Tiffany & Co
By: Kelli Monk
Company Snapshot
• Founded in 1837 in New York City by Charles Lewis
Tiffany
• CEO Michael Kowalski
• Headquarters in NYC
• Makes over $2 billion in sales annually
• 220 stores worldwide
• 8,400 employees worldwide
Snapshot Continued
• Segments: Americas, Asia-Pacific and Europe
• Target market: women with a higher household
income and a taste for the finer things in life, and
men who buy for those women
• Products: jewelry, timepieces, sterling silverware,
china, crystal, stationary, fragrances and
accessories
PEST Table
Factor
Trend
Evaluation
Impact (1 = low, 5 Rank in terms of
= high)
importance
Political
-Unrest in diamondproducing countries
-Threat
3
2
Economic
-Growing international
-Opportunity
3
1
sales
--International economic -Treat
recession
-Threat
-Earthquake in Japan
Social
Technological
4
3
-Trend towards
“pinching pennies”
-Changing roles of
women
-Consumers spending
on items that last
-Threat
3
-Opportunity
4
-e-commerce for sales
of jewelry
-Opportunity
-Opportunity
3
3
3
4
Political Factors
• Threat of conflict diamonds from diamondproducing countries in political unrest
• Availability and price of these diamonds depends on
political stability of country
Economic Factors
• International sales of luxury goods is on the rise
– Emerging markets included, where Tiffany is
already established
• International economic recession
• 2011 earthquake in Japan, reducing purchases of
luxury goods in region
Social Factors
• There is a trend of rising female employment,
allowing women their own income to purchase
Tiffany products
• Changing roles of women means changes in
mindsets of working women
• Because of the recession, consumers want to
spend their money on products that will last, which
includes Tiffany products
Technological Factors
• E-commerce makes purchasing of products easier
for customers
• E-commerce makes it easier for Tiffany to reach
international customers
Industry Analysis
Factor
Evaluation
Intensity of Rivalry
Strong Force
Buyer Power
Strong Force
Supplier Power
Benign Force
Threat of Substitute Products
Strong Force
Threat of New Entrants
Benign Force
Intensity of Rivalry
• Strong force
• Louis Vuitton Moet Hennesy owns over 60 luxury
brands
• They compete directly with Tiffany & Co
• LVMH has a good deal of power in the industry
Buyer Power
• Strong force
• Market demand determines supply
• Customers demand high quality from Tiffany,
therefore they must produce it
• Tiffany must find a way to keep buyers purchasing
their products even during times of recession
Supplier Power
• Benign force – not a threat to Tiffany
• Possibility of depletion of nonrenewable resources,
such as diamonds, but not an immediate threat
Threat of Substitute Products
• Strong Force
• Many possibilities for substitutes
• Examples: Vacations, home renovations, car
purchase, etc.
Threat of New Entrants
• Benign force
• Not difficult to establish a jewelry store, but more
difficult to establish a luxury goods store
• Very difficult to establish a high quality luxury goods
store on the level of Tiffany & Co
• Takes years of recognition to be considered high
quality
Blue Ocean Strategy
Blue Ocean Strategy
Tiffany & Co
Create uncontested market space
Successful
Make the competition irrelevant
While Tiffany has a secure place in the market,
they haven not made competition completely
irrelevant.
