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Tiffany & Co. Case Analysis

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    I.

    Current Situation Tiffany & Co. is a retailer, designer, manufacturer, and distributor of luxury fine jewelry. It was established by Charles Lewis Tiffany and his classmate John Young in 1837 as a stationary store in downtown Manhattan, New York. The vision of the founder, Charles Tiffany, was to establish the grandest preeminent house of design and the world’s premier jewelry house.

    Centuries later, Tiffany & Co. has proven to be faithful to the vision being listed in the 2001 Top 40 Plus in the National Jeweler’s Annual Reports.In January 2003, Tiffany & Co. operates 44 stores in the United States and 82 stores in other international countries with a total of 126 stores worldwide.

    The United States represented approximately 59% of Tiffany’s net sales while Japan contributed 28%, other Asia-Pacific countries brought in 6%, Europe with 4% and the remainder is from Canada, Latin America and the Middle East.The bulk of Tiffany’s net sales come from jewelry at approximately 79% in 2003. The rest come from tableware at 6%, timepieces at 4% and all other categories summing up at 11%. Attached herewith as Annex A is the latest Financial Highlights of Tiffany & Co.

    lifted from its 2007 Annual Report. In a glimpse, Tiffany & Co. has grown to 184 stores and boutiques and had a 15% increase in net sales based from the Year 2006.Exhibit 1 of the case shows a downward trend of the five-year stock price of Tiffany & Co.

    from a high of $41.38 per share in January 2003 to $23.06 per share in March 2003 covering only a three-month period. The tight competition, economic recession after September 11 and the severe acute respiratory syndrome (SARS) are all contributing factors that pulled down the stock price of Tiffany & Co.

    As of December 4, 2008, the company registered as TIF at the New York Stock Exchange sells at $21.20 per share. This may be attributed to the global financial crisis being experienced at the present.On the other hand, the Shareholder Information published in the company’s website, www.

    tiffany.com, show positive values in Return on Investment (12.09) and Profit Margin (10.00) indicating the profitability of Tiffany & Co.

    and the effectiveness of its management in handling resources. Other data presented include the company’s Quick Ratio (.52) Current Ratio (2.50) and Total Debt Equity (49.

    90) all signifying Tiffany & Co.’s financial strength.On the basis of the data given above, the following strategies were identified by the authors of the case that may continue to lead Tiffany & Co. as the ‘world’s premier jewelry house’:1.

        Create a long-term shareholder value in an increasingly competitive environment.2.    Develop an effective differentiating enterprise wide strategy to survive and prosper against growing global competition. II.

    Corporate GovernanceIn January 2003, Michael J. Kowalski assumed the role of Chairman of the Board and Chief Executive Officer (CEO) of Tiffany & Co. The case provides as Exhibit 2 the company’s Organizational Chart and includes the following elements: 1. Products, 2.

    Customers, 3. Sales and Distribution, 4. Operations, 5. Manufacturing and Design, 6.

    Technology, 7. Advertising, 8. Geographic Region and 10. Financial.

    Tiffany’s management incorporates all these elements in their goal to cope up with the intense competition in the jewelry market. It recognizes the need to use as leverage the cheaper resources of other countries like manufacturing, design and labor cost. The management moved to expand in potential markets like Brazil, China and Canada.Further, the company acquired Little Switzerland, a specialty retailer of luxury items to allow Tiffany & Co.

    evolve rapidly in the luxury goods and specialty fine jewelry sector. It also acquired Aber Resources that will help the company to assure the availability of future diamond needs.Meanwhile, as Tiffany & Co. deals with expansion and collaboration strategies, the management also needs to build brand image and recognition to successfully capture the international market.

     III. External Environment: Opportunities and ThreatsThe following is a list of opportunities and threats lifted from the case. These are significant factors to be considered for the realization of Tiffany & Co.’s strategic intents.

    Opportunities:1. China became a member of the World Trade Organization (WTO) in 2002 and it opened an opportunity for the fine jewelers both because of its growing consumer market and because it had low-cost production for custom work and fine craftsmanship.2. The fine jewelry industry in Brazil is growing due to lower design and operation costs.

    Tiffany & Co. may take advantage of this to outsource some of their manufacturing process to lower product costs.3. Canada is also another growing market in the fine jewelry industry because of the growing popularity of diamonds.

