Tiffany and Co Case study
Is blue box packing a great strategy?
Given that spending in the luxury retail market has demonstrated resilience during and post recessionary times, how can Tiffany continue to grow? Will it be able to maintain a prominent brand in future?
1837: Founded in New York by Charles Lewis Tiffany and John F. Young: The Blue Box introduced 1910-1940’s: 57th street and Fifth Avenue Flagship store
2000: Tiffany and Co. foundation established
They sell jewelry, timepieces, silverware etc using their key stores in high profile locations. 90% of their revenue is from jewelry. Out of 90%, 57% revenue is generated from their affordable line collection.
PORTER’S V FORCES
a) Market is fragmented with Tiffany having the second largest market share after Signet b) People can go to other retailers such as Cartier, Signet or Blue Nile c) Even the chain stores, like Costco is posing huge competition not because of cheap cost and good quality but also good return policy. Customers can get bigger carat diamonds of next to similar quality at half a price; the only difference is the brand and bi big blue box packaging.
a) Few diamond suppliers in the world, so they have power to dictate prices. b) Moreover they do diamond cutting and polishing on their own
a) Buyers have high disposable income
b) They feel connected with the brand
c) Able to choose from retailers and easily switch, so emphasis on experience
Threat of Substitutes
a) When buying engagement rings, there are few substitutes
b) When buying other designer pieces and accessories then wide range of options and retailers.
Barriers to Entry
a) High cost of capital to start a luxury jewelry business
b) Consumers likely to shop from a brand that they know
Analysis of external factors
Political: Government plays a key role in mining practices, so there is an ease in getting raw material at cheap prices.
a) Asian markets are growing extensively especially China. It is the fastest growing and second largest luxury market in the world. b) America is the largest diamond market followed by China.
a) Spending on luxury goods has increased
b) Brands are more important to customers than products.
All jewelry designers use Computer Aided Design
Analysis of Internal factors: Resources
Brand name and image i.e. high quality, sophisticated, classic Moreover their CSR activities add to their image.
a) Sales training
b) Design team, which includes leading designers Elsa Peretti, Frank Gehry and Paloma Picasso.
b) Real Estate
c) Prestigious store locations
d) Metal and gemstone mines.
Core Competencies and Competitive Advantage
a) Design and innovation
b) Marketing and excellence
c) Brand development
d) Customer service
e) Quality and craftsmanship
a) Product differentiation
b) Brand loyalty
c) Online retail presence
SWOT ANAYLYSIS OF TIFFANY
Majority in-house production
(60% production and 70% diamonds sourced directly from mines) Strong brand in the highly fragmented market
(2.1% market in the real jewelry market and ranks 2nd in market share) Strong direct selling channels
(21.7 M catalogues in the US in 2006 and 0.7M sales via telephone, internet or US mail) Broad offerings
(About 3,500 products-jewelry, timepieces, sterling silverware, china, crystal, fragrances, stationary, precious and semi-precious stones, titanium etc.) CSR initiatives
(Bristol Bay Protection Pledge to preserve salmon fishery and surrounding wilderness and uses 100% recyclable paper and blue bag etc) Weaknesses
No Promotion model
(Average engagement price range $10,000 three times the market average,...
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