Create and capture new demand
Demand for jewelry and luxury goods is not a
new demand
Break the value-cost trade-off
Tiffany products have very high value at
reasonable cost to the company – sold at a
high price to customers
Align the whole system of a firm’s activities in
pursuit of differentiation and low cost
The Tiffany brand strives on differentiation, but
not low cost
Blue Ocean Strategy
• Tiffany does not need to offer discounts to keep
making sales or fight to be noticed in the
marketplace
• Tiffany focuses on differentiation rather than cost
cutting
• Tiffany experiences high growth in a high growth
market and does not rely on mergers or acquisitions
• These shows Tiffany has a high possibility of a BOS
Conclusions
• Economic factors have the largest impact on Tiffany &
Co
• The growing markets offer a large opportunity for the
company with possible further expansion into
international markets
• A blue ocean strategy could help Tiffany, but they
already have an established place in the market with
little threat of new entrants
• Tiffany is a consistently growing company established
worldwide in stable countries with growth potential
Tiffany & Co
Analysis of Competition
By: Kelli Monk
Key Competitors
• High-end competition
– Louis Vuitton Moët Hennessy
• Lower-end competition
– Signet Group
– Zale
– Blue Nile
Comparison in Revenues
Company
2010 Revenue
Tiffany & Co
$2.71 billion
LVMH
$24.5 billion
Signet Group
$3.16 billion
Zale
$1.63 billion
Blue Nile
$314 million
Market
Tiffany & Co 4%
LVMH 36%
Signet Group 2.4%
Blue Nile .5%
Other 57%
Louis Vuitton Moët Hennessy
Made up of over 60 luxury brands
Recently acquired Bulgari
High international sales
Smallest division of company is watches and
jewelry
• Consistent customer base: wealthy individuals
($100,000/ year or more)
•
•
•
•
Signet Group
• World’s largest specialty jewelry retailer
– Kay Jewelers & Jared The Galleria of Jewelry
• Has 4.4% of total jewelry market
• Sells “affordable luxury”
– Middle class customers
• Sales only in US (75%) and UK (25%)
Zale
• Focuses on middle income and young adult
customers
• Extremely vulnerable to economic downturns
• Operates abroad (Puerto Rico & Canada)
Blue Nile
• Largest online diamond retailer
• Primary business in the US
– Operates websites in UK and Canada
– Ships products to over 25 countries
• Positioned as a high-end jeweler, but majority of
sales are below $5,000
• Vulnerable to economic downturns
Geographic Scope
Stores in the US
Stores outside of US
Tiffany & Co
91
129
LVMH
543
1,827
Signet Group
1,401
558
Zale
680
567
Blue Nile
-
-
Business Segments
Segments
% of Sales
Tiffany & Co
Non-gemstone & sterling silver
Gemstone & band rings
Diamond Rings & wedding bands
Non-gemstone, gold or platinum
Other
31%
27%
21%
12%
9%
LVMH
Fashion & leather goods
Selective retailing
Wine & spirits
Perfumes & cosmetics
Watches & jewelry
36%
28%
16%
16%
4%
Signet Group
Jewelry, watches & associated services
100%
Zale
Fine jewelry
kiosk jewelry
other
86%
13%
1%
Blue Nile
Online retail jewelry
100%
Tiffany & Co
Blue Nile
LVMH
Signet Group
Zale
How Companies Compete
Company
Competitive Position
Tiffany & Co
High-low products: high-priced products next to low-priced products
LVMH
High quality, high-priced products: luxury
Signet Group
Affordable luxury
Zale
Low-priced products
Blue Nile
Online retailer: convenience
Jewelry Market
• $58.8 billion market
• Customers less price sensitive – looking for quality
rather than focused on price
– Lower-end retailers more sensitive to economic
downturns than the high-end jewelers
• Experienced decline during 2008 recession, but has
risen since then
Target Market
• Women & Men who buy jewelry for women
• For the high-priced jewelry, target market is
individuals with household incomes of $100,00+
• Wealthy customers lead to consistent sales even in
tough economic times
Social Media
Social Media Site?
Useful?
Tiffany & Co
Facebook, Twitter
Yes
LVMH
Facebook
No
Signet Group
Facebook
No
Zale
Facebook
Yes
Blue Nile
Facebook, Twitter
Yes
The social networking sites of these brands show pictures of new products, which
can help customers to choose the products they wish to purchase. Social Networks
are a good way to build brand awareness, but for higher quality luxury brands, they
are not necessary.
Conclusions
• The jewelry market is very large, and not ruled by
Tiffany or any of its competitors.
