Tom Ford_Richemont Watch Business Plan1.0 Executive Summary TFR Ltd (Tom Ford Richemont Ltd) is a start-up watch producer and distribution company, which will be fully owned by Richemont. Its strategy is to serve the upscale niche markets of the watch industry. It will capitalize on the Swiss engineering and manufacturing used to build the watches and the universal appeal of Tom Ford’s designs to carve a niche in the accessible luxury watch industry. There are many untapped potential markets within this industry that desire high-quality, stylish goods, and a combination of Richemont and Tom Ford will help both the companies to effectively cater to these markets. It will be the firms intention to build and export its products to the major markets in the world. To do this the companys long-term goals are to achieve a major market share in the U.S in its price segment, make significant progress in key European markets like Italy, France and Germany and build a substantial presence in Asia, specifically in Hong Kong, South Korea and China. The firm aims to build brand image and brand equity through marketing, achieve a sustainable 70% gross profit margin, and eventually produce luxury watches in addition to the initial, mid-level price segment. The Company TFR Ltd will be a privately held company belonging to Richemont. Production will take place in Geneva, Switzerland. Richemont will earmark space in one of the existing manufacturing units and invest in segregating an exclusive facility for the manufacture of TF watches. The factory will be of 1,000 square meters and should be large enough for the first three years of the companys growth Sales and marketing are focused on the United States; Germany, France and Italy in Europe; Hong Kong, South Korea and China in Asia and Dubai in the Middle East. Expansion into further markets will be planned out after 5 years of operation. TFRs sales force consists of President based out of Geneva with key functions of Manufacturing, Marketing, Commercial and Supply Chain, Vice Presidents for America, Europe and Asia, who will have a team of 2-3 sales managers to look after the distribution channels. The Products The initial product line will be elegant analog, mechanical and quartz watches with characteristics in line with the core values of Tom Ford. The watches will be water resistant to 100 meters of depth.
Tom Ford_Richemont Watch Business PlanThe pricing strategy will be to directly compete with the other major competitors in theaccessible luxury watch segment example Gucci, Hermes and Dunhill. The price perwatch will range between $1000 and $3000. A select and limited range will also belaunched in the vicinity of $4000 which will be advertised and be the face of the brand.The MarketEntry into the mid-level luxury watch industry comes at a right time, with some keyconsumer buying behavior changes after the 2008 recession. Over the past two years,the purchase of mid-level and high-level European watches has increased by 50 percentin the U.S. and this trend is expected to continue.One of the most important recent trends is that potential watch buyers are willing tospend higher amounts on watches because of the enhanced image appeal. Therefore, acompany that can build a substantial brand image in this industry gains a significantcompetitive advantage. It is the aim of TFR Ltd to capitalize on the image of Tom Fordand the high quality of Richemont while pursuing the innovative styles necessary forbrand building.Financial ConsiderationsThe companys start up costs will be $25 million. Richemont will initially fund the venturecompletely. The majority of the start-up costs will consist of investing in amanufacturing facility, research and development, initial inventory, marketing and astrong cash account. The Break-even Analysis shows TFR Watches will be able to make asteady profit from the first year itself.Chart: Highlights
Tom Ford_Richemont Watch Business Plan1.1 Objectives 1. To make TF Watches one of the top 10 selling European watch brands in the accessible luxury segment. 2. To eventually produce luxury watches in addition to the moderately priced line. 3. To achieve a 70% gross profit margin. 4. To achieve appreciable market share in the U.S, French, German, Italian, Middle East (Dubai), Hong Kong and Chinese markets.1.2 Mission TFR Ltd is a watch company that produces wrist-watches for sale across the key markets in the world. The company will build its image based on the style quotient of Tom Ford and the quality quotient of Richemont, and then will begin selling higher profit, luxury watches.1.3 Keys to Success To succeed TFR Watches must: • Build and sell high quality products which are high on style and dream factor coupled with a unique timeless appeal. • Achieve 100% customer satisfaction. • Build brand image and brand equity through marketing.2.0 Company Summary TFR Ltd will sell quality watches and provides excellent customer service for customers seeking a reliable watch within the accessible luxury watch market.2.1 Company Ownership TFR is a privately held international corporation. Production takes place in Geneva, Switzerland and sales and marketing will be focused on the United States, Germany, France and Italy in Europe, Hong Kong, South Korea and China in Asia and Dubai in the Middle East. Ownership: • Richemont – 100%
