation in their approach is explained as a prisoner's dilemma; for each "game" round, the collaborators can choose to either defect or cooperate. In the case that one player chooses the 'defect' option where the rest undertake cooperative efforts, the defector will gain a higher profit without attaining scale economies. The 'defection' could take place in withholding developments on the area of research and technology development from others, spreading misinformation in the network, or staying outside the network but appropriating the ideas. Similarly, so Oughton and Whittam say, in the case of technology sharing, certain firms may attempt to capture a greater use of the (shared) technology. This leads to the possibility that the defecting firm reaps greater benefits from the venture, since the other firms pay the joint costs. Yet, they receive (inferior) returns

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strategies can be used to make cooperation the most favorable approach. An example Oughton and Whittam mention is the "trigger strategy", following the cooperative strategy and punishes potential defectors with perpetual non-cooperation in the future. Another, less extreme punishment strategy is tit-for-tat, where players will adjust cooperation based on the moves of the other players in the previous round, with the difference that a possible defection will not per se lead to perpetual non-cooperation. The notion of "perpetual" (non-)cooperation implies that there must be a belief that there are indeed possibilities that the game will continue forever. It is posed that with this problem in mind, the strategy that is expected to yield the highest returns in the end is the one that is most likely to be played out by most of the players(Oughton and Whittam, 1997). This theory leads to conclude that there should be an extent of mutual dependency among the participants in order to ensure their commitment to successful cooperation and limit the risk of defections.

Oughton and Whittam (1997) conclude that by taking a cooperative approach, collective external economies can be attained on the areas of research and technology development, training, marketing, export promotion and advertising; these thus represent areas on which a cooperative approach is possible. In the same article, they (Oughton and Whittam, 1997) posit the issue that in a cooperative configuration, a risk of free-riding exists and several methods are possible to counter the risk of free-riding. In order to overcome free riding issues, the cooperation needs to (1) enforce cooperation to prevent opportunistic behavior; (2) an effective market competition is needed to prevent the gains from cooperation to spillover and (3) effective control over intellectual property rights is needed (Oughton and Whittam, 1997). Their work concludes with the notion that for successful cooperation, an extent of mutual dependency is needed. Then, Beverland (2000) was presented, who found that strategic alliances could be founded in order to (1) reduce uncertainty and complexity, (2) access new markets, (3) reduce costs, (4) develop a joint product and finally (5) share expertise. Aylward (2004) contributes in this section by shedding light on clusters in the wine industry, stating that the clusters in the South African wine industry in general can be considered "embryonic". In 2005, Aylward describes that both Old World and New World producers increasingly target the same markets and use strategic alliances (or their clusters) to be able to get access to price points others are competing in. Beverland (2007) links cooperation to branding, an implied goal by the firm under research. The variables to be researched in the case study section thus entail whether the selected cases see the benefits of cooperation in terms of overcoming barriers to export

marketing (Ghauri et al., 2003; Tesfom et al., 2006), the five benefits described by Beverland (2000) and the creation of economies of scale (Oughon and Whittam, 1997); if they perceive the same areas to cooperate on as does literature, whether they perceive the risk of free riding as defined by

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perceived to be involved with cooperation and finally, if the proposed benefits of cooperation give incentive to actually engage in cooperation with other wineries.

Target market

Anderson, Norman and Wittwer (2003) provide the first contribution in this section with their outlook on globalization in the wine market. They divide the global wine market into different segments, being the non-premium, commercial premium and super-plus premium segments. The target market of the firm of research - the super-plus premium class - is described as coming more in the favor of the end consumer due to an emerging preference for higher complication, higher quality wines (Anderson et al., 2003). This foreseen trend is seconded by Banks and Overton (2010), who recognize developments in 'new classes' of consumers in rapidly developing countries such as Ukraine, Thailand, Brazil, India, or China, who replicate the consumption patterns for both bulk and fine wine of the USA, Australia and the United Kingdom. Taking a more focused approach, Beverland (2004) goes into efforts to describe the luxury wine market and how to develop brands into this market. In classifying the different segments, he quotes Geene et al. (1999), who segment the wine industry into icon wines ($US50,- per bottle or more), ultra-premium wines ($US 14-50,-), super-premium ($US 7-14,-), super-premium ($US 5-7,-) and bulk ($US 5,- per bottle or less). Currently scratching the $US 50,- border with the "main" wine, the firm of research fits well between the icon - and ultra-premium segments. Defining the luxury wine market, Beverland (2004) uses Phau and Prendergasts (2000) definition of luxury, consisting of that a luxury brand evokes a feeling of exclusivity, having a well-known brand identity, enjoys high brand awareness and is able to retain sales levels and customer loyalty. Beverland's 2004 contribution will be further discussed in the section "Brand management" of this paper, conjointly with several other of his contributions.

