Hw.Summary
- 1. SARAH FISHER, NATALIE GASH, ERICA SHADFORD-1695450center<br />Executive Summary<br />A comprehensive capstone report for Harry Winston Diamond Corporation has been prepared, through an in-depth analysis and environmental scan of both macro and industry environments for the jewellery industry, the internal environmental for Harry Winston Diamond Corporation, separated by Primary and Secondary value creating activities, followed by an assessment of both Corporate and Business-Level strategy challenges. Following this evaluation, recommendations for both Corporate and Business –Level strategy have been presented, as well as a detailed action plan of timelines and costs for two value-adding initiatives: a re-launch of the Harry Winston retail website, as well as a line extension into the US premium sunglasses market. To evaluate North America, Asia, and Europe, proxy regions of the United States, Japan, and the European Union were chosen.<br />Forces acting strongly on the fine jewellery industry include changing demographics concerning who purchases these products, the economic situation, technology, branding, and consumer confidence. Such factors alter the attractiveness of this industry to both incumbents and those thinking about entering the market. The fine jewellery industry is very favourable for incumbents, with many exciting opportunities opening up. Looking at primary activities, supply chain management is a major strength, while struggles in this area include high inventory and the inability of the company to exploit online capabilities. Although Harry Winston operates in four regions worldwide, the company is still considered inaccessible as they have a very limited online purchasing interface. Marketing has traditionally been a strength for Harry Winston, having a definite competitive advantage in their branding and reputation, build on the principles of Harry Winston himself. In secondary activities, Harry Winton’s human resource management scores high, as well as patenting and successful product lines. In the Corporate Strategy section, Harry Winston occupies a strong position vertically in the value chain, being backwardly integrated with its interest in the Diavik diamond mine. Horizontally, Harry Winston is focused on businesses that create synergies: mining, rough diamond selling, diamond jewellery retailing, and retailing and manufacture of rare timepieces. Geographically, Harry Winston uses a Global strategy for its international endeavours; the strong Harry Winston brand exempts the company from needing to tailor their products to specific markets. In expanding internationally, Harry Winston has used a wholly owned subsidiary and licensing approach, building a retail salon network of Harry Winston owned boutiques, and also partnering with retail affiliates. In the Business Strategy section, it was discovered that Harry Winston needs to improve its customer service, ability to serve two distinct target markets, and overall online presence to stay competitive in a changing industry. <br />A strategy recommendation for Harry Winston has been presented, involving a website re-launch to better serve emerging markets in different languages, expand online selling capabilities, and showcase the jewellery pieces in a more artistic way. In addition, a complete rollout plan for a new line of Harry Winston diamond sunglasses has been designed, taking into account the company’s strong branding and backward integration. Following the action plan outlined, Harry Winston Diamond Corporation will address its need to become more accessible to new and emerging markets, while maintaining the status of their brand and not eroding the decadent luxury it has carefully crafted. <br />Table of Contents TOC \o \" 1-3\" \h \z \u Executive Summary PAGEREF _Toc247984345 \h 2Introduction PAGEREF _Toc247984346 \h 4Macro & Industry Analysis Highlights PAGEREF _Toc247984347 \h 6Internal Environment Analysis Highlights PAGEREF _Toc247984348 \h 8Strategy & Recommendations PAGEREF _Toc247984349 \h 10<br />Introduction<br />''People will stare. Make it worth their while.'' – Harry Winston<br />Harry Winston Diamond Corporation (HW, HWD) is a specialty diamond retailer of fine jewellery, a seller of rough diamonds, and has an interest in the diamond mining industry. Owning 40% of the Canadian diamond mine Diavik, located in the Northwest Territories, Harry Winston sells high quality rough diamonds to a global market. Leveraging such a supply of rough diamonds is a key strength for the company. Harry Winston Inc, which is owned by Harry Winston Diamond Corporation, is the luxury diamond retailing entity of the company, dating back to 1932, when a young jewellery designer founded his own company in New York, inspired by the spirit and the energy of the city. Since the humble start of acquiring famous jewellery collections and resetting the stones, Harry Winston has grown into Harry Winston Diamond Corporation, the world’s largest publicly traded pure diamond company, which purchased the retail entity Harry Winston Inc. in 2006. The company is renowned internationally as an exclusive, true luxury brand, with unparalleled quality in gemstones and hand set artistic fine jewellery. Before his death in 1978, Harry Winston created an excitement that still surrounds the brand today and a legacy as the inventor of modern couture jewellery. Harry Winston transformed the Academy Awards into the glamorous event it is today as he was the first jeweller to ever lend