Is the appl e watch killing the watch indus try? · Case 1; “Is the Apple Watch killing the Swiss...
Transcript of Is the appl e watch killing the watch indus try? · Case 1; “Is the Apple Watch killing the Swiss...
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Is the apple watch killing the watch industry?
Jaqueline LedezmaMario MartinezDaniel FelixMauricio Martinez
EGADE BCG 1
EGADE BCG
Case 1; “Is the Apple Watch killing the Swiss watch industry?’ The Apple Watch – a threat or an opportunity for the Swatch group ltd?”is based on IMD Case: IMD-7-1844, available from the case centre at www.thecasecentre.orgcopyright © 2017 by IMD, Lausanne, Switzerland (www.imd.ch)
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Mandate
EGADE BCG 2EBCG
• Should Swatch Group directly compete with Apple Smartwatch?
• Is it a threat or opportunity to grow market share of existing products?
• Should the company introduce new products?
• How can it integrate technology without destroying its brand heritage?
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Agenda
EGADE BCG 3EBCG
• Recommendation
• Analysis
• Key issues
• Strategy
• Implementation
• Wrap-up
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Recommendation
EGADE BCG 4EBCG
• Swatch Group should compete with Apple watch just through its Swatch
brand
• Use Apple’s smartwatch trend to grow market share of its watches
• Swatch Group smartwatch product line should compete in the low end
segment
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Concentration of 90% of global exports (watches)
EGADE BCG 5EBCG
Asia
• HK• China• Singapore• Japan
America
• USA
Europe
• Switzerland• Germany• France• Italy• UK
China is the largest exporter of low-end watches
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Swatch Group Sales Growth
EGADE BCG 6EBCG
6 764
7 796 8 456 8 709 8 451
0%
5%
10%
15%
20%
25%
-
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2011 2012 2013 2014 2015
Swatch Group Sales
Net Sales Net profit margin
• Last 5 years strong growth, but declining profitsin 2015 by 21% due to strong swiss franc and decline
In exports
CAGR Sales – 6%CAGR Net Inc – (3)%
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Concentration of 90% of global exports (watches)
EGADE BCG 7EBCG
Vs.Global sales
(%)Units sold (mill) Sales (blln $usd)
Average price unit ($usd)
Switzerland 2.5 29.3 22.9 737
China 58 678.5 5.2 3
Apple Watch 0.1 13.5 - *299 – 17k
By 2015
* Price range
Switzerland dominates the luxury segment ( 4.5x > than China)
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Swatch Group sales push
EGADE BCG 8EBCG
B2C
• Luxury watches• Smart product
B2B
• Micromechanics• Microelectronics
Watch ingeneering technologies is the core competition
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Engaging in the luxury market worldwide
EGADE BCG 9EBCG Although in the future, a combination of both can reinforce
Luxury consumer
27% prefer smartwatches
15% SW substitutes
luxury watches
73% prefer luxury watches
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Key issues
EGADE BCG 10EBCG Having these in mind to create the best strategy
How to grow market share?
Maintain brand
heritage
Work with specific price
segments
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Swatch Group Positioning
EGADE BCG 11EBCG
Brand reliability
In house development
Swiss bloodline
Easiness to use
Positioning
• Timeliness• Craftsmanship• High efficiency with lower parts• Strong brand presence
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Swatch Group does not depend on third parties for its watches
EGADE BCG 12EBCG Swatch group has a vertical integration model
Designs watches Manufactures watches
Sells finished watches, jewelry and components
Distributors
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Alternatives
EGADE BCG 13EBCG
Compete against Apples Smartwatch
- Mid-to-high prices- Direct competition with
Apple
Luxury Smartwatches
- Higher prices- New product for a high
end segment
Low-end segments: Swatch
- Lower prices- Existing products in low
end segment
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Evaluation
EGADE BCG 14EBCG
DriversCompete against
Apple`s SmartwatchLuxury Smartwatches
Low-end segments: Swatch brand
Technology - - - + + +
Potential revenue + + + -
Brand alignment - - + + + +
Market knowledge - + + + + + +
Manufacturingcapabilities
+ + + + +
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Strategy time frame
EGADE BCG 15EBCG
Steps/periods 1-6 months 6-12 months 13-18 months19-24
months
New product development
Heavy advertisingcampaign
Expanding boutiques presence
Second productintroduction
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What are the possible risks involved?
EGADE BCG 16EBCG
Impact
Probability
New luxury players Currency
fluctuations
Successful low-end
price products
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New product development
EGADE BCG 17EBCG A Swiss watch is a symbol of quality
Develop the new smartwatch in house at the SWATCH research facility in Switzerland to keep its swiss bloodline.
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Smartwatch analysis
EGADE BCG 18EBCG
Smart technology
Feature including:• Cardiac frequency• GPS coordinates• Functionality: a small smartphone
• Limited battery life• Traceability• Needs to be paired with smartphone• Small screen size• High price
Strenghts Drawbacks
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Apple Watch introduction is an opportunity for SwatchGroup
EGADE BCG 19EBCG People still prefer a regular watch
• People in the US were not using watches anymore
• Swatch can profit from Apple creating growing market demand for watches
Only 27% of global luxury consumers prefer Apple Watch to a luxury watch
Only 15% see Apple Watch as potential substitute for luxury watch
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Customized swatch smartwatches –low end segment
EGADE BCG 20EBCG Take advantage of vertical integration
•Measures swimming time•Manages assignments•agenda
• Safety features•GPS• Barometer•Altimeter•Humidity levels
•Measures performance, steps, distance,calories
•Calories• Food intake•Weight•Cardio activity•Medicine tracking
Health conscious
watch
Smart touch zero
one
Student smartwatch
Mining and oil industry
• Suit specific requirements for sports: snowboarders,
swimmers, surfers, volleyball, soccer players
• Other categories: Students, health conscious, mining and
industry
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Heavy marketing
EGADE BCG 21EBCG
Sports Events Kids Millenials
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Advertising
EGADE BCG 22EBCG Target will be young and trend followers
Strong advertising campaign
• Millenials• Young adults• Kids• Sporting events
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How to have presence
EGADE BCG 23EBCG Distribute the product on Swatch owned boutiques
Open new
boutiques
U.S.
Europe
Latin America
Asia
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What about a second product?
EGADE BCG 24EBCG There is always going to be interest in the NEW product
Version 2.0 to be developed
• Keep interest in the product line• Improve any consumer needs• Keep up with updates and
competition
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Wrap up
EGADE BCG 25EBCG Proposed strategy aligned with objectives
Determine threats and
opportunities
Maintain brand
heritage
Work with specific price
segments