Hwdc Slideshow2.0

Editor's Notes

• #6: Technological EnvironmentThe technological environment in the diamond jewelry industry has primarily seen growth in the use of online sellingThere has been an increase in the use of online capabilities to support brick and mortar locations. Companies are beginning to capitalize on the functionality of the internet and jewelry retailers are using 360 degree product views, more product information, and celebrity advertising to help sell their products. Economic EnvironmentThe recession has negatively affect the sale of non-essential goods such as those in the fine jewelry industry Decreased consumer confidence- Decreased disposable income- Expected to increase within the next three years which is beneficial for the jewelry industry- Increased unemployment rate (peaks in 2010 and begins to decrease after that- Expected to decrease within the next three years- All information concludes that the economy will regain its strength in the next few years. The fine jewelry industry can expect to increase in popularity once again- Because specialty goods are purchased infrequently and are non-essentials, as the economy is declining, the sale of fine jewelry is negatively affected and can be expected to decline with it.Poor performing economies have posed a considerable threat to this industry, as real GDP levels have fallen in several market areas, including the US, the EU, and Japan as discussed prior.- Unemployment rates and disposable income levels have also posed threats to the health of the fine jewelry industry, as many economies continue to lose jobs and see no growth or decline in disposable income rates.
• #7: Socio-Cultural EnvironmentPolitical/Legal EnvironmentWithin the diamond industry dozens of regulations, acts and laws have been developed to ensure all diamonds are conflict free. The most notable is:-The Kimberley Process Certification Scheme which was established in 2003 to find a solution to the international problem of conflict diamonds or blood diamonds. The US decided to take it one step further andIn 2003, signed the Clean Diamond Act which prohibits the import/export of rough diamonds not controlled through the KPCSPartnered with the worlds concern over the sale of conflict diamonds is the increasing threat of counterfeiting diamonds. To combat this issue the US-Enacted the Prioritizing Resources and Organization for Intellectual Property Act of 2008. It acknowledges the harm caused by trademark and copyright counterfeiting and infringement to the US economy. The US government has also enacted an- The Anti-Counterfeiting Trade Agreement which is aimed at setting standards for the enforcement of intellectual property rights.
• #8: Industry Overview- Industry Overview- NAICS code was 448310 which is the code for fine jewelry- Growth in total revenue:- Of the fine jewelry industry was 49% from 2006 to 2008 while the number of employees remained fairly constant- Growth of ROA from 2006 to 2008- Increase of 46.4%- Growth from 06-08 - Increase of 22.8%
• #9: As Tokyo Kiho is not a household name in North America, this company ranks lower on image and as this jeweller does not offer any online sales, it is ranked the lowest in that respect.Zales and Blue Nile both have a strong online presence but do not have the same luxury appeal as other brands in this class. Zales only offers products online to customers in the US, while Blue Nile has both a US and Canadian page. Blue Nile operates exclusively online, while Zales uses the internet and their own stores to sell their jewellery. Zales product offering is at a lower price point than Blue Nile and the other competitors in this category. DeBeers and Harry Winston are both ranked at the top for quality and image, where Harry Winston slightly edges out DeBeers in the image category. Both of these luxury players offer a very limited selection of their products online and their most expensive pieces are only available for sale in store. The strategic group shows a small connection between perceived quality of jewellers and the efforts those companies have made to make their products available online. -There is a correlation between online presence and image and perceived quality-As perceived quality goes down, online presence goes up-As you can see, Harry Winston ranks the highest on image and quality because it is such a prestigious brand, however, its online presence is lacking, compared to one of its top competitor, Blue Nile-A challenge that Harry Winston faces is how to maintain its image and quality, while reaching the level of online presences its competitors, such as Blue Nile and Tiffany have.
• #10: Rivalry of Direct Competitors- Harry Winston’s top competitors are DeBeers and Tiffany & Co. - Overall, the rivalry of direct competitors has been rated 8/10 and is the most significant threat in the industry; especially those that are multinational firms competing in the global market  - It is relatively hard for new competitors to enter the market because of the rarity of diamonds and the need for the financial backing to start a luxury jewelry business.  - However, once a firm does enter the industry, its size, number of locations and total revenues and total assets are not clear predictive tools of whether a new entrant will be able to compete and survive or not.   - The competitors that are already in the market pose a threat, but the entry barriers are helpful in keeping more firms out of the industry.Threat of Entry: the capital investment needed to enter, the presence of strong brand names among existing firms, the idea of backward integration, and government / industry standards.-With the increase in online capabilities, companies like Bluenile.com can minimize overhead costs and sell exclusively onlineThreat of Substitutes: discount brands, discount jewellery , natural, genuine, and synthetic gemstones . There is no true substitute for diamond or fine jewellery, just a differentiation in the way customers can purchase and view the products, whether it be in store, online, or through catalogue. A high switching cost of quality is paid when a jewellery customer chooses a product downmarket from a real diamond. Power of SuppliersPower of Buyers
• #11: Thank you Erica, So in terms of Harry Winston’s Primary Value Creating ActivitiesA huge source of competitive advantage is the companies Supply Chain Management function-this is a result of Harry Winston’s backward integration and ownership of 40% of Diavik mines. -Harry Winston supplies themselves with rough diamonds. Then the rough diamonds are sorted.Then the rough diamonds are either sold to other jewellry manufacturers AND Harry Winston’s diamonds are sent to a company called Overseas Diamonds who polish the stones and send them back to Harry Winston’s New York SalonThen all the jewellry is handcrafted in New York by Harry Winston designers. In terms of Operations and DistributionHarry Winston is currently refurbishing its existing stores and expanding its salon network by opening more salons across the world.  -Distribution is a source of competitive advantage for Harry Winston because the sales per store are so high ($14.8 million sales per store compared to $13.9 million for Tiffany & Co.)- This competitive advantage is rare- there are very few extremely high-end competitors that are able to have both a small number of stores and high annual revenues the majority of the companies in the fine jewelry industry have high annual revenues because of the great number of stores they operate
• #12: Marketing & Sales is a very important value creating activity,-Harry Winston has fared well during the recession compared to competitors as a result of the strong brand equity it has developed.-Harry Winston’s past advertising efforts have relied heavily on publicity generated from fashion weeks and celebrity endorsements. They do not rely on traditional mass media adverting, because that’s not who their target market is. -To give you an idea who their target market would be, Harry Winston does not sell a product lower the than $3,600. -% change in net revenue (06/07 17.4%, 07/08 5.8%)-Market Share: highly fragmented, no single company controlling more than 6% of the market. HW controls approximately 0.05%)-Between 2007 and 2008, Annual Sales Decreased by 11.5%-between2007 and 2008 annual sales for Harry Winston decreased 11.5% this was in part due to the recession and in part die to the 3% decrease in the marketing and advertising budget.
