Exploracion de las caracteristicas y oportunidades de empresas vitivinicolas de rapido crecimiento en Chile.
| Autor | Roman, Jorge J. |
| Cargo | Ensayo |
Exploring features and opportunities of rapid-growth wine firms in Chile
Explorando as caracteristicas e oportunidades de empresas vitivinicolas de rapido crescimento no Chile
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Introduction
The behavior of the international wine industry has been widely studied in countries such as Spain, Italy and France (Bardaji, 2004; Deconinck& Swinnen, 2015; Flint, Golicic, & Signori, 2011; Loubere, 2014). However, after the entrance of the "new world" in the wine market, i.e., namely the wines from Chile, Australia, New Zealand, South Africa, Argentina and the United States, California in particular, little has been investigated and characterized regarding this industry in the Chilean context.
The latter certainly is a disadvantage for Chilean wine firms, which may not necessarily be aware of the determinant factors that explain their increased competitiveness, not only in the current market scenario, but also in the future of a market that is growing tremendously, even presenting the fastest growth (Berrios & Saens, 2012).
The aim of this study is to provide information and knowledge regarding the features and explanatory factors that allow enhanced development of rapid-growth wine firms in Chile, which create a greater impact on the economy, not only by generating a large sales volume, but also by creating more jobs and adding more dynamism to the industry.
To answer this, the paper applies case study methodology as a means to analyze the factors that could cause the rapid-growth of wine companies in Chile. Six wine firms founded in Chile between 1990 and 2006 were analyzed, divided into two groups; three companies demonstrating rapid-growth from their beginnings, also referred to as gazelle companies, and three companies showing gradual growth. The selection criteria for this sample corresponds to companies whose efforts to achieve growth mainly focus on the international market, with 75% of total sales in exports and family-owned administration.
Among the main results of this paper, we can indicate that the typical characteristics presented in the literature of dynamic firms (Barringer, Jones, & Neubaum, 2005) are not always present in the Chilean wine industry. For example, it is impossible to differentiate dynamic entrepreneurships from gradual growth companies by passing annual sales of $100,000 USD during the first year of their foundation. There are also no differences by having over 20 workers, or by having a founder with higher education, or previous experience in the same industry. Neither a network with inter-organizational partnerships nor the use of multiple-distribution channels would be relevant to distinguish dynamic entrepreneurships from gradual growth firms.
Nonetheless, new factors that are particular to dynamic wine firms would prove relevant to be analyzed, among which we find: previous founding experience in large businesses; formal establishment of a growth-based strategy and investment in the innovation processes.
Most of these parameters can be associated with founders' prior experience in businesses that are different to the wine industry, where they have managed to value certain best practices which include a higher average price per bottle, a customer-loyalty indicator for the product, and the use of new technologies in their processes, which is the main feature of dynamic entrepreneurships.
The results of this work could be considered by wine entrepreneurs interested in promoting rapid-growth in their companies. In addition, it could also be of interest for economic development agencies that maintain and develop public programs to support industry competitiveness.
This paper is structured as follows. After this introduction, Section 2 describes the literature review. Section 3 explains the selected methodology. In Section 4 the results of case studies of six Chilean wine companies are displayed. Finally, Section 5 includes the conclusions and possible future research.
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Literature review
The concern in Chile and in other developing countries to strengthen their economies requires investigating which factors could drive rapid business growth. In this regard, it is important that each project ideally follows dynamic growth, as it is considered the foundation for economic development, job creation, innovation, income generation and general community well-being (Cancino, Bonilla, & Vergara, 2015; Davidsson & Delmar, 2006; Storey & Morgan, 1996).
Birch (1981) deeply analyzed which type of companies create more jobs in the US economy. He found that the most important companies in employment creation are those with an intermediate number of workers, but which are characterized by growing at a rapid pace, which led to the creation of the term gazelles for these new companies. Of the various forms of entrepreneurships, dynamic enterprises, particularly high-impact type or gazelles, generate true momentum in the economy (Autio, 2007).
