Executive Summary
Since its establishment, Tiffany & Co has been operating in the luxury jewelry brand industry that is associated with high-quality romance, style, and even quality. Initially, luxury jewelry brand gained prominence as a major silversmith and then later gained fame for the production of engagement rings and diamonds. Currently, Tiffany & Co focuses on the production of high-end jewelry, glassware, and even watches. The company has grown extensively throughout the US economy expanding their stores Europe, Australia and even in the Asian markets. The company traditionally gained success within the diamond engagement ring industry and sterling silver items. In the recent years, there have been diverse factors that are believed to have affected the success of the company and overall luxury goods industry. The recent economic slowdown that took place in the year 2007 led to a dramatic decline, especially during the poor seasons. The company has agreed to open more stores, especially in the Asian and Los Angeles area markets as part of its expansionary strategy. Various issues must be taken into consideration as the company pursues its strategies to gain a competitive advantage in the industry. First, the initiative to enhance their competitiveness might cause the brand to be perceived as having diminished quality and commercialized about brands offered by high-end competitors.
Secondly, Tiffany & Co strategy to expand their operation into other potential markets in the world is believed to be ill-informed and ill-timed since the expansionary strategy has been implemented in most parts of Asian and European markets currently facing possible recession and this could have affected Tiffany & Co expansion strategy. Thirdly, Tiffany & Co. has shown to have been performing very poorly in the management of commodities where Tiffany & Co bottom line suffered greatly as a result of high prices of brands offered in the market.
Delegate your assignment to our experts and they will do the rest.
Company Background
Tiffany and Young was established in the year 1837 by Charles Lewis Tiffany and John F. Young. The store with its headquarters in New York was dedicated to production and selling of stationery and costume jewelry. In the year 1845, they ventured into selling real jewelry. Later in 1853, the store name was changed to Tiffany and Company adding into their items, silverware, perfumes and even timepieces. The company has been successful in solidifying their current position in the market as one of the leading competitor within the global jewelry industry by developing brands that are of high value, quality, and exclusivity in addition to superior quality (Strickland & Morgan, 2012). The company has been able to establish a strong brand name and high-level customer loyalty through it famous Tiffany Blue Box. The company’s goal is to make sure they attain a long-term integrity brand by creating what they believe to be a “feel good” experience. The company can be said to be at the mature stage of the product lifecycle. Despite the current highly volatile economic downturn that hit the market, Tiffany and Co. have managed to remain highly attractive in the industry besides being the leading competitor (as indicated in the Appendix B: Dominant Economic Characteristics). The company has engaged in various expansionary strategies to achieve a global presence in the global jewelry industry by opening stores and branches in the Middle East, Asia, and Australian regions.
Strategic Issues and Recommendations
Various strategic issues have been argued to have been eating into Tiffany & Co competitiveness in the recent times and which have threatened to push the firm into what can be considered as the oblivion within the jewelry industry. These key issues include the following:
Issue #1
Tiffany & Co strategy to expand their operation into other potential markets in the world is believed to be ill-informed and ill-timed. The company has strategies in place aimed at expanding their operation beyond the European and US market by specifically focusing most of the established and emerging markets like Asian markets (as indicated in Appendix F: Current Strategy). Instead of over saturating the US markets by opening extensive stores, the company focuses on expanding both its lower and higher end lines by establishing new designers. It is worth noting that that the company’s massive part of its expansionary strategy has been implemented in most parts of Asian and European markets (Strickland & Morgan, 2012). Most of the Asian and European regions have been argued to face possible recession, and this could have affected Tiffany & Co expansion strategy (see Appendix A on PESTEL analysis). Studies had pointed out that, Tiffany & Co’s aggressive expansion strategy was not well planned since it was implemented at the time when debt markets and the global credit were beginning their contracting, and as a result of this, it led to various undesirable economic effects (Strickland & Morgan, 2012). To ensure that their expansion strategy is effective, Tiffany and Co. should first conduct a marketing research into various potential economies. This would enable them to identify potential risks opportunities in these new markets. Further, it is critical to focus on one country’s market before venturing into the entire globe. They will also be able to understand what works in an international market and then research other economies to identify the economy that is similar to those that they have been successful and which will yield positive results.
