INDEX PAGES MANAGING STRATEGICALLY (MST) ASSIGMENT 1 QUESTION 1- OVERVIEW OF THE RETAIL JEWELLERY INDUSTRY AND STRUCTURE Executive

e summary INTRODUCTION I- OVERVIEW OR THE RETAIL INDUSTRY KEY DRIVERS OF THE RETAIL JEWELRY INDUSTRY 3 4 5 5

A- THE MACRO ENVIRONMENT OF THE RETAIL JEWELLERY INDUSTRY A-1 Political Factors A-1-1 Trade restriction A-1-2Change in Overtime Regulations A-2 Economic Factors A-2-1 Recession A-2-2 Disposable income A-3 Social Factors A-3-1 Demographic and cultural aspect A-4- Technological Factors B- MICHAEL PORTERS FIVE FORCES ANALYSIS B-1- Buyers Power B-1-1 Switching cost B-1-2 Buyer information B-2 Suppliers Power B-2-1 Suppliers concentration B-2-2Differentiation of input B-3 Intensity of Competition B-4 Threat of New Entrants B-5 Threat of Substitute Products B-5-1 Propensity to substitute C- COMPETITIVE POSITIONING C-1 Competitive Positioning C-2 Competition Strategies II- STRUCTURE OF THE JEWELLRY RETAIL INDUSTRY 6

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CONCLUSION

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QUESTION 2 OPPORTUNITIES AND THREATS JEWELLERS RETAILERS FACES I OPPORTUNITIES I-1 CHINA WTO MEMBERSHIP (World Trade Organization) I-2 TECHNOLOGY I-3 AFRICAN INTERNATIONAL EXPANSION II-THREATS II-1 COUNTERFEITS PRODUCTS II-2 ECONOMY PERFORMANCE II-3 UNCONTROLLED RIVALRY AMONGST COMPETITORS II-4 CHINESE AND SMALL LOCAL SUPPLIERS

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QUESTION 5 CHOICE III RECOMMENDED STRATEGIES III-1 MARKET SEGMENTATION III-2 ADVERTISEMENT THROUGH CELEBRITIES DIVERSIFICATION III-3 ADVANCE ELECTONIC CUSTOMIZATION

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IDENTIFICATION OF ALTERNATIVES STRATEGIES FOR THE COMPANY AND MOTIVATION OF OUR

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III-4 CUSTOMER RELASHIONSHIP MANAGEMENT References

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MANAGING STRATEGICALLY (MST) ASSIGMENT 1

QUESTION 1- OVERVIEW OF THE RETAIL JEWELLERY INDUSTRY AND STRUCTURE

Executive summary

The fine jewellery industry globally is a very competitive one and as every business sector, they are highly influenced by micro, macro and meso environmental components. For instance most of these companies declined after the 11 th September 2001, they are affected by the current economy downturn. We will be reviewing this industry and present the current structure.

INTRODUCTION The retail jewellery industry can be segmented into 3 different categories: fine jewellery retailers, general jewellery retailers and specialities retailers. All supplies different type of product such as: times pieces, rings, bracelets etc. We have been tasked to study and present the overview of this industry as well as its structure. In order to remain realistic and provide useful information, we have decided to limit the time of the study from 1990 upwards. We will use the American industry as it is the one we could provide more known references. In order to substantiate our findings, we will use the PESTLE and Porters 5 forces to analyse the industry. Before this exercise, the drivers of that specific industry will be presented.

I- OVERVIEW OR THE RETAIL INDUSTRY KEY DRIVERS OF THE RETAIL JEWELRY INDUSTRY According to a research and publish on advertising age (2002), the main drivers of the industry are: Quality as it represents 85% of consumer will, Value as it represents 58.66% Design and style as it represents 40.12 % Price as it represents 39.82 % A- THE MACRO ENVIRONMENT OF THE RETAIL JEWELLERY INDUSTRY The macro environment measures the interaction between few components and the industry. In order on examine in depth these impacts, the PESTLE will be introduced.

A-1 Political Factors A-1-1 Trade restriction

Every industry is influenced by the politics. Many American companies were subjected to a slight decline after the September 11 event. The politics may also impact on the target market. For instance the fine jewellery industry target high income buyers and if there is a trade restriction between America and a specific country that is seen as a potential buyer, there will be no possibility to supply that market. E.g.: IRAQ, AFGHANISTAN etc

A-1-2Change in Overtime Regulations

America introduced in 2005 a change in overtime regulations. This impacted all sectors. (2) Keeping employee for longer hours may have financial implications such as overtime remuneration.

A-2 Economic Factors A-2-1 Recession

The current economic downturn has created a lot of uncertainty as far as buyers are concerned; hence jewellery is not a priority when one cannot predict the next economic trend. Also, the fact that more people are unemployed may contribute to the sales slowdown.

A-2-2 Disposable income

The disposable income may be a determinant factor as well. The reason being that it may contribute to cash purchase of goods.

A-3 Social Factors A-3-1 Demographic and cultural aspect

The demographic and cultural beliefs influence the buying attitude for instance as America is a cosmopolitan republic with people coming from all over the world. Africans may not buy a ring for the engagement finger as it is a curse to wear anything on that finger that has not been offer by the fianc.

