Free Essay

Silkwood Imc

In: Business and Management

Submitted By korime
Words 16405
Pages 66
2. Executive summary
• Two countries researched for potential market entry of Silkwood Wines, using macro-environmental (PEST) analysis, are Argentina and New Zealand.
• Argentina is an attractive market for winemakers from ‘target-market’ point of view, but it is not a good time to commence exporting to this country. Unfavourable political and economic situation are the strongest factors that influence this decision. High physical, psychic, cultural and linguistic distances from Australia represent additional potential complications.
• New Zealand on the other hand offers less opportunity for profits, but being physically, psychically, culturally and linguistically close to Australia, with a favourable applicable tariff rates and historically good relationship, it is a safe option.
• American slightly positive GDP growth in the last quarter and some other latest statistics indicate that the worst times relating to world financial crisis is in the past. Nevertheless, world’s economists are prognosticating that long time is needed for full recovery. Some countries are still in recession and Argentina is battling hard to come out as a winner. Higher risks are associated with these hard times, thus a safer option is recommended.
• Taking all this into consideration and the facts that Silkwood Wines are inexperienced in exporting and have limited human and financial resources, I recommend New Zealand as the best country for initial entry. With characteristics above described, New Zealand can be regarded as an ‘extension’ of Australian market. It will offer some expansion of production and extra profits, but more importantly experience that Silkwood Wines will be able to use once decision is made to enter other markets.
The following table summarizes research findings for Argentina and New Zealand

Political Situation Economic Climate Ease of Doing Business Cultural Difference Physical Distance Target Market Profit Opportunity
New Zealand       
Argentina       

The following table compares available market entry options (applicable for both countries):
Entry Option Distribution Costs Control Commitment Export
Foreign Importing Agent Medium (variable) Medium Medium Direct
Distributor Low to Medium Low Low Direct
Australian Exporting Agent Low Low Low Indirect
• Again because of Silkwood’s limited financial and human resources, use of the distributor in New Zealand is recommended market entry option. Relevant distributor can also provide a complete service regarding logistics and storage for a competitive price and has a developed network of distribution to relevant store outlets.
• Both Argentina and New Zealand have strong domestic wine industries with similar competition. There are more Australian wines currently exported to New Zealand.
• Further research is required for detailed competitor analysis, preferably conducted in New Zealand.
• Argentina shouldn’t be disregarded altogether. It still remains an attractive target market and it should be reassessed once the company is established in New Zealand, gains experience in exporting and if times change for better in Argentina.
3. Research Objectives/Scope of Report
To conduct a research in regards to entry into foreign markets by exporting, I have chosen Silkwood Wines, a vineyard and a vinery company from Pemberton, West Australia which produces a range of quality Australian wines.
Reasons for this decision are:
• Australia has a great reputation of its famous high quality tasteful wines, which gives opportunity and a good starting point for other Australian wine makers that wish to expand production by entering other markets.
• Still supplying the domestic market only, Silkwood Wines hasn’t commenced exporting yet, but it has reached its production capacity and is ready for expansion.
• They state their eagerness for innovation, development and progress on their website.
• Putting emphases on quality, Silkwood Wines have a great range of high quality affordable wines. Its ‘Heritage’ range, chosen for export, comprising of Chardonnay, Sauvignon Blanc, Pinot Noir and Shiraz wines, has a good chance of success in different markets. Top wine consuming nations, 2005
Country L/year per capita Population (million) ML per year % of world
France 52 64 3353 14.1
Italy 47 58 2701 11.4
Portugal 46 10.7 490 2.1
Spain 34 40 1368 5.8
Argentina 27 41 1097 4.6
Germany 24 82 1984 8.3
Australia 22 (+5.5 tourists) 21 452 1.9
United Kingdom 20 61 1200 5.0
New Zealand 19 (+2.4 tourists) 4.2 80 0.4
USA 8 307 2511 10.6
Russia 8 140 1050 4.4
China 1 1338 1350 5.7 Principal wine producing countries (in thousands of hl)

As it can be seen from the tables above, the biggest wine consumers are also the biggest wine producers. France, Italy and Spain are most famous wine lovers. That’s why their wine markets are oversaturated both with domestic and foreign wines as they are most attractive. It is hard to enter these markets without substantial capital investment that overextends Silkwood’s capabilities. The same goes for The United States of America, not so much because of the wine itself, rather more because its market is oversaturated in regards to any product.
Argentina on the other hand is also a big producer, but is not that of a popular destination as once previously mentioned. Thus there is a good chance of success for a foreign wine, differentiating as something different, something new. With a population of 41 million people and substantial wine consumption of 27L/year per head, they account for big wine lovers consuming over 1000 millions of litres per year. This is not surprising considering the fact that they are both Spanish and Italian descent. Also, Argentina has some similarities to Australia – it is also a large Southern Hemisphere country, with a lot of natural resources and wealth and similar, just a bit colder climate.
For all these reasons, I have chosen to research Argentina, as potential country to export to.
New Zealand is close physically, culturally more similar to Australia and we have a long lasting, good established relationship. Even though New Zealanders also love to enjoy good wines, and are use to Australian wines, with population of 4.2 million, the opportunities for profit returns are smaller, even if we include 2.4 million overseas annual visitors. For wine industry, Argentina is opportunistic with a large potential for profit returns, but because of the obvious obstacles in terms of differences to Australia, such as cultural and linguistic differences, psychic and physical distance, there is a bigger risk of failure. Consequently, I decided for second potential export market to be the opposite, more secure option – New Zealand.

Regarding macro-environmental analyses to conduct the research of mentioned countries, I will use the PEST method (traditional basic model), to split the research to political, economic, socio-cultural and technological environments of the country.

I will analyse following market entry options: Licensing, Franchising, Joint-venture, Acquisition, ‘Greenfield site’, Foreign sales office, Overseas importing agent, Distributor and Australian exporting agent.

4. COMPANY AND PRODUCT BACKGROUND
4.1. The history of Silkwood Wines
Silkwood Wines vineyard is based in the South West part of Western Australia, amongst picturesque and famous Karri and Jarrah forests of Pemberton.
The search and selection process for establishing the location for Silkwood Wines begun out of a belief that critical combination for depth of flavour and character of good wine can only come from healthy grapes grown on an ideal soil in the right climate.
Based on the prevailing temperate climate, gently undulating landscape and the rich gravelly loam soils that overlay the clay base, as well as on Professor Gladstone’s 1967 recommendation that Pemberton, Western Australia is the most suitable wine region, third-generation farmers Pam and John Allen established Silkwood vineyard here in 1998, and after a year of soil preparation and building of the necessary vineyard infrastructure, planted the first three hectares of Shiraz and two hectares of Sauvignon Blanc vines in 1999. In 2000 a further five and a half hectares of Riesling, Pinot Noir, Merlot and Cabernet Sauvignon were planted.
Under new ownership by Blair Meiklejohn (2004), in 2007 vintage was expanded by a further 6 hectares of vines by the purchase of the adjoining property.
Initially, wines were made under contract, while Silkwood only grew vines and grapes. In 2007 latest technology winery facility was installed and, Silkwood now makes its own wines, putting emphases on quality of its products and branding.
4.2. Mission and vision statements
Mission statement
“The philosophies in the winery and in the vineyard are the same—to produce the finest fruit possible from strong healthy vines and allow that fruit character to carry through to the finished wine...we believe that good wine can only come from healthy vines grown on good soil in the right climate...Our focus on quality at Silkwood is of the utmost importance,...Guinea Fowl are used as a biological means of controlling insect pests, reducing the use of chemicals. With this philosophy our aim is to produce boutique wines that our customers will be proud to share with their friends.”
Interpretation
Silkwood is determined to put emphasis on quality of its products, by implementing quality production techniques. By doing so it wishes to position its wines as healthy, chemical free, rich taste, affordable, but not cheap, fun and popular quality wines, which people will love to buy to enjoy themselves and with friends or, as a nice present when going to a party or other type of social gathering.
Vision statement
“From the Owners, Managers and Staff, everyone loves what they do, are high achievers and welcome the challenge of being able to really make an impact in the wine industry, even in a small way, with the development of Silkwood over the next few years.”
Interpretation
Believing it has to offer innovative high quality products, Silkwood is not afraid of competing in the industry, wishing to progress, evolve and expand. Among other, one of expansion methods is exportation to new markets.
4.3. Products
Silkwood produces four separate wine ranges, differently positioned, to target different market segments. These ranges are as follows: Silkwood Heritage range is a selection of varietal, meaning that no other varieties are blended into the wine, which enhances the uniqueness and individuality of the wines. Available products are:
Chardonnay Sauvignon Blanc Pinot Noir Shiraz

Seasons range offers simple, crisp wines made with a focus towards drinkability and enjoyment. Available products are:
Classic White Twilight Blush Dew Spice Zest

Wild Dog White Wild Dog Red

Pinot/ Chardonnay Sparkling Shiraz ‘Little Bitch’ represents
Silkwood’s range of champagne products.