Issue #2
First, Tiffany & Co. has shown to have been performing very poorly in the management of commodities. Tiffany & Co. operates in the luxury goods. Recently, it was established that Tiffany & Co bottom line suffered greatly as a result of high prices of brands offered in the market (as indicated in the Appendix C: Five Forces Analysis). However, Tiffany & Co increased its process to ensure that they offset the increasing cost of gems, diamonds, and other precious metals, most of the wealthy consumers might have increased their overall expenditure with the lack of subsequent increase the business’s bonuses. Therefore, it is clear that Tiffany & Co strategy to increase significantly prices of high ticket brands with the aim of remedying its gross margin issues might have driven away a majority of their potential customers. The company mostly targets high-end designer that are believed will enhance Tiffany & Co brand exclusive nature and further improve the company’s currently strong financial position as shonw in (Appendix I: Financial Analysis) . Especially, in the Japanese market, Tiffany & Co brand management must ensure that they extensively explore various growth opportunities. There are numerous exciting expansion opportunities available in the non-Japanese international markets that with effective management, the company will be able to capture and enhance their productivity and profitability (See Appendix H: SWOT). It has been established that in most of these emerging market, sales are strong and growing hence the need for the company to enhance the quality of their brands, customer service and their overall sophistication by establishing their stores in high-end gemstones and even engagement jewelry (Strickland & Morgan, 2012).
Issue #3
Tiffany & Co. brands face another major issue where the brand is perceived as being of low-quality and commercial about the brands offered by the company’s high-end competitors (as shown in Appendix E: Competitor Analysis). It has been established that the four major players in the jewelry industry in the US have about 20 percent of the entire jewelry market. This implies that the level of competition is very stiff in this industry and they compete based on the quality of brands they provide in the market (see Appendix D: Drivers of Change in the Industry). Further, this industry has been argued to be highly fragmented with no single dealer owning more than 10 percent of the total market and this is believed to be the case as a result of the huge volume of retail jewelry stores in addition to the vast availability of jewelry brands and merchants. According to Strickland & Morgan, (2012), ever since the establishment of the company, they have been focusing largely on sterling silver. Sterling silver pieces success has been argued to have given the company and its brands larger market. However, studies have established that the increased level of access and affordability has led to the company’s brand losing core status that is believed to be associated with the aspect of exclusivity and luxury. The success of lower price sterling silver pieces in the recent years has caused Tiffany & Co to lose its status that they had been enjoying in the years the 1980s. By opening stores across the globe dealing with the lower price point, items is believed to have a negative impact regarding diluting the company’s brand beyond repair. A greater part of reputation of Tiffany & Co is believed to be strongly founded on the selling of jewelry beyond what is considered as the reach of an average American that was specifically made famous in the famous movie, ‘Breakfast at Tiffanys.’ The strategy of expanding its stores focusing specifically on lower price point products has been argued to have the potential of diluting the brand offered in the market beyond repair, and this will significantly hurt the company’s long-term sales. It is evident that smaller store format is effective since it helps enhance the consumer’s intimacy of purchasing experience (See Appendix G: VRIN Analysis). Tiffany & Co must thus weigh critically the shorter sales volume about the inevitable long terms brand dilution (Strickland & Morgan, 2012).