pieces to nominated actresses. For example, in 1943 Jennifer Jones won best actress wearing Harry Winston Diamonds. Actresses such as Gwyneth Paltrow and Halle Berry also followed in this best actress category sporting exquisite pieces borrowed from Harry Winston. Another testament to his star power is the amount of famous diamonds and gem stones Harry Winston himself owned, including the “Taylor-Burton”, the “Court of Jewels Collection”, and the most famous stone in the world, the Hope Diamond. This stone was donated to the Smithsonian Institute in 1958 and is considered Winston’s “gift to the world”. Named both the “King of Diamonds” and “Jeweller to the Stars”, Harry Winston not only created breath taking, quality jewellery pieces, but also decades of strong branding that continue to bring success to the modern company. <br />Currently, Harry Winston Diamond Corporation is headquartered in Toronto, Canada, and is responsible for the company’s mining interests and stock market activity. Harry Winston Inc, the retail entity, is headquartered in New York City, USA, and is composed of nineteen luxury diamond salons worldwide, with over 150 retail affiliates for the company’s luxury timepieces. The watch aspect of the company was not part of the original core business, but has become a very successful endeavour for the diamond jewellery company. Annual revenues for the company in 2009 total $609.2 million, while 2008 saw revenues of $679.3 million. Harry Winston Diamond Corporation employs 79 people and the company’s net income totals 70.1 million and 106.4 million in 2009 and 2008 respectively. <br />“If I could, I would attach the diamonds directly on to a woman’s skin” – Harry Winston.<br />What sets the company apart is Winston’s vision of how a diamond should enhance and draw attention to a woman’s beauty. Winston had a “pure stone” perspective which led to legendary designs of intricate settings for gemstones, allowing more dimension, light, sparkle, and the ability of his pieces to drape luxuriously. The current direction of the company is to build on their established luxury reputation, increase product offerings to enhance and expand their market position, and to serve the needs of the changing consumers emerging in the diamond jewellery market. The company’s market share is estimated at 0.05% (See section: Market Share).<br />Macro & Industry Analysis Highlights<br />An in-depth analysis and environmental scan of both macro and industry environments was performed for the jewellery industry. Through this several trends, opportunities, and threats were discovered. To evaluate North America, Asia, and Europe, proxy regions of the United States, Japan, and the European Union were chosen.<br />In the macro or general environment, technological advancement, online sales, population composition, urbanization, industry regulations and legal intellectual property protocols all present opportunities in the industry for incumbents. Considerable threats are seen mainly in the economic scope of poor performing economies, falling real GDPs, and little to no growth in disposable income, with consumers in some areas experiencing drops in their wages. Due to the nature of the industry, composed of non essential goods, an economic downturn presents an even more difficult situation for marketing and deciding on production levels. Socio-cultural factors such as marriage rates also pose a threat as the wedding and engagement segment is extremely important to this industry. <br />Looking specifically at the industry environment, no new jobs are being created but in terms of ROA, ROE, sales, and growth rates, the jewellery industry is thriving despite the recession. The threat of entry in this market is very low, given the backward integration trend in the industry and the high capital investment required to become a power player. The threat of substitutes is considered high, as treated and synthetic stones make jewellery much more affordable. However, in a true luxury market, the threat of substitutes is low, as natural stones are rare. As precious gems and metals are traded as commodities, suppliers do not possess a lot of power in this industry; they are price takers. Buyer power is fairly high as there are thousands of jewellery retailers worldwide, selling through a wide range of price points and outlets.<br />In conclusion to this industry report, the fine jewellery industry is very favourable for incumbents, with many exciting opportunities opening up. Throughout the current recession, the jewellery industry has shown resilience and demonstrated an ability to insulate environmental threats. <br />Internal Environment Analysis Highlights<br />An in-depth analysis of the internal environmental was performed for Harry Winston Diamond Corporation, separated by Primary and Secondary value creating activities. Looking at primary activities, supply chain management highlights include Harry Winston’s synergy between diamond mining and retailing, and their handcrafting in Harry Winston workshops. Struggles in this area include high inventory and the inability of the company to exploit online capabilities. Operations for Harry Winston focus on their 100% ownership of Harry Winston Inc., the retail entity of the corporation and the company’s planned expansion of their exclusive salon network. Although Harry Winston operates in four regions worldwide, the company is still considered inaccessible as they have less than twenty retail outlets and a very limited online purchasing