• While these companies compete on different
stances, they try to capture the same market
• With continuing international growth, expanding
further into international markets would be
beneficial to each company
Conclusions
• Awareness of companies such as Tiffany and LVMH
brands is not an issue, but for smaller companies
such as Gordon’s Jewelers (Zale), social
networking sites are helpful
• Each company is successful, residing in the ‘star’
category of the BCG matrix, but the percentage of
the total market each company holds could increase
by a large amount
Tiffany & Co
Internal Analysis
By: Kelli Monk
Business Model
• Tiffany has made its name on product design,
manufacturing and retailing
• They thrive on differentiation and quality products
• Focus on excellent customer service
– Knowledgeable employees
Company Performance
2006
2007
2008
2009
2010
Net Sales
$2.561 Billion
$2.939 Billion
$2.860 Billion
$2.710 Billion
$3.085 Billion
Net Earnings
$273 Million
$323 Million
$220 Million
$265 Million
$368 Million
10.99%
8%
10%
11.9%
Profit Margins 10.66%
• Sales were on the increase until 2008 when they dropped due to the economic
recession
• Sales continued to drop in 2009, but increased again in 2010 with profit margins
rising in both years
Distribution
• Tiffany products are only sold in Tiffany stores
2006 Sales by Region
2009 Sales by Region
Europe 7%
Europe 12%
Americas 62%
Americas 52%
Asia Pacific
28%
Other 3%
Asia Pacific
35%
Other 1%
Resources
Resource
Advantage
Historic Brand
174 years of quality have established Tiffany as a household name and an
iconic brand
Global Brand
Tiffany products are sold in 22 countries, thus creating demand in many
different markets around the world
Differentiation
Tiffany competes on differentiation, thus staking its claim on the highest quality
jewelry and accessories
Brand Loyalty
Focus on creating brand loyalty with customers
Innovation
Tiffany products have always been at the top of the innovation chain
Key Assets
•
•
•
•
High quality commodities
Brand image
High revenues
Product expansion
BCG Matrix
Tiffany’s
Value Chain
Primary Activities
Inbound Logistics
Warehouses and collection of raw materials
Operations
Producing the final products from raw materials
Outbound Logistics
Distribution of products to retail locations
Marketing and Sales
The Blue Book
Service
Well-trained employees provide knowledge and assistance to
customers before and after the sale
Value Chain Cont’d.
Support Activities
Firm Infrastructure
Technology direction and solutions, financial planning
and analysis, resource management, information
security, compliance, operating systems, database,
voice and data communications, service and support
HR Management
Employee recruiting, compensation and training
Technology Development
Global manufacturing and distribution, provide effective
business solutions and innovation
Procurement
Raw materials and equipment for factories
Competitive Position
Generic Strategy
• Somewhat of a niche player
– Targeted towards higher-income customers, but offers
lower priced items for middle-income customers
Grand Strategy
Product
Development
Continue to develop the newest products and
keep up with product trends to compete
Differentiation
Brand is already synonymous with
differentiation; continue the trend
Customer
Service
Tiffany prides itself on excellent customer
service to ensure repeat business
Global
Expansion
Tiffany has been expanding into global
markets which are growing segments
Store
Expansion
New stores are added each year to broaden
the brand name
Grand Strategy Continued
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
High quality brand
name
Products sold only in
Tiffany stores – limited
access for customers
Growth in international
markets
Rising commodity
prices
Growth in sales
Recession effects
sales: should be a
recession-proof
company
Internet sales
Economic recessions
Expansion into retail
outlets
Decline in Japanese
market due to tsunami
Growth in international
markets
Product differentiation
Counterfeit products
(small threat)
Conclusions
• Tiffany has been able to differentiate themselves
based on high-low cost and high quality products
• Tiffany sales continue to grow
– Both domestic and international
• Tiffany continues to expand into international
markets
– Future growth opportunities
• Business model is based primarily upon
differentiation