For initial exporting, Silkwood will focus on its Heritage range, as it is its main and its trademark collection. After successful establishment in the chosen overseas market, introduction of other ranges will be considered in the extent that overall brand positioning is not threatened. 4.4. Target market within Australia
With first three ranges above mentioned, Silkwood Wines are targeting different market segments.
According to Roy Morgan, there are 10 different market segments in Australian society today, which he named: “Fairer Deal” (4%), “Look At Me” (12%), “Basic Needs” (3%), “Real Conservatism” (5%), “Traditional Family Life” (20%), “Conventional Family Life” (12%), “Young Optimism” (7%), “Socially Aware” (14%), “Something Better” (6%) and “Visible Achievement” (17%). By studying these segments we can determine, which ones apply to which wine range, and thus determine the potential target market size.
Heritage range is designed for more sophisticated wine drinkers, which are piquant about the wine taste and quality, choosing their wines thoroughly and usually sticking with preferred brands, while having several of them on the menu, each to go with the different type of meal. Nevertheless, they are also concerned about the ‘value for money’ they get, thus being sensitive about the price. These are usually older, educated and well situated people who will know to appreciate Heritage’s mid-low price range, while recognising its quality. Thus Heritage brand needs to be established firmly with a view to a long lasting relationship towards target customers. People from “Real Conservatism” and “Traditional Family Life” segments are most likely to buy this wine. Also “Socially Aware”, “Conventional Family Life” and “Something Better” can be partially included. Conclusively, size of target market for Heritage range is from 5.5 to 8 million potential consumers
Season range is for lighter social drinkers that like to enjoy a glass of wine, usually with friends, or for lunch/dinner. This part of market is usually comprised by younger people that require drinkability and enjoyment out of wine, represented mostly by “Conventional Family Life” and “Young Opportunism” and partially by “Look At Me” (the legal age), “Something Better” and “Socially Aware”, together constituting a target market of a size from 4.2 to 7 million.
With aboriginal rock art of a ‘dingo’ on a fun and simple label, which has great appeal to overseas visitors, and a unique touch of 'Italian' traditions, 'Dingo Creek' wines are specifically designed to target international tourist. According to Tourism Australia Statistics, there were 5.5 million people that visited Australia last year, out of which almost all adults would want to try famous Australian wines. Wine tourism is also famous in Australia, and Silkwood Wines property has been tastefully decorated in the earthy red and forest greens of its surroundings and lakeside has been designed with memorable panoramic views, to offer an inviting experience facilitated by its ‘Cellar Door’. ‘Little Bitch’ is a celebration drink that represents Silkwood’s range of champagne products. People are most likely to buy it as a gift, for anniversary, on the way to a party, birthday or any other celebration. Same market segment that would buy Season range would also potentially chose this champagne.
4.5. Company structure
Silkwood Wines is a family owned limited liability company, comprising of a small dedicated team of 10 to 12 staff and additional seasonal workers. There is no middle or higher level of management; the owners are the ultimate decision makers.
4.6. Strengths and weaknesses
Strengths
• Property on great soil, which accompanied with Pemberton climate, produces great unique wines
• Established wine brands and ranges
• Knowledge and experience in vine growing and wine making Weaknesses
• Lack of management skills
• No exporting knowledge
• Limited budget

4.7. Resources
• Modern vinery facility
• Latest technology wine making equipment
• Property on a 25 ha of great soil

4.8. Past performance
Silkwood has produced 8000 cases last year

4.9. Current areas of operation
Still supplying the domestic market only, Silkwood Wines hasn’t commenced exporting yet, but it has reached its production capacity and is ready for expansion. Its wines are also available for purchase online.

4.10. Key competitors within the Australian market
There are numerous competitors in Australia in the wine industry, as there are a large number of vineyards, and also a large number of winemakers who do not necessarily grow vines as well. The key competitors are the ones that produce similar wine ranges, with similar quality and sell them for the similar price. Identified as such are:

For Heritage range
• Bellarmine for Chardonnay
• Stella Bella and Lenton Brae Semillon for Sauvignon Blanc
• Henty Estate for Shiraz
• Bream Creek for Pinot Noir

For Season Range
• Grant Burge Wines
• Tahbilk Wines

For Dingo range
• d'Arenberg
• Hunter Valley Wine Country

For Little Bitch range
• Brown Brothers for Pinot / Chardonnay
• Seppelt Original for Sparkling Shiraz 5. MACRO-ENVIRONMENTAL ANALYSYS
5.1. Argentina

Introduction

"They say Argentina is a country of Spanish-speaking Italians who live in French houses and want to be English”. (Martin Donovan, “Apartment Zero”, Premiere Magazine, November 1989).
Argentina is also a country of demographic extremes, social contrast, great geographic diversity, political contradictions and one could argue, of strong women.
Its population and culture were heavily shaped by Italian and Spanish immigrants arriving from 1860 to 1930

Geographic location, size and structure

Argentina is situated at the utmost South of South America, bordering Atlantic Ocean and Uruguay on the East; Brazil on the North-East; Paraguay and Bolivia on the North; and Chile on the West .

Figure 1 Figure 2
It is the eighth largest country in the world, third in the southern hemisphere and second in South America in size, with landmass surface area of 2,780,400(2). Of those, approximately 54% consist of Pampa Argentina plains (Prairies and Savannahs); around 23% of high mountain plain (mesetas); and another 23% of mountain ranges and peaks.
• Perth to Buenos Aires – 12,618kms (26 days shipping time)

For purposes of researching market of Argentine Republic I used PEST analysis (basic model) presented on the following pages. 5.1.1. Political environment
5.1.1.1. Government type

Argentina is Federal Presidential Republic. Two main levels of government are federal and provincial. There are 23 provinces and federal capital Buenos Aires. On both levels system of powers is separated into:
• Legislative - bicameral congress with lower and upper house elected every four and six years, with a half and a third of the house respectively renewed every two years;
• Judicial – courts;
• Executive – government formed by the winning party or coalition on the election.

5.1.1.2. Political parties and coalitions, unions and pressure groups

When forming relationships, following groups should be taken into consideration:
• Major political parties and active leaders:
 Justicialist (Peronist) Party (PJ - Partido Justicialista). Leader: Nestor Kirchner;
 Radical Civic Union (UCR - Union Cívica Radical). Leader: Gerardo Morales;
 Republican Proposal (PRO - Propuesta Republicana). Leader: Mauricio Macri (includes Federal Recreate Movement or RECREAR. Leader: Esteban Bullrich);
 Socialist Party (PS - Partido Socialista). Leader: Ruben Giustiniani;
 Union For All (UPT - Unión Por Todos). Leader: Patricia Bullrich.
• Major coalitions:
 Front for Victory (FpV - Frente para la Victoria) - a broad coalition, including elements of the UCR and numerous provincial parties.
 Civic Coalition (a broad coalition including UCR and PS, loosely affiliated with Elisa Carrio);
 Interbloque Federal or IF (a broad coalition of approximately 12 parties including PRO).
• Major unions and pressure group:
 Argentine Association of Pharmaceutical Labs (CILFA);
 Argentine Industrial Union (manufacturers association);
 Argentine Rural Confederation or CRA (small to medium landowners association);
 Argentine Rural Society (large landowners association);
 Central of Argentine Workers or CTA (a radical union for employed and unemployed workers);
 General Confederation of Labour or CGT (Peronist-leaning umbrella labour organization);
 White and Blue CGT (dissident CGT labour confederation);
 Roman Catholic Church.
 Argentina is also a member of the International Labour Organisation (ILO) 5.1.1.3. Current political situation

Currently, from the political point of view, Argentina is a very unpopular investment destination since the change of the government is in place, elevating uncertainty levels.

• Current government and head of state
The government, formed by the Front for Victory (left wing - a faction of Peronist Party), lost its dominant congressional majority at preliminary mid-term elections in June 2009. With the loss of 19 seats in the lower house (total of 110) and 4 seats in the Senate (total of 34), they are left with 30.8% of the total voting body.
Active chief of state as well as the head of parliament is still President Cristina Fernandez De Kirchner, representing the departing ruling party led by her husband and the former Argentine President Nestor Kirchner. Her presidency term ends in 2011.
This deformation of government, with the active president staying in power, is causing miscellaneous problems. It complicates governability, risks political instability, and it could lead to a deep recession and social unrest in the worst case scenario.

• Current opposition
The newly empowered opposition included candidates with a wide range of views, including on economic policy.
The Civic Coalition (centre-left) with Elisa Carrio came as the second party, winning additional 18 seats in the lower house (total of 73) and 6 seats in the senate (total of 23) – 23.9%.
Union Pro Coalition or Republican Proposal (PRO – centre-right), with Mauricio Macri, came as the third party winning additional 19 seats in the lower house (total of 32), and they now have 17.7% of the voting power. Notable, they are not represented in the senate.
Opposition candidate Francisco de Narvaez, of the Union Pro coalition, who won 35% in the province of Buenos Aires, calls for the exemption from the 21% VAT tax for basic food items.
In the next several months, the election winners will be forming their policies. If they can push proposed measures through a divided congress, Argentina’s economic model is likely to change.
The new congress will not assemble until 2010.

5.1.1.4. Political stability and regulation trends

• With the president being both the chief of state and head of government, in practice the presidency dominates. Both the president and the vice-president are elected for a four-year term by a direct public vote.
• Democratic institutions have achieved a higher level of stability, but as above mentioned recent events suggest, the government can be unstable, and social unrest due to high power distance is not rare.
• Recent events of Argentina’s farmers launching a four-month campaign of strikes and roadblocks, after the government raised taxes on soybean exports to nearly 50%, insinuate that protests are a common practice, as well as it is the government interference through regulations.
• No conflicts out of cultural, religious or linguistic divisions should be expected, since Argentina is homogenised on high level from those perspectives. This is discussed in more details in the socio-cultural section of the report.
• OECD ranks Argentina as a high risk country, with political stability index (PSI) valued 7, whereas PSI for Australia is 0.

Figure 3 5.1.1.5. Government policies
• From 2004 till 2007, during favourable international conditions, Argentina ran large fiscal and current-account surpluses and accumulated reserves through a weak peso policy.
• Later government, during the time of economic downturn, pursued pro-cyclical fiscal policies, with raising the taxes and lowering its spendings.
• Present government introduced unorthodox anti-inflation measures such as domestic price accords, export taxes and utility tariff freezes which caused tensions within MERCOSUR accusing Argentina to be protectionist.
• Farmers organised strike imposing nationwide roadblocks, since March 2008 when government introduced a sliding scale export tax scheme for grains and oilseeds. The issue hasn’t completely resolved.
• In recent years Argentine Government nationalised county’s post office, airline and private pension funds.
• World Trade Organisation accuses Argentine Government of trying to use anti-dumping actions to counter-balance the liberalisation of trade and the reduction in import duties, mainly against cheap imports of textiles, footwear and steel products.
5.1.1.6. Environmental issues and consumer-protection legislation
• Environmental issues relating to Argentina
 Typical of an industrializing economy such as deforestation, soil degradation, desertification and air pollution.
 Argentina is a one of the world leaders in setting voluntary greenhouse gas targets.

