Finding a Smart PartnerSWATCH Competitive Reaction

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Is Smart-Touch enough

Apple had a strong launch into the smartwatch

Consumers stating to indicate smartwatch preference

Swatch net sales declined in 2015 by 3%

Profit margins are still healthy 17%

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

What should Swatch do

Expand marketing for existing products

Partner with existing smartwatch company

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Smart watches cannibalizing sales

27% of luxury watch consumers prefer the Apple

Watch

Sales will decline as smart watch

market grows

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Net sales & operating profit declining

2012 2013 2014 2015 2016 2017 2018Net Sales 7,796 8,456 8,709 8,451 7,611 6,855 6,174

Operating Profit 1,978 2,314 1,752 1,451 1,115 857 772

All financials are in Millions of CHF

0

2,000

4,000

6,000

8,000

10,000

2012 2013 2014 2015 2016 2017 2018

Net Sales Operating Profit

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Net sales growth is declining rapidly

Year Growth in Net Sales

2015 -3.0%

2018 -9.9%

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

How does Swatch need to react

Org

aniza

tiona

l Per

form

ance

Time

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

External factors hurt performance

High exchange rate contributed to losses

Switzerland had negative exchange rates in 2016

Stronger competition from wearable and smartwatch

Economy is doing well; disposable income is on the rise

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

New technology created smartwatches

Large portion of consumers want to be connected

Technology can change quickly

Wearable technology and fitness trackers are aligned with consumer

trends

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Consumers drive the market

Consumers have a lot of choice &

different preferences

Large number of competitors

Competitors offer specific product

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Smartwatches are a luxury

Swatch dominates luxury market

Swatch has a history of innovation

Strong brand and reputation

Can survive market disruptions

Timeless craftsmanship

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

External resources required for success

Lacking brand awareness with younger generations

Decline in sales (3%) in 2015

Decline in operating income (17%) in 2015

Failed partnership with Microsoft

Low resources available for developing smart watch software

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Turn threats into opportunities

Opportunities• Low penetration in

smartwatch

Threats• Exchange rate• Limited N.A. Market

share• 15% potential

substitute• 27% prefer Apple

watch

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Turn threats into opportunities

Opportunities• Low penetration in

smartwatch• Limited N.A. Market

share• 15% potential

substitute• 27% prefer Apple

watch

Threats• Exchange rate

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Past success with Jonathan

Distinguished professional

Appreciates quality

Willing to pay a premium price

Between 35 – 55 years old

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Meet Erica

Tech-saavyBetween 20 – 35 years

old

Competitive salary

Appreciates technical quality

Needs to stay

connected

Physical activity is important

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

An ideal solution

Increase sales

Maintain market share

Leverage existing brand

awareness

Short-term implementation

timeline

Develop and innovate

technology

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

What can Swatch do

Expand marketing for existing products

Develop a robust luxury smartwatch

Partner with existing smartwatch company

Maintain existing trajectory

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Expand marketing for existing products

• Capitalize on growing watch market in North America• Maintain market share• Targeted marketing will engage ages 20-35• Does not sustainable develop sales growth by expansion

into smart watch

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Expand marketing for existing products

• Capitalize on growing watch market in North America• Maintain market share• Targeted marketing will engage ages 20-35• Does not sustainable develop sales growth by expansion

into smart watch

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Develop a robust luxury smartwatch

• Success is dependent on customer reaction• Swatch unknown development capabilities in high tech• Long term implementation horizon• Develops technology for future growth

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Develop a robust luxury smartwatch

• Success is dependent on customer reaction• Swatch unknown development capabilities in high tech• Long term implementation horizon• Develops technology for future growth

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Partner with existing smartwatch company• Partner with existing smartwatch company Garmin• Integrate Swatch timeless craftsmanship• Increase sales• Maintain market share• Develops technology partner for the future

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Partner with existing smartwatch company• Partner with existing smartwatch company Garmin• Integrate Swatch timeless craftsmanship• Increase sales• Maintain market share• Develops technology partner for the future

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Maintain existing trajectory

• Lose 27% of customers who prefer apple watch• No improvement to North American market• Does not plan for the future

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Maintain existing trajectory

• Lose 27% of customers who prefer apple watch• No improvement to North American market• Does not plan for the future

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

What should Swatch do

Expand marketing for existing products

Develop a robust luxury smartwatch

Partner with existing smartwatch company

Maintain existing trajectory

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Landing a smart partner

In the world of face-paced technology, you need to be quick and decisive in securing capabilities and resources from a partner firm in the first six months

