Swatch Group: It’s About “TIME” - .Swatch Group: It’s About “TIME” DeGroote Consulting,

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  • 1

    Swatch Group: Its About TIME DeGroote Consulting, Strategy Division

    Sarah SchweinbergerBriana KnowltonMichael WidlickiShelby Gorelle

  • Opportunity Statement

    2

    Should the Swatch Group incorporate technological features with its Swiss watch elements to compete directly with the Apple Watch in the smartwatch segment?

  • Recommended Solution

    3

    Its About

    TIMEWe recommend that the Swatch Group does not compete directly with Apple.

    Instead, the Swatch Group should stay on top of technology trends by expanding its product line to include sensory capabilities and develop a Swatch activity tracker.

    How? Using the TIME methodology!

  • Key Considerations

    4

  • Key Considerations

    5Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low HighBrand Protection

    Swiss watches are synonymous with quality Swatch Group has a long standing

    heritage in this industry that it must protect

    Brand Protection

    Its About

    TIME

  • Key Considerations

    6Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low HighCustomer Preferences

    Todays customers are tech-savvy, demand a high degree of transparency and personalization, and are becoming less loyal to brands overall

    That being said, Apple is world renowned and has inspired significant levels of repeat buying

    Brand Protection

    Customer Preferences

    Its About

    TIME

  • Key Considerations

    7Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low HighSmartwatch Product Obstacles

    There are four key obstacles current smartwatch users report:

    Battery life Smartphone linkage Screen size Price

    These must be considered if the Swatch Group commits to the smartwatch industry

    Brand Protection

    Product Obstacles

    Customer Preferences

    Its About

    TIME

  • Key Considerations

    8Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low HighCurrency fluctuations

    The Swiss franc is currently strong (through implied to be overvalued) resulting in decreased revenues on a dollar basis

    Sales volume decreasing also as a result of relatively high selling price

    Brand Protection

    Customer Preferences

    Product Obstacles

    Currency Fluctuations

    Its About

    TIME

  • Key Considerations

    9Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low HighPast Smartwatch Challenges

    Failed smartwatch partnership with Microsoft in 2004

    Swatch Group moved too early and the technology did not resonate; must learn from past failures

    Brand Protection

    Customer Preferences

    Product Obstacles

    Past Challenges

    Currency Fluctuations

    Its About

    TIME

  • Key Considerations

    10Key Issues Analysis Alternatives Solution Execution Contingencies

    Importance

    Urge

    ncy

    High

    Low

    Low High

    Key Takeaway: The Swatch Group must balance its brand heritage with the demands of consumers and technological advances.

    Brand Protection

    Customer Preferences

    Product Obstacles

    Past Challenges

    Currency Fluctuations

    Its About

    TIME

  • Analysis

    11

  • Industry Analysis: Smartwatch

    12Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Its About

    TIME

  • Industry Analysis: Smartwatch

    13Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Threat Level: Low/Medium

    Apple and Samsung dominate industry Many small players attempting to take small

    market share It challenging to become a dominant

    player; unlikely that a new big player will enter

    Its About

    TIME

  • Industry Analysis: Smartwatch

    14Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Threat Level: Low/Medium

    Physical apparatus suppliers is low (it has all been commoditized)

    Smart technology is medium because there are two operating platform options: iOS (Apple) and Android

    Apple generally does not share technology; Android is more open

    Its About

    TIME

  • Industry Analysis: Smartwatch

    15Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Threat Level: High

    Many substitute options to choose from Smartphones Tablets Laptops Timekeeping watches Activity trackers

    The utility of a smartwatch is redundant

    Its About

    TIME

  • Industry Analysis: Smartwatch

    16Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Threat Level: High

    Technology buyers are flavor of the month focused

    Jewelry (ex. Timekeeping watches) have staying power

    Technology does not; it generally obsolete within 2 years

    Its About

    TIME

  • Industry Analysis: Smartwatch

    17Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Threat Level: High

    Apple dominates the industry Samsung and Motorola also offer

    smartwatch options Remainder are small players that are

    aggressively seeking market share

    Its About

    TIME

  • Industry Analysis: Smartwatch

    18Key Issues Analysis Alternatives Solution Execution Contingencies

    Rivalry within the Industry

    Threat of New

    Entrants

    Supplier Power

    Threat of substitutes

    Buyer Power

    Key Takeaway: The smartwatch industry is technology; it is not jewelry. While the appeal of jewelry has stood the test of time, there has yet to be a technology company or product that has done so.

    Its About

    TIME

  • Ansoff Matrix

    19Key Issues Analysis Alternatives Solution Execution Contingencies

    Existing New

    New Product Development Diversification

    Existing Market Penetration Market Expansion

    MarketPr

    oduc

    t

    Key Takeaway: If the Swatch Group chooses to compete in the smartwatch segment, it must pursue a product development strategy to address the product obstacles.

    Its About

    TIME

  • Customer Profiles

    20Key Issues Analysis Alternatives Solution Execution Contingencies

    Timekeeper Watches

    SmartwatchesActivity Trackers

    There are three sub-segments in the watch industry.

    Each sub-segment appeals to a different group of customers.

    Its About

    TIME

  • Customer Profiles

    21Key Issues Analysis Alternatives Solution Execution Contingencies

    Timekeeper Watches

    SmartwatchesActivity Trackers

    Target Customer: Joe Segment

    Who is Joe?

    Age: 45, bank manager Looking for a functional accessory Income level and price sensitivity vary, but

    the core need to satisfy are consistent: Functionality tells time effectively Fashion appealing design

    Its About

    TIME

  • Customer Profiles

    22Key Issues Analysis Alternatives Solution Execution Contingencies

    Timekeeper Watches

    SmartwatchesActivity Trackers

    Target Customer: Jillian Segment

    Who is Jillian?

    Age: 36, Vice President of Brand Marketing Health conscious and active; looking to

    understand her own habits and improve Budget conscious to a degree Core needs:

    Accuracy of tracker readings Visually appealing

    Its About

    TIME

  • Customer Profiles

    23Key Issues Analysis Alternatives Solution Execution Contingencies

    Timekeeper Watches

    SmartwatchesActivity Trackers

    Target Customer: Steve Segment

    Who is Steve?

    Age: 24, software engineer Tech-savvy and early adopter of

    technology Fad-chaser, looking for the next best thing Willing to spend extra to have the best in

    technology, but may not spend extra for style alone

    Its About

    TIME

  • Customer Profiles

    24Key Issues Analysis Alternatives Solution Execution Contingencies

    Timekeeper Watches

    SmartwatchesActivity Trackers

    Key Takeaway: Through the various brands in its portfolio, the Swatch Group is currently targeting customers in the Joe segment (at various levels of price sensitivity).

    Its About

    TIME

  • DuPont Analysis

    25Key Issues Analysis Alternatives Solution Execution Contingencies

    2012 2013 2014 2015Performance

    NI/Revenue 20.57% 22.80% 16.26% 13.24%Revenue/ Total Assets 74.75% 72.69% 68.29% 63.67%Total Assets/ Total Equity 1.22x 1.22x 1.19x 1.18x

    ROE 18.71% 20.14% 13.27% 9.95%

    ROE = Profit Margin x Asset Turnover x Financial Lever