Tiffany Analisis

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Strategic Report for Tiffany & Company

Harkness Consulting
Innovation through Collaboration
Jenn Wilcox Scott Damassa Zeeshan Hyder April 14, 2007

Table of Contents

Executive Summary ………………………………………….. 3 Company History ……………………………………………… 5 Competitive Analysis ………………………………………… 9 Internal Rivalry ………………………………………………….... 9 Entry ……………………………………………………………….... 12 Substitutes and Complements ………………………………. 12 Supplier Power …………………………………………………... 13 Buyer Power ………………………………………................... 15

SWOT Analysis ……………………………………………… 15 Financial Analysis …………………………………………… 17 Strategic Issues and Recommendations ……………. 20 References …………………………………………………… 25

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Executive Summary
Throughout its history, Tiffany & Co has been a luxury jewelry brand associated with romance, quality, and style. Originally gaining fame as a silversmith and later for its association with engagement rings and diamonds, Tiffany & Co now reaches a wide market through its sale of high-end jewelry, watches and glassware. Tiffany’s has grown steadily alongside the American economy and expanded across the United States and into South America, Europe, Asia and Australia. The firm offers a wide array of price points in its pieces, from sterling silver items under $100 to quarter of a million dollar signature pieces covered in diamonds and other gems. Tiffany & Co sells jewelry under its own name as well as featuring collections designed by famous artists such as Elsa Peretti, Frank Gerry, and Paloma Picasso. The firm has traditionally found success in the diamond engagement ring industry, statement jewelry, and sterling silver items. The industry is characterized as notoriously “tight-lipped,” where consumers are buying both a piece of jewelry along with its associated status and brand recognition. The supplier power on DeBeers and others is critical to shaping the industry’s dynamics and future. In an industry characterized by private labels and almost secretive dealings, Tiffany & Co took a dramatic step in 1987 when it decided to go public. Trading under the ticker TIF, the company has a 52-week range between 32.84 and 57.34, with a market capitalization of $5.84 billion. Some jewelry experts and consumers speculate that since its public offering Tiffany has “lost some of its luster,”1 but the firm’s explosive growth from 1999-present indicate that the business model is based in solid financials. Recently, several factors have affected the performance of both Tiffany’s and the luxury goods industry. Typically, spending in general and on luxury goods in particular depends greatly on consumer confidence in the economy as a whole. With the recent economic slowdown of late 2007, Tiffany & Co as well as the luxury jewelry industry has experienced dramatic decline, captured in a particularly poor holiday season. Facing further anticipated economic softening, the firm has decided to open an alternative store

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model in the Los Angeles area that focuses exclusively on its lower-end sterling silver jewelry whose average price point is $200. Tiffany & Co is also focusing on growth opportunities in non-Japanese Asian markets as well as opening its first store in the Middle East. In this report, Harkness Consulting focuses its attention on two main strategic issues. This first issue is the risk to Tiffany & Co if the initiatives above cause its brand to be perceived as diminished in quality and commercialized relative to its high-end competitors. With the success of lower price point sterling silver pieces, Tiffany’s has arguably already lost some of the status it enjoyed in the 1980s and before, made famous in the movie Breakfast at Tiffany’s. However, these items account for roughly a third of sales2, indicating this is a popular sector of the business model. By making the Tiffany & Co brand accessible to individuals willing to spend $100-$200 on a piece of jewelry, the firm has dramatically...
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