• Regulations or standards that wine needs to comply with in Argentina.
 On 10 July 2002, Government of Argentina has signed Mutual Acceptance Agreement (MAA) on oenological practices, administered by The World Wine Trade Group (WWTG), formerly called the New World Wine Producers. Those countries that have already signed the MAA have agreed to mutually accept the winemaking practices of the other parties to the agreement. The current signatory countries are: Australia, Canada, Chile, New Zealand, South Africa and the United States of America.
 Argentina was named to the "priority watch list" for the 1996 annual review of intellectual property protection based on allegations that its patent protection law was inadequate.
 The ‘Wine Institute’ complains that, as a result of joining the MERCOSUR agreement, Argentina has raised tariffs on imports from non-MERCOSUR countries.
 Labels – wines that carry a grape variety on their label must be made from at least 80% of that grape variety.
 The National Wine Institute (Instituto Nacional de Vitivinicultura - INV) exercises control over the authenticity of wine and wine products during their production, manufacturing, and marketing stages.
 Wine imports are required to have a ‘certificate of analysis’, and a ‘free sale certificate’ (A document issued by a government agency confirming that a food, beverage, drug, medical or cosmetic product is approved for unrestricted sale in the country of origin and/or export).
 It is prohibited to import wine in bottles that exceed 5L in size.

 Products imported through INV (wine): A sticker label should be affixed to each imported bottle of wine, containing the following information in Spanish: 1. Brand 2. Legal identification of the product (wine) 3. Alcoholic grade 4. Net content 5. Country of origin 6. Acronym and analysis number (granted by the inv) 7. Colour 8. Sugar content (if more than 6 milligrams per liter of sugar) 9. Importer’s name, address and inv registration number
10. Other components other than wine
11. Warning statements (“beber con moderación” “prohibida su venta a menores de 18 años”)
 “The importer must have proof of prior Tax Identification Registration with AFIP (in which the importer will obtain a CUIT, or unique tax identification number) before registering with the National Institute of Vitiviniculture (INV)”.
 “The importer should visit the local office of the INV (a contact list can be found on the last page of the INV Import Regulations document - PDF) and submit form “1856-O y M – Modelo Oficial” with an attached copy of the registration ticket issued by AFIP, signed and stamped by the applicant. If approved, the INV will issue a Certificate of Inscription as Importer of Wine Products (Certificado de Inscripción como Importador de Productos Vitivinícolas) along with a registration number that may be requested by authorities in subsequent importations”.

5.1.1.7. Freedom of press, rule of law and levels of crime and corruption
Every year, new allegations are made regarding journalists being intimidated or killed by police officers. In 2002 Police was linked to execution-style killings; The Argentine human rights group ‘Mothers of the Plaza de Mayo’, weekly demonstrate against the scenes of ‘assassins walking the streets of Argentina’, alluding to the police force.
According to Transparency International – the global coalition against corruption, on scale 0 to 10 with 0 being worst, Argentina’s 2008 corruption perceptions index was 2.9. That groups it with the countries with least success in battling corruption (109th)(1). For comparison, Australia’s 2008 CPI was 8.7 (9th)(1).
The following charts represent Argentina’s level of success in battling corruption in different sectors:
Figure4 Battling corruption in Argentina - Core Five State Institutions
Leadership Military Police Judiciary Civil Service Good Good Low Moderate Moderate
(Source: The Fund for Peace, 2007, Country Profile, Argentina)
Crime rates are very high. Close to 800 crimes are being reported daily in the capital including the metro area. Also, a big international issue is human trafficking for the purposes of sexual exploitation and forced labour.

5.1.1.8. Trading blocs memberships, free trade agreements and international organization participation

Argentina has:
• Membership in:
 South American customs union (MERCOSUR) with Brazil, Paraguay, Uruguay and Venezuela.
 Further extending relations, MERCOSUR is a member of ALADI(6) free trade area, alongside CAN(7), Chile, Cuba and Mexico.
• Signed free trade agreements:
 With Brazil, Chile, Mexico, Paraguay, Uruguay;
 Through MERCOSUR with SACU(5), India, Colombia, Ecuador, Bolivia and other countries, already in relationship with.
• Active participation in most major international organisations such as IMF, WTO, WCO, UN, G15, G20, Interpol, etc.

5.1.1.9. Bilateral relationship with Australia

Responsible for maintaining good economic, political and social relations with Argentina is the Council on Australia Latin America Relations (COALAR). CER-MERCOSUR(8) Dialogue is dealing with relations between Australia and New Zealand on one side and MERCOSUR countries on the other.
Argentina and Australia share important mutual interests in:
• International environment policy and trade liberalisation and economic cooperation policies;
• Antarctica;
• Weapons of mass destruction (WMD) proliferation, international peacekeeping and disarmament.
Addressing these issues, both countries are participating in G20 forum, the Cairns Group, the UN, the Commission for the Conservation of Marine Living Resources (CCAMLR), the Antarctic Treaty and the International Whaling Commission (IWC).
Argentina and Australia have signed an investment protection agreement, which entered into force in 2000 and bilateral memorandum of understanding on scientific and technological cooperation in 2003.

5.1.2. Economic environment
5.1.2.1. Size of economy, stage of market development and distribution of income

• Economy size with Gross Domestic Product (GDP) of US $338.7 billion (30th)(1) equals to one third of Australian economy.

• Gross Domestic Product per capita Purchasing Power Parity (GDP per Capita PPP) - $14,200 per year (81st)(1).
Argentina has just managed to fall into ‘high income’ group of countries in recent years, but since this CIA factbook figure is a purchasing power parity estimate, and some other sources are reporting lower figures (e.g. Human Development Reports – US $4,728 (2007/2008); China Financial Daily – US $5,840 (2008)), as well as considering the facing economic downturn, it would be more advisable to view it as an ‘upper-middle income’ country.

• Although average gross income is high, it is not equitably distributed. Population below poverty line of 23.4% (January-June 2007) and distribution of family income shown through Gini index valuing 49 (January-March 2007), indicate that population is divided on lower percentage of very rich people and large number of poor people, resulting in small middle class and low purchasing power of majority of the population, but also lower labour cost - US$1.15/h ($225 per month for a 45 hour week). 5.1.2.2. Economy growth

• According to CIA factbook, 2008 estimate for GDP real growth rate for Argentina was 2.2% (159th)(1). Some statistics and leading politicians interpreting them suggest that economy could record a slight growth in 2009, but many of the leading economists forecast the opposite outcome with country going into a deep recession.
• The graph below depicts firstly, the 1998-2002 economic crises, triggered by currency crises in some of Argentina’s leading trading partners, Brazil and Russia, and pegging of Argentine peso to US dollar, which was later followed by a devaluation of national currency, as well as tax increases led country to a recession. Economy recovered in the following years recording a sustained growth, with Peronists and Nestor Kirchner applying a weak peso policy and current-account surpluses to accumulate reserves. Then, in the recent years, the government led by Nestor’s wife Cristina Fernandez de Kirchner, applied ill-measured pro-cyclical policies, which in addition of the global economic downturn are again leading Argentine Economy towards recession, approaching 2% GDP growth rate last year, and with many prognosticating a negative growth rate in the near future.
5.1.2.3. Economic system structure and type

• Services sector dominates GDP composition with 56.7% share, followed by 34.1% for industry and 9.2% agriculture sector (2008 est.)(3).

• Mix of Argentine economy is leaning towards market allocation system, even though strong presence of command system elements (dragged from the past political systems) is evident. For example, government currency control interventions using central bank reserves in the 1990s, privatisation of public entities (water, gas, public transport, etc.) in the recent years, and above mentioned raise of taxes on soybean exports. 5.1.2.4. Monetary stability, interest rates and level of debt

• Graph below shows a sustained decline and relative stability of Argentine peso over the years. More abrupt change in the last year reflects current economic downturn. Current value is AU$0.3114 (23 August 2009).

• Since its last recession in 2002, Argentina managed to lower its interest rates to a minimum. Since t hen, they were recording a very steady growth rate.

• So far, Governments managed a reasonable level of external debt - $135.5 billion (31 December 2008 est.). Public debt was 51% of GDP in June 2008.

5.1.2.5. Inflation, lending and unemployment rates

High Inflation rate for consumer prices (2008) of 22% (208th)(1), coupled with Commercial bank prime lending rate of 28% (November 2008 - 7th(1)) and high unemployment rate of 7.8% (September 2008-103rd(1)), it is lowering the buying power of consumers and also making the market more unpredictable.

5.1.2.6. Taxes, tax regime, trade and tariff controls
• Financial transactions tax for deposits is 0.4% and 0.6% for withdrawals;
• Income tax is levied at progressive rates between 9% and 35%;
• Corporate income tax on worldwide income is 35%;
• The value-added tax (VAT) is 21%.

According to the Mercosur Common Market Agreement, Argentina uses Mercosur Common External Tariff (CET). In general, the CET for the bulk of products ranges between 10 and 20 percent. There are exceptions, however
Argentina’s tariff rates are high when compared to Australia’s, but when compared to the rest of the world, these rates are below average.
• Simple average final bound – 31.9% (Australia - 9.9%);
• Simple average most favoured nation applied - 12.0% (Australia - 3.5%) (2007);
• Simple average tariff for Beverages & tobacco final bound – 35% (Australia – 10.3%) (2007);
• Simple average tariff for Beverages & tobacco (most favoured nation applied – 17.2% (Australia – 3.6%) (2007). Australia doesn’t have a preferential status.
5.1.2.7. Infrastructure
• There are 260 AM (and more than 1000 unregistered) radio and 42 television stations available for product promotion facilitation.
• Communication network is highly developed with almost everyone owning a mobile phone, nearly every household having a land telephone line and close to 90 in 100 households with internet usage.
• Transportation infrastructure includes 31,409 km of railways (9th)(1); 231,374 km of roadways; and 1,150 Airports (2008) (6th)(1) (out of which 154 are with paved runways).
5.1.2.8. Resources
• Energy resources are listed in the table below

Resource / Activity Production Consumption Exports Imports
Electricity - in billion kWh (2006 est.) 109.4 97.72 2.628 10.27
Oil (reserves 2,587) - in bbl/day (2007 est.) 790,800 440,000 339,900 23,380
Natural Gas - billion cu m (2007 est.) 44.8 44.1 2.6 1.9

• Argentina is also rich in fertile plains of the pampas, lead, zinc, tin, copper, iron ore, manganese, petroleum and uranium.
5.1.2.9. Major industries
Leading industries are agriculture (sunflower seeds, lemons, soybeans, grapes, corn and wheat, tobacco, peanuts, tea, livestock), food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy and steel.
5.1.2.10. Export and import

• Prime exports commodities are soybeans and derivatives, petroleum and gas, vehicles, corn and wheat.
• Leading export partners are Brazil 19.1%, China 9.4%, US 7.9%, Chile 7.6%.

