Tiffany Business Model Final

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MBA Strategy Class Project

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  • While known best for their diamond jewelry, Tiffany has begun integrating more lower-priced items into their collections in an attempt to attract younger, less-affluent consumers. These products consist of more sterling silver, which includes the increasingly fashionable “ Return to Tiffany & Co.” engraved collection of bracelets and necklaces designed as chains with circular or heart-shaped dog tags. With prices starting as low as $175, this collection has become popular among male customers buying for their wives or girlfriends as young women continue to aspire to own something from the brand (Chee Kee, 2004, ¶8)
  • knock off market (high end on line jewelry without the high price) (men are the majority of the buyers, yet 86% of advertising is to women)
  • Tiffany moved from Focused Differentiator to Broad Differentiator with the introduction of the return to Tiffany silver line in 1995
  • * DO WE NEED A CHART which explains what Co-opetition is? See sales force model
  • Dent’s theory His model shows 80 year cycles of how the economy moves through periods such as inflation and innovation, to growth and boom, to deflation to a maturity boom. He shows the correlation between the waxing and waning populations, and the respective economic growth or decline as a result of those demographic trends. Dent uses centuries of economic data to show these historic correlations in an effort to show the validity of his predictions.
  • Can I personalize or customize a Tiffany gift? For non-business account holders, customization of items ordered online is limited to the engraving of three initials on selected gifts. Business account holders have more customization options and access to extensive customization services through our business gift consultants. Contact our Gift Consultants to discuss additional engraving, etching and embossing options available when you make a purchase through one of our stores or by calling, 800-770-0080.
  • Clayton Christensen - The Innovator's Dilemma Blue Nile cut deals with loose diamond suppliers to provide large diamonds on a consignment and proceeded to design a site that offered Internet savvy consumers an information intense environment from which to shop; all in the convenience of their office or home. Blue Nile cut deals with loose diamond suppliers to provide large diamonds on a consignment and proceeded to design a site that offered Internet savvy consumers an information intense environment from which to shop; all in the convenience of their office or home. Few people would tell you to pay a lot more than necessary for a mounting, or a diamond, for that matter. The truth is that only a relatively few individuals do shop and buy at Tiffany & Co for diamonds and/or mountings. Those who do shop there would likely not shop elsewhere. To them, the money is well spent and they are content. Just look at the success Tiffany & Co. enjoys. For the majority, the opposite might well be true. Saving a buck and buying right are smart options for nearly everyone to look at. A small minority do not need to examine these options or choose not to. That is real freedom of choice. Is a BlueNile purchase the equal of Tiffany & Co? I think the answer would very much depend if you consider yourself a part of the majority or of the minority I have mentioned above.
  • Tiffany Business Model Final