    Most thriving diamonds industry mines are in this area. Being a pioneer in the fine jewelry industry by investing in diamond mines was expected to help enhance a specialty fine jeweler’s diamond holdings and help streamline its sourcing process. As a result of having larger holdings of diamonds, this generally also meant a larger portion of the market share could be obtained in Canada.All the opportunities enumerated above can shape the success of Tiffany & Co.

    to grow and become competitive in the international market. On the other hand, these opportunities should be carefully studied vis-à-vis the following threats:1. As Tiffany’s started to make its way into potential overseas markets, its competitors’ proactive efforts in expansion and innovation became increasingly aggressive in these potential markets, as well as in the existing markets.2.

    Tiffany’s competitors aggressiveness in the industry was taking a toll on the company’s stock price.3. At present, the people are more inclined to save their money and spend less on luxury goods like those offered by Tiffany & Co. because of the global financial crisis.

    Powell writes in Time Magazine,The great risk, as consumers cut their spending, is that bad economic news begets more bad news. Bernanke recently called this the “adverse reaction loop,” as consumers spend less, the economy weakens more, unemployment rises, mortgage foreclosure increase, putting more pressure on the financial system, and on the downward spiral goes. The opportunities presented by China, Brazil and Canada cannot be fully utilized by Tiffany & Co. if the threats presented will not be addressed immediately.

    Thus, the need arises for a defensive strategy against new entrants in the market eyeing for the same opportunities. IV. Internal Environment: Strengths and WeaknessesThe following were lifted from the given case and are considered as strengths of Tiffany & Co.:1.

    Through its strong advertising campaigns, diversified portfolio of products and license arrangements with third-party designers such Elsa Perelli and Paloma Picasso, Tiffany & Co. was able to produce innovative designs that were signature Tiffany style brands. These signature products contributed to its established brand name and success.2.

    Its quality and durable pieces helped project a positive brand name.3. Its differentiated products through signature products such as the Return to Tiffany collection that were highly trendy and fashionable pieces, offered as everlasting pieces for every occasion to its customers. Tiffany also offered effective competitive pricing at various price ranges to compete in the industry.

    It offered a sterling silver collection that was prices less than its other fine jewelry pieces.3. Tiffany catered to the wealthiest segments of all age groups.4.

    Tiffany was strong in offering various price ranges, the latest trends, beautiful and detailed styles, an easy return and exchange policy and availability of products at stores, online and via the catalog to make it easier for working women to shop.5. Tiffany stores were located in prime retail space areas that had high visibility and high traffic. This contributed to the convenience factor for working women and for other target markets.

    The locations of the stores were in high-end areas to support the high-income individuals targeted. The stores were company operated with knowledgeable sales staffs. With Tiffany’s effective décor and layout, excellent lighting, attractive merchandising of “Tiffany Blue” displays, beautiful packaging, excellent inventory on hand, and elegant store atmosphere, customers are attracted to the positive shopping experience Tiffany offered.6.

    By establishing a popular, signature product, Tiffany was able to help promote its brand image in an industry that equated brand to quality, craftsmanship and value.7. Tiffany’s linked communication between suppliers and personnel had enable a strong relationship to be build. This helped in its sales operation by replenishing inventory and meeting customer demands through its effective real-time data.

    The supplier relationship had been built using total quality management, inventory control, and just-in-time operations. Feedback and constant communication helped build the relationship stronger, and, as a result, create quality products effectively and in the most cost-effective manner. Once the products were produced, the timely delivery of the products (just-in-time) was important. Tiffany’s inventory management and schedule were timely and effective so that inventory would always be on hand.

    8. Tiffany’s strong ability to outsource helped it reduce costs since this process was less costly compared to in-house operations.On the other hand, the following were seen as weaknesses of Tiffany & Co.:1.

    Tiffany & Co. has more stores outside the US. However, its international presence produced less than 42% of net sales even though the number of company – operated stores outside the United States was nearly double the number of US stores.2.

    The company may have good advertisement as a strength but its small use of celebrity sponsors only modestly supported the Tiffany brand name.3. It currently has a limited selection of products for men.Synthesizing all the strengths and weaknesses together, one issue came out as the strongest: Tiffany & Co.

    has a strong brand positioning in the market yet it does not help its international sales to grow. V. Analysis of Strategic FactorsTiffany & Co. has double the number of retail stores outside the US but it contributes lesser net sales compared to the stores in the US.