• Prime import commodities are machinery, motor vehicles, petroleum and natural gas, organic chemicals and plastics
• Leading import partners are Brazil-34.6%, USA-12.6%, China-12% and Germany-5%.

5.1.2.11. Impact of globalization and of global economic crisis

Throughout the 1990s, Argentina was on the road of great prosperity, gaining large benefits from its international dealings boosted by globalisation trends, with steady growth at an average rate of 8.7%. Nevertheless, an unbalanced public fiscal budget, high foreign debt levels, and an uncompetitive currency level led to financial crisis in 2001. As a result, abrupt loss of confidence in the Argentine peso led to bank deposit freezes, public debt default, countrywide street protests, and the resignations of the finance minister and the president.
Following increase of power distance and shrinking of middle class, changed most Argentineans' views on globalization from better to worse.
Argentina managed to recover great deal since then, but again, bad Government policies, above mentioned in section 3.1., left a country unprepared for global financial crisis, and many are now pessimistic of its chances to pull though without entering into a deep recession.

5.1.2.12. Likely economical changes

Bank of Bilbao Biscay and Argentina (BBVA) forecast GDP real growth for Argentina in 2009 to be minus 1.8%. ‘Economist’ forecasts Argentine economy to contract by 3.5% in 2009 and then to grow weakly in 2010, with inflation easing to 10-15% in 2010.
Already mentioned likelihood of entering into financial crisis and deep recession should be most advisable and seriously taken into consideration.

5.1.3. Socio-cultural environment
Population and culture of Argentina were heavily shaped by Italian and Spanish native newcomers arriving between 1860 and 1930.
5.1.3.1. Population, growth rate and age profile
Estimated population for July 2009 was approximately 41 million people (10.5 million households), with 1.0% average annual growth rate for period 2000-2008. With age structure 25% in 0 to 14 years group, 63.5% in 15 to 64 years and 10.8% of population over 65 years of age and median age of 30, we can say that Argentina is a fairly young nation.
Most of the population lives in the cities as urban population is surprising 92% of total population (2008), which is even higher than of that of Australia (89%). Large concentration of the population is in greater Buenos Aires area where more than one-third of the residents live.
5.1.3.2. Physical quality of life (indices) – health, education
Life expectancy at birth of 76.56 years (66th)(1), infant mortality rate of 11.44 per 1,000 live births (149th)(1) and intermediate degree of risk for major infectious diseases, are indicators that health system needs improvement.
With high level of literacy of 97.2% and social mobility index (SMI) of 0.1017 for teenagers (13-19) and 1.1847 for young adults (20-25), young Argentineans can expect to have a fair chance of succeeding in life.
When combined, figures above show the physical quality of life through a ‘physical quality of life index’ - 95.7(9).
Another useful indicator is United Nations Human Development Index (UN HDI) that combines normalized measures of life expectancy, adult literacy, education index and gross enrolment index (GEI) (or combined primary, secondary and tertiary gross enrolment ratio – 88.6 for Argentina (35th)) and GDP per capita. 2008 UN HDI (2006 collected data) for Argentina is 0.86 (46th) on scale from 0 to 1.
5.1.3.3. Language
Official language of Republic of Argentina is Spanish, which is ‘home-used’ by almost 90% of the population, although Argentinean Spanish is different from the Spanish spoken in Spain. It is blended with Italian to an extent. Other spoken languages, used by about 10% of the population include Italian (3.9%), Arabic(4) (2.6%), German (1%), Paraguayan Guarani (0.5%), Eastern Yiddish (0.5%), English, French, Araucanian, Quechua, etc.; but it is rare to hear English being used in business.

5.1.3.4. Religion, Ethnic groups and Cultural divisions
Roman Catholics comprise 92% of people, but only 20% practice religion. Furthermore, 2% are Protestant and another 2% are Jewish.
White (mostly Spanish and Italian descent) make 97% of population; Remaining 3% consists of Mestizo (mixed white and Amerindian ancestry), Amerindian and other non-white groups.
No conflicts out of social and cultural divisions should be expected, since Argentina is homogenised on high level, from both perspectives.
5.1.3.5. Psychic distance from Australia
“The Doing Business Project” places Argentina as number 113 in the world for “ease of doing business” economy rankings. Australia is ranked number 9; Australians need approximately 2 working days to start a new business, while in Argentina it takes 31.
Psychic distance index for Argentina is 9.2, from Australian perspective.
Taking all that into consideration, it is easy to conclude that Australian native will need heavy researching and adaptation in regards to culture and business practices prior to doing business in Argentina.
5.1.3.6. Hofstede’s cultural dimensions
• Power distance (49) is high as level of unemployment and poor population above mentioned indicate.
• Individualism – 46. Argentina puts emphases on collectivism trough family and friendship tight bonds.
• Masculinity – 56. Short-term orientation and opportunism depict the masculine nature of Argentine culture.
• Uncertainty Avoidance - 86
Uncertainty avoidance index shows a high attention to achieving safety, security and risk reduction. As the graph below shows, consumer confidence has slowly decreased over the years, lowering the consumption, especially for luxury items and increasing savings.
5.1.3.7. People and the culture
Argentines are proud people and even though not over patriotic, they will take offense at negative comments about their nation. Prosperity, family, education, and personal relationships are important values so it is important to honour friendships and show respect to the elderly. Figure 16
• Family
Families are small, averaging two children. The responsibility of raising children and managing household chores and finances falls mainly on the mother, who thus plays a big role in family decision making. Consequently, women comprise less than 30% of the work force, and men are often occupied with work, working long hours. Children are central to the family and receive a great deal of attention. Families will sacrifice much to give their children a good education. Many companies, even large companies and holding groups, remain family-owned and family run. Hence personal dealings and knowledge of individuals remains strong.
• Friends Argentines often visit friends and relatives without prior arrangement. People enjoy having guests in the home and it will not offend the hosts if they arrive even up to thirty minutes late. Each person is greeted individually as a group greeting is inappropriate. Small gift such as flowers, candy, or pastries to their hosts as well as compliments about the home, meal, or host’s family are appreciated.
• Sports and recreation
Argentina's national game is soccer (they call it football). Important matches are often the topic of discussion, even among strangers. Football and politics have rarely been far apart in Argentina. Mauricio Macri, the mayor of Buenos Aires, built his reputation by successfully running Boca Juniors, one of the capital’s two big clubs.
Horse racing is another popular spectator sport. Races are held throughout the year. The two most important events are the Argentine Republic Prize, held in April, and the Grand National in November.
Besides famous ‘Tango Argentino’, Argentina is home to a diverse array of music and dance styles from its various geographic regions such as indigenous ‘Zamba’. Favourite activity for younger people and couples is dancing. Going to movies and eating at restaurants are also popular dating activities. 5.1.3.8. Business facts and practices In Argentine business culture, relationships and “insider” status are very important as ties are tight.
• Business dress
Dress codes are generally formal and conservative regarding style and colours: suit and tie for men and a discreet business suit (skirts or trousers) for women. Wearing immensely bright colours and eye-catching jewellery is not recommended.
• Making appointments
To conduct business, it is advisable to obtain third party introductions through institutions such as law firms, consulting firms or banks.
Reaching a decision maker should be done through a personal assistant or secretary. Appointments usually need to be scheduled one to two weeks in advance.
Commonly, it should not be expected to immediately get a reply for emails, faxes, letters or phone calls unless a message explicitly requests a prompt answer.
Punctuality is appreciated and expected from foreigners; however, you may find your Argentine counterpart to be 15 to 20 minutes late.
• Conversation
It is custom to address people by using the titles Señor [Mr], Señora [Mrs], Señorita [Miss] followed by surnames. A handshake and slight nod show respect and eye contact is considered important. Women are most likely to kiss each other, but a man and woman may greet in this manner if well acquainted. It is not polite to call out a greeting. When approaching someone, one should always greet before asking any questions. Interruption while speaking is common.
Argentineans are well informed and proud of having the latest, most precise information. They will often enter into a serious discussion expressing their views on two most popular topics - politics end sports. It is imperative to be able to participate in such discussions for business negotiations.
In person, Argentineans are normally diplomatic and courteous, but therefore over-promising and under-delivering are frequent. Arrangements should always be double-checked
• Gestures
Personal proximity tends to be less than in other cultures, and people might touch each other during conversation. Yawning without covering the mouth, as well as placing the hands on the hips, is considered impolite. Hats are removed in buildings, houses, elevators, and in the presence of women.
• Other facts
Business is often opportunistic and decisions will be expected to be fast, as business strategies are often dominated by short-term considerations.
Worst time to do business is during the slowdown in the holiday months January and February.

5.1.4. Technological Environment
• ADSL and cable broadband internet technologies are used in networks installed in all major cities; Satellite communications are also available for a higher price.
• All major cities have digital television and cable networks, as well as satellite coverage.
• Electronic transaction and payment options are widely used and available.
• The latest technology, Silkwood is using in its wine production is more advanced than the technology currently used in most vineries in Argentina.
5.1.5. Competition in Argentina
There is an ‘ocean’ of wine producers in Argentina. It would be suicidal to try to compete with these domestic wine makers ‘head on’ (e.g. FDI in Argentina, and produce local, while positioning to be Argentine own, or some similar scenario).
That’s why Silkwood Wines is going to position its products as foreign (Australian), quality wines with something unique to offer.
I have tried to pinpoint imported wines sold in Argentina trough the internet, but with no success. Thus I have focused on Australian winemakers that export to Argentina. In order to conduct this research, I have browsed through all wine producers, vineyards and merchants that advertise in Australian Yellow Pages and have their website listed (around 300 listings). On the websites, I have looked for links such as ‘Distributors->International’, ‘Contact->International distributors’ or ‘Export’. Using this technique, I have found only one Australian company that is exporting wine to Argentina and 16 exporting to New Zealand. This proves earlier point that, even though there is a lot of opportunity for profits, Argentina is not the most popular export destination for wine makers.
The identified competitor in Argentina is: Torbreck Vintners.
David Powell founded the vineyard in Barossa Valley, South Australia in 1994, naming it Torbreck after a forest in Scotland. In the middle of 2008 a long term vision reached completion, with a new winery and administration facility completed on land acquired from a next door neighbour. Today, Torbreck is sells its wines in over 30 countries worldwide including Argentina (Australia, New Zealand; Argentina, Brazil, Costa Rica, Mexico; Canada, USA; UAE; Check Republic, Denmark, Germany, Ireland, Italy, Russia, Spain, Sweden, Switzerland, UK, Ukraine; China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam).
Their wine range is a bit different to Silkwood’s wines.
This competitor analysis is insufficient and it is necessary to send a researcher to Argentina (or to employ a research company from Argentina) to conduct a detailed competitor analysis, as it is impossible to do it properly sitting outside of Argentina.