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Landing a smart partner

Task Responsibility Cost Key Metrics

Dedicate partnership task force:• Developing

contracts• Estimates• Ownerships/

legalities

Procurement & senior leaders

N/A(Existing employees & processes)

• Task force created• Negotiation

started

Sign contract with Garmin• Outsource

development –Garmin

• Physical Design –Swatch

Task force 50/50 revenue spline Contract signed

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Landing a smart partner

Task Responsibility Cost Key Metrics

Hold focus group forexisting partners• Marketing• Advertising

Marketing 1 Million CHF Defined target market for smartwatch

Begin hardware build for next smartwatch

Engineers, R&D, Designers

50 Million CHF Prototype

Current customer marketing & awareness• Select brand

ambassador• Focus on current

brand

Marketing & PR 5 Million CHF Launch campaignIncreased salesIncreased market share

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Focus on the future

During the next 6 – 12 months, a balance between smart technology and your strong brand of timelessness and craftsmanship will be critical.

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Focus on the future

Task Responsibility Cost Key Metrics

Integrate Garminoperating system with Swatch hardware• UAT• Customization

Swatch Task force & Garmin

20 Million CHF Minimum viable product

Focus groups for testing of prototype• Look & feel• Wear-ability• Feedback

Marking, PR, Tech team

1 Million CHF Revised user requirements

Refined final product• Integrative

feedback loop

Swatch Task force & Garmin

1 Million CHF Final Product

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Focus on the future

Task Responsibility Cost Key Metrics

Manufacture and mass produce for sale

Manufacturing leads 40 Million CHF Completion of 3 million watches (phased approach)

Marketing and distribution development plans• Co-branded• Co-distributed• Advertising

Swatch & GarminProduct leads

20 Million CHF Final marketing planDistribution channels secured

Launch marketing campaign

Marketing teams Incurred above Website hitsView countsPresale totals

Launch product Marketing, PR, senior leaders

Incurred above Market shareSales

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Engineering future growth

The next 12-24 months of implementation will focus on ensuring resources and capabilities are aligned for future success. This will require constant monitoring of all product lines.

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Engineering future growth

Task Responsibility Cost Key Metrics

Monitor productlaunch

Product Manager Business as Usual SalesMarket Share

Launch secondarycampaign for current customer brand awareness• Luxury• Technology

Marketing, PR 10 Million CHF Website hitsSales

Create innovation hub• Developing

technology in house

Hayek 20 Million CHF N/A

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Engineering future growth

Task Responsibility Cost Key Metrics

Hire for innovation tech hub• Engineers• Designers• Technical Expertise

HR Previously Incurred Secure employees

Launch innovationhub

Innovation hub employees

Previously Incurred Number of viable ideas

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Financial Assumptions

• 2.5% increase in sales from US marketing plan in 2017• Increased watch awareness in US market responds to

campaign

• 2.6 Million units sold at US$800 in 2018• Smart Watch market growth predictions are accurate

• Currency rates stay at current level, no further appreciation

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Net Sales surpass 2014 results by 20182012 2013 2014 2015 2016 2017 2018

Net Sales 7,796 8,456 8,709 8,451 7,611 7,802 8,842Operating Profit 1,978 2,314 1,752 1,451 1,115 1,187 1,827

0

2,000

4,000

6,000

8,000

10,000

2012 2013 2014 2015 2016 2017 2018

Net Sales Operating Profit

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Plan has positive net returns

2017 Costs 2018 Costs

Finding Smart Partner 57 Million CHF

Focus on the Future 82 Million CHF

Engineering Future Growth 30 Million CHF

Yearly Revenue Increase 946 Million CHF 2,667 Million CHF

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Plan has positive net returns

2017 Costs 2018 Costs

Finding Smart Partner 57 Million CHF

Focus on the Future 82 Million CHF

Engineering Future Growth 30 Million CHF

Yearly Revenue Increase 946 Million CHF 2,667 Million CHF

12% Hurdle Rate

Project NPV = 3,162 Million CHF

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Key risks & mitigation

• Smart Product does not generate expected sales• Increase marketing and advertising to promote product• Rely more heavily on current customer market share

• Swiss Franc continues to appreciate• Participate in hedging

• Product launch is delayed• Invest in more resources (use Garmin or Swatch)

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

What should Swatch do

Expand marketing for existing products

Partner with existing smartwatch company

Problem

Analysis

Decision Criteria

Alternatives

Recommendation

Implementation

Financials

Q & A

Q & A