Ponte (2007) has contributed with his work on the value chain for South African wine (on which will also be elaborated in the "Distributor relations" section). Visualizing the wine market as a pyramid, on the bottom of the pyramid, basic quality wines reside. In the middle and top of the pyramid, mid- and high quality are described respectively. For each position, Ponte provides instruments of

verification selectors in the market use. For the top quality wines, these verifiers are Endorsement, Terroir and Personality (Ponte, 2007). Several other classifications in the wine market exist.

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2007). Terroir is generally recognized as a unique microclimate in the soils of the vineyards. Ponte finally notes that "personality" of the wine is an indicator of quality. This personality is reflective of the terroir, brand image, winemaker or a specific story. In this sense, the quality conventions in the top end of the market reflect the theory of Mol and Wijnberg (2007), who state that 'selectors' in a market determine the end value for a product and that endorsements by these key selectors are essential to attain market success over competitors. In the medium end range, endorsements still help in selling the wine (Ponte, 2007). However, Ponte argues that in this range, the actual quality of the wine becomes more important, determined by geographical origin, brands and grape varieties. The geographic origin, according to Ponte, is mentioned to communicate an (often romanticized) connection with the wine and for some regions the geographical indications actually speak louder than does a specific brand, as also underlined by Spence and Hamzaoui Essoussi (2010).

Summarizing this section on the target market, it can be said that some important contextual issues are highlighted. First, Anderson et al. (2003) describe developments in the target market that would mean expansion of the target group of consumers, the super-plus premium class, of the firm of research in rapidly emerging countries. Beverland (2004) describes this class as ultra-premium and notes this target group is defined by price classes between $US 14-50,-, whereas $US 50,-+ can be considered "luxury". The luxury market is the market that the firm under research aspires to be active in, so possibly the prices need to be developed towards this section. Cooperation could be an appropriate strategy to reach the desired development, due to the possibility of creating economies of scale on the area of branding in export markets (Beverland, 2000). Ponte (2007) then contributes by providing the verifiers of quality in the identified segments, being endorsements, terroir and personality. Possibly, this means that by cooperating with other wineries to attain a superior

performance on these areas would lead to higher brand equity, which in turn is argued to be element of the market-driven capabilities. The importance of the selectors (Mol and Wijnberg, 2007) and their endorsements (Ponte, 2007) are elements that have been looked into in practice to frame the

market-driven and relationship-driven capabilities of the firms as well as to identify if cooperation could be beneficial to overcome a potentially negative influence of selectors. Finally, in order to gather background information and verify the compatibility of the reviewed firms, the price points targeted were inquired into.

Export marketing

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and export marketing performance. This section thereby gives context to one of the areas wherein a cooperation is argued to be beneficial.

Beaujanot and Lockshin (2003) are the first contributors in this section with their work on export marketing through relationship development. They argue that the global wine industry is generally export oriented and that global competition is increasing in intensity. Furthermore, they recognize the fact that the wine industry as model could rather be expressed as B2B than B2C, witnessing that most producers sell their wine via distributors, wholesalers or retailers rather than directly to the end consumer. Therefore, they highlight the importance of developing relationships with wineries' business partners, thereby taking a relationship approach rather than a transactional approach, due to the identified overlap between marketing orientation and business relationships. The definition as proposed by Gronroos (1994) in Beaujanot and Lockshin (2003) is the following: “Relationship marketing is to identify and establish, maintain and enhance and when necessary also to terminate relationships with customers and other stakeholders, at a profit, so that the objective of all parties are met and this is done by a mutual exchange and fulfillment or promises”. Thus, Beaujanot and Lockshin have severely stressed the importance of developing relationships with business relations abroad and testify in their results that a developed relation leads to higher mutual understanding between winery and distributor, better products as a result of better market information, better customer orientation as a result of focus on a long-term relationship and finally a better marketing orientation. They conclude with the notion that developing relationships will have a positive

influence on performance in abroad markets, yet warn not to take this for granted as sustained effort is needed to make the relationship work (Beaujanot and Lockshin, 2003). Marketing orientation and the role of brand management will be further elaborated on in the section dedicated to brand management.