5.2. New Zealand

Introduction
New Zealand is a developed country that ranks highly in international comparisons on human development, quality of life, life expectancy, literacy, public education, peace, prosperity, economic freedom, ease of doing business, lack of corruption, press freedom, and the protection of civil liberties and political rights. Its cities also consistently rank among the world’s most liveable Political Environment.

Geographic location, size and structure
New Zealand is an island country in the south-western Pacific Ocean, comprising two main landmasses (commonly called the North Island and the South Island), and numerous smaller islands, most notably Stewart and the Chatham Islands. The total land area is approximately 268,000 square kilometres.

The population of New Zealand is mostly of European descent, the indigenous Māori are the largest minority. Asians and non-Māori Polynesians are also significant minority groups, especially in urban areas. The most commonly spoken language in New Zealand is English.
The climate throughout the country is mild and temperate, mainly maritime, with temperatures rarely falling below 0 °C (32 °F) or rising above 30 °C (86 °F) in populated areas.
• Perth to Auckland – 5,345kms (10 days shipping time)

For purposes of researching market of New Zealand, I used PEST analysis (basic model) presented on the following pages.

5.2.1. Political Environment
5.2.1.1. Government type
New Zealand is a parliamentary democracy in the Westminster tradition.
• The Prime Minister (John Key, elected November 2008) is the Head of Government.
• HM Queen Elizabeth II is the Head of State, represented by the Governor-General.
Parliament is summoned by the Governor-General and has only one chamber, the House of Representatives, which usually seats 120 Members of Parliament.
Parliamentary general elections are held every three years under a form of proportional representation called Mixed Member Proportional.
New Zealand's fifth election under the MMP system was held on 8 November 2008.
“New Zealand’s National Party came close to winning an outright victory in the 8November 2008 election. They have been able to form Government in coalition, via confidence and supply arrangements with the ACT Party (which won five seats), the Maori Party (five seats) and United Future (one seat). With National’s 58 seats, this provided a clear majority of 69 seats in a 122-seat Parliament. Labour secured 43 seats and the Greens nine seats.” Source: DFAT,1 November 2009.
The next election is due to be called by late 2011.
5.2.1.2. Political parties and coalitions, unions and pressure groups
Following groups should be taken into consideration:

• Major political parties:
 National party
 Labour party
 Green party
 Maori party
 Progressive party
 United future party

• Major unions and pressure group:
 Women's Electoral Lobby or WEL
 Apartheid groups
 Civil rights groups
 Farmers groups
 Maori
 Women's rights groups 5.2.1.3. Current political situation
• Current government
The Prime minister of New Zealand is John Key of the National Party. The National Party currently advocates policies of reducing taxes, reducing social welfare payments, promoting free trade, restoring or maintaining New Zealand's traditional (Western) defence and security alliances and promoting one standard of citizenship for all New Zealanders
• Current opposition
The New Zealand Labour Party is a New Zealand political party. The head of the party is Phil Goff. During the Fifth Labour Government, he served in a number of ministerial portfolios, including Minister of Defence of New Zealand, Minister of Corrections, Minister of Foreign Affairs and Trade, Minister for Disarmament and Arms Control and Associate Minister of Finance. Currently, from the political point of view, New Zealand is still on a steady course to safe investment with government advocating policies of reducing taxes and promoting free trade.
5.2.1.4. Political stability and regulatory trends
• According the political instability index the likelihood of political unrest has increased up to 3.6 but still is recognized as ‘low’, which coincide with Australia.
• Country is divided in two major social groups (see the map in ‘religion’ heading), but there are no major conflicts arousing.
• OECD ranks New Zealand as a very low risk country, with political stability index (PSI) valued 0 (same as Australia)
• New Zealand is promoting free trade and its tariffs and quotas are generally very low, especially for Australia, where Under the Australia New Zealand Closer Economic Relations Trade Agreement, any product that has a 50% or more Australian content can enter New Zealand duty free. Source: ONDD (Offica National Du Ducroire) – The Belgian Export Credit Agency 5.2.1.5. Environmental issues
• Environmental issues concerning New Zealand are as follows:
 Protecting Indigenous Habitats and Biological Diversity
 Managing Pests, Weeds and Diseases
 Managing Pollution, Waste and Hazardous Substances
 Managing Land Resources
 Managing New Zealand's Water Resources
 Sustainable Fisheries
 Managing the Environmental Impacts of Energy Services
 Responding to the Risk of Climate Change
 Restoring the Ozone Layer

5.2.1.6. Regulations and standards that wine needs to comply with, when exported to New Zealand.
 New Zealand’s Wine Act 2003 came into force on 1 January 2004 and was fully implemented on 1 December 2008. The Act is administered by the New Zealand Food Safety Authority (NZFSA). If you are a winemaker, you are responsible for ensuring that your wine meets the wine standards and requirements set under the Wine Act. These include standards for:
Labelling and label claims
Ÿ Composition (eg additives, processing aids, contaminants, use of water)
Ÿ Production
Ÿ Traceability and record keeping
Ÿ Winemaking.
 If you intend to sell wine, you will need a licence issued under the Sale of Liquor Act 1989.
 All winemakers, and all other persons specified in specifications for the purposes of this regulation, must ensure that any packaging materials that come into contact with wine, wine products or commodities are designed, made, stored, and used in a manner that ensures that the wine or wine products or commodities remain fit for their intended purpose.
 Domestically labelled products also meet the legal requirements for export to New Zealand. Typical wine label will contain:
Ÿ Winery name/trade mark/business or brand name (optional)
Ÿ Name of food ‘wine’, or grape varietal name, or generic wine style name eg. Dry red/white - (a name is mandatory, but variety is optional*)
Ÿ Geographical indication (optional*) - (i.e. Region of grape origin)
Ÿ Vintage (optional*) - (i.e. Year grapes harvested)
Ÿ Volume (mandatory) (min. 3.3mm high)
Ÿ Alcohol content (mandatory) (wording is not prescribed)
Ÿ Standard drinks (mandatory)
Ÿ Allergens declaration- (mandatory, where applicable)
Ÿ Name, address (mandatory) - name and street address of responsible entity - must not be postal address only.
Ÿ Country of origin (mandatory)
 Under the Australia New Zealand Closer Economic Relations Trade Agreement, any product that has a 50% or more Australian content can enter New Zealand duty free.
 All alcohol attracts excise duty. 5.2.1.7. Freedom of press, rule of law and levels of crime and corruption
• ‘Reporters Without Borders’ (RWB) place New Zealand as 13th country, in terms of press freedom, with its ‘press freedom index ‘ - 3 (just above Australia – 3.13).
• According to Transparency International, New Zealand is the least corrupt country in the World.
• Generally, New Zealanders are not violent and will not pursue the vengeance, but due to ‘manly macho’ type of their men, fights and violence can occur, but will really lead to devastating consequences. Generally, New Zealand doesn’t have a major crime issue.
5.2.1.8. Trading blocs memberships, free trade agreements and international organization participation
• Active participation in international organisations such as IMF, WTO, UN, INTEROL, G-20.
Agreements
• ANZCERTA – Australia New Zealand Closer Economic Relations Trade Agreement
• ASEAN-Australia/NZ Free Trade Area
• New Zealand-China Free Trade Agreement (NZ-China FTA)
• Trans-Pacific Strategic Economic Partnership (Trans-Pacific SEP)
Brunei/Chile/New Zealand/Singapore
• New Zealand and Thailand Closer Economic Partnership (NZTCEP)
• New Zealand and Singapore Closer Economic Partnership (NZSCEP)
• Australia and New Zealand Closer Economic Relations (CER)
Agreements under negotiation
• New Zealand and Malaysia Free Trade Agreement Anti-Counterfeiting Trade Agreement
• New Zealand-Gulf Cooperation Council Free Trade Agreement
• New Zealand and Hong Kong Closer Economic Partnership
• Expansion of the Trans-Pacific Strategic Economic Partnership (TransPac)
• New Zealand-Korea Free Trade Agreement

5.2.1.9. Bilateral relationship with Australia
• Migration, trade and defence ties, keen competition on the sporting field, and strong people-to-people links have helped shape a close and co-operative relationship.
• Australia and New Zealand cooperate closely in the international arena and in regional bodies, such as the Pacific Islands Forum, APEC and the ASEAN Regional (Security) Forum.
• Under ANZCERTA – Australia New Zealand Closer Economic Relations Trade Agreement, tariff free trade is implemented and relationship strengthened.
• Signed the treaty between the Government of Australia and the Government of New Zealand establishing certain Exclusive Economic Zone and Continental Shelf Boundaries which definitively settles the maritime boundaries.
• Defence relations between Australia and New Zealand are close and longstanding. 5.2.2. Economical Environment
5.2.2.1. Size of economy, stage of market development and distribution of income

New Zealand has a modern, prosperous, developed economy with an estimated GDP (PPP) of $115.624 billion (2008).
• Economy size with Gross Domestic Product (GDP) of US $128.5 (official exchange rate) billion is substantial for such a small country and indicates relatively high standard of living. • Gross Domestic Product per capita Purchasing Power Parity (GDP per Capita PPP) - $28,000 (2008 est.) (50th)(1). New Zealand is a high income country. • Distribution of family income & Population below poverty line (NA) (10)
New Zealand was traditionally supposed to be a classless society. Although this claim hasn’t been entirely true since 1980s, it is among the countries closest to being classless. The country has no formal class structure and the people in New Zealand don’t care much about the wealth and social status. They take pride in individual achievements and believe that opportunities are available to all. 5.2.2.2. Economy growth
• The New Zealand economy grew strongly between 1999 and 2004 (averaging around 3.7 per cent) but started to slow from 2005. Annual GDP growth was 2.7 per cent for the September 2007 year. The IMF has forecast growth of 2.8 per cent in 2007 and 2.3 per cent in 2008, but that forecast failed due to world economic crisis, and as we can see from the graph below, New Zealand was declared to be in recession in the third quarter of 2008, and was strongly hit buy it. Nevertheless, as other it is trend in other countries in the world, that line on the graph is starting to pick up with the economy slowly recovering.