Key Recommendation
Focusing on the SWOT analysis of Tiffany & Co, it is evident that the company holds various and tremendous capabilities to exploit numerous opportunities while at the same time suppress their threats to improve their future capabilities. It is critical that the company place more weight in their approach which is strongly based on facts and research on various issues at hand. However, Tiffany & Co had involved themselves in various approaches that might have led to various undesirable outcomes. For instance, the company’s decision to increase the prices of their diamonds and jewelry might increase the company’s profits, but it scared away potential consumers (Strickland & Morgan, 2012). Evidently, Tiffany & Co has shown to have greater opportunities and chances that they can adopt and implement to enhance their bottom-line and their competitiveness in the jewelry industry. However, there are diverse issues within and without as shown above that Tiffany & Co must address. First, Tiffany & Co has a highly impressive balance sheet that offers them with high capacity to carry out prospective projects that are believed will improve the company’s bottom line. To be successful in their projects and expansionary efforts, Tiffany & Co must undertake these strategies founded on proper research and market analysis. It is clear that this will allow Tiffany & Co to examine the most appropriate time for them, to invest in the most promising economies and further strategize on how to win consumer confidence in these markets (Strickland & Morgan, 2012).
Further, Tiffany & Co must change their overall focus on profit oriented to profitability oriented. Research has shown that Tiffany & Co focuses immensely on top-line growth but at the same time, they tend to compromise on the health of their bottom-line. It can be argued that Tiffany & Co efforts to expand their consumer market and their product lines appears to have significantly stretched the business thin and at the same time increase their revenues while on the other hand, reduce their gross margins. In addition to this, Tiffany & Co must ensure that they focus on efforts to make their business more flexible in order to exploit the potentially emerging markets especially focusing in the world of internet and emerging online shopping. It is important that Tiffany & Co expansion strategy should be highly supported by the emerging online presence and this is because most of the current consumers prefer online shopping rather than the traditional offline or even what is considered at brick and mortar stores.
The essay has critically focused on the Tiffany’s & Co analyzing various issues affecting the success of the company and the most effective recommendation that would enable the company to address these issues. Tiffany & Co has been operating in the luxury jewelry brand industry that is associated with high-quality romance, style, and even quality. It is clear that the company is highly successful in the jewelry industry. The company has adopted various strategic expansion plans that would enable them to expand their global expansion exploiting the opportunities available in these markets. Tiffany & Co strategy to expand their operation into other potential markets in the world is believed to be ill-informed and ill-timed. The company has shown to have been performing very poorly in the management of commodities. Further, the brand is perceived as being of low-quality and commercial about the brands offered by the company’s high-end competitors.
Appendix: Industry and Competitive Analysis
External Analysis Appendix A: PESTEL Analysis
Using PESTEL analysis, we can identify opportunities for the company and where these opportunities lie in the luxury market.
Politics: various political policies and regulations must be considered including customs duty, import VAT in addition to the consumption tax. In most states, there are regional policies that offer benefits to attract investors. The company must evaluate the royalties, the Free Trade Agreements, and even the tariff classifications before they start operation in a country. Economics: in these economies, urbanization is considered the single most inescapable reality when focusing on economic development. With increasing population, there is increased demand for jewelry brands. Most of the developing countries experience increasing unemployment rates; therefore, they do not have the income to purchase luxury brands. Inflation, economic slowdown, and fluctuating currency rate must be taken into consideration since they have a greater impact on the success of the company and their profitability. Consumers have become brand conscious, where some believe that higher pricing significantly corresponds directly to better quality (Strickland & Morgan, 2012).
Technology: the recent technological development has lead to increased online transition, and this has been considered as an emerging business. Most consumers prefer purchasing online since this is easy, safe and less costly. New and innovative online advertising technologies have been developed including online classified advertising, e-mail marketing, and the commonly used social networking advertising that have helped deliver the message to potential consumers globally. The Facebook, YouTube, and even Twitter have been extensively used to create brand awareness in the recent years (Strickland & Morgan, 2012).
Social factors also have been argued to play a critical role when focusing on the luxury brands because it tends to be purchased by a specific group of individual. Age plays a critical role in purchasing luxury brands. Therefore, the current demographic features must be taken into consideration when focusing on new brands to be released into the market.
