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Mary Smith, a Level II CFA candidate was recently hired for an analyst position at the Bank of Ireland. Her first assignment is to examine the competitive stratopias employed by variou French wineries Smith's report identifies four wineries that are the major players in the French wine industry. Key characteristics of each are cited in thetable below. In the body of Smith's report, she Includes a discussion of the competitive structure of the French wine industry. She notes that over the past five years, the French wine industry has not responded to changing consume tastes. Profit margins have declined steadily, and the number of firms representing the industry has decreased from 10 to 4. It appears that participants in the French wine industry must consolidate in order to survive South Winery North Winery East Winery West Winery Founding date 1750 1903 1812 1947 Generic competitive strategy 2 Cost leadership Cost leadership Coot leadership Major customer market (more than 80% concentration) France France England US Production site France France France France Characteristics of Four Major French Wineries Smith's report notes that French consumers have strong bargaining power over the industry. She supports this conclusion with five key points, which she labels "Bargaining Power of Buyers": Many consumers are drinking more beer than wine with meals and at social ocasions Increasing sales over the Internet have allowed consumers to better research the wines, road opinions from other customers, and identity which producers have the best prices More than 65% of the business for the French wine industry consists of purchases from restaurants Restaurants typically make purchases in bulk, buying four to five casos of wine ata time Land where the soil is fertile enough to grow grapes necessary for the wine production process is scarce in France After completing the first draft of her report, Smith takes it to her boss, RonVanDriesen to review. VanDriesen tells her that he is a wine connoisseur himself and often makes purchases from the South Winery Smith tells VanDriesen "In my report I have classified the South Winery as a stuck in the middle firm. It tries to be a cost leader by selling is wine at a price that is slightly below the other firms, but it also tries to differentiate itself from its compotitors by producing wine in bottles with curved cocks, which increases its contructure. The end mauris that the South Winery's profit margin gets squeezed from both sides." Van Driesen repies have mot members of the management team from the South Winery at a couple of the wine conventions I have attended, I believe that the South Winery could succeed at following both a cost leadership and a differentiation strategy is operations were separated into distinct operating units, with each unit pursuing a different competitive strategy." Smith makes a note to do more research on generic competitive strategies to verlly VanDrosent assortions before publishing the final draft of her report If the French home currency were to greatly appreciate in value compared to the English currency, what is the likely impact on the competitive position of the East Winery? No impact since the major market for East Winery in England, not France Make the firm les competitive in the English Market Make the firm more competitive in the English market