Tom Ford_Richemont Watch Business Plan2.2 Start-up Summary Sixty percent (60%) of start-up costs will go to assets. Start-up costs will be financed through the owners investments, and loans. The assumptions are shown in the following tables.Table: Start-up Expenses
Tom Ford_Richemont Watch Business PlanTable: Start-up Funding2.3 Company Locations and Facilities • The Switzerland factory is situated at Geneva. • The factory is 1000 square meters and should be large enough for the first three years of the companys growth. • The watches will be shipped and distributed from Switzerland.3.0 Products The watches will be mid-level all-around high-quality watches with a style quotient in sync with Tom Ford’s designing expertise. The watches will be water resistant. The price will be very competitive: $1000-$3000. A few offerings will be done in the range of $4000.3.1 Product Description Tom Ford watches are to be a combination of unconventional design and the creative source. The collection will encompass a common passion for design, functionality, craftsmanship, quality, and lifestyle. We partner with Richemont to develop two basic
Tom Ford_Richemont Watch Business Plan lines. A new idea that redefines a highly crafted but yet accessible lifestyle watch, and another line is to be elegant, sleek and yet classical men’s watch. Our watches will have, besides functionality, an uncompromising style. A perfect combination of analogue dial, quartz and automated mechanical movement will deliver style and function, without having to compromise on one or the other. Our elegant line will be analogue watch line with a quartz movement. All TF watches will be water resistant to 100 meters of depth. Lifestyle watch lineSkeletonised This model shows Skeleton dialtitanium case and through a skeleton automaticdial; the most dial and a clear mechanicalexpensive piece of sapphire crystal movement;the sports collection case back anusing rose gold and automatic Titanium case,alligator strap mechanical titanium dial(different colors); movement. Strap – spido textileautomatic The surface will be material;mechanicalmovement hand treated with a black Basic silver titaniumfinished in Diamond-Like- color.Richemont factories Carbon coatingateliers. which is 3 times harder than steel, and second only to diamond. Strap – spido textile material.
Tom Ford_Richemont Watch Business PlanElegant, quartz watch line This model is This model comes produced with with a kautschuk analog dial display band bracelet – which may come in because of the different colors, specific kautschuk quartz movement; smell the bracelet is made with light Sleek, elegant with a cedar wood perfume note; kautschuk and titanium band dial may come in bracelet; comes with different colors interchangeable bracelet – leather in different colors3.2 Competitive Comparison TF Watches will have the following sustainable competitive advantages: 1. Swiss technology, experience, proficiency, and reputation. 2. High quality and style at an accessible price. 3. Elegant and ergonomic styling. 4. Devoted Swiss work force. 5. American marketing skills.
Tom Ford_Richemont Watch Business Plan3.3 Sales Literature TF Watches will use advertising, public relations, and sales programs to make the public aware of the watches. 1. Advertisements and public relations pieces in local newspapers. 2. Full-color brochures will be distributed at the various outlets where the watches are sold.3.4 Sourcing TFR Watches will only sell watches produced at its Swiss factory, therefore additional sourcing of watches will not be necessary. However, the sourcing of parts for the manufacturing of the watches will play a constant role in the firms profitability.3.5 Technology PC-based software will be used for accounts receivable/payable, inventory, purchasing, sales, shipping, and returns.3.6 Future Products A luxury watch is the current main focus for a future product. Other future products could include alarm clocks, wall clocks, and clocks for luxury automobiles built in Germany.4.0 Market Analysis Summary The purchase of accessible luxury watches has increased considerably over the past one year. We expect the sales to continue growing, and to capitalize on this ever-present market for watches - people will always need and buy watches.4.1 Market SegmentationIn the table Price segmentation in the watch market, four different segments aredistinguished within the watch market according to pricing. They are exclusive luxury,accessible luxury, mid price and low price. Luxury watches are defined as being those with afactory-gate price of over CHF 500 (553$), which corresponds more or less to a retail pricein excess of CHF 1500 (1660$). Accessible luxury watches are defined as those being soldfor factory prices between CHF 500 (553$) and CHF 3000 (3320$), which corresponds to aretail price between CHF 1500 (1660$) and CHF 9000 (9955$). The technologies used aremainly based on mechanical movements and to a lesser extent quartz movements. Theexclusive luxury segment represents watches with a factory-gate price in excess of CHF3000 with no upper limit given. The production involves sophisticated craftsmanship andtechnologies are usually exclusively based on top-grade mechanical movements.