• #13: Customer Service is a weak function in the value creating activitiesThe website is only available to US residents with approximately 5% of its items being available for online sales.Also, there is no post-purchase customer support and no long term relationship with highly valued customers.
• #14: In terms of Research & Development,-Harry Winton has few launches of new products. However, when they do they usually centre around film festivals and fashion weeks. As for Corporate Leadership,-the jewellry industry is highly fragmented. 75% of the jewellery industry is made up of small companies with no single company controlling more than 6% of the industry. -Harry Winston controls 0.05% of the jewellry industry Normalized FinancialsNet income is much higher than that of the competitors, as a result if Harry Winston were to expand its product line, they would have the financial stability to carry that growth.
• #17: Poor Online Development and Distribution through online sales -Harry Winston’s website is not a source of competitive advantage-Blue Nile is Harry Winston’s main competitor online and they have -custom made jewelry feature-The overall functionality of the site is not up to parIt is hard to locate everything the customer could be looking for-Considering the use of technology and online sales are increasing, it would be beneficial for Harry Winston to update its site in order to create a more user-friendly atmosphere-Offering online sales solely to those in the United StatesMaking sure they are more accessible while maintaining the high end, prestigious Harry Winston name Leveraging the Excitement of the Brand While Focusing on the Correct Age Group -Deciding what the most profitable age group to focus on would beActively splitting its resources between the two age groups-Leveraging the existing brand name and existing brand reputationRelies too heavily on the existing reputation of the brandMore money should be sunk into marketing and advertising if Harry Winston were to expand its product line, this would be necessary-We said marketing and advertising was done well given that they have this existing brand reputationThis brand took them decades and decades to develop – a prestigious quality product Inadequate Customer Service -The after sale customer service is not sufficient considering the prestigious -Important for the consumer’s overall level of satisfaction-Harry Winston’s website is only available in English50% of the Hispanic population in the US is planning on making significant purchases in the near future
• #18: Website Re-LaunchOffering the ability to buy more products online with the exception of highly expensive items that will still require consultationLaunch website in all regions so consumers in other regions can shop online and buy Harry Winston productsOffering the website in more languagesAlso, include information about the designers on the website, perhaps a brief biography and showcase the pieces they have designed.Showcase the jewellry like a piece of art, giving credit to the artist. Launch a Line of Sunglasses to Increase the Excitement of the Brand-Generate brand excitement through the introduction of a new product line, still utilizing Harry Winston’s core competency, which is its backward integration and brand equity, but they would outsource the manufacturing of the frames-To integrate this with the website, we suggest Harry Winston use the website to inform and excited consumers about the upcoming launch of the productLaunch sunglasses exclusively to the US market after a period of intense product excitement generationImproved Online Post-Purchase RelationshipA “members-only” feature where the most valued consumers have access to something exclusive
• #20: If Harry Winston follows our proposed plan to increase website capabilities it will improve their ability to compete with online competitors, and if Harry Winston expands its product line by venturing into the premium sunglass industry they will be able to use their core competencies to command market share and enjoy a sustainable competitive advantage in the luxury goods industry. -This is just an average cost for the sunglasses because consumers will get to work exclusively with a designers to build their frames with vision with gemstones and diamonds. - The sunglasses will be very customizable and could reach prices into the hundreds of thousands of dollarsCalculations: Revenue = 1000 frames x $7000 = $7 000 000SG&A = $7 000 000 x 48% = $3 360 000Manufacturing = 1000 frames x $100 = $100 000 Notes:SG + A as a percentage of sales is 48%Average price of a pair of sunglass between $5000 - $9000Possibility for more expensive, custom made sunglassesThe supplies such as diamonds and gold and silver are not included in this because Harry Winston already has its supplies of this factored in elsewhere in the annual reportTotal Revenue will increase as the number of frames sold increases over the years1 % of sales will come from sunglasses in the first yearWhat will the growth be?10% average growth for Harry Winston over the past 3 yearsTherefore, we assumed a 5% growth in sunglass sales over the years