TIffany and Co.
TIffany and Co.
TIffany and Co.
Competitive
Analysis
Team 6
Jessica Aragon
Raynee Bradley
John Cayo
Cole Naylor
Jessica Wilson
Brandy Wolfe
Click Me?
Current Strategy
Launching new, lower-priced products to take
advantage of the growing number of consumers
demanding quality goods at lower prices.
Target: Middle income - introduce products with
prices ranging from $100 to $250
Affordable luxury and Exclusive luxuryMix?
Must assure its affluent customers that the quality
of its products and service has not lessened even
though its brand has become more affordable.
Has created mass amounts of short term revenue,
but in the long run it could be detrimental to the
once timeless, exclusive brand.
Accounting/Financial
Strategy
Accounting Criteria
Tiffany and Co. is consistently conservative in its financial
and accounting practices.
As required by U.S. law, Tiffanys employs GAAP
accounting, but also maintains industry norms for choices
not specified by GAAP.
Tiffanys previously used the LIFO inventory method, but
has recently switched over to the Average Cost method.
The majority of competitors use the FIFO method.
Accounting Flexibility
The use of GAAP practices allows for
a great deal of flexibility in several
areas.
The options available for inventory
costing, depreciation, goodwill, and
pension accounting provide
companies with leverage and
flexibility in their financial
statements.
Flexibility in Inventory
Flexibility in inventory costing can change
margin, profits, and expenses.
Tiffanys previously employed the LIFO
costing method which creates the highest
inventory expenses of the three methods.
This also portrayed lower profit margins and
more conservative accounting
Flexibility in Pension
Accounting
Pension accounting practices in the U.S. has
been recently scrutinized.
In order for Tiffany and Co. to more accurately
estimate pension expenses indices such as the
Merrill Lynch yields reports are referenced.
Tiffany and Co. also uses what is know as the
projected unit credit actuarial method for
financial reporting of pension expenses.
This method involves the use of a certified actuary
to estimate and attest to the estimated pension
expense to be realized by a company, and is
regarded to be the most accurate and reliable.
Return on Equity
ROE Explained
Tiffany and Co. shows not only a greater
ROE than its competitors and the
industry, but also a more steady ROE over
the years. There are no drastic changes
like those experienced by Zales and
Tiffanys continues to maintain strong
numbers in the twenties and teens which
portray high profit returns from the
money invested by stockholders. This
makes Tiffanys attractive for investors.
Gross Margin
Target market
Upper-middle to
high income consumers
Advertisements
Pop culture
Something for everyone
Weaknesses
Opportunities
Threats
Counterfeit goods
Increasing rental rates in
US
Slowdown of US economy
Competitor SWOT
Blue Nile
Strengths
Weaknesses
Opportunities
Threats
Counterfeit goods
Slowdown of US economy
Bulgari
Strengths
Weaknesses
Opportunities
Threats
Counterfeit goods
Slowdown of US economy
Relative Competitive
Strength
How does Tiffany & Co.
measure up against their
competition?
Resources
Financial stability
Large stores in expensive areas
Store expansions here and abroad (206
locations)
Famous designers
Elsa Peretti
Paula Picasso
Frank Gehry
Assets
Most valued assets is the Tiffany brand
others valuable assets include quality and
reputation
Imitations
Many product styles are imitated
but none are comparable in quality
Counterfeit goods (streets and eBay)
Tiffany Blue Box is non-imitable
Substitutes
Other symbols of status and
success: cars, clothing,
cosmetics, hand bags, homes
The average Tiffanys consumer
is also purchasing beautiful
homes and expensive cars.
Superior race that strives for
elegance, quality, and exclusivity
in all aspects of their lives.
Cost Strategy
There are three types of cost strategy:
Cost Leadership
Differentiation
Focus
Differentiation or Focus?
Tiffanys offers a broad product range to
several types of markets.
Their main focus is in the fine jewelry and
bridal markets.
The signature blue box which Tiffanys is
known for differentiates it from all other
companies.
However, Tiffanys is more focused on separate
markets and target groups within them
suggesting a more focused cost strategy.
Cost Structure
Tiffanys main source of capital is through
external investors, not debt financing
As previously stated, the main cost is the
cost of raw materials.
The strong-hold over diamonds by companies
like DeBeers and Aber Corp. have forced
Tiffanys into long term contracts for raw
materials purchasing.
This reliance on diamond is also placed on
Tiffanys competitors
Inventory Costing
Tiffanys used the LIFO method for
inventory costing for years, but recently
switched to the average cost method.
Most of the jewelry industry, and
Tiffanys main competitors use FIFO
instead.
This inflates competitor financial
statements by portraying a smaller number
for inventory expenses
Leverage Ratio
Identifying Strategic
Issues and Problems
Scenario Analysis
A scenario analysis is basically a what-if
analysis.
The purpose of this analysis is to allow improved
decision-making by addressing all issues and
giving full consideration of outcomes and their
implications.
This will involve evaluating the current condition
of the companys external environment,
consumer environment, and internal
environment.
Realistic Options/Choices
Locked into the option of only making
improvements in their same basic
strategy.
There are two basic options:
Option 1: Broaden Scope Through
Lower-Priced Jewelry
Option 2: Focus on Brand Image
and Exclusivity
Advantages and
Disadvantages
Advantages
Increases sales and market share
Preserves the missing segment of
aspirational buyers
Stabilizes the company during the recession
Disadvantages
Advantages and
Disadvantages
Advantages:
Consistent with the brand image
Maintains long-term success
Upholds the companys exclusive
reputation
Disadvantages:
Risk riding out the recession
Short-term loss of profits and market share
Favorable Option
We feel that option 2 is the most favorable
option for the company.
Recent results with Tiffany & Co have proven
that lower-priced products compromise the
integrity of their brand. ~ silver charm bracelet
These lower priced products are likely to
alienate the jewelry firms older, wealthier, and
more conservative clientele. In the end, it could
possibly forever damage Tiffanys timeless
reputation and image for luxury.
Strategy
Our strategy for Tiffany and Co. came
down to one key factor that needs to be
maintained: their exclusive brand.
Effective branding creates market resilience.
The Tiffany blue box and the Tiffany & Co.
brand has developed into one of the best-known symbols
for quality, prestige and value in retailing.
CEO Michael Kowalski states We dont plan any
dramatic change in strategy. Like all good luxury brands,
we manage this company from a very long-term point of
viewwe are certainly going to [continue to] do that.
Tiffanys needs to adapt while still holding on to their
core value, which strengthens their brand image. Stick to
what they do best!