Swatch. University of Toronto Rotman School of Management

Transcription

1 Swatch University of Toronto Rotman School of Management

2 Agenda Challenge Recommendation Analysis Strategy Implementation Risks and Mitigations Summary

3 What is the problem that Swatch is facing? New Competitors Changing Consumer Preferences Smart Technology Devices

4 What should Swatch do? To both retain and grow market share, we recommend that Swatch: Capitalize growing trends and existing clientele in the highmarket segment Further innovate its product offerings to meet mid-market and low-end customer categories Develop a new cross segment consumer retention program

5 Swatch Group Ltd. Background Past Designs, manufactures, and sells finished watches, watch movements, jewelry and components Born in the Quartz Crisis Last five years, net sales grew and net profit above 20% Present Operates in 50 countries with 36,000 employees Portfolio of 18 watch brands across all price segments Led by Nick Hayek, son of founder Future 2015 net sales decreased 3% to 8.451B Swiss francs Introduced technology enables devices, learning from previous product failure

6 S.W.O.T. Analysis Swatch

7 S.W.O.T. Analysis Strengths - Timeless heritage - Luxury brand loyalty - Technology sales to other manufacturers - Patents - Diversified Swatch

8 S.W.O.T. Analysis Strengths - Timeless heritage - Luxury brand loyalty - Technology sales to other manufacturers - Patents - Diversified Weaknesses - Reliance on heritage - Arrogance / conservative - Underestimate new competitors Swatch

9 S.W.O.T. Analysis Strengths - Timeless heritage - Luxury brand loyalty - Technology sales to other manufacturers - Patents - Diversified Weaknesses - Reliance on heritage - Arrogance / conservative - Underestimate new competitors Swatch Opportunities - Smart technology integration or collaboration - Growth of watch use in new demographics - Battery life & price - Independent of smart phones - Retail distribution network

10 S.W.O.T. Analysis Strengths - Timeless heritage - Luxury brand loyalty - Technology sales to other manufacturers - Patents - Diversified Weaknesses - Reliance on heritage - Arrogance / conservative - Underestimate new competitors Swatch Group Ltd. Opportunities - Smart technology integration or collaboration - Growth of watch use in new demographics - Battery life & price - Independent of smart phones - Retail distribution network Threats - Apple Watch and other smart watch entrants - Changing consumer preferences - Inexpensive Chinese made alternatives

11 The current watch market can be divided into 3 customer segments based on consumer needs Timekeeping Pure timekeeping Little to no additional functionalities Activity Trackers Sports and healthoriented functionalities Smartwatches Smartphone features on the wrist Includes activity tracking functionalities

12 Smartwatches today offer the same functionalities as activity trackers watches Timekeeping Activity Trackers Smartwatches - Fitness tracker - Step counter - Heartrate monitor Pure timekeeping as a luxury jewelry piece remains a distinct category

13 However, consumers continue to be price-conscious, with price being a significant determinant of buying behaviour High-end $1000 and up Mid-range $300 to $1000 Low-end Less than $300 Price dictates segments within timekeeping, activity tracking, and smartwatches

14 Apple is a leading competitor in smart watches, but Swatch s strengths lie in its brand and craftsmanship in luxury watches Size (2015 Net Sales) Brand Awareness Strengths Swatch Apple 8.5B CHF $234B High, leader in luxury watches Timelessness Craftsmanship Luxury High, 91% awareness of Apple Watch prior to launch Technological capabilities Innovation Connectivity of devices Weaknesses Low capabilities in high-tech Battery life Reliance on success of iphone

15 Strategy Overview The emergences of the smartwatches and wearable technology creates opportunities for Swatch in each of it s segments; low, medium, and high range. Low Range ($0 - $300) Mid Range ($300 - $1000) High Range ($1000+) Advanced Technology Apple Low Technology Fitbit Timekeeping Only Current Swatch Offerings

16 High Range Strategy Continue with the same luxury offerings while focusing on educating mid range customers to drive long term luxury sales. According to Albatross survey only 27% consider the Apple Watch as a luxury and only 15% consider it as a substitute. Two Segments 1) Timelessness & craftsmanship 2) Technology

17 High Range Strategy Continue with the same luxury offerings while focusing on educating mid range customers to drive long term luxury sales. 95% of profits come from luxury Survived the Quartz Crisis Swatch should not risk losing these loyal customers by hurting the luxury brand name

18 High Range Strategy Continue with the same luxury offerings while focusing on educating mid range customers to drive long term luxury sales. According to CEO Nick Hayek, due to increase in smart watches, there is an increase in demand for Swiss mechanical watches Focus on educating consumers and transform them into luxury watch customers

19 Mid-range strategy: Collaborate with Apple Growing smartwatches segment Complementary core competencies Brand value

20 The mid-range smartwatches segment is growing, but Swatch cannot compete with Apple on the tech side Swatch and Apple s core competencies are complementary and can create mutual value and a superior product Core competencies Swatch Design Manufacturing Watch technologies Luxury Apple Technological capabilities Connectivity of devices ios

21 Swatch and Apple can build on their collective brand values to offer a highly desirable product TAG Heuer and Intel have collaborated to offer a luxury advanced tech watch The brand value of Apple and Swatch s mid-range brands can offer a desirable alternative to TAG Heuer s offering

22 Low-end strategy: Collaborate with Fitbit Most price sensitive Interested in basic activity tracking Current smartwatches are perceived to be redundant and inconvenient

23 Low end consumers require a basic entry level device Gently introduces to smartwatch market with lower priced product Provides basic activity and tracking capabilities, not dependent on having a phone

24 Swatch should partner with Fitbit to satisfy the low-end consumer market Fitbit already has an established presence in the activity tracking market Swatch should introduce a watch at a low-price ($50) to encourage purchase Swatch should promote low price point and activity tracking features

25 Customer Retention Program New customer retention program will aim to move customers up the sales ladder by allowing upgrades at a reduced rate. Up sell Educate Retain customers

26 Strategy Implementation Timeline

27 Risks & Mitigations Shrinkage in luxury watch demand Partnerships with technology companies fail Currency fluctuations with the franc Penetrate into mid and low range segments Develop a larger target list of firms to partner with Hedge against current currencies to eliminate risk

28 Summary of Recommendations To both retain and grow market share, we recommend that Swatch: Capitalize growing trends and existing clientele in the highmarket segment Further innovate it s product offerings to meet mid-market and low-end customer categories Develop a new cross segment consumer retention program

29 Thank You. Questions?