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small wineries, as they have a great need for cashflow. Due to the fact that wineries have to pre-finance their complete product and thereby carry all risks, financial constraints could be a cause for underperformance in export marketing. External problems are related to the industry, the export market and the macro environment the firm is operating in (Ghauri et al., 2003). Examples here are the industry structure, differences between market systems domestically and internationally and the intensity of price competition. Macro environmental problems are noted to be those that are beyond the firm's control, such as unfavorable exchange rates, lack of proper trade institutions and

international agreements, tariffs or trade regulations (Ghauri et al., 2003). The networks that firms can engage in can be classified as horizontal and vertical. Vertical networks are defined as those cooperative relationships between suppliers, producers, buyers, aiming at resolving marketing problems, improved production efficiency or the exploitation of market opportunities. This definition is extended as "..vertical networks are also termed as marketing channel networks. Marketing channels are networks that efficiently promote, modify and move goods to markets. In doing so the channel participant adds value to the product and shares profit and market risk with partners in the channel" (Ghauri et al., 2003). As opposed to vertical networks, horizontal networks are those that involve cooperation between competitors, further defined in the following words "Horizontal networks as cooperative network relationships among manufacturers who want to solve a common marketing problem, improve production efficiency, or exploit a market opportunity through resource mobilization and sharing. Most of these initiatives are known as export-grouping networks" (Ghauri et al., 2003). The basic conditions for a network to form are that there has to be a common problem or opportunity for the potential participants, they should have a preference for a cooperative approach and the product marketed by the cooperative should be important for the income-formation of the related firms. Ghauri et al. also recognizes the fact that for the success of the venture, the key people involved have to be able to work well together.

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overcome human resource barriers by creating a common pool for training or hiring personnel skilled for export marketing to represent the participants as a group. Thirdly, knowledge sharing can help in the horizontal network to improve product quality. Thus, taking a cooperative approach to export marketing on the areas defined in this section, the performance of the wineries in these export markets might be improved.

In summary, Beaujanot and Lockshin (2003) emphasize the importance of relationship development for successful export marketing and stress that this will have a positive influence on performance. Ghauri, Lutz and Tesfom (2003) have then been discussed in this section, stating that cooperative networks can be used to overcome export marketing issues that have their base internal (like for example, lack of resources) or external (industry related). Ghauri et al. (2003) propose that both horizontal and vertical networks can be used to overcome these issues if the potential collaborators perceive a common problem or opportunity, have a preference for cooperation and if the common product to be marketed is important for the income formation of the related firms. In their 2007 contribution, Tesfom, Lutz and Ghauri elaborate further on the issues that can be overcome by cooperative export marketing. Horizontal networks are seen to be helpful to exchange information and perform market research together, whereas vertical integration helps in providing information on the requirements to the product (Tesfom et al., 2007). In the light of this thesis, the case studies will specifically aim to analyze possibilities in horizontal cooperation to overcome barriers to export marketing as defined by Tesfom et al. (2007). Furthermore, the perceived importance of

relationships will be inquired into, as the perceived importance of relationships with distributors is considered to have major influence on the relationship-driven capabilities. The next section will elaborate on distributor relations.