Tom Ford_Richemont Watch Business PlanSource Pictet, FHQ – Quartz movement, M – Mechanical movementOur strategic positioning will be in the accessible luxury segment with our average pricebeing between 1000$ – 3000$. Only certain limited collection pieces will be priced at 4000$and will be featuring precious metal and hand made mechanical movement.Also, on the Matrix chart for the watch industry the most important brands in the watchindustry are displayed. They can be grouped into five different profiles resulting from theirconsumer image. The categories are the following:• Connoisseurs/Specialists• Sport• Fashion• Lifestyle• JewelleryThe chart is additionally showing the division into four regions using three criteria: the price(low price – accessible luxury – exclusive luxury), the type of movement (mechanical andcomplication versus quartz) and the technology grade (technical content versus designcontent).Our brand will be positioned in the accessible luxury segment as a lifestyle/fashion watch.Majority of the pieces sold will be from our fashionable elegant quartz line with some of thesales coming also from our more upscale lifestyle line. As it is seen from the chart our majorcompetitors will be Dunhill, Gucci and Rado.
Tom Ford_Richemont Watch Business Plan Chart: Matrix for the Watch Industry4.2 Target Market Segment Strategy The watch industry, particularly the accessible luxury segment, has witnessed a good growth in 2010. Potential watch buyers are willing to spend moderate to high amounts on watches because they can make the customer look good - and hence feel good about themselves. In addition, TF Watches will be built to last a lifetime - battery replacement every 5 years will be the only necessary maintenance, therefore customers will see the inherent value in the watches. The materials employed like titanium are easy and light to wear and have extreme durability. The upscale niche market that TF Watches has targeted is competitive because of the competitors and the discerning consumers it serves. However, the competition is based more on quality than price unlike the discount market.4.2.1 Market Needs The upscale watch industry is currently in a growth period, so now is an ideal time for entry.
Tom Ford_Richemont Watch Business Plan4.2.2 Market Trends TFR Ltd will distribute the watches across the key markets across the world. • The cost of marketing the new product is expected to be the biggest challenge for TFR Ltd. The initial use of Richemont’s facilities as a distribution channel will allow for cost savings. • Strong Brand names – Tom Ford and Richemont have very strong resonance with consumers in the luxury industry.4.2.3 Market Growth Consumers often only buy a new watch every 5 to 10 years, yet they purchase them often as gifts. Therefore, advertising will be increased during the Christmas holiday season. The intended retail outlets are full price and full service, and moreover the company will take advantage of the extensive Richemont distribution channel across the world.4.2.4 Main Competitors The main competitors are Gucci, Hermes, Dunhill, and Rado. These brands have strong equity, but there is room in this market for a new company as brand loyalty is not high on potential consumers reasons for purchasing and moreover, Tom Ford’s popularity will help in establishing the brand quickly across the key markets.5.0 Marketing Strategy and Implementation Summary TFR Watches strategy is to serve the accessible luxury markets of the watch industry. It will capitalize on the Swiss engineering and manufacturing used to build the watches. There are many untapped potential markets that desire high-quality goods which are high on the style quotient. TFR Watches marketing strategy will alleviate this problem. TFR’s business mission will be composed of 3 main pillars: • Purpose • Business domain • Major Objectives The purpose of TFR is to offer products of the highest quality combined with a reputation as an authoritative purveyor of style. This purpose has the legitimacy to succeed because of the inherent strengths of the two partners. The business domain of TFR is watches, whilst the major objective of TFR is to become the one of the key players in the accessible fashion segment.
Tom Ford_Richemont Watch Business Plan The market positioning snapshot provides TFR with a relevant indication for high potential success in the watch market. TFR shall differentiate itself attractively from its major competitors securing profit in the Lifestyle Fashion market segment. TFR shall leverage on the very specific capabilities of Richemont Group in order to successfully serve the market, and second, compare its current state in relation to the corresponding characteristics of its major competitors. The international success of TRF will depend entirely on how closely the skills of the company’s personnel match the expectations and aspirations of customers and other important stakeholders in the market. The blend of knowledge and the ability to apply this knowledge appropriately embodies the skill set of the HR structure of TRF. Also by combining the resources of Richemont Group and TF, TRF consolidates a unique portfolio of financial, technological, stylistic, production, information and organizational elements.Global Core StrategyCore Value Proposition TRF offers unequalled quality timepieces by striking a delicate balance between craftsmanship, technology, the exclusive use of the highest quality materials and the endorsement of an authoritative purveyor of style.