A-4- Technological Factors

with the development of new technologies such as internet, many retailers are opening online shops that allow them to reach customers all over the world and further more, offer online secure payment methods. A small portion of buyers are environmentally conscious and do not wish to buy jewellery where some part are from animals such as Ivory where used as it impact on the ecosystem. The legislation also controls diamond exploration.

B- MICHAEL PORTERS FIVE FORCES ANALYSIS B-1- Buyers Power B-1-1 Switching cost
In the retail jewellery industry, there is no switching of costs as one can move around from one supplier to another, this make the buyer power high.

B-1-2 Buyer information

With the development of Information Technology, buyers are more informed as they get information through internet, magazine etc this gives them the upper hand when it comes to choosing the supplier they think may be the best based on the information gathered. In this case the consumer power remains high

B-2 Suppliers Power B-2-1 Suppliers concentration

The raw materials needed for the jewellery are specific e.g. diamonds, sapphire, Gold etc. and only few accredited Mining companies can supply the required quality and this gives these mining companies power over the industry. Few companies opted for vertical integration by buying shares into mines.

B-2-2Differentiation of input
After the transformation is done, consumers is not able to differentiate if the raw material used were from one or other suppliers of raw material and this give the jewellery companies power over they suppliers.

B-3 Intensity of Competition

The competition is very tough in the retail jewellery industry as aggressively used online advertising, online magazine, and multiple channel line. The after sales service and multiplicity of stores enhance customer the experience. We can distinguish many type of stores: customer jewellery stores, fine jewellery stores and cheap jewellery stores. Another type of competitors comes from those who produce counterfeit goods and use internet to advertise which is low cost and no store.

B-4 Threat of New Entrants

Capex required to start a jewellery retail business is too high. You need to invest in raw material, production, and marketing, store etc. This limits the number of potential entrants in the industry. In this competitive sector, brand awareness is a determinant factor and it is difficult to build hence it take a lot of time to build.

B-5 Threat of Substitute Products B-5-1 Propensity to substitute

Although the potential buyers are high income and require quality. The counterfeited version of the product may attract some of these buyers as it may look like the original and may be very difficult to differentiate. Because these products are cheaper, the potential client who is looking for value for his money may be willing to try that product.

C- COMPETITIVE POSITIONING C-1 Competitive Positioning

Competitive positioning of the four US jewellery retailers on the following parameters: Market Share Number of Retail Stores Product Range Store Footage in million sq. ft Store Formats The main competitors are: Zales Corporation with around 2300 stores in USA, 90 outlets and 170 stores in Canada. Harry Winston David yurman Tiffany & Co Imitators. This group wait for a product to be successful and make a counterfeit version.

C-2 Competition Strategies

To survive in this industry, competitions focus on the industry key drivers as presented above. They also try to penetrate foreign market such as Canada, Brazil, Japan, and China. Over and above, they improve their supply chain, and marketing strategy. They emphasise on new technology to reach the target market, look for new opportunities, consolidate their strengths and minimise they weaknesses.

II- STRUCTURE OF THE JEWELLRY RETAIL INDUSTRY

The jewellery retail industry can be structured according to the type of product sold. We have 5 main categories: bridal jewellery (30%), fashion jewellery (22%), watches (18%), precious stones (15%) and precious metals (15%). The category of watches generally includes clocks as well as most jewellery repairs. Precious metals include gold, silver, platinum and palladium. Precious stones come in over 130 varieties, around 50 of which are commonly sold by retail jewellers.

bridal jewellery 15% 30% 15% fashion jewellery watches P recious stone 18% 22% precious m etal

Grand structure of the Jewellery retail industry

This industry may also be structure according to the type of items and the material used. In this case the diagram below illustrates this structure.

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Structure according to product, service and key statistics. (3)

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CONCLUSION

The retail jewellery industry has evolved with the technological trend and as the world has became a global village, it is important to use the latest communication tools to reach the remote areas. The jewellery industry has taken advantages by using Internet to reduce advertising costs and attract more customers. The babies boomers, generation X and Y can be contacted in real time and enjoy specials, the uses of real-time solution were used to decentralise production line and still be in touch with the team. Nevertheless the American market, close to its saturation level, open doors to new market such as Canada, Brazil, Japan, China etc. The man power is also cheap in this emerging market and allows hence we will advise key players to decentralise their production lines into these areas and export the final product so that they can survive the tough competition from counterfeits. We encourage vertical integration so that one can control part of the raw material production process to limit the supplier power.

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QUESTION 2
OPPORTUNITIES AND THREATS JEWELLERS RETAILERS FACES

I OPPORTUNITIES
Opportunity is one or more favorable circumstance from the external environment that may contribute to the company success if management take advantage of them. The jewelry retail industry has many opportunities: I-1 CHINA WTO MEMBERSHIP (World Trade Organization) China alone got at least half of the world population. This is an opportunity for the retail jewelry industry to penetrate the market. Further more, it is know that the labor is the cheapest in chine therefore, jewelry retail companies should transfer most of they manufacturing plant in China to save in labor cost so that they can face the growing competition.