Distributor relationships

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With his work on the global value chain of South African wine, Ponte is a main contributor in this section on distributor relations of wineries. In his 2007 article, Ponte describes that the main South African marketers have attempted to keep suppliers in their network through 'grower club' activities. These clubs entail participation in events, the sharing of market knowledge, comparative tastings and travelling abroad. Simultaneously, the participants are setting up joint marketing ventures among themselves, in collaboration with target country-based partners. Ponte notes that the main

instruments of verification of quality in the top-class of wines are endorsements, hereby overlapping with Goodman (2011) on his described point (3) of perceived quality (presented later in this

document). The most interesting point Ponte seems to make is that for mid-range wines "retailers and branded wine marketers (and producer/marketers) are mutually dependent – the first need ‘successful brands’ to sell; the latter need a retail outlet, a contact with the consumer; both need to pay attention to wine critics’ judgments." The mutual dependency described suggests that there are mutual goals, thus referring back to Ghauri et al. (2003).

Ponte and Ewert (2009), in their article on the supply chain for South African wine in general, describe the trend of retailers squeezing margins upstream the value chain by "reverse internet auctions". Furthermore, they state that the current margins on wine are low in the retail market in the UK, The Netherlands and Germany (representing three main export countries for South African wine producers, the fourth is the US market). These findings underline the fact that the industry is highly competitive and that it is difficult for small wineries to retain decent profits.

On distribution of wine, Goodman (2011) has written an informative article outlining the determinants for a distributor's decision when taking on a winery to represent. According to

Goodman, the decision of which wineries to represent is a result of several decisions made along the wine supply chain. With regard to the winery, the choice of grapes, style, quality and region of operation influence the choice of the distributor. On the other hand, the current range of products in style and variety the distributor represents affects the decision for a new winery to take on. The research results in several factors that influence the decision for a new winery to represent. The five most important perceived factors are (1) brand, (2) origin of the wine (the region in which it was produced), (3) the taste, (4) the total range of wines offered and finally (5) the profit margin for the distributor. Alignment of the goals pursued by both the winery and the distributor was seen as a key factor for a successful business relationship, as was understanding the profit margin of the

distributor (Goodman, 2011).

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of mutual dependency, herein confirming the work by Ghauri et al. (2003). Endorsements by wine critics have been argued to be important for the brand image of a producer and thus influences the relationship between the winery and distributor (Ponte, 2007). Ponte and Ewert (2009) underline the notion that the wine industry is highly competitive and that it is difficult for wineries to retain decent profits. Goodman (2011) has contributed in this section by providing insight in the factors that influence the distributor's decision to represent a winery. For the case study, this means that it should be analyzed how well-developed the wineries perceive the relationship with individual distributors and how wineries perceive the actual influence of critics in the wine industry. Looking into how well the wineries perceive the development of relations to be, as well as their perceived importance to the distributor will done to verify how the wineries perceive their position vis-à-vis the distributors as a method to evaluate the relationship with the distributors. Furthermore, it should be determined how a cooperation with other wineries could lead to improved relations with the

distributors, which is likely to be based in higher brand equity for the involved winery. The next section will go more into depth on what constitutes the brand management and brand equity of wineries .

Brand management

As recognized as an important element for effectively marketing wine, this section will aim at

describing what constitutes the brand in general and what the importance for brands is for small and medium sized firms. After giving a general outline of what constitutes a brand, a more detailed description of luxury brands will be sought, as the luxury segment is the segment pursued by the firm under research. Then, an in-depth explanation about developing luxury brands should provide a sound base to undertake further research for the firm in this case.

Kicking off in this section, Abimbola and Vallaster (2007) contribute with their article on the status quo in the academic literature on brands and brand management. Distilled from numerous

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more positive the interaction, the stronger the positive brand value will be, say Abimbola and Vallaster. Furthermore, the ability of firm's representatives to interact directly with customers (as opposed to larger firms) has a direct positive influence on the brand equity. As concluding remark, they state that the success of small and medium sized firms can be seen as reliant on the ability to exploit the resources brand and reputation (Abimbola and Vallaster, 2007), which is also argued to be a part of the market management capabilities as defined by Aakouk (2006) in the section "integrating the concepts".