5.2.2.3. Economic system structure and type
• Services sector dominates GDP composition with 69.9% share, followed 25.7% for industry and 4.4% agriculture sector (2008 est.)(3).

• Forces in New Zealand economy are predominantly market controlled.
5.2.2.4. Monetary stability, interest rates and level of debt

The graphs below show some instability and sharp changes in relation to Australian dollar. It is advisable to use Forward Exchange Rates or to complete transactions in Australian Dollars. Current value is AU$0.798 (1 November 2009).

• Interest rates dropped to 3% since 2008 in order to stimulate economy recovery. • Public debt was$34 billion, 24.6% of GDP (2008 est.).

5.2.2.5. Inflation and unemployment rates
• New Zealand is currently experiencing labour shortages due to record low unemployment and high participation rates. Since late 1998 the unemployment rate has been trending downwards and has been below 4 per cent since September 2004. Ongoing labour market tightness has contributed to strong growth in labour incomes while labour force participation has increased to record levels. The unemployment rate was 3.4 per cent in the December 2007 quarter and 4.2% (2008 est.). The New Zealand Government has identified improving productivity as a key challenge for New Zealand's economy.

5.2.2.6. Taxes, tax regime, trade and tariff controls
• Companies pay income tax at 30% on profits.
• In New Zealand excise duties are charged on a number of products, including alcohol products, tobacco products, and some fuels. Excise duty for wine is as follows:
 Wine (not fortified): Not more than 14% $2.4765 per litre More than 14% $45.102 per litre of alcohol
 Fortified Wine, Spirits and spirituous beverages $2.4765 per litre of alcohol
• Goods and Services Tax (GST) is 12.5% for most products and services.

New Zealand tariff rates are generally low, and especially for Australian exporters.
• Simple average final bound – 9.9% (same as Australia’s)
• Simple average MFN applied (2007) – 3.0 % (Australia – 3.5%)
• Simple average tariff for beverages & tobacco final bound – 11.9% (Australia – 10.3%) (2007);
• Simple average tariff for wine (most favoured nation applied – 2.9% (Australia – 3.6%) (2007). Australia has the preferential status through ANZCERTA, and zero tax applies for Australian exporters.

5.2.2.7. Infrastructure
• There are 124 AM and 290 FM radio and 41 television stations available for product promotion facilitation.
• Communication network is highly developed with almost everyone owning a mobile phone, nearly every household having a land telephone line and more than 3.36 million internet users.
• Transportation infrastructure includes 4,128 km of railways (40th)(1); 93,576 km of roadways; and 120 Airports (2008) (out of which 41 are with paved runways).
5.2.2.8. Resources
• Energy resources are listed in the table below

Resource / Activity Production Consumption Exports Imports
Electricity - in billion kWh (2006 est.) 42.41 38.93 0 0
Oil (reserves 2,587) - in bbl/day (2007 est.) 47,850 158,400 14,570 137,300
Natural Gas - billion cu m (2007 est.) 4.573 4.572 0 0

• Argentina is also rich in iron ore, sand, coal, natural gas, timber, hydropower, gold and limestone.
5.2.2.9. Major industries
Leading industries are food processing, wood and paper products, textiles, machinery, transportation equipment, banking and insurance, tourism, mining 5.2.2.10. Export and import

• Prime exports commodities are dairy products, meat, wood and wood products, fish and machinery.
• Leading export partners are Australia 23.1%, US 10.1%, Japan 8.4%, China 5.8% (2008).

• Prime import commodities are machinery and equipment, vehicles and aircraft, petroleum, electronics, textiles and plastics.
• Leading import partners are BrazilAustralia 18.1%, China 13.2%, US 9.5%, Japan 8.3%, Singapore 4.7%, Malaysia 4.4% and Germany 4.3% (2008).

5.2.2.11. Impact of globalization and of global economic crisis
Globalisation brings a range of opportunities and benefits for a small, geographically isolated country like New Zealand.
According to the Ministry of Agriculture and Forestry and the Ministry of Foreign Affairs, there are assessments that the Uruguay Round of trade negotiations resulted in gains of over NZ$9 billion to the New Zealand economy over the period 1995-2004 (primarily in the agriculture sector), with significant gains in employment over and above what it would have been without the Uruguay Round.
All countries within the WTO have the opportunity to initiate a dispute against any other country in breach of WTO rules. This has allowed New Zealand to take on a range of larger, more powerful countries (e.g. United States of America – in relation to a safeguard that was imposed on imports of lamb; European Communities – in relation to ruling that the butter manufactured by Ammix and spreadable butter-making processes were not eligible for New Zealand’s country specific tariff quota).
The establishment of a multilateral, rules-based system for international trade has been an achievement for New Zealand and other countries that lack the size, influence and economic and political weight of larger, more powerful trading partners.
Global financial crisis has had a bad impact on the tourism industry, with visitor arrivals to New Zealand down 6.6% - over 11,000 people less than in September 2007.
GDP recorded negative growth of -2.4% (down from +3.9% in one year), but interest rates also dropped from 8% to 3% in the same period.

5.2.2.12. Likely economical changes
According to ASB Bank Ltd, New Zealand’s economy has recovered from recession early and will be stronger than expected next year. The economy is predicted to contract 1.5 percent this year, less than the 2.5 percent previously expected. Growth forecast is 2.4 percent in the 12 months ending March 31, 2011, up from a 1.9 percent forecast the bank made in July.
5.2.3. Socio - Cultural Environment

The population of New Zealand is mostly of European descent, the indigenous Māori are the largest minority. Asians and non-Māori Polynesians are also significant minority groups, especially in urban areas.
5.2.3.1. Population, growth rate and age profile
Estimated population in New Zealand for July 2009 was approximately 4,213,418.With age structure 0 to 14 years group 20.7%, 15 to 64 years 66.5% and 65 years & over 12.8%. In the period of April 2007 to March 2008, the total number of births in New Zealand was 63,250 and the number of deaths was 28,300. The Maximum number of births was 22,960 in Auckland, 7330 in Canterbury, 6730 in Wellington and 6200 in Waikato.
Most of the population lives in the cities as urban population is 87% of total population (2008).
5.2.3.2. Physical quality of life (indices) – health, education
Life expectancy at birth of 80.36 years (18th)(1), infant mortality rate of 4.92 per 1,000 live births (192th)(1) and very high level of literacy rate of 99%, indicate good quality of life.
When combined, figures above show the physical quality of life through a ‘physical quality of life index’ - 100(9).
Another useful indicator is United Nations Human Development Index (UN HDI) that combines normalized measures of life expectancy, adult literacy, education index and gross enrolment index (GEI) (or combined primary, secondary and tertiary gross enrolment ratio – 107.5 for NZ (2nd)) and GDP per capita. 2008 UN HDI (2006 collected data) for New Zealand is 0.95 (20h) on scale from 0 to 1.
5.2.3.3. Language
English (official) Knowledge of English language is ‘mandatory’ for doing business in New Zealand. It is most widely used official language (97%).

Maori (official) Maori is only used in New Zealand and nowhere else in the world. Despite its official status, the language continues to struggle against being lost. A recent survey by the New Zealand government shows about 130,000 people (3%) speak some Maori.

Sign Language (official) New Zealand Sign Language is the main language of the deaf community in New Zealand. 5.2.3.4. Religion, Ethnic groups and Cultural divisions

According to the above chart we can say that most of the people who live in New Zealand are Christians and compared to that most of the people doesn’t have or do not practice a religion.
On the religion map on the right we can see that the country is regionally divided in terms of main religions, but there are no major conflicts arousing from this division.
Although New Zealand is a largely secular country, religion finds a place in many cultural traditions. Major Christian events like Christmas and Easter are celebrated by religious and non-religious alike, as in many countries around the world.
Religion does not usually play a major part in the politics of New Zealand, and most New Zealanders consider politicians' religious beliefs (or lack thereof) to be irrelevant.

5.2.3.5. Psychic distance from Australia

“The Doing Business Project” places New Zealand as 2nd in the world for “ease of doing business” economy rankings (right after Singapore). Australia is ranked number 9; Australians need approximately 2 working days to start a new business, while in New Zealand it would all be done in one day.
From Australian perspective , psychic distance index for New Zealand is 0.7, which places it in top four, right after USA, UK and Canada, which is logical, since we are all English speaking countries with British background.
It is very easy for Australians to do business in/with New Zealand, which can almost be regarded (in some terms) as an extension of our market. 5.2.3.6. Hofstede’s cultural dimensions • Power distance (19) shows a very much close to classless society.
• Individualism – 76, shows that each person likes to decide by itself on the taste and thus brand affiliation.
• Masculinity – 54
• Uncertainty Avoidance (45) – New Zealander’s are quick to jump to new brands.
• Long Term Orientation (28) – They are spending more and saving less.
Uncertainty avoidance index shows a high attention to achieving safety, security and risk reduction. As the graph below shows, consumer confidence has steeply decreased in the 2008 crisis, lowering the consumption, especially for luxury items and increasing savings; but it was also quick to pick up with first announcements of economy recovery.
According to Roy Morgan, The New Zealand Consumer Confidence Rating rose 5.5 points (to 120) in mid September 2009 – its highest since January 2008 and 10.1 points higher than a year ago. New Zealanders increasing confidence, about both the short and long-term future, were the drivers for this large rise. [3]
In the recent survey, 56% of New Zealanders declared expectations for their financial situation to improve in a year’s time.