I-2 TECHNOLOGY Technology is the one of the must powerful tools the industry must take advantage of. For instance the use of internet must be done to the fullest to insure that the target market get the right message and on time. Unlike magazine that may be delayed, internet will deliver messages instantly. The advertisement may be done in 3 or 4 dimensions using latest software to insure that customer get the real view of the final product on paper. Such as MFG/PRO Eb2 and QAD Eq helped retailers to collect their customers information and improve operational

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efficiencies. Using such technology gives competitive edge over the fine jewellery retailers (John A. Pearce II & Richard B. Robinson, Jr, 2009) I-3 AFRICAN INTERNATIONAL EXPANSION Key players have so far failed to consider Africa as they target market but the potential is huge in the continent. In some countries like Democratic Republic of Congo, Sierra Leone, there are possibilities for vertical and backward integration. These countries are global diamond are gold producers.

II-THREATS Threats can be view as external challenges that may jeopardise the growth and sustainability of the industry and we may have the following:
II-1 COUNTERFEITS PRODUCTS The threats caused by counterfeits product are very big. Often time, imitation jewellery is made from small companies that mainly sell through website. (John A. Pearce II & Richard B. Robinson, Jr, 2009). This causes lost in revenue because they sale their products at a very low price causing unfair competition. II-2 ECONOMY PERFORMANCE The raw materials are generally diamond, gold etc. and this come with the price. At the time when the economy is on recession like the present time, it became very difficult to have enough disposable income to buy expensive jewellery. People changes their buying behaviour and this impact on the industry.

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II-3 UNCONTROLLED RIVALRY AMONGST COMPETITORS Rivalries amongst competitors if ill controlled may be a serious threat as they may start a price war and this will only benefit the customer and contribute to market instability. This may also give power to buyers who may start to dictate the buying prices. II-4 CHINESE AND SMALL LOCAL SUPPLIERS Small local supplies and Chinese jewellers may bring new product with NO BRAND but attractive enough to influence the market share. Managers have to be proactive by creating substitute of these products and give no chance for this to happen.

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QUESTION 5 IDENTIFICATION OF ALTERNATIVES STRATEGIES FOR THE COMPANY AND MOTIVATION OF OUR CHOICE
Tiffany & Co was established in 1837 with the vision of to establish the grandest preeminent house of design and the worlds premier Jewelry house. (John A. Pearce II & Richard B. Robinson, Jr, 2009). In order to identify a strategy that will help us improve the company performance we will have to identify internal weaknesses and capitalise on them to achieve our goals. Tiffany & Co operated with few limitations that we have identified: They products line are geared for women They lag on using celebrities to promote they products Slow expansion in high growth market Limited enhancement of retail shopping experience

III RECOMMENDED STRATEGIES

III-1 MARKET SEGMENTATION

The current Tiffanys market segmentation focuses on high income earners and women. Other segment such as middle class and men are neglected. We will have to introduce these new segments so that we can capitalize on men who offered Gift and they can be influence by women to purchase some product. The middle class as well can potentially become high earners and should not be neglected. Should we feel that they current income cannot allow them to purchase upfront, a South African technique called LAYBAY can be implemented to allow them

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to pay in many installments. We can also target new MBA and post graduate student as the probability to have good remuneration is high. III-2 ADVERTISEMENT THROUGH CELEBRITIES The brand is well perceived when one sees it on celebrities. By using the images of celebrities from all ages, tiffany brand can be boosted. This is one of the techniques used in the sport industry where Nike used Ronaldo, David Beckam to advertise and the results are phenomenal.
DIVERSIFICATION

By diversifying tiffany will give to its customer a better shopping experience and this will enhance the sales hence customer will have more choice. III-3 ADVANCE ELECTONIC CUSTOMIZATION With immediate effect, I will recommend that on the Tiffany website, there are standard tools where every customer will be able to log on, create a profile and build his preferred own jewelry. Within 48 hours the design team will be able to reply to the query and if approved send a specific personalize signature to the design and produce it. This will help fight counterfeits as people will prefer they own original item and be proud to claim the uniqueness. III-4 CUSTOMER RELASHIONSHIP MANAGEMENT It is more expensive to gain new customer than to maintain the current one. According to the research publish by advertising age 2002, 76.65 % of luxury buyers are driven by the fact that they buy things because they know it will last. We must therefore make sure that we have a tasked team who insure that the product last, and the customers are satisfied. By implementing these strategy we can be insure that Tiffany will have a competitive edge against its main competitors

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References (1)http://www.msgcpa.com/general.php?
category=Industry+Library&headline=Jewelry+-+Retail access on the 27th April 2009 (2)http://www.epi.org/publications/entry/webfeatures_viewpoints_final_overtime_re gulations/ access on the 27th April 2009 (4)http://www.ibisworld.com/industry/retail.aspx?indid=1075&chid=1 Access on the 28th of April 2009 (John A. Pearce II & Richard B. Robinson, Jr, 2009)

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