External Analysis Appendix B: Dominant Economic Characteristics
The identification of dominant economic characteristics is considered imperative when it come to analyzing the level of competitiveness in the industry. This is critical since it provides a suitable overview of Tiffany& Co landscape of the industry. The company can understand various strategic moves that competitors in this industry might adopt. Major jewelry industry dominant economic characteristics include the market size and the growth rate: in this case, the market size is the total number of companies that operates in the jewelry industry including Signet Group, PLC, Bulgari S.p.A, Blue Nile, Inc. and Costo in Seattle. It is evident that this industry is growing tremendously as a result of high demand for accessories and the growth of the internet. The second feature is the number of rivals in the jewelry industry which in this case we have four major competitors. However, there are also other small rivals. Some companies have merged to enhance their strengths in the market. According to Strickland & Morgan, (2012), the third aspect is the scope of competitive rivalry. It is evident that in the jewelry industry competition level is very stiff and this is because entry to the market is easy and the emergence of online marketing has reduced the cost of starting a business and operation. The other feature is the buyer’s needs and their preferences. First, buyers in this industry demand high-quality brands at a lower price that they can afford and which will meet their needs. Research is critical to understand what exactly consumers want in the market and their presence to enhance the success of the company. Product differentiation is critical since it will help distinguish the company from its competitors. Companies in this industry have adopted the aspect of customization to ensure that they are different from their rivals. Product innovation is believed to be the key feature in the jewelry industry since companies have invested heavily in the R&D to enhance their competitiveness and increase their brand diversification. Focusing on the profitability of this industry, it is evident that the industry is highly profitable based on the Tiffany’s & Co financial report. The production is believed to be a luxury oriented hence tends to attract wealthy consumers who are willing to pay huge amounts for these brands increasing their profitability (Strickland & Morgan, 2012).
External Analysis Appendix C: Five Forces Analysis
Five forces analysis
The five forces analysis of the strengths of competitive forces facing Tiffany & other retailer’s jewelers plays a critical role in the evaluation of the company’s areas of strengths and weaknesses. The five forces analysis is an effective framework that is applied in analyzing the level of competition existing in the industry. It is vital in evaluating the probability of making profits in the industry. It focuses on core elements including; threats of new entrants, rivalry, barriers to entry, bargaining power of buyers and suppliers and threats of substitutes (Strickland & Morgan, 2012).
Threats of New Entrants
Threats of new entrants in this jewelry industry are believed to be low to medium. Therefore, most potential business willing to enter the industry is required to have a substantial capital to start the business, especially if the business wishes to target the wealthiest consumers such as in the case of Tiffany & Co. It is important to note that there is not particular single dealer owning more than 10 percent of the market share (Strickland & Morgan, 2012). Therefore, there is very minimal probability that other businesses will enter the industry to offer a substantial level of competition. The online segment of jewelry industry allows small companies to enter the industry with little capital.
Threats of rivalry
The threat of rivalry is believed to be very high. Recently there has been an increasing usage of internet within this industry leading to increased rivalry. Various jewelries are currently competing for the same market. The use of internet gives consumers the opportunity to compare different prices of different jewelry offered by different companies (Strickland & Morgan, 2012). Consumers are now able to experience a low cost of switching since it has become easy for them to shop online for jewelry and further easily locate the competitor’s website. The level of the rivalry will increase with the growth of the market. The growth of the internet has led to an increasing growth of jewelry market. It can be said that the online segment of online jewelry is a type of an emerging business that is in its infancy.