Tom Ford_Richemont Watch Business Plan5.1 Marketing Strategy The marketing strategy will focus on two segments: 1. The company will benchmark the objectives for promotion, outlet selling, and personal selling. 2. The marketing budget will be $10 M per year. The marketing of the Tom Ford watches will be aligned on a macro level with the marketing of the Tom Ford brand worldwide. The TOM FORD collection encompasses an extensive range of high level luxury men’s clothes, tailoring, dress shirts, suits, accessories, footwear and leather goods as well as women’s wear. The watch line is an organic extension of the product range which serves as an extension to the modern wardrobe. The underlying objective of the campaign is to increase awareness of the line of watches. It is of paramount importance that the desired brand awareness level is reached without compromising the mission statement of TFR. The main lever which shall enable the company to achieve such goals is the legitimacy that Richemont Group through its manufacturing capabilities can bring to the brand. The marketing communication structure needs to be conceived as an organic extension of the distribution policy. More specifically the communication campaign is an institutional one where the initial € 10 Million marketing budget is allocated in such a way that a unified consistent brand message is delivered throughout the collection lifecycle. The elements of the institutional campaign are numerous and can vary depending on the distribution type of the business. As a general outline – the philosophy is to have a targeted global expansion plan leveraging an extensive network of POS and DOS that are slated to open or are already existing, including flagships, free standing stores, shops in shops and multi-brand distributors. Another characteristic of the Tom Ford distribution strategy is to undersign agreements with high profile franchise partners in key cities in Europe, South America, Asia and the Middle East. Franchise partners are to invest and operate the store under the strict guidelines of Tom Ford International. Of course this entails a certain degree of parity between business partners which can be exploited in the benefit of TFR as well, more specifically sharing the costs of Institutional Direct Marketing Tools is a normal business practice in such business models. As a definition we classify as TFR marketing tools the following: 1. Advertising • Advertorials • Editorials • Outdoor Print • Outdoor Media (LED, LCD etc.) 2. PR: • Materials, • Richemont manufacture events, • Prepared campaign video 3. Events: • Animations • Cocktail events
Tom Ford_Richemont Watch Business Plan 4. Direct Marketing Tools ( Seasonal Institutional Tools ): • Catalogues • Flyers • Posters • Samples • Show cards • Thank you notes • Client information card 5. Window materials: • Window images • Sales stickers • Printed guideline • Special window props • Special window stickers • Themed windows The marketing approach of the TFR product line launch lies within the clear focus on two communication pillars. In order to initiate and educate the customer about the essence of the Tom Ford brand of watches, contacts with consumers must be given priority at the initial phase and so the communication shall stress the investment into in-store events like DM tools and window materials. The second pillar on which the awareness shall be built on will be “word of mouth”. It is expected that the incredible awareness and appeal that Tom Ford has as a designer and as a successful Hollywood movie director will be a big opportunity to generate buzz and augment the initial editorial coverage of the product line launch. The communication campaign shall be initiated by using a viral video clip shot in a Hollywood movie trailer style featuring Tom Ford in a story about style, time, seduction and competition. The movie trailer itself shall not feature any kind of hint or clue as to what it may be pertaining to – it could be a movie of Tom Ford or one of his latest fashion endeavors – the focal aspect being able to create a buzz and hype with a sense of secrecy surrounding the actual product line. The product related visuals / ads will be released after a month of the teaser campaigns in the relevant media platforms and also on internet such as youtube and facebook posting wherein the tagline be revealed to maximize the number of engaged social media users. Having covered the institutional tools it is important to mention that through Richemont’s expertise the intention is to carefully establish a set of guidelines for tactical communication in selected regions of the world where more locally adapted scenarios can be implemented while adhering to the two main marketing pillars.5.1.1 Pricing Strategy The pricing strategy will be to be directly competitive with the other major competitors. The price will be very competitive: $1000-$3000. A few offerings will be done in the range of $4000.
