1) What are the strategically relevant factors of the macro-environment that aff
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Question
1) What are the strategically relevant factors of the macro-environment that affect the attractiveness of the U.S. jewelry industry? Specifically, are general and industry economic conditions and socio-cultural factors favorable to Tiffany & Co.’s business situation?
2. How strong are the competitive forces confronting Tiffany & Co. and other retail jewelers? Which one of the five competitive forces is the strongest? Do a five-forces analysis to support your answer.
3. What key factors will determine a company’s success in jewelry retailing in the next 3-5 years?
4. What is Tiffany & Co.’s strategy? Which of the five generic competitive strategies discussed in Chapter 5 most closely fit the competitive approach that Tiffany & Co. is taking? What type of competitive advantage is Tiffany trying to achieve?
5. What does a SWOT analysis for Tiffany & Co. reveal about its ability to seize market opportunities and nullify external threats?
6. What is your appraisal of Tiffany & Co.’s financial performance based on the data in case Exhibit 1? How do the company’s EBIT margins compare for the 2006 – 2011 period? Is there evidence that Tiffany’s strategy is working?
7. Does Tiffany have adequate competitive strength to defend its position in the industry? Do a weighted competitive strength assessment using the methodology presented in Table 4.4 of Chapter 4 to support your answer.
8. What strategic issues and problems does Tiffany & Co. management need to address?
9. What recommendations would you make to Tiffany & Co. management to strengthen the company’s competitive position and future strategic and financial performance?
Explanation / Answer
1. The strategically relevant factors of the macro-environment that affect the attractiveness of the U.S. jewelry industry in general and Tiffany in particular are: economic, political, social, technological and competitive.
The current economic situation is not very robust and this negatively affects companies like Tiffany.
The change in socio cultural factors are causing a change in the mindset of the consumers and they favor social and ethical responsibility by not buying conflict diamonds and dirty gold.
Tiffany has few factors like catering to the changes in consumers mindset in its favor and few factors like a weakness in global economy against it.
2. 5 forces analysis for Tiffany:
a. bargaining power of suppliers - this is very high due to the scarce diamond supply. This gives a high degree of control to the suppliers over the selling price.
b. bargaining power of customers - The products offered by Tiffany are luxury products, resulting in lower bargaining power for customers.
c. Threat of new entrants - Barriers to entry is high due to the supply structure. This lowers the threat of new entrants.
d. Threat of substitute products - The level of this threat is high as with changing trends consumers may be willing to consider substitutes.
e. Competitive rivalry - Th level of competitive rivalry is high. As the switcing cost for consumers is low, firms try and lure consumers on the basis of price and design.
Thus, competitive forces are strong. According to me, it is the bargaining power of supplier that is the strongest force. Tiffany buys its diamonds from DeBeers and Aber, who have absolute control over the selling price. Tiffany has little or no leg room for bargaining.
3. Going forward Tiffany should focus on innovations in the e-commerce space to lower costs, and sell better designed products. It can create new niches through sub brands and new segments.
4. The strategy of Tiffany is to maintain product diversity in order to absorb the shocks of economic downturn. The company's strategy is also to increase product line to capture a bigger marketshare. Of the 5 generic competitive strategy, Tiffany adopts the focused differentiation strategy. The company's main customers are upper and upper-middle class.
5. SWOT analysis of Tiffany suggests that has a strong and robust direct sales channel. It can use this strength alongwith its strong brand, to grow its presence in new geographies. External threats in the form of high competition in the industry cannot be nullified but can certainly be reduced by expansion. The opportunity of expansion can be tapped by focusing on its strength of strong brand equity and robust direct sales channel.
6. Exhibit 1 not given
7. Table 4.4 not given
8. The management need to address the problem of its customer profile. Its main customers are from upper middle class segment and demand from this class will fall significantly during economic downturn. This factor needs to be addressed.
9. My suggestion is that Tiffany should expand in Europe and Asia. This will help the company absorb wide range of diamond inventory, tap the high growth markets, dilute competition by increasing its ability to compete with diversified players.
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