5.2.3.7. People & the culture
New Zealanders are happy people that love to enjoy life. New Zealand ranked 8th in the OECD population happiness survey, conducted among 30 democratic nations (05 May 2009).
Today, New Zealanders are largely sophisticated and highly educated urban dwellers. As members of a unique and vibrant multicultural society, New Zealanders are embracing 21st century technology and culture in record numbers.
• Unique in the World
Being isolated as an island country, New Zealand’s diverse population still has some uniting features that make it unique in the world, distinguishing New Zealanders as being quiet and independent, yet resourceful and self-reliant, with a famous ‘Kiwi ingenuity’ – genius for invention.
• Backyard Genius
Natural drive for discovering and inventing things has been a mark of New Zealand culture for many years, with many of these inventions literally created in a backyard, displaying ‘Kiwi ingenuity’ - an ability to solve any problem, often using unconventional means, with whatever tools available. While frozen meat, the Hamilton Jet boat, and the bungy jump are probably the most famous Kiwi inventions, they are also responsible for the tranquilliser gun, seismic ‘base’ isolators (rubber and lead blocks which minimise earthquake damage), electric fences, the fastest motorbike in the world, freezer vacuum pumps, stamp vending machines, wide-toothed shearing combs, and the electronic petrol pump.
• Outdoor People
New Zealand has a low population density and spectacular scenery, with no point further then 120 km from the ocean, providing the climate suitable for outdoor activities. As a result, a love for landscape and the outdoors is displayed through hiking, mountain climbing, kayaking, fishing, sailing, competitive sports, or simple enjoyment of exploring the landscape with a trip to the beach or a bush walk.
• Newcomers and the changes they brought
Many Europeans, Asians and others came in the 80s and 90s. Prior to their arrival, large numbers of Pacific Island immigrants settled in New Zealand. New Zealand absorbed the new culinary tastes, fashions, and lifestyles of the Pacific Rim and combined them with more traditional ones, along with technological and economic changes, to produce a totally new and unique national identity. New Zealanders are as likely to visit an Asian restaurant or modern art gallery as they are to attend a rugby game or daily agricultural activities.
In the twenty first century, New Zealanders have embraced the global economy and the latest technology. They are some of the highest mobile phone and internet users in the world. They also rank the highest as newspaper readers.
• Sports
Sport is a big part of everyday life of ‘Kiwis’. Most popular sports in New Zealand, namely rugby, cricket and netball, are primarily played in Commonwealth of Nations countries. Sport is very popular in New Zealand and despite New Zealand being a very small nation, it has enjoyed great success in many sports notably Rugby Union (The national sport) and also Rugby League, Cricket, Americas Cup Sailing, Netball, motorsport and many other sports.
New Zealand's most popular sport is rugby union, the national sport. Other popular sports include cricket, rugby league, soccer and netball (the top ranking female sport by participation), golf, tennis, rowing and a variety of water sports, particularly sailing. Snow sports such as skiing and snowboarding are also popular. 5.2.3.8. Stereotypes
• The kiwi male stereotype
As a unique product of New Zealand's colonial period, stereotypically New Zealand male is essentially a pioneer type, with underlying features such as:
• Democratic; Unintellectual;
• Strong, with little showing of emotions;
• Rural; has little time for high culture; good with machines and animals (particularly horses);
• Able to turn his hand to nearly anything;
• Heterosexual;
• Displaying ability for problem solving (‘Kiwi ingenuity’);
• Prone to violence;
• Affinity to Rugby, Racing and Beer Urban New Zealanders supposedly still have many of these qualities
• The kiwi female stereotype
There stereotypes surrounding New Zealand women are not as strong as those involving men. The two strongest elements are:
• Independence
• Lack of femininity (wearing masculine clothing, spending little time on makeup, etc.)

5.2.3.9. Attitudes
• Anti-intellectualism
Intellectual activity is not regard highly among New Zealanders, especially if it is more theoretical than practical. This originates in the Anglo background of many of its residents, and the habit for solving problems by seeing what works rather than by applying a theory (idea of 'kiwi ingenuity'). Nevertheless, New Zealand participation rates in tertiary education rates are reasonably high, producing a number of scientists.
• Regionalism
Regional differences are most notable either between the North Island and South Island, or increasingly, between Auckland and the rest of the country. As the largest city, Auckland dominates New Zealand economically. Culturally, these regional differences manifest through people from the rest of New Zealand allegedly regarding Aucklanders as self-centred, brash and crass.
• Attitudes towards government
New Zealand has been rated the second least corrupt country in the world, and New Zealanders have faith in their democracy, but most of them will say they distrust politicians.
• Attitudes to promotion
Television and magazine publications are still good channels for advertising besides the internet. The average consumer in New Zealand is price conscious, thus great method of attracting buyers is a price reduction strategy. 90% of consumers bought a product after price reduction and 58% after adding extra quantities for the same price, as show in a survey by AC Nielsen.
5.2.3.10. Business facts and practices

• Meeting and Greeting
Greetings are casual, often consisting simply of a handshake and a smile. One does not underestimate the value of the smile as it indicates pleasure at meeting the other person. Although New Zealanders move to first names quickly, it is best to address them by their surname until they suggest moving to a more familiar.
• Relationships & Communication
 New Zealanders can be somewhat reserved, especially with people they do not know.
 Once they develop a personal relationship, they are friendly, outgoing and social.
 Do not appear too forward or overly friendly.
 They respect people who are honest, direct, and demonstrate a sense of humour.
 They trust people until they are given a reason not to.
 If this happens in business the breach will be difficult to repair and business dealings may cease or become more difficult.
• Business Meeting Etiquette
 Appointments are usually necessary and should be made at least one week in advance by telephone, fax or email.
 It is generally easy to schedule meetings with senior level managers if you are coming from another country if the meeting is planned well in advance.
 It can be difficult to schedule meetings in December and January since these are the prime months for summer vacation.
 Arrive at meetings on time or even a few minutes early.
 If you do not arrive on time, your behaviour may be interpreted as indicating that you are unreliable or that you think your time is more important than the person with whom you are meeting.
 Meetings are generally relaxed; however, they are serious events.
 Expect a brief amount of small talk before getting down to the matter at hand.
 If you make a presentation, avoid hype, exaggerated claims, hyperbole, and bells and whistles. New Zealanders are interested in what people 'can do' not what they say they can do.
 Present your business case with facts and figures. Emotions and feelings are not important in the New Zealand business climate.
 Maintain eye contact and a few feet of personal space
• Negotiations
 The negotiating process takes time.
 Do not attempt high-pressure sales tactics.
 Demonstrate the benefits of your services or products rather than talking about them.
 Do not make promises you cannot keep or offer unrealistic proposals
 They are quite direct and expect the same in return. They appreciate brevity and are not impressed by more detail than is required.
 Agreements and proposals must state all points clearly. All terms and conditions should be explained in detail.
 Stick to the point while speaking.
 They appreciate honesty and directness in business dealings

5.2.4. Technological Environment
• ADSL and cable broadband internet technologies are used in networks installed in all major cities; Satellite communications are also available for a higher price.
• All major cities have digital television and cable networks, as well as satellite coverage.
• Electronic transaction and payment options are widely used and available.
• The latest technology, Silkwood is using in its wine production is present with some larger wine producers in New Zealand.
5.2.5. Competition in New Zealand
Australian wines are accepted and their quality and taste are known in New Zealand. As ‘Kiwis’ regard ‘Aussies’ as their friendly neighbours (and vice versa), all Australian products (thus wines as well) are well accepted.
By the same method of using Australian Yellow Pages, I have identified 16 Australian winemakers that export wine to New Zealand:
 Australian Vintage Ltd
 Bethany Wines
 Casella Wines
 Constellation Wines New Zealand (International company also present in Australia)
 Coriole Vineyards
 Mount Langi Ghiran, Pernord Richard New Zealand (Orlando Windham Group (Orlando Wines) - International company also present in Australia)
 Peter Lehmann Wines
 Sticks Yarra Valley
 Tyrrell’s Wines
 Vasse Felix
 Wolf Blass
 Yalumba
 Penley Estate
 Yering Station

Out of these 16, the strongest competitor companies are Wolf Blass and Casella. Both of these companies have a wide range of wine products, thus some of which with good quality and low price tag that will compete well with Silkwood’s wines. Also both of these companies have commenced heavy advertising campaigns and are well known brands.
Even though, when researching New Zealand’s market using only secondary data, deeper competitor analysis is possible, in order to conduct a full and detailed competitor analysis (which will include competitors that import wine to New Zealand from countries other than Australia), additional ‘on field’ research (primary and secondary) will be necessary.

6. MARKET ENTRY OPTIONS
There are several options for entering new markets. Silkwood Wines could use only some of them:

Licensing and Franchising are not an option, as Silkwood brand is not known in overseas markets at present. These options are also not commonly used in the wine industry due to the fact that, when starting their own wine production, people like to label the wines they make as their own.

Manufacturing based entry options, such as joint-venture, acquisition or ‘Greenfield site’ are also not good strategies for Silkwood Wines. Both Argentina and New Zealand have very strong domestic wine industries. Silkwood Wines intends to position its products as ‘foreign and unique’ rather than ‘home based’ and thus to avoid direct combat with domestic competitors, while also taking the advantage of established good reputation of Australian wines. Also these options require capital investments that overextend well over Silkwood’s financial and human resources.