interface. Operationally, Harry Winston’s strengths lie in having high sales per store and high overall sales in their industry. Distribution for the company focuses on personal, in store selling. An industry trend, however, shows companies moving to expand their online distribution systems, which poses a challenge for Harry Winston; the company must keep a luxury status (exclusivity) while optimizing online sales potential. Marketing has traditionally been and continues to be a strength for Harry Winston. They have a definite competitive advantage in their branding and reputation, build on the principles of Harry Winston himself. Revenues for the company have been increasing over the last three years, not including the economic slump of 2009. The marketing mix for the jeweller is comprised of high quality products, luxury mark up prices, marketed globally, using various promotions with a heavy focus on publicity and celebrity. Harry Winston offers customer service equivalent to the offerings of their competitors. Personalized customer service is an area of strength for the company, while the nonexistence of warranties for their products is a source of potential problem. <br />In secondary activities, Harry Winton’s human resource management scores high; they have the highest employee productivity of their competitors and offer attractive benefit plans. Research and development is an important area of focus for Winston; although their mining and exploration is not as expansive as that of DeBeers, they still hold a competitive advantage above others in the industry. Patenting and successful product lines are also organizational strengths. In terms of corporate leadership, Harry Winston executives bring valuable experience and expertise to the company, who has an advantage in recruiting top personnel. <br />Harry Winston has been evaluated using an internal factor evaluation matrix, as well as Hitt’s Typology. Normalized financial statements have been discussed in depth, leading to the conclusion that Harry Winston is an industry leader, holding several valuable, difficult to imitate competitive advantages. Areas of improvement and challenges for the company have also been presented. Harry Winston Diamond Corporate has been structured in a way to optimize and exploit their core capabilities, and opportunities exist in both primary and secondary value creating activities to further strengthen the legendary diamond organization.<br />Strategy & Recommendations<br />In the Corporate Strategy section, Harry Winston occupies a strong position vertically in the value chain, being backwardly integrated with its interest in the Diavik diamond mine, its supply for rough diamonds it sells, and diamonds it uses in jewellery manufacture for its retail segment, Harry Winston Inc. Horizontally, Harry Winston is focused on businesses that create synergies: mining, rough diamond selling, diamond jewellery retailing, and retailing and manufacture of rare timepieces. Geographically, Harry Winston uses a Global strategy for its international endeavours, allowing the company to centralize corporate decisions and offer streamlined products across all regions it markets in. The strong Harry Winston brand exempts the company from needing to tailor their products to specific markets. In expanding internationally, Harry Winston has used a wholly owned subsidiary and licensing approach, building a retail salon network of Harry Winston owned boutiques, and also partnering with retail affiliates to sell its jewellery and watches. This strategy has brought the company success, but limits access to new and emerging markets as online selling and showcasing of products has only recently been explored by the company, and this segment has not been optimized; Harry Winston’s competitors are much more online present. <br />In the Business Strategy section, it was discovered that Harry Winston needs to improve its customer service, ability to serve two distinct target markets, and overall online presence to stay competitive in a changing industry. A five year online functionality plan, including expanding regions the company sells to online, products offered, and a members only application to improve overall customer service and tailor programs to their two target markets. <br />The proposed action plan and strategy recommendations for Harry Winston Diamond Corporation takes into account trends in the external environment such as aging world populations, technological advances and emerging markets. The two specific target markets, 25-35 year old wedding market and the 45-60 year old high income category will both be better served under the new plan. Harry Winston will now take advantage of advances in online retailing and e-commerce specialties through the knowledge of experienced firms. Industry trends in specialization and online selling are also taken into account under this plan, as well as leveraging on Harry Winston’s core competencies while expanding its abilities to create new sustainable competitive advantages. Harry Winston will also take advantage of its backward integration to expand into a new line and begin selling premium sunglasses. Analysis of the sunglass industry has shown this to be a very lucrative market allowing market growth success for Harry Winston. Harry Winston will combine its projected growth in online capabilities with the expansion of product offerings to produce a strategy capable of sustaining its competitive advantage in the luxury goods industry.<br />