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School of Business and Economics
• Introduction
• 5 Forces Analysis
• SWOT Analysis
• Strategic Advise
• Conclusion
School of Business and Economics
Introduction 5 Forces Analysis SWOT-Analysis Strategic
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Introduction
School of Business and Economics
Internal Rivalry
● 3-ratio concentration index = 45.8%● 8-ratio concentration index = 64.1%● HHI = 0,08009
●Different logics for luxury and low-cost●High but non-measurable effect of counterfeiting
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School of Business and Economics
Internal Rivalry
● Premium: vertically integrated, importance of brands
●Budget: watch assemblers, brands are less established
●Common: streamlined production process, -competition on design and new models,- after-sale service, warranty and quality against counterfeiting
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Entry
●Budget: basic know-how, access to commodities or components
● Premium: difficult to establish a brand, owned distribution channels, Swiss government support, Swiss vertical integration
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Complements● Jewelry, clothes, fashion accessories
Substitutes
● Budget: Smartphones (need of “telling time”)
● Premium: luxury goods (need of self-establishment, social recognition etc.)
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School of Business and Economics
Substitutes - Smartwatches
● Emerging and growing trend, covers all market segment
● Purpose: “make life easy”● Technologic firms: Apple, Samsung etc.● Watchmakers (Fossil, LVMH etc.) trying to
catch up●Sales of traditional watches have been decreasing recently, but it's not sure to what extent it's been due to smartwatches.
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School of Business and Economics
Supply Power● Big integrated groups: sensible to
fluctuations in precious materials● Independent manufacturers: are supplied
by big groups, for whom they are an accessory source of revenue
● Low cost: need for commodities and/or cheap mechanisms
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School of Business and Economics
Buyer power● Premium: low price elasticity● Budget: higher price elasticity● Common: relatively inexpensive goods,
infrequent purchase, low switching cost, few users are competent
● Retailers: bargaining power greater than end customers, no real threat of backwards integration, rely on manufacturers to carry on their business.
Introduction 5 Forces Analysis SWOT-Analysis Strategic
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School of Business and Economics
Summary
Introduction 5 Forces Analysis SWOT-Analysis Strategic
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Premium segment
Budgetsegment
Internal Rivalry
Moderate High
Entry Low High
Substitution Moderate Moderate-High
Supply Power Low Moderate
Buyer Power Low Moderate
School of Business and Economics
The Swatch Group
• 19 brands (low range, middle range and premium)• Manufacturer of watches, components, movements and
electronic systems
Introduction 5 Forces Analysis
SWOT-Analysis
Strategic advice
Conclusion
18.30%
15.70%
11.80%5.20%4.70%3.90%
3.40%2.10%
34.90%
Swatch GroupRichemontRolexFossil GroupLVMHCitizenSeikoCasioOther
Competitors in the watch industry (by market share in 2013)
Currently, the Swatch Group is market leader.
School of Business and Economics
Strengths
• Vertical integration• Balanced product offering• Financial prowess• Overall global presence• Commitment to labour• Innovativeness (design, materials and processes)• Electronic systems
Introduction 5 Forces Analysis
SWOT-Analysis
Strategic advice
Conclusion
Weaknesses
• Low social media presence• Limited presence in the US• High labour costs
School of Business and Economics
Opportunities
• Smartwatches• Online retailing• Valuable strategic alliances • Asian market growth
Introduction 5 Forces Analysis
SWOT-Analysis
Strategic advice
Conclusion
Threats
• Counterfeit products• Price volatilty of raw materials• Industry inertia• Exchange rate fluctuations
School of Business and Economics
Aspects of SWOT-Analysis that the strategy recommendation builds on
Introduction 5 Forces Analysis
SWOT-Analysis
Strategic advice
Conclusion
The Swatch Group
Strengths
• Vertical integration• Balanced product offering• Financial prowess• Commitment to labour• Innovativeness • Electronic systems
Weaknesses• Low social media presence• Limited presence in the US
Opportunities
• Smartwatches• Online retailing• Valuable strategic alliances
Threats
• Counterfeit products
School of Business and Economics
Discussion question:
Do you think that the selection of relevant strengths or weaknesses (as well as opportunities and threats) is useful due to the limited scope of this paper?
Do you agree with the above selection?
Introduction 5 Forces Analysis
SWOT-Analysis
Strategic advice
Conclusion
School of Business and Economics
Maintain competitive advantage by…
Introduction 5 Forces Analysis SWOT-Analysis Strategic
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Low/middle segment
• Share strategy• Try to keep price parity with competitors
• Let benefit advantage drive share increases
Premium segment
• Margin strategy • Offer differentiated products
• Charge higher price
• Defend critical capabilities and resources:
• Process efficiency• Investment in R&D • Commitment to skilled labour• Sport collaborations• Limit supply to competitors• Exploit access to owned mines
School of Business and Economics
First strategy: Horizontal differentiation with smartwatches
44%of watch executives see smartwatches as the “next big thing“ according to a study led by Deloitte in 2014
• In April 2015, Apple has released the first model of a smartwatch, “iWatch“
• Apple iWatch is an all-in-on smartwatch• Price: from 399 to 14,000 euros
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• In July 2015, Swatch has released the “Touch Zero One“
• First touchscreen wartch built with beach volleyball in mind
• Price: 120 euros
School of Business and Economics
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• Merging of sophisticated technology with Swatch Group design capabilities:
• Develop technological capabilities by means of strategic alliance with Google and Intel
• Benefits from knowledge spillover
• Combine newly acquired technological knowhow with design
• Tailored products with regard to features to customers needs:
School of Business and Economics
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Second strategy: Product improvement
Swatch Group decision in 2011 to phase out the supply of ETA movements to rivals
• Counterfeit is considered as an important weakness for the Group
• More important risk for the low and middle segment
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• In the luxury segment, Swatch should further advance quality of components to take an advantage on its competitors by 2020
• In the low and middle segment, Swatch Group should propose customizable watches for the customers:
• Create a new eshop platform• Each customer could create its own
watch• Price would vary depending on the
features used
• Swatch Group should also enhance its jewellery offerings in order to complement with its watches products
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Introduction 5 Forces Analysis SWOT-Analysis Strategic
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Third strategy: Increase integration in the US
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• Distribution is a critical resource to enter the industry, but for Swatch Group should be not too hard to establish a partnership
• Swatch Group should increase partnership with some important retailers
• Swatch Group should also increase the number of stores in the US:
• Hour Passion• Tourbillon Boutique
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Introduction 5 Forces Analysis SWOT-Analysis Strategic
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Forth strategy: Increase brand equity
Watch executives rate social media as the most important marketing channel, closely followed by print and then blogs
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• Explore new collaborations with fashion labels
• Celebrity endorsement for the middle range and the premium segement
• Increase social media presence of undevelopped brands:• Tailored social media campaigns with youtubers • Advertising • Event promoting
School of Business and Economics
Introduction 5 Forces Analysis SWOT-Analysis Strategic
advice Conclusion
Innovation beyond
traditional watches
Smartwatches, jewelry,
customization
Differenciation in marketing
strategies
Celebrity endorsment, social media presence, collaborations in
fashion
Increasing the Group
presence in the USA
Partnership with retailers, new
stores