Threat of substitute
The threat of substitute in the industry is very high, however; there is diverse fake jewelry that might not offer a significant threat. The existence of brands beyond common product boundaries is believed to have the potential of increasing the consumer’s propensity to switch to other brand alternatives. The main factor that must be taken into consideration is the switching cost of buyers, buyer’s propensity to substitute and even the perceived level of brand differentiation. According to Strickland & Morgan, (2012), Tiffany & Co products offer a minimal chance of challenging the company’s profitability especially in the short term since most clients can tell a genuine product from a fake one. Further, consumers will incur low switching costs, and on the other hand, they will incur a high propensity to substitute. Consumers have diverse options to buy jewelry from retailers like Tiffany & Co. There are alternative sources where consumers will purchase products where some retailers will charge prices that are considered reasonably competitive.
Bargaining power
The threat of bargaining power is very high. Most of the suppliers wield tremendous leverage in addition to bargaining power when focusing on the terms and prices of jewelry. In this industry, there exist various alternative suppliers. Therefore, the retailers of jewelry like Tiffany & Co can easily change from one supplier to another. Most of the suppliers carry out their jewelry cutting, they polish the, craft them and even distribute them hence making it unlikely for the retailers to switch suppliers (Strickland & Morgan, 2012).
Bargaining power
It is clear that buyers tend to incorporate minimal capacity to bargain and even demand very lower prices for the jewelry products Most of the jewelry brands offered in the market are expensive and does not allow for bargaining. Consumers, therefore, have the capacity to either buy or not to buy the jewelry at the stated price. No one consumers have the capacity to negotiate with the retailers concerning the item’s terms and condition under which they acquire the item. Consumers can decide to switch retailers whether online or offline, but this will not amount to exerting bargaining (Strickland & Morgan, 2012).
Based on this analysis of five forces analysis, it can be said that the competitive pressure related to the jewelry retailing are very strong but not overwhelming as seen in Tiffany & Co’s capacity to attract potential customers and further compete favorably with other forces. It is clear that competition from various substitutes and rivalry are considered the strongest competitive forces. The threat of new entrants is believed to be significant especially in the situations where the concerned groups are well-recognized and highly trusted brands.
External Analysis Appendix D: Drivers of Change in the Industry
The success of the company is often determined by its current profitability especially in the long-term and short-term. Various factors might impact the bearing of the company’s profitability, and this depends on the industry where the company operates. The jewelry industry has been argued to have distinct features and core factors that might determine the company’s success including:
The brand image and reputation of the company in the industry will determine the success of the enterprise (Strickland & Morgan, 2012). It is worth noting that reputation is critical as far as the company’s appeal is concerned to potential consumers. For the jewelry shoppers, they will prefer to make their purchases in companies with strange brand image and name since this will assure them that they will not buy fake products.
Secondly, the increasing growth of internet an online segment in this industry will play a critical role regarding determining the success of the business. The online segment will thus increase the reach of the firm to consumers and further help reduce the cost of setting up a business and even marketing the brands. Therefore, the ability of a business to adopt and implement online segment and further make use of the same will determine the business’ capacity to grow. This will thus enable the company to compete favorably in the industry.
Thirdly, the ability of the business to customize their brands will determine their success as influenced by growing buyer preferences. The majority of the consumers in the contemporary society are vouching for brands that are tailored to meet their needs and specifications. Customization can be in the form of color, shape or even the combination of gems offered in a given item. This is because gems and jewelry are considered a status symbol, therefore, the more they are unique and distinct the higher the chances that it will be expensive and less common. Therefore, by customizing the product, it will determine their level of attractiveness among middle and upper consumers hence their success in the industry.
Lastly, the other key determining factor of success in this industry is the presence of effective collaborative arrangement with gem suppliers that will enable the companies to display ranges of stones and gems on their websites without having to purchase them but obtain them when a customer places an order for them (Strickland & Morgan, 2012). It is evident that jewelry business requires huge amount of capital to start; therefore, few businesses can operate in this industry and further have the requisite brand reputation that will enable them to succeed in the market. However, online stores for these products will enhance the success of these retailers if they manage to enter the industry and from the collaboration with suppliers. They will thus use the gem image on their websites to attract potential customers and then purchase them when customers place an order.