More in-depth on the management of brands in small and medium sized firms, Krake (2005) starts out positing the same advantages small and medium sized firms have over larger firms in their marketing activities as do Abimbola and Vallaster (2007), being flexibility, speed of reaction and an eye for market opportunities. According to Krake, a successful marketing strategy is based on two pillars: differentiation in the sense of the distinctiveness of the product from the competitors and added value in the sense that a branded product has more value for a customer than a non-branded product. Krake posits that a branding strategy cannot per se be considered part of a general

marketing strategy. Rather, he says that even though they are quite related, the specific problems encountered can differ vastly due to a high level of case dependency. To develop a brand, Krake proposes a set of guidelines to follow. These are (1) concentration on building one or two strong brands, (2) focus a creatively developed marketing program on one or two important brand associations, to serve as source of brand equity, (3) use an integrated mix of elements that support the brand awareness and image, (4) have a logical policy and consistency in the external

communication , (5) ensure that there is a clear link between the character of the entrepreneur and that of the brand and finally (6) cultivate a passion for the brand within the company (Krake, 2005). Furthermore, Krake recognizes sets of brands consisting of beginning and underprivileged brands, emerging brands, established brands and historical brands. By the conscious actions of the entrepreneur, Krake argues that one can steer the brand to develop into recognition and acceptation. An example of the approach followed by Krake can be found in the "Pinotage Association". This organization focused on building the "pinotage brand"(Froud, 2011). In this association, emphasis is continuously placed on the high quality of the wine that the associated producers make, thus forming an umbrella through which the Pinotage-branding is done cooperatively. The elements that support the brand awareness and image are the Pinotage

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Truter-signature wines as an indicator of a top quality Pinotage cultivar wine or wine blend . Finally, due to the strict standards to be met to be allowed to produce under the Pinotage Association label, it may be assumed that all producers do have a passion and motivation for the brand and are dedicated to it (Froud, 2011).

More recently, Spence and Hamzaoui Essoussi (2010) have elaborated on the status quo on brand management as a part of marketing management in literature. Building on Abimbola and Vallaster (2007) as well as Krake (2005), the authors investigate the creation of brand identity and the management thereof in small and medium sized firms (Spence and Hamzaoui Essoussi, 2010). They find that the development of a brand in small and medium sized firms usually is the continuation of the entrepreneur's vision, beliefs and values, which is in line with Krake (2005). In which this paper contributes, is that it recognizes country of origin or inspiration of the brand can be used as a secondary association to enhance brand equity in small and medium sized firms at a low cost. Furthermore, both symbolic and functional values were used to develop a strong and positive brand image and several branding strategies can be used juxtapositioned, as complementary to one

another (Spence and Hamzaoui Essoussi, 2010).The case studies to be conducted will shed more light into whether or not a cooperative branding strategy is possible to develop individual brands of the cases involved, as proposed by Beverland (2000) in the cooperation section.

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Figure 2. - Beverland (2004).

Firstly, Beverland (2004) presents product integrity. By this component, the measurable quality of the product and the more evasive images of "attention to detail" and "credibility", as well as integrity of the product and production methods are captured. Value driven emergence represents the deliberation of crafting a luxury product and presenting it as such . Culture and history are important components as a means of showing a track record for quality in wine making. Emphasis was placed on the pioneering history of all the cases researched, stressing that through their history, their current brand was developed . This can also include "stories"; romanticized depictions of past events. Examples of these could be decisions not to bring out any wine in a certain vintage year due to a disappointing quality of the yield, or accolades attained in difficult years (Beverland, 2004).

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"unique" image of the brand. The wineries carefully deliberated to create an image of scarcity around their products by keeping production volume low, as to position it above "bulk" producers who carry the image of unlimited supply. "Attention to detail" was also found to be an element in marketing, affecting all aspects of the publicly visible part of the winery. Summarizing the process, Beverland states that the luxury brands are developed over a period of time through dedication to the integrity of the end product. Sustained dedication to the highest quality allowed the firms to build a track record for quality. Endorsements, the firm culture and carefully deliberated marketing programs reinforce this position. In his concluding remarks, Beverland (2004) says that his used definition for luxury brands of Phau and Prendergast holds only actually true for the element of exclusivity. In his 2000 and 2007 contributions, Beverland links the development of brands to

cooperation. Since this has already been presented in the Cooperation section, it will not be repeated here. It is mentioned to underline the interrelation between the subjects.

