is the appl e watch killing the watch indus try? · case 1; “is the apple watch killing the swiss...
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Is the apple watch killing the watch industry?
Jaqueline LedezmaMario MartinezDaniel FelixMauricio Martinez
EGADE BCG 1
EGADE BCG
Case 1; “Is the Apple Watch killing the Swiss watch industry?’ The Apple Watch – a threat or an opportunity for the Swatch group ltd?”is based on IMD Case: IMD-7-1844, available from the case centre at www.thecasecentre.orgcopyright © 2017 by IMD, Lausanne, Switzerland (www.imd.ch)
Mandate
EGADE BCG 2EBCG
• Should Swatch Group directly compete with Apple Smartwatch?
• Is it a threat or opportunity to grow market share of existing products?
• Should the company introduce new products?
• How can it integrate technology without destroying its brand heritage?
Agenda
EGADE BCG 3EBCG
• Recommendation
• Analysis
• Key issues
• Strategy
• Implementation
• Wrap-up
Recommendation
EGADE BCG 4EBCG
• Swatch Group should compete with Apple watch just through its Swatch
brand
• Use Apple’s smartwatch trend to grow market share of its watches
• Swatch Group smartwatch product line should compete in the low end
segment
Concentration of 90% of global exports (watches)
EGADE BCG 5EBCG
Asia
• HK• China• Singapore• Japan
America
• USA
Europe
• Switzerland• Germany• France• Italy• UK
China is the largest exporter of low-end watches
Swatch Group Sales Growth
EGADE BCG 6EBCG
6 764
7 796 8 456 8 709 8 451
0%
5%
10%
15%
20%
25%
-
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
2011 2012 2013 2014 2015
Swatch Group Sales
Net Sales Net profit margin
• Last 5 years strong growth, but declining profitsin 2015 by 21% due to strong swiss franc and decline
In exports
CAGR Sales – 6%CAGR Net Inc – (3)%
Concentration of 90% of global exports (watches)
EGADE BCG 7EBCG
Vs.Global sales
(%)Units sold (mill) Sales (blln $usd)
Average price unit ($usd)
Switzerland 2.5 29.3 22.9 737
China 58 678.5 5.2 3
Apple Watch 0.1 13.5 - *299 – 17k
By 2015
* Price range
Switzerland dominates the luxury segment ( 4.5x > than China)
Swatch Group sales push
EGADE BCG 8EBCG
B2C
• Luxury watches• Smart product
B2B
• Micromechanics• Microelectronics
Watch ingeneering technologies is the core competition
Engaging in the luxury market worldwide
EGADE BCG 9EBCG Although in the future, a combination of both can reinforce
Luxury consumer
27% prefer smartwatches
15% SW substitutes
luxury watches
73% prefer luxury watches
Key issues
EGADE BCG 10EBCG Having these in mind to create the best strategy
How to grow market share?
Maintain brand
heritage
Work with specific price
segments
Swatch Group Positioning
EGADE BCG 11EBCG
Brand reliability
In house development
Swiss bloodline
Easiness to use
Positioning
• Timeliness• Craftsmanship• High efficiency with lower parts• Strong brand presence
Swatch Group does not depend on third parties for its watches
EGADE BCG 12EBCG Swatch group has a vertical integration model
Designs watches Manufactures watches
Sells finished watches, jewelry and components
Distributors
Alternatives
EGADE BCG 13EBCG
Compete against Apples Smartwatch
- Mid-to-high prices- Direct competition with
Apple
Luxury Smartwatches
- Higher prices- New product for a high
end segment
Low-end segments: Swatch
- Lower prices- Existing products in low
end segment
Evaluation
EGADE BCG 14EBCG
DriversCompete against
Apple`s SmartwatchLuxury Smartwatches
Low-end segments: Swatch brand
Technology - - - + + +
Potential revenue + + + -
Brand alignment - - + + + +
Market knowledge - + + + + + +
Manufacturingcapabilities
+ + + + +
Strategy time frame
EGADE BCG 15EBCG
Steps/periods 1-6 months 6-12 months 13-18 months19-24
months
New product development
Heavy advertisingcampaign
Expanding boutiques presence
Second productintroduction
What are the possible risks involved?
EGADE BCG 16EBCG
Impact
Probability
New luxury players Currency
fluctuations
Successful low-end
price products
New product development
EGADE BCG 17EBCG A Swiss watch is a symbol of quality
Develop the new smartwatch in house at the SWATCH research facility in Switzerland to keep its swiss bloodline.
Smartwatch analysis
EGADE BCG 18EBCG
Smart technology
Feature including:• Cardiac frequency• GPS coordinates• Functionality: a small smartphone
• Limited battery life• Traceability• Needs to be paired with smartphone• Small screen size• High price
Strenghts Drawbacks
Apple Watch introduction is an opportunity for SwatchGroup
EGADE BCG 19EBCG People still prefer a regular watch
• People in the US were not using watches anymore
• Swatch can profit from Apple creating growing market demand for watches
Only 27% of global luxury consumers prefer Apple Watch to a luxury watch
Only 15% see Apple Watch as potential substitute for luxury watch
Customized swatch smartwatches –low end segment
EGADE BCG 20EBCG Take advantage of vertical integration
•Measures swimming time•Manages assignments•agenda
• Safety features•GPS• Barometer•Altimeter•Humidity levels
•Measures performance, steps, distance,calories
•Calories• Food intake•Weight•Cardio activity•Medicine tracking
Health conscious
watch
Smart touch zero
one
Student smartwatch
Mining and oil industry
• Suit specific requirements for sports: snowboarders,
swimmers, surfers, volleyball, soccer players
• Other categories: Students, health conscious, mining and
industry
Heavy marketing
EGADE BCG 21EBCG
Sports Events Kids Millenials
Advertising
EGADE BCG 22EBCG Target will be young and trend followers
Strong advertising campaign
• Millenials• Young adults• Kids• Sporting events
How to have presence
EGADE BCG 23EBCG Distribute the product on Swatch owned boutiques
Open new
boutiques
U.S.
Europe
Latin America
Asia
What about a second product?
EGADE BCG 24EBCG There is always going to be interest in the NEW product
Version 2.0 to be developed
• Keep interest in the product line• Improve any consumer needs• Keep up with updates and
competition
Wrap up
EGADE BCG 25EBCG Proposed strategy aligned with objectives
Determine threats and
opportunities
Maintain brand
heritage
Work with specific price
segments