Opening a foreign sales office – This option also requires investments that overextends well over Silkwood’s financial and human resources and it is an option rarely used in wine industry. Wine and spirits are usually sold in wine cellars or similar stores that would have a wide range of wine, beer and spirits on selection. Sales outlets that would sell only one brand of wine could only be found at actual wineries.
Using an overseas importing agent requires more commitment towards the actual agent. It is not always easy to break the relationship with an employed agent due to domestic protective legislation. This option also requires some financial and human resources as Silkwood would have to organise and cover all the exporting costs. But it also gives Silkwood more control over its sales and its relationship with the end-user.
Using a distributor is similar to using an overseas agent in terms of exporting costs being paid by Silkwood. The difference is that the actual sale is made to a distributor, who then sells the wine to the end-user. There is less control over the relationship with the end-user, but the contract with the distributor is easier to exit then the one signed with an agent. It is important to choose relevant distributor that has developed network with relevant store outlets, and doesn’t distribute products of direct competitors.
Using an Australian exporting agent is similar to a domestic sale from Silkwood’s perspective. It does open less opportunity for higher profit margins but this can be compensated if relationship is established with a good agent that has access to preferential costs (freight forwarding, insurance, storage, etc.) and can arrange for lower overall exporting costs. It is a good option in terms that it requires least investment, but the price and overall positioning of the product towards the end user cannot be controlled.

Silkwood will chose to use the distributor as the means for initial entry to a new market. With additional services that distributors offer, such as preferential storage and distribution costs, and sometimes joint promotion, it is no wonder this is an exporting option most commonly used among smaller, middle sized and even larger wine producers.

All said is relevant both for Argentina and New Zealand.

7. CONCLUSIONS AND RECOMMENDATIONS
7.1. Conclusions

Argentina:
• Its population and culture are heavily shaped by Italian and Spanish immigrants.
• Situated at the utmost South of South America, it is physically far from Australia: 12,618kms (26 days shipping time).
• High political instability. Current political situation is unsatisfactory and disturbing, with population unhappy with its troubling government.
• Current demonstrations and possible social unrest.
• Wine industry regulated with non preferential high tariffs applying for wine imported from Australia.
• High corruption and crime rates
• Overall relationship with Australia is positive.
• Argentina is no more a rich country. GDP PPP Per Capita is in the higher range of upper middle income countries but it is not well distributed. GDP recorder negative growth rate with Argentina entering recession. Economy is to suffer further in the near future.
• Unfavourable high unemployment rates, large percentage of population bellow poverty line and high inflation rate are present.
• Argentina does have resources to pull out of recession and to get back on the track of prosperity in the long time frame, but only if accompanied with right governmental policies.
• Infrastructure levels are satisfactory with the world standards.
• There is a large target market within the population of 41 million people, providing a large potential for profit returns.
• Spanish is official and most commonly used language. English is rarely heard in the business.
• Large psychical and cultural distance from Australia
New Zealand:
• Its population and culture are largely shaped by European immigrants (mainly British – similar to Australia)
• Situated at the utmost South East of Oceania, it is physically close to Australia: Perth to Auckland – 5,345kms (10 days shipping time)
• High political stability and stable current political situation.
• Wine industry regulations for Australian wine is favourable with ANZCERTA (tariffs $0).
• Low corruption and crime rates
• Overall relationship with Australia is historically strong and close.
• New Zealand is a rich country with a high standard of living. GDP PPP Per Capita is US$28,000. GDP recorder negative growth rate during world financial crisis but it has started to recover during the last year.
• Interest and inflation rates dropped down in 2009 but unemployment rate remains high (6%)
• Economy is on the track of recovery.
• Infrastructure levels are high according to the world standards.
• Target market is small within the population of 4.2 million people (+2.4m tourists pa), providing only small ‘extension’ of current profits.
• English is official and most commonly used language.
• Psychically and culturally very close to Australia

Both countries have strong domestic wine industries with similar competition. There are more Australian wines currently exported to New Zealand. For both countries more in-depth ‘on-field’ research needs to be conducted for detailed competitor analysis.
Market Entry Option
The following table compares available market entry options (applicable for both countries):
Entry Option Distribution Costs Control Commitment Export
Foreign Importing Agent Medium (variable) Medium Medium Direct
Distributor Low to Medium Low Low Direct
Australian Exporting Agent Low Low Low Indirect

7.2. Recommendations
Even though Argentina is an attractive market for winemakers from ‘target-market’ point of view, it is not a good time to commence exporting to this country. Unfavourable political and economic situation are the strongest factors that influence this decision. High physical, psychic, cultural and linguistic distances from Australia represent additional potential complications.
New Zealand on the other hand offers less opportunity for profits, but being physically, psychically, culturally and linguistically close to Australia, with a favourable applicable tariff rates and historically good relationship, it is a safe option.
American slightly positive GDP growth in the last quarter and some other latest statistics indicate that the worst times relating to world financial crisis is in the past. Nevertheless, world’s economists are prognosticating that long time is needed for full recovery. Some countries are still in recession and Argentina is battling hard to come out as a winner. Higher risks are associated with these hard times, thus a safer option is recommended.
Taking all this into consideration and the facts that Silkwood Wines are inexperienced in exporting and have limited human and financial resources, I recommend New Zealand as the best country for initial entry. With characteristics above described, New Zealand can be regarded as an ‘extension’ of Australian market. It will offer some expansion of production and extra profits, but more importantly experience that Silkwood Wines will be able to use once decision is made to enter other markets.
Again because of Silkwood’s limited financial and human resources, use of the distributor in New Zealand is recommended market entry option. Relevant distributor can also provide a complete service regarding logistics and storage for a competitive price and has a developed network of distribution to relevant store outlets.
Further research is required for detailed competitor analysis, preferably conducted in New Zealand.
Argentina shouldn’t be disregarded altogether. It still remains an attractive target market and it should be reassessed once the company is established in New Zealand, gains experience in exporting and if times change for better in Argentina.

8. APPENDIX
8.1. Bibliography
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8.1.1. Illustrations
Organisation Internationale de la Vigne et du Vin (OIV), Situation report for the world vitivinicultural sector in 2005 [Online], Available from: http://news.reseau-concept.net/images/oiv_uk/client/Commentaire_Statistiques_2005_EN.pdf (Accessed: September 26, 2009)

Figure 2, Exclusives Americas, Map of Argentina. Available from: http://www.exclusiveamericas.com/maps/map_argentina.htm (Accessed: November 1, 2009).

Figure 3, Office National Du Ducroire, Argentina - Risk assessment. Available from: http://www.ondd.be/WebONDD/Website.nsf/AllWeb/Argentina?OpenDocument&Disp=1&Language=en

Figure 4, Trading Economics, Argentina - Core Five State Institution. Available from: http://www.fundforpeace.org/web/index.php?option=com_content&task=view&id=241&Itemid=384 (Accessed: November 1, 2009).

Figure 5, Argentina Gross Domestic Product (GDP). Available from: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 6, Trading Economics, Argentina GDP per capita (Purchasing Power Parity PPP). Available from: http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 7, Trading Economics, Argentina GDP per Growth Rate. Available from: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 9, Yahoo Finance, Basic chart AUD/ARS (CCY). Available from: http://finance.yahoo.com/q/bc?s=AUDARS=X (Accessed: November 1, 2009).

Figure 10, Yahoo Finance, Basic chart ARS/AUD (CCY). Available from: http://finance.yahoo.com/q/bc?s=ARSAUD=X (Accessed: November 1, 2009).

Figure 11, Trading Economics, Argentina Interest Rate. Available from: http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 12, Trading Economics, Argentina Inflation Rate. Available from: http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 13, Trading Economics, Argentina Unemployment Rate. Available from: http://www.tradingeconomics.com/Economics/Unemployment-rate.aspx?Symbol=ARS (Accessed: November 1, 2009).

Figure 15, Itim International, Geert Hofstede™ Cultural Dimensions. Available from: http://www.geert-hofstede.com/hofstede_argentina.shtml (Accessed: November 1, 2009).

Figure 16, Trading Economics, Argentina Consumer Confidence. Available from: http://www.tradingeconomics.com (Accessed: November 1, 2009).

Competitor websites: http://www.torbreck.com/Distributors/SouthAmerica/tabid/197/Default.aspx http://www.australianvintage.com.au/International/NewZealand.aspx http://www.bethany.com.au/winebox/distributors_detail.asp?mmid=&smid=&country=New%20Zealand http://www.casellawines.com/distributor-contacts http://www.cbrands.com/CBI/constellationbrands/AboutUs/Companies/ConstellationWinesNewZealand.html http://www.coriole.com/contact/international-distributors/ http://www.langi.com.au/cpa/htm/htm_article.asp?page_id=23 http://www.orlandowyndhamgroup.com/_agev.php?ret=/default.php%3F http://www.penley.com.au/Distmap.htm#NZ http://www.peterlehmannwines.com/DistributorCountry.aspx?p=34&id=7 http://www.sticks.com.au/winebox/content.asp?smID=14 http://www.tyrrells.com.au/promotions/new-zealand-promotion.aspx http://www.vassefelix.com.au/LinkClick.aspx?fileticket=V3MD8AHQCa8%3d&tabid=60 http://www.wolfblass.com/default.aspx http://www.yalumba.com http://www.yering.com/cpa/htm/htm_article_detail.asp?article_id=86&page_id=57
8.1.2. Footnotes
1 – Country comparison to the world according to CIA world factbook.
2 – Note: The statistic for landmass surface area was sourced from CIA world factbook, which takes into account the landmass continent of South America only. In Argentinean sources, the figure of 3,791,810 Km2 can be found, inclusive of the area of South Atlantic Islands and parts of Antarctica that they claim, which America does not recognize.
3 – Statistics sourced from CIA world factbook.
4 – North Levantine Spoken Arabic.
5 – Southern African Customs Union (SACU). Members are: Republic of South Africa, Botswana, Lesotho, Swaziland and Namibia.
6 – Spanish: ALADI - The Asociación Latinoamericana de Integración; English: LAIA - the Latin American Integration Association.
7 – Community of Andean common market, comprising Bolivia, Colombia, Ecuador and Peru.
8 – Spanish: MERCOSUR - Mercado Común del Sur; Portuguese: MERCOSUL - Mercado Comum do Sul; English: Southern Common Market.
9 – Calculated by adding literacy rate, indexed infant mortality rate ((166 - infant mortality) × 0.625) and indexed life expectancy ((Life expectancy - 42) × 2.7) and then dividing result with 3. Result is viewed on the scale 0-100 with 0 being the worst.
10 – As Gini index figure (36.2), found in CIA factbook and other sources is out of date (1997), it won’t be taken into consideration. Income and expenditure figures, and conclusions relating were rather sourced from Statistics New Zealand.

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