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 TableFactor Trend Evaluation Impact (1 = low, 5

= high)Rank in terms of importance

Political -Unrest in diamond-producing countries

-Threat 3 2

Economic -Growing international sales--International economic recession-Earthquake in Japan

-Opportunity

-Treat

-Threat

3

4

3

1

Social -Trend towards “pinching pennies”-Changing roles of women-Consumers spending on items that last

-Threat

-Opportunity

-Opportunity

3

4

3

3

Technological -e-commerce for sales of jewelry

-Opportunity 3 4

Political Factors

• Threat of conflict diamonds from diamond-producing 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 StrategyBlue 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

By: Kelli Monk

Analysis of Competition

Key Competitors

• High-end competition– Louis Vuitton Moët Hennessy

• Lower-end competition– Signet Group– Zale– Blue Nile

Comparison in RevenuesCompany 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 SegmentsSegments % of Sales

Tiffany & Co Non-gemstone & sterling silverGemstone & band ringsDiamond Rings & wedding bandsNon-gemstone, gold or platinumOther

31%27%21%12%9%

LVMH Fashion & leather goodsSelective retailingWine & spiritsPerfumes & cosmeticsWatches & jewelry

36%28%16%16%4%

Signet Group Jewelry, watches & associated services 100%

Zale Fine jewelrykiosk jewelryother

86%13%1%

Blue Nile Online retail jewelry 100%

Tiffany & Co

Blue Nile Signet Group

LVMHZale

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

By: Kelli Monk

Internal Analysis

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

Profit Margins 10.66% 10.99% 8% 10% 11.9%

• 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

2009 Sales by Region

Europe 12%Americas 52%Asia Pacific 35%Other 1%

2006 Sales by Region

Europe 7%Americas 62%Asia Pacific 28%Other 3%

ResourcesResource 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 ChainPrimary 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 StrategyProduct

DevelopmentContinue 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 AnalysisStrengths 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

Growth in international markets

Expansion into retail outlets

Decline in Japanese market due to tsunami

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