Tom Ford_Richemont Watch Business Plan5.1.2 Promotion Strategy Promotion will be initially spearheaded by public relations because of its low cost, and then through advertising once the company begins to increase cash flow to an acceptable figure.5.2 Sales Strategy TFRs sales force will consist of a President based out of Geneva with key functions of Strategy, Manufacturing, Marketing, Commercial and Supply Chain and Vice Presidents for America, Europe and Asia, who will have a team of 2-3 sales managers each to look after the distribution channels.5.2.1 Sales Forecast The following table and chart show our present sales forecast. Chart: Sales by Year
Tom Ford_Richemont Watch Business PlanTable: Sales ForecastSales Forecast is segregated to Tom Ford stores, POS and Departmental stores. Detailed below are theforecasts calculated for each of the segments.Sales Projections: Tom Ford storesSales Projection: POS
Tom Ford_Richemont Watch Business PlanSales Projection: Departmental stores5.2.2 Sales Programs Sales will be made by Richemont. Outlets that achieve the highest figures in sales will receive 1% discounts as sales incentives in order to encourage increasing sales. The costs will be a part of the marketing expenses.5.3 Milestones This table lists important program milestones, with dates and managers in charge and budgets for each. The milestone schedule indicates our emphasis on planning for implementation.Table: Milestones Milestones Milestone Start Date End Date Budget Manager Department Business Plan 4/16/1998 4/16/1998 $4,000 FG Devpt Factory Selection 5/5/1998 5/5/1998 $6,000 FG Finance Retainer Contracts 6/1/1998 6/1/1998 $2,500 HW Sales Brochures 6/11/1998 6/11/1998 $5,500 HW Marketing
Tom Ford_Richemont Watch Business Plan Copywrite 6/28/1998 6/28/1998 $6,500 WY Legal Totals $24,5006.0 Management Summary TFR Watches will have 5 members in the board of directors including one representative from Tom Ford organization. The company will initially work on a flat organizational structure6.1 Organizational Structure TFR Watches is split by both location and functionality. The production division is located in Switzerland where the factory is, and owned by Richemont. The central sales and marketing, and finance and administration divisions are located in Geneva and are run by President of the company with the help of 6 personnel overseeing different functions. The sales divisions are present in Europe, America and Asia which will oversee the local market strategy implementation.Organization Chart6.3 Management Team Gaps The following important gaps exist:
Tom Ford_Richemont Watch Business Plan • Territory-wise dedicated financial and commercial personnel to take care of import duties and taxes. • Dedicated training personnel to train sales consultants on nuances of product knowledge and selling skills. Influx of manpower can be planned from Year 3 to take care of the increase of business turnover and complexity in the various regions.6.4 Personnel Plan The personnel plan calls for adding two employees by the end of the first year for a total of eighteen. After the third year, employment is expected to increase by another ten. These new employees will go into sales, commercial and training functions.7.0 Financial Plan Growth will be supported by cash flow and owner investment. Further investments will be funneled through debt financing. Given the financial and distribution muscle of Richemont, the growth will be fast paced. Moreover, it will allow the management to have complete control over the firm.7.1 Important Assumptions TFRs financial plan relies on several important assumptions - most of which are shown in the following table. The key assumptions are: • Sufficient access to capital. • Steady economy without a major recession. • No unforeseen drastic technology changes.7.2 Key Financial Indicators • Keeping average collection days at 60 days or below is very important as this could become a major cause of cash flow problems for the first year. • Gross margins must remain above 65%.7.3 Break-even Analysis The Break-even Analysis chart and table show that if the costs stay at the current, or relatively stable, level TFR Watches will be able to make a steady profit from the first year.
Tom Ford_Richemont Watch Business PlanTable: Break-even Analysis Chart: Break-even Analysis7.4 Projected Profit and Loss The following table and chart shows TFRs expectations for profit and loss. The company will begin to make a profit in its first year of operation. Detailed in the annexure are monthly sales forecast and P&L for the period 2013-2017.
Tom Ford_Richemont Watch Business PlanChart: Profit YearlyTable: Profit and Loss
Tom Ford_Richemont Watch Business Plan7.5 Projected Cash FlowTable: Cash Flow
Tom Ford_Richemont Watch Business Plan7.6 Projected Balance Sheet As seen in the balance sheet, a strong growth in net worth is expected over the next three years. Table: Balance Sheet7.7 Business Ratios Standard business ratios are provided in the following table. The ratios show a strong, yet safe growth.