Fischer and Reuber (2003) consider gazelles, as companies that present a 20% growth rate in annual sales during 5 consecutive years, while for Barringer et al. (2005) gazelles are those which have a compound annual growth rate equal to or over 80% during a period of 3 years. Moreover, Autio (2007) defines them as companies with approximately 20 employees during their first five years, while Kantis and Diaz (2011) consider that gazelles are born as small businesses, but quickly transform into Small and Medium Enterprises (SMEs). According to Cunneen and Meredith (2007), a fast-growing company should be managed independently, with a turnover of more than $100,000 USD the first year and reach growth rates of 40%. Finally, Leiva and Alegre (2012), regard gazelle companies as those that excel due to their growth, either in number of employees, sales, profits or a mixture of these factors. The difficulty in defining fast-growing ventures can be an indicator of the difference between the different business areas; therefore, for each study it is necessary to use the definition that fits the context, even creating a new one, if necessary.
Beyond definitions, gazelles appear to be an isolated phenomenon; 1 out of 7 companies as stated by Barringer et al. (2005) and from 2% to 5% of Anglo-Saxon companies according to Sims and O'Regan (2006), which turn out to be transcendental not only with regard to employment generation (Kuratko, 2005), but also to drive the development of competition and improve the state of supply (Leiva & Alegre, 2012), promote the general revenues of the country (Reynolds, 1987), and create new industries (Barringer et al., 2005). In the latter sense, gazelle companies have been identified in a wide-range of production areas, covering areas as diverse as technology (Grilli & Murtinu, 2015), construction (Autio, Arenius, & Wallenius, 2000), manufacturing (Allen, 1999; Case, 2001; Molina, 2009) or services (Delmar, Davidsson, & Gartner, 2003).
In 2012, a report was written by Ibisworld, a business information specialist, which situated the wine industry as one of the 11 industries with the greatest potential for growth in the future, based on both sales in previous years and on global demand growth, this is given essentially by the consumption boom in the United States (Berrios & Saens, 2012). However, despite the importance of the previous statement, it is not easy to currently find studies that attempt to determine the characteristics of rapid-growing companies in the wine industry.
The Chilean wine industry is raising questions on how to adapt the current model to transform it from a sector that reacts to global market conditions toward having a more proactive attitude, striving to develop growth in order to position itself as the leading producer of premium category sustainable wines in the "new world" countries (Berrios & Saens, 2012; Felzensztein, 2014; Valenzuela & Maturana, 2016).
The behavior, strategies and specific decisions made by wine company management, within other attributes, will then be key factors in the development of dynamic entrepreneurships. A summary of these characteristics can be seen in Table 1, adapted from Barringer et al. (2005) and Cancino et al. (2015). In the table, parameters addressing characteristics of the founders, the company organization and its business practices are described.
With regard to the founder's characteristics, many researchers have described that personal attributes directly influence the rapid-growth of a company. According to MacMillan and Day (1988), previous experience in the industry by the founder is considered a factor that exerts a positive force for accelerated growth through the use of networking and market-knowledge. When focusing on higher education, Sapienza and Grimm (1997) argue that entrepreneurs, or business-owners, who have this level of education are able to develop their management better, based on communication skills and competencies that are consolidated as a result of these studies. In addition to these attributes, founders that have experience in business creation are also correlated with a rapid-growth of the new venture (Singer, 1995). For Baum et al. (2001), the features and the individual skills of entrepreneurs have a direct effect on the rapid-growth of companies; hence, private investors consider it important to know who the entrepreneur is in order to speculate on the success of a new business. Finally, in terms of social and professional networks of founders of new businesses, the literature indicates that a lack of critical resources in the early stages of development can be managed better by having a strong network of personal contacts. According to Donckels and Lambrecht (1995), entrepreneur networks have a great impact on the growth of new and small businesses, especially through the resources that can be channeled by third-parties and that supplement the meager assets at the beginning of operations.
The second dimension describes how a series of...
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