Case study 1

Topics: Watch, Rolex Pages: 46 (25095 words) Published: May 1, 2015
A  case  study  on  the  luxury  watch  market  
The  following  case  study  is  largely  focused  upon  Prestige  luxury  watches  but  in  order  to  give  a  context  to  the   activities  of  this  business  also  presents  some  background  information  on  the  luxury  watch  market  and  some   information  about  a  number  of  other  brands  operating  in  this  market.  A  number  of  positioning  matrices  are   included  in  the  Appendix  to  aid  understanding  of  the  competitive  market.   1.

The  luxury  watch  market  

Switzerland  dominates  the  global  watch  market  through  a  near  monopoly  on  luxury  watches.    A  long  history,   dedicated   university   and   apprenticeship   programs   together   with   related   and   supporting   industries,   such   as   fashion   and   precision   engineering,   have   created   a   rich   environment   of   integrated   and   independent   ǁĂƚĐŚŵĂŬĞƌƐŝŶ^ǁŝƚnjĞƌůĂŶĚ͛Ɛ:ƵƌĂƌĞŐŝŽŶ͘dŚĞ^ǁŝƐƐDĂĚĞůĂďĞů͕ƐƵƉƉŽƌƚĞĚďLJƚŚĞŐŽǀĞƌŶŵĞŶƚĂŶĚƌĞƐĞĂƌĐŚ focused  institutions  for  collaboration  (IFCs),  has  been  of  enormous  benefit  in  marketing  Swiss  watches  abroad,   especially  in  Asia,  which  is  the  single  biggest   market.   There  is  a   danger  however   that   the  value  of  the  Swiss   Made  brand  motivates  complacency  and  that  the  Swatch  Group  holds  a  near  monopoly  on  part  of  the  value   chain  (components).    

 
Wristwatches   fall   broadly   into   two   categories:   mechanical   and   quartz.   Mechanical   watches   rely   on   an   ƵŶǁŝŶĚŝŶŐƐƉƌŝŶŐĂŶĚŵĞĐŚĂŶŝĐĂů͞ŵŽǀĞŵĞŶƚƐ͟;ĐŽŵƉŽŶĞŶƚƐͿƚŽƉĂĐĞŚĂŶĚƐĂĐĐƵƌĂƚĞůLJĂƌŽƵŶĚĂĚŝĂů͘YƵĂƌƚnj watches  rely  on  battery  power  and  a  quartz  crystal  oscillator  to  keep  time  accurately.  Today  quartz  watches   are   more   widespread   because   they   are   cheaper   to   produce   and   are   more   accurate.   Mechanical   watches   mostly  occupy  the  luxury  segment,  but  many  luxury  quartz  watches  exist.  Beyond  the  underlying  technology  of   the   watch   however,   the   single   greatest   determinant   of   a   ǁĂƚĐŚ͛Ɛ ǀĂůƵĞ ŝƐ ŝƚƐ ĐŽƵŶƚƌLJ ŽĨ ŽƌŝŐŝŶ͕ ŚĞŶĐĞ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞŽĨƚŚĞ^ǁŝƐƐ ŵĂĚĞůĂďĞů͘&Žƌ Ă ǁĂƚĐŚƚŽďĞĂƌ ƚŚĞ͞^ǁŝƐƐDĂĚĞ͟ůĂďĞů͕^ǁŝƐƐůĂǁƌĞƋƵŝƌĞƐƚŚĂƚĂƚ least   60%   of   the   components   are   Swiss,   that   the   movement   is   cased   up   in   Switzerland   and   that   the   final   inspection  of  the  watch  happens  in  Switzerland.  Despite  the  importance  of  this  issue,  the  cost  of  components   and  movement  assembly  for  a  typical  Swiss  luxury  watch  is  only  around  6%  of  its  retail  price  (Pictet,  2003).    

The  Swiss  watchmaking  industry  is  both  prosperous  and  extremely  secretive.  Reliable  figures  are  hard  to  come   by,  and  are  never  provided  directly  by  watchmaking  brands  themselves.  Only  the  Federation  of  the  Swiss   Watch  Industry  (FH)  regularly  publishes  official  export  data.    Switzerland  exported  28.1million  finished  watches   in  2013,  a  drop  of  3.6%  on  the  previous  year  and  continuing  a  downward  trend.  However,  this  figure  only   represents  around  2.5%  of  the  1.2  billion  watches  manufactured  worldwide  over  the  same  period.  China  is,  in   fact,  the  market  leader  in  this  respect,  producing  634.4  million  watches  in  2013͘/ƚŝƐƚŚĞǁŽƌůĚ͛ƐůĂƌŐĞƐƚ exporter  of  finished  watches,  followed  by  Hong  Kong,  which  produced  331.5  million.  Switzerland  comes  in   third    place.  However,  the  opposite  is  true  when  it  comes  to  value,  where  Switzerland  takes  the  lead,   producing  95%  of  all  watches  sold  at  prices  of  over  1,000  francs.  It  should  also  be  noted  that,  in  2013,  Swiss   watches  cost  on  average  791  dollars  having  doubled  over  the  last  12  years,  as  opposed  to  barely  3  dollars  on   average  for  watches  manufactured  in...
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