To summarize this section, Abimbola and Vallaster (2007) were presented to the relevance of brand, organizational identity and reputation for small and medium sized firms, lying therein that the success of those firms is reliant on the ability to exploit brand and reputation. Krake (2005) posits that a set of guidelines can be followed to successfully develop a brand, being (1) concentration on building one or two strong brands, (2) focus a creatively developed marketing program on one or two important brand associations, to serve as source of brand equity, (3) use an integrated mix of

elements that support the brand awareness and image, (4) have a logical policy and consistency in the external communication , (5) ensure that there is a clear link between the character of the entrepreneur and that of the brand and finally (6) cultivate a passion for the brand within the

company. Krake (2005) contributes to the research in the fact that he gives comprehensive guidelines a successful branding strategy could follow. Spence and Hamzaoui Essoussi (2010) then describe that country of origin (or area of origin) can be used as a secondary association to enhance brand equity at relatively low cost and that several branding strategies can be used as being complementary to one another. Finally, Beverland (2004) was introduced, elaborating on his work on building luxury brands in the wine industry. Culture, marketing, endorsements, product integrity, history and value driven emergence were presented as the main components of luxury brands in the wine industry. Brand management can be considered

The configurational approach

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the resources controlled and capabilities to exploit them) and the marketing based view, which represents the notion that the orientation towards the market is the primary source of advantage to a firm in a business-to-business perspective. This configurational approach advocated by Aakouk is a balanced combination of these "inside-out" and "outside-in" schools of thought and is argued to be more realistic in that it considers both the firms heterogeneous bundles of resources (the resource based view) as well as heterogeneous demand from the market (the marketing based view). Aakouk proposes a conceptual model, using market-driven capabilities, relationship-driven capabilities, supply-chain capabilities and human resource capabilities as impacting on business performance. Market-driven capabilities are said to be those capabilities that enable the firm to gather and assess information about customers and competitors in the market in order to act on trends in current and prospective markets (Aakouk, 2006). In the background for the case study at hand, these are integrated by all discussed factors - distributor relationships, target market, export marketing and brand management all translate to being elements of the market-driven capabilities and relationship driven capabilties in the sense of the definition. The relationship-driven capabilities are defined as those capabilities that enable the firm to build and maintain relationships with the market. According to Aakouk, this is generally practiced by sharing information with stakeholders and customers and cooperating with them in order to develop a relationship. Thus, the factor distributor relations is captured by this set of capabilities. The supply-chain capabilities refer to logistics capabilities and information technology capabilities. For the high end South African wineries under research, literature has shown that it is common for distributors to handle logistics abroad, and that good relationships with these distributors are key to export marketing performance. Domestic logistics fall outside of the scope of this research. Because the key to logistics lies thus in the quality of the relationships, the supply chain-capabilities as defined by Aakouk (2006) have been omitted for this particular case. Finally, the human-resource capabilities refer to the capabilities that are reflected by the skills of employees and the skills of the management to handle these resources (Aakouk, 2006). Since the firm under research is already active in export markets, this thesis will assume that the human-resource capabilities are sufficient to enact the previously mentioned capabilities.

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Visualized in a table, the concepts fit in Aakouk's (2006) framework as following: Market-driven

capabilities

(Aakouk, 2006)

Target market and Export marketing Anderson et al., 2003;

Aylward, 2007;

Beaujanot and Lockshin, 2003; Beverland, 2000;

Beverland, 2004; Ghauri et al., 2003; Mol and Wijnberg, 2007; Oughton and Whittam, 1997 Tesfom et al., 2007.

Perceived height of internal barriers to export marketing

Perceived height of external barriers to export marketing

Perceived risk of free riding

Perceived benefit from cooperative export marketing

Distributor relationships Spawton, 1991;

Ponte, 2007;

Ponte and Ewert, 2009; Goodman, 2011.

Information on the targeted market segment through the agent/distributor

Mutual dependency between winery and agent Mutual understanding and alignment of goals Perceived quality of the mutual relationship Understanding of the mutual obligations between winery and agent

Brand management Abimbola and Vallaster, 2007; Beverland, 2004;

Krake, 2005;

Spence and Hamzaoui Essoussi,2010.

Exploitation of brand and reputation in the targeted markets

Focus on the Beverland (2004) indicators of luxury brands

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Relationship-driven capabilities (Aakouk, 2006) Distributor relationships Spawton, 1991; Ponte, 2007;

Ponte and Ewert, 2009; Goodman, 2011.