External Analysis Appendix E: Competitor Analysis
The primary competitors in the jewelry industry to Tiffany and Co include Signet Group, PLC that is considered the largest jewelry retailer globally with approximately 9.7 percent of the market share with more than 1300 stores spread out ion US and the UK. The second competitor is Bulgari S.p.A which is considered the top luxury brand and jewelry retailers globally and further operates about 41 companies in about 21 states, approximately 295 retail stores in addition to more than 3800 staffs globally. The third major competitor is Blue Nile, Inc. which is currently one of the largest online retailers in the jewelry industry of diamond and fine jewelry. The other major competitor is Costo in Seattle, Washington and it is considered one of the largest membership warehouse chains throughout the US and had sales of more than $ 87 billion in the years 2011. All of these companies compete with brands offered in the market, the target market, time, money and even attention (Strickland & Morgan, 2012).
Internal Analysis: Analysis of the Firm Itself
Internal Analysis Appendix F: Current Strategy
The company has the plan to launch lower-priced brands in the market to take advantage of the high demand in the market especially those who demand high-quality brands at a lower price. The strategy is aimed at targeting the middle income by introducing brands with lower prices of between $100 to $250 (Strickland & Morgan, 2012). It is clear that Tiffany’s & Co. currently follows an effective best-cost strategy where they give their customers enhanced value for their money spent on various brands by incorporating what can be considered as a good to excellent brand attributes at a lower price compared to the prices charged by competitors. Additionally, Tiffany’s & Co. follows a strategy differentiation strategy in theory brands and in their process of selling. The company offers a wide range of unique, high-value and high-quality brands in order to satisfy its consumer's tastes and preferences unlike the rest of the competing companies. Tiffany’s & Co has been established to offer a high quality and unique buying experience to its consumers where their clients enjoy knowledge received through their purchasing process and offer brands purchased in what is believed to be a unique box that often takes into consideration Tiffany’s & Co sign (Strickland & Morgan, 2012).
It has further been established that Tiffany’s & Co strategy tend to incorporate two key elements. First, Tiffany’s & Co offer its consumers fine jewelry in addition to a high-quality diamonds at what is believed to be considerably competitive prices. Secondly, Tiffany’s & Co is well known to offer its customers some important educational information, grading reports in addition to a trusted guidance. This is believed to be highly important since it ensures that consumers have in-depth information and knowledge concerning g the brand offered in the market. Therefore, consumers can determine the brand’s value and their distinctiveness in the market.
There are various generic competitive strategies that are believed would fit effectively into Tiffany’s & Co competitive strategy they the firm has undertaken. First, the company offers different brands where potential consumers can select the most appropriate brands that will meet their needs and preferences. Tiffany’s & Co has incorporated a wide range of jewelry in sedition to independently certified diamond including, watches, wedding bands, necklaces, rings and even the earrings. Tiffany’s & Co has also been argued to have incorporated the capacity to customize most of their brands offered in the market and further deliver these unique brands to potential consumers within a very short period that is believed to play well into what they consider to be the likes and preferences of their customers.
Further, Tiffany’s & Co currently offer their customers a blue box when they buy any brand from its stores. This is considered as a form of after sales service or a gift to its loyal customers and often comes as a symbol of Tiffany’s & Co high-quality brands, reputation, respect to its consumers and their overall needs in addition to the company’s commitment to excellence. Therefore, it can be said that the after sale service tends to cement Tiffany’s & Co reputation in the eyes of their potential customers.
Additionally, Tiffany’s & Co have managed to increase their market reach through opening their doors to various potential consumers. The company’s stores are located in numerous wealthy neighborhoods, but at the same, they offer various brands at a low priced, for instance, a deck of cards for persons who seeks to have a glimpse at Tiffany’s & Co experience.