    This is a significant strategic issue that needs to be addressed to allow the company become the leading fine jewelry retailer in the international scene.Analyzing the strengths given above, it may seem that Tiffany & Co. has all the characteristics of a strong and thriving company. It has financial strength, good customer relations, and efficient operations and invests on huge advertisement projects to keep Tiffany & Co.

    a recognizable brand. However, looking to a different view, there are other factors that may affect the success of an organization even if it is already well established. Companies like Tiffany & Co. attempting to grow and enter international markets may be driven by local pressures far different from the company’s own country.

    Hill and Jones (2004, p. 268) identified different pressures for local responsiveness as follows:Differences in Customer Tastes and Preferences. Strong pressures for local responsiveness emerge when customer tastes and preferences differ significantly between countries, as they may for historic or cultural reasons. In such cases, a multinational company’s products and marketing message have to be customized to appeal to the tastes and preferences of local customers.

    This typically creates pressures for the delegation of production and marketing responsibilities and functions to a company’s overseas subsidiaries.Differences in Infrastructure and Traditional Practices. Pressures for local responsiveness arise from differences in infrastructure or traditional practices among countries, creating a need to customize products accordingly. Fulfilling this need may require the delegation of manufacturing and production functions to foreign subsidiaries.

    Difference in Distribution Channels. A company’s marketing strategies may have to be responsive to differences in distribution channels among countries, which may necessitate the delegation of marketing functions to national subsidiaries.Host Government Demands. Economic and political demands imposed by host country governments may require local responsiveness.

    Considering all these forces, it may seem Tiffany & Co. have not gone through intensive research and development to ascertain the varying cultures of the countries they are penetrating. China, for example, coming from a communist perspective, may not be open to the purchase of luxurious goods as a gift for other people. Similarly, like Brazil, they may like a different cut or style for jewelry far different from what has been made by the top designers of Tiffany.

    Thus, there is a need to re-assess the local strategies being implement in the different locales where Tiffany & Co. is located. Discussed in the next section is  a strategy that can be employed in re-assessing strategies locally. VI.

    Strategic Alternatives and Recommended StrategyTiffany & Co. has to implement a global strategy. According to Hill and Jones, when a company embarks on a global strategy, it has to locate its manufacturing and other value chain activities at the global location that will allow it to increase efficiency, quality and innovation. In doing so, it has to solve the problems of coordinating and integrating its global value chain activities.

    It has to find a structure that lowers the bureaucratic costs associated with resource transfers between corporate headquarters and its global divisions and provides the centralized control that a global strategy requires. The answer for many companies is a global product division structure.Hill and Jones defines that in this structure, a product division headquarters is created to coordinate the activities of its home and overseas operations. Within each division, headquarters managers decide where to locate the different functions at the optimal global location for performing that activity.

    Thus, if Tiffany & Co. will be able to re-organize their company, they may be able to implement their strategies responding to the different capabilities and needs of their international stores. They may put up regional branches focusing on the research and development of their specific customers, i.e.

    a regional branch in China studying the preferences of Asians. Instead of concentrating all their flag stores in the US like New York, they may study establishing flag stores around the globe that will boast on Tiffany’s differentiated product for different sets of customer based on culture, preferences and the like. VII. ConclusionTiffany & Co.

    is a strong company presented with great opportunity to lead the jewelry industry. It owes its success to its strong brand – even referred by some as a symbol status. This may be a guarantee for realizing their vision yet they also need to be aware of the external factors, specifically local factors that they need to address in international competition.APPENDIX A Financial Highlights of Tiffany & Co.

    for the Year 2007         All references to years relate to the fiscal year that ends on January 31 of the following calendar year.See Item 6. Selected Financial Data for significant non-recurring factors that affected 2007 net earnings.* See Non-GAAP Measures section in Item 7.

    Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of GAAP to non-GAAP measures.;;Reference;Hill, C.W.L.

    , Jones, G.R. Strategic Management: An Integrated Approach. 2004.

    Houghton Mifflin Company, Boston, MA.;Powell, B. 2008. Life Without Credit.

    p.30. Time Asia. November 8, 2008.

    Hong Kong.;Mockler, R.J. Tiffany ; Co.

    : A Specialty Fine Jewelry Retailer. 2003. Contact Strategic Management Research Group. New York.

    ;What is strategic management? (n.d.) Retrieved December 5, 2008, http://www.allbusiness.

    com/management/2975129-1.html.;Tiffany and Co., Shareholder Information.

    Retrieved December 5, 2008, http://investor.tiffany.com/financials-keyRatios.cfml.

    Tiffany & Co. Case Analysis. (2017, Mar 04). Retrieved from https://graduateway.com/tiffany-co-case-analysis/

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