Information on the targeted market segment through the agent/distributor

Mutual dependency between winery and agent Mutual understanding and alignment of goals Perceived quality of the mutual relationship Understanding of the mutual obligations between winery and agent

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Conceptual Model

Integrating the described concepts, a conceptual model has been drawn up and visualized in Figure 3. As was already presented in the table in the previous chapter, the contextual factors show a high extent of overlap and all hold relevance to the central topic, cooperation. As such, all of the

capabilities identified by Aakouk (2006) have a positive influence on performance. This conceptual model proposes, in line with the literature study, that cooperation on the market-driven and relationship-driven capabilities and underlying contextual factors will have an enhancing effect on the export marketing performance. As is visualized, the model argues that cooperation can act as a moderator for this relationship, leading to a higher performance than is possible individually. The first and second construct in the conceptual model, market-driven capabilities and relationship-driven capabilities, have been extensively argued to positively impact on the export marketing performance. The market-driven capabilities have been defined as those capabilities that enable the firm to gather and assess information about customers and competitors in the market in order to act on trends in current and prospective markets (Aakouk, 2006). Relationship-driven capabilities are those capabilities that enable the firm to build and maintain relationships with the market (Aakouk, 2006). The underlying factors determining the market-driven capabilities are export marketing, brand management and the distributor relations. "Export marketing" is measured by the firm's activity in foreign markets, as well as their perceived presence and height of both internal and external barriers to export marketing. As multiple authors have argued, the quality of the relationships with foreign agents is instrumental to the export marketing performance. Hence, this is the second underlying factor to the formulated capabilities. The quality of these relationships are measured subjectively by indexing how well the wineries perceive the relationships to be developed, how important the wineries regard themselves in the portfolio of the distributor and how well the wineries are aware of the reasons distributors have to represent the wineries. Finally, the brand has been argued to have important influence on the export marketing performance as an element of the market-driven capabilities. Therefore, it has been subjectively measured how well developed the wineries perceive their brands to be. Furthermore, the "luxury" brand elements as defined by Beverland (2004) have been inquired into, as to measure what the brand value is for each respective case.

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individually is dependent on the perceived height of the internal and external barriers to export marketing. The preposition is that these can be considered push factors to cooperate. The internal barriers are formulated in line with Ghauri et al. (2003), being those barriers related to limited organizational resources for export marketing. Specifically, financial resources to finance exports as well as be able to fund targeted marketing schemes are expected to pose a barrier. The other main internal barrier is expected to be knowledge about the export markets. For both of these perceived barriers, it will be indexed to what extent the interviewees perceive these elements as a barrier to export marketing. External barriers to export marketing have been argued those barriers related to the industry structure, trade institutions, regulations and tariffs as well as variable exchange rates. Like as for the internal barriers, the cases reviewed are analyzed through how high they perceive these specific barriers to be. The expectation is that the higher these barriers are perceived to be, the more incentive the cases will have to cooperate with others in order to overcome these barriers. The focus in this research lies on horizontal cooperation in the value chain on the capabilities defined by Aakouk (2006) in order to gain those benefits that have been thoroughly described by Oughton and Whittam (1997). As a result, the performance in export marketing would be enhanced.

"Cooperation" itself is specified as the willingness to cooperate with other wineries (horizontal cooperation) based on the perceived benefit to interviewee's firm in overcoming internal and external barriers to export marketing. The preposition is that perceived presence and height of these barriers leads to incentive to cooperate. Free riding, as a risk associated with cooperation, is

visualized to have a negative incentive to cooperate. Weighing the perceived benefits and risks, cooperation will to a greater or lesser extent influence how the market-driven capabilities and relationship-driven capabilities lead to export marketing performance.

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MSc BA Thesis Small Business & Entrepreneurship

MSc BA Thesis

Small Business & Entrepreneurship

Abstract

Preface

Table of Contents

Introduction

Description of the industry

The global wine industry: an introduction

The worlds of wine

The world of South African wine

The world of high-end wineries

Cooperation in the South African wine industry

Theoretical background

Cooperation

Target market

Export marketing

Distributor relationships

Brand management

The configurational approach

Conceptual Model