Further, Tiffany’s & Co have been able to acquire its strength in the jewelry market by specializing in particular line with approximately 90 percent of their sales coming from the jewelry selection. Most of the jewelry offered by Tiffany’s & Co are provided in diverse segments where a third of the firm’s revenues coming from the sale of gold and silver and the other third coming from their quintessential engagement rings and also from the wedding bands (Strickland & Morgan, 2012).
Evidently, Tiffany’s & Co. core strategy is believed to revolve around what is thought to be persisting in the company’s product line expansion in such a way that would not easily compromise the company’s prestigious brand name that had been built for a very long time. This is believed to have necessitated the company being highly selective in the types of brands offered in the market while at the same time persist in their expansion strategy.
Focusing on the VRIN analysis, the valuables related to Tiffany & Co include the attractive features and the lower cost for its brands that are of high quality. Secondly, it is clear that few companies possess the skills to produce brands that are similar to those offered by Tiffany & Co. this is this considered as a temporal competitive advantage for Tiffany & Co. the skills used by Tiffany & Co are costly to imitate therefore most companies are unable to develop or even to purchase at what can be considered as a reasonable price. The company is well organized to capture and exploit various competitive potentials (Strickland & Morgan, 2012).
Internal Analysis Appendix H: SWOT
SWOT analysis
SWOT analysis is critical when it comes to evaluating the company’s current position and further in determining potential opportunities that the company has. Through SWOT analysis the company will be able to understand various things that must be done to enhance their competitiveness and profitability. Therefore, SWOT analysis will enable Tiffany & Co. to identify the internal core internal strengths and weakness and external threats and opportunities.
Strengths
The main strength of Tiffany & Co. focuses on the company’s ability to incorporate a strong direct selling strategy through the use of various direct distribution channels. Most of the retail sales in the US entail direct sales through its stores and business to direct business selling. The company has also been selling its brands online (Strickland & Morgan, 2012). The use of these strategic approaches has enabled them to come out as the most prominent players within the jewelry industry.
Further, Tiffany & Co. has a range of offerings that are provided to its clients including; selection jewelry, sterling silverware, accessories and even fragrances. The company further refreshes its range of brands at a regular interval hence keeping customer’s interest high. The diversity in the offering enables the company to meet diverse needs of clients.
The company has a strong brand name and high-level reputation in the jewelry industry. It is one of the leading jewelry retailers throughout the US. The strong brand name has given the company competitive advantage over its competitors. Further, consumers are assured to get quality products when purchasing at Tiffany & Co. The company also has a strong balance sheet. The firm has numerous branches across Europe and US and has been making huge profits from these economies. The strong balance has enabled Tiffany & Co. to undertaken numerous initiatives and projects that have further enhanced the company’s profitability giving them the competitive advantage over its rivals (Strickland & Morgan, 2012).
Weakness
In the last few years, the company has experienced a reduced cash flow that might impact the financial position of Tiffany & Co. hence limiting their investment options and even their ability to pay future dividends .this might further affect the performance of Tiffany & Co. in the stock market. It is clear that Tiffany & Co. has not been doing very well in several markets where they have branches for instance in Japanese markets where it has been argued that consumer confidence has been declining. Therefore the underperformance experienced might impact negatively on the revenue growth of the company.
Opportunities
Tiffany & Co. has the opportunity to intensify their retail outlets. The company initiated an expansion strategy in the year 2007 hence have been able to expand its outlets in various economies such as in New Jersey, Hong Kong, and even Belgium. The new outlets will enable Tiffany & Co. to increase their geographical presence and enhance its competitiveness.
There are huge opportunities for online sales. Online selling is an emerging new business that is in its infancy and has presented diverse opportunities to Tiffany & Co. in the jewelry industry. Buyers will be comfortable to make huge purchases online. Online selling is an easy and cheap way for consumers to make their purchases and this will result in increased sales volume.
The men fragrances have been growing recently creating more opportunities for Tiffany & Co. to enhance their production and diversity. Fragrance market is highly favored by the current lifestyle trends including men’s willingness to spend time and money on quality appearance. This will thus boost Tiffany & Co. revenues in the long-term.
