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QGM 6163
Competitive Strategic Management
(Group A: Report)
Case Study:
TIFFANY’S LITTLE BLUE BOX: DOES IT HAVE ANY STRATEGIC SIGNIFICANCE
Prepared by:
NAME
MATRIC NO
Abdul Wahab bin Md Din
KLM1590018
Muhammad Faisal bin Mohd Salleh
KLM1650002
Siti Sofiah binti Ramli
KLM1650018
Khairunnisa binti Mohd Ali
KLM1590015
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TABLE OF CONTENT:
1.0 Macro-environment factors…………………………………………………………………… 2-7
1.1 Macro-environment factor that affect the attractiveness of U.S jewelry?
1.2 Economic conditions and socio-cultural factors favorable to Tiffany & Co.’s business
situation?
2.0 Five–Forces Model ………………………………………………………………..………..….. 8-9
2.1 How strong are the competitive forces confronting Tiffany & Co. and other retail
jewelers?
3.0 Five Generic Competitive Strategies………………………………………………………10–15
3.1 Tiffany & Co.’s Strategy
3.2 Summary of Tiffany & Co.’s Strategy
3.3 Tiffany & Co.’s Competitive Strategies
3.4 Tiffany & Co.’s Competitive Advantage
4.0 SWOT Analysis………………………………………………..……………………………….16–21
4.1 Strengths
4.2 Weaknesses
4.3 Opportunities
4.4 Threat
5.0 References ……………………………………………………………..………..……………..22
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CASE 8: TIFFANY’S LITTLE BLUE BOX: DOES IT HAVE ANY STRATEGIC SIGIFICANCE?
[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?
Tiffany & Co. established their position in the market reflect the firm luxury brand image
with supreme service. The firm maintaining the mission to be the world’s most respected
jeweler. How macro-environment affect the attractiveness of the jewelry industry depends on
factors such as economic, soio-cultural, technological, political, environmental and legal factors
that determine the business situations of Tiffany & Co. in the market proposition.
To begin the discussion, PESTEL analysis can be used to analyze and assess the strategic
relevance of the six principle components of macro-environment namely political, economic,
social, technological, environmental and legal. Macro-environment factors affect different
industries in different angle. It is crucial for managers to identify the most influential factors for
firm strategic expansion decision. Firm make decision for long term direction. In the long run,
small strategy could determine the diversification of a firm ranging from small to big profit.
Tiffany & Co. had sustained in the jewelry industry for 179 years with excellent sales and
strong brand recognition across the globe. In the next paragraph, we shall first discuss the
macro-environment factor that affect the attractiveness of U.S jewelry industry followed by
identifying the general and industry economic situation conditions and socio-cultural factors
favorable to Tiffany & Co. business situation.
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1.0 Macro-environment factor that affect the attractiveness of U.S jewelry?
a) Economic conditions
Economic condition referring to general economic climate and factors such as the
interest rate, inflation rate, unemployment rate and rate of economic growth. These economic
conditions will affect the consumer distribution of income. Besides that, industries such as
automotive are vulnerable to the downturns as they are affected by the low interest and rates.
To encounter these firms have to promote discount selling that may be beneficial when
economic is as consumer became sensitive in price changes.
Referring to the case study, recession affect attractiveness of U.S jewelry in 2008 as the
luxury spending began to decline. The sales drop as the consumers reduce their expenditure
and spending habit that caused decline in total revenue rate at 2.7% from 2006 to 2011. Interest
rate and debt from default loan from borrowers led to sunk cost. Resulted to increase of debt
emerged firms to file for bankruptcy such as Friedman’s Jewelry in 2008. However, some
companies avoid bankruptcy by closing the retail locations to save cost. Overall recession and
debt lead to decreased number of operating store from 62,005 in 2007 to 56,007 in 2011.
Beside recession, rising pricing of gold also impacted jewelry industry. Reduction on
demand of jewelry occurred as the gold price had raised and became more expensive.
Consumer became selective and affected not only Tiffany & Co. but the overall jewelry industry.
The price of gold increased from $604.71 per ounce in 2006 to $1564.91 per ounce in 2011.
Increased in cost of gold forced company to raise overhead cost and significantly profit drop by
5.1% from 2006 to 2011. Many firms in the jewelry industries had to implement budget-cutting
measures to remain profit. Firms had to cut wages as the industry wages dropped from $5.2
billion in 2006 to 4.6 billion in 2011. These economic conditions proved that firms have to
identify the economic conditions first and encounter in order to remain in the industry. Next we
shall move on to the second macro-environment factor which is sosio-cultural forces.