    1. 1. Names: Susan Tartara, Christina Caamano, Sara Birnbaum, Corinne White Emails: &quot;Susan Tatara&quot; <STatara@stanfordmed.org>, &quot;Corinne White&quot; <corinnewhite76@hotmail.com>, &quot;Sara Birnbaum&quot; birnbaum.sara@gmail.com, Christina Caamano <christinacaamano@yahoo.com> MBAE 2010-2 http://www.youtube.com/watch?v=PluRW3_FEt0 http://www.last.fm/music/Marilyn+Monroe/+videos/+1-nZtGybjFjOU
    2. 2. Tiffany & Co. Susan Tartara, Christina Caamano, Sara Birnbaum, Corinne White MBAE 2010-2 Business Model Analysis
    3. 3. Agenda <ul><ul><li>Company Overview </li></ul></ul><ul><ul><li>Brand Overview </li></ul></ul><ul><ul><li>Business Model </li></ul></ul><ul><ul><li>Financial Overview </li></ul></ul><ul><ul><li>Porter’s Five Forces </li></ul></ul><ul><ul><li>S-Curve </li></ul></ul><ul><ul><li>Co-opetition </li></ul></ul><ul><ul><li>Dent’s Demographic Analysis </li></ul></ul><ul><ul><li>Mass Customization </li></ul></ul><ul><ul><li>Christensen’s Theory </li></ul></ul><ul><ul><li>Overview </li></ul></ul>
    4. 4. Company Overview PRODUCTS -Fine jewelry -Engagement/bridal jewelry -Timepieces -Sterling silverware -China -Crystal -Stationery -Fragrances -Accessories Tiffany Product Sales Luxury Goods Retailer To be the world’s most respected jewelry retailer Tiffany & Co.’s Mission
    5. 5. History 1837 New York City Charles Lewis Tiffany and John F. Young Founded Tiffany & Young Selling Stationary and Costume Jewelry
    6. 6. Tiffany & Young Introduced its signature Little Blue Box as a presentation box during its first year of operation
    7. 7. Brand Overview
    8. 8. Brand Overview 1880 Tiffany originated its six-prong setting with the first diamond setting the diamond away from the band, Expanding the diamond’s brilliance. Permitting light to shine through the setting Innovation Introduction of lower-priced items to create an “ Aspiration Brand”
    9. 9. Brand Overview “ We believe that the Tiffany blue box and the Tiffany & Co. brand have developed into one of the best-known symbols for quality, prestige and value in retailing, and that the value of this brand will continue to increase over the long term” (Kletter, 1999, ¶16) The Tiffany Experience Focus is on customer service 6 – 8 weeks training for store representatives Training on how to prepare the Blue Box
    10. 10. Business Model - Financial Overview Revenue Streams: 87% of Net Sales Jewelry 13% of Net Sales Timepieces, tableware and all other products Sales Mix by Geography: 57% of Net Sales Americas 33% of Net Sales Asia Pacific 10% of Net Sales Europe Tiffany & Co. Brand Jewellery Sales by Type FY08 Tiffany & Co. Brand Jewelry Sales by Type FY08 Type of Jewelry Description Average Price Percent of Total Sales A Gemstone jewelry and band rings $3,300 27% B Diamond rings and wedding bands $3,000 20% C Non-gemstone gold or platinum based jewelry $700 11% D Non-gemstone silver based jewelry $200 30%
    11. 11. Financial Overview
    12. 12. Financial Overview
    13. 13. <ul><li>- Threat of substitutes – EBay- </li></ul><ul><li>-Threat of new competitors- Blue Nile </li></ul><ul><li>-Sustainable competitive advantage – Brand power </li></ul><ul><li>-Bargaining power of buyers- displaced decision-making </li></ul><ul><li>- Bargaining power of suppliers - They do their own diamond cutting and polishing, jewelry crafting and distribution – limited vendors. </li></ul>Porter’s Five Forces
    14. 14. Porter’s Five Force’s Model
    15. 15. S-Curves
    16. 16. <ul><li>WEAKNESSES: </li></ul><ul><li>- Currently they have very few partnerships </li></ul><ul><li>STRENGTHS: </li></ul><ul><li>- Famous Artists as Designers who also make their own jewelry lines </li></ul><ul><li>Elsa Peretti – Bean, Tear drop </li></ul><ul><li>Paloma Picasso – Loving Heart collection </li></ul>Co-Opetition
    17. 17. Dent’s Demographic Analysis TIF’s Main Revenue Source: Engagement Rings -Average U.S. Marrying Age : Men 27.8, Women 26.0 -Next Boom? Per Dent will be 2023 (population median age of 48) -Per Dent’s theory: TIF’s spike in growth happened in 2003 (when the population was getting engaged) -Solution; TIF should be Lean and Innovative -New Target Market; TIF should also target an older demographic to meet the needs of the next large boost in population
    18. 18. <ul><li>-Tiffany &Co. embraces Martha Roger’s theories </li></ul><ul><li>-Online customization: For all Customers </li></ul><ul><li>-Personalized shopping: For Corporate Accounts </li></ul><ul><li>-B2B channel : Creates custom pieces to meet customer’s needs </li></ul>Mass Customization
    19. 19. Christensen’s Theory <ul><li>-Tiffany is a market leader </li></ul><ul><li>-Tiffany’s needs to protect their dominate market share </li></ul><ul><li>-Competing with retailers with lower price points, less features, and solely an online business (ex: Blue Nile) </li></ul><ul><li>- High Quality Vs. Lower Quality Dilemma: </li></ul><ul><ul><li>Some consumers want high quality mounting, others only need a lesser product </li></ul></ul><ul><li>-Market Cap Comparison: </li></ul><ul><ul><li>Blue Nile market cap = $719.6 million VS. </li></ul></ul><ul><ul><li>Tiffany’s market cap = $5.85 billion </li></ul></ul><ul><li>-Blue Nile’s net income grew 47 % in 2009 </li></ul><ul><li>(could surpass Tiffany) </li></ul>
    20. 20. <ul><li>Diagnosis : </li></ul><ul><li>200 year old successful company with endurance & strong brand </li></ul><ul><li>Increased competition in the market and threats </li></ul>Overview Prescription : Tiffany’s to continue their product image of exclusive high end brand through target market and brand management Expand target market to older generation, future purchases Projection : Will Achieve Competitive Edge through Brand awareness Market expansion and innovation
    21. 21. Questions

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