Threats
There is high rate production of counterfeit in the jewelry industry. This has been the case especially in the fashion accessories including rings and necklaces and the market for these accessories has been increasing. Increasing counterfeit trade has the potential to result in huge loss of Tiffany & Co. brand equity (Strickland & Morgan, 2012). Further, Tiffany & Co. financial capacities are believed to be highly threatened by the slowdown of US economy. It is clear that US economy forms the most fundamental market for Tiffany & Co. therefore; the slowdown would significantly depress revenue and margin growth.
Internal Analysis Appendix I: Financial Analysis
Tiffany and Co can be said to be consistently conservative when it comes to their financial and accounting practices. Tiffany, therefore, uses GAAP accounting, but on the other hand, it also maintains industry norms for choices that are not clearly specified by GAAP. Additionally, Tiffany’s uses the point-of-sale revenue recognition principle. Based on the company’s financial report, it is clear that Tiffany & Co financial performance has been increasing in the recent years despite the global recession that had been experienced. In the year 2008, the net sales were approximately $ 2848859 but dropped in the years 2009 to about $2709704 but later on increased rapidly in the year 2010 and 2011 to approximately 3085 290 and $ 3642937 respectively (Strickland & Morgan, 2012). Tiffany and Co have shown highly consistent and high profitability ratios for the entire period. Tiffany & Co. ‘s gross profits were $ 1,646,442 in the year 2008 and then dropped in 2009 to $1 530,219 in the year 2009 before rising significantly to about 1,822,278 and 2, 151, 154 in the years 2010 and 2011 respectively. The drop in profits in 2009 is the point of concern to the management. Profitability is critical, and thus Tiffany & Co is highly profitable but this can be said to be with significantly lower margins (Strickland & Morgan, 2012) . The company should focus specifically to improve the margins and further increase their earnings will enable the company becomes more attractive to investors seeking who are seeking profitable returns.
The company’s net earnings improved significantly throughout the year where in the year 2008 it was $220, 022, in 2009, it was $ 264, 823, in 2010, it rose to about 368, 403 and then rose significantly to approximately 439, 190 in the year 2011. Additionally, the total assets of Tiffany & Co. have been shown to have improved significantly over the years where it was $3102 283 in 2008 then rose to 3488360 in the year 2009 after which it then increased to 3737 669 in 2010 before rising further to about 4158992 in 2011. Tiffany & Co. cash and cash equivalent was approximate to be approximately 160, 445, 785,702, 681,591, 433,954 in the years 2008, 2009, 2010 and 2011 respectively. It can be argued that an increase in the Tiffany & Co.’s revenues is attributed to the brand price increases in addition to a decline in the recessionary effects. This, therefore, implies that the strategy adopted by the company works positively for the company. Focusing on the inventory net of Tiffany & Co. it is established that the company had about 1601236, 1427855, 1625302 and 2073212 in the years 2008, 2009, 2010 and 2011 respectively (Strickland & Morgan, 2012).
The company short-term borrowing and the long-term debt has been increasing tremendously wherein 2008 it was 708 804, 754 049, 688240, 712 147 in the years 2008, 2009, 2010 and 2011 respectively. The stockholder's equity has also been shown to have increased significantly from 1588 371 in 2008 and 1883 239, 2177475, and 2348905 in the years 2009, 2010 and 2011 respectively. Based on the company’s financial report, it clear that Tiffany & Co.’s working capital was improving significantly throughout the years from 1446 812 in the year 2008 to 2262998 in the year 2011.
Reference
Strickland, A. J. & Morgan, S. (2012). Tiffany’s Little Blue Box: Does It Have Any Strategic Significance? CASE 8. Retrieved from:
https://www.homeworkmarket.com/sites/default/files/q/24/09/tiffanys_little_blue_bo x-casesmallpdf.com_.pdf