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b) Sociocultural forces
Sociocultural forces defined the societal values, attitudes, cultural influences and
lifestyles that impact demand of goods and services. Besides that, demographic factors such as
the population size, age distribution also impact the attractiveness of a firm. Sociocultural varied
by locale and change over time. Trend for purchasing expensive jewelry might be shift to
affordable items with average distribution of income. Demand for cigarette might be shifted due
to healthier lifestyles. Population of demographic reflect significant difference in the industries
such as jewelry, healthcare and even food when service vary with the demographic factors in
terms of age, gender and income distribution.
Referring to the case study, the first affect of sociocultural in jewelry industry is the
status effect. People purchase jewelry for reputation that reflected the wealth, class of an
individual. All jewelry is a planned purchase which marked the price as the most important factor
to consider. The quality and courtesy of a salesperson matters as honesty and knowledge might
shifted consumer behavior as it is crucial serve customer according to their standard upon
purchasing jewelry. Attitudes towards something or service provided by the sales person
embarked interest and trust from consumers and led to purchasing the demanded jewelry.
Consumer tends to have varied preference towards jewelry product. Diamond recorded
the largest amount of income in the jewelry industry due to increasing number of marriage.
During recessionary period, marriage rate decline as couples postpone weeding due to income.
However, although the number of income decreased in recession, the diamond segment had
slightly increased due to the overall rise in personal wealth. Gold in the other hand make up as
the second largest in the jewelry industry. Due to positive demand and price in gold, most of
consumers purchase gold for investment and trend had shifted from gold rings to platinum rings.
The trend will keeps shifting and trend remarks the sosiocultural impact in the jewelry industry.
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Thirdly, the concentration of population impacts the demand in jewelry industry. U.S
jewelry industry focused in the Southeast and Mid-Atalantic regions which uphold 45% of the
total industry sales. The higher the population and higher per capita income, more concentrated
the market area. Since, it is not easy to penetrate, the jewelry industry had steadily increased
and expected to rise throughout 2016. Low barrier to entry and high competitive and constantly
growing remarks the nature of purchases and income is greatly influence the competitiveness in
the industry. Firm tried to implemented strategies to differentiate their product with signature
trademark and reputable brand to push and acquire recognition in competing with the other
firms. Next, I shall discuss whether industry economic conditions and socio-cultural factors
favorable to Tiffany & Co.’s business situation?
1.1 Specifically, are general and industry economic conditions and socio-cultural factors
favorable to Tiffany & Co.’s business situation?
Yes, economic conditions favorable to Tiffany & Co.’s business situation. Tiffany & Co.
suffered financial downturned declining sales in 2008 and 2009. Sales were down 4.9% n 2008.
Tiffany & Co. affected the effects of recession on profit and growth. However, due to brand
recognition and superior product quality, Tiffany & Co. increased their retail price due to rising
gold price of $3,400. Higher price lead to increasing number of profit. Economic conditions will
affect the consumer distribution of income. Besides that, industry such as jewelry is vulnerable
to the downturns as they are affected by the low interest and rates. Since 2010, the firm shown
strong growth potential with sales grew 15% in 2011 and sale grows 18% and net earnings also
increased by 19%.
To encounter Tiffany & Co. implemented strategies of attracting and marketing to the
more affluent consumers instead of open market. In the long run, the firm had to offer a
selective product line. Competitor such as Bulgari and Blue Nile is expanding their market with
median household income as compared to Tiffany & Co. To attract new consumer, Tiffany
expanded product offering with low-priced “tourist items” for a glimpse of experience. Economic
conditions do reflect significant influences to Tiffany & Co. growth and profit. However, mission
to be the world’s most respectable jeweler had positioned Tiffany & Co. at its own prestige level.
No, sociocultural factors does not favorable to Tiffany & Co.’s business situation. Tiffany
& Co. main business is to keep expanding their product line. This strategy will diminish entire
Tiffany’s reputation. Sociocultural forces defined the societal values, attitudes, cultural
influences and lifestyles that impact demand of goods and services. The trend for jewelry tends
to shifted based on preference. To continue the legacy, the firm should be selective which
product to carry and expanding the Blue Box Catalog strategy. Does the product reflect
significant value to consumer beside as a memorable gift for weeding should be answer by the
firm?
Tiffany’s started to introduce their eyewear collection in 2008, and also variety of men’s
and women’s jewelry including key chains, handbags, scarves and leather goods. This prove
Tiffany struggles to blend in the current trend and lifestyles preference by the customers.
