Tissot Watch Company Analysis - Essay Example

?Choose ONE product/service of a popular company or any company which is listed on a stock exchange market and write an essay or a report Contents Contents 2 Tissot Watch Company: 3 Elasticity: 5 Economic growth: 6 Unemployment: 6 Inflation: 7 Balance of Payments: 7 Business Cycle: 7 References: 9 Tissot Watch Company: Tissot, one of the branded Swiss watch manufacturer founded in 1853 came into the limelight by manufacturing the first anti-magnetic watch in 1929-30. In present times, Tissot is associated with various sporting events developing more accurate timing systems for a specific event. In this tenure there are several factors which affected the sales and profitability for the company to sustain in the industry. The first and foremost is brand recognition. Tissot relies heavily on different strategies that require lots of investment in advertising to create product value. As Tissot involved well known personalities to promote their products, this acted in their favour create brand recognition in the industry. The consumer base of the company has been strong enough which enabled the organisation to take steps into new products which in turn will attract new customers and cement the consumer base. Marketing and communication sets Tissot stand differently from its competitors. The design of the watches is built in such a way so that it attracts every level of consumers if not income wise but choice wise. Tissot took the step in distributing their products in different markets which not only raised their sells but penetrate other markets and drive out their competitors. The Swiss watch manufacturer has large and highly skilled pool of labor. They are trained for the specific purposes and latest innovations and techniques are injected into the products which affects the sales of the company. The price of the products is set at such a level which attracts targeted customers. The prices are competitive with other competitors in the industry and technological advancement is the factor which differentiates its products from other competitors. A huge product base is also offered for the customers with different price ranges. Luxury watches are defined as those watches which have a factory gate price of over CHF 500, and corresponds to more or less to sale price of over CHF 1500. A Harvard Business School Professor stated a ‘five forces model’ to make an analysis of the watch industry. There is the threat of new entrants which may be able to attract the consumer bases of the already existing players. There is rivalry among the players in terms of pricing, branding and advertisements. The only difference the watch industry has from all other industries is that it is not possible to deliver substitutable products. That is why the other aspects of business are foremost in this industry [Gautschi, 2005, pp. 7-8]. (Gold, Godsey, Cernusca, 2003, p. 9) The key to sustain in the Swiss watch industry is in fulfilling the strategic and operational goals of an organisation. Tissot has been able to capture a consumer base but in order to sustain in the industry the need of the time is inject new technologies and pricing strategies. Injection of new technologies will involve investments and the current needs of the market need to be identified. Once the needs are identified, new products are injected into the market using appropriate process strategies. Tissot should also have adequate back up plans for sudden entry of new competitors into the market. These unexpected moves are required to be handled efficiently. Research and development is one of the key areas which cannot be eliminated from any company in order to sustain in an industry (Adler and Shenhar, 1989, p. 10). Time should be spent on new product innovation and marketing of the products around the globe. Elasticity: One of the important concepts that can influence the pricing strategy is price elasticity of demand which shows the change in the quantity demanded of a certain product due to change in the price of the same product. Tissot will have to analyse the change in the demand of a certain watch due to change in the price of the same product. Suppose Tissot reduces the price of one of its products by 10% and the demand of the same product increases by 20% then the price elasticity is 2. The demand curve of the watches are said to be elastic. Again if the price of the same watch increases by 10% but if the demand rose by only 5% then the demand curve comes out as inelastic (Biz/ed, 1998). Another important concept is the income elasticity which is referred to as change in demand of a certain product (watches in this case) due to changes in the income of the people keeping the other conditions as constant. Since watches are considered as normal good the income elasticity it will be positive. Elasticity of cross price is measured as the variation in demand for a product (watches) due to fluctuations in the price of substitutes of that good. In this case if the competitor of Tissot reduces the price of its products it will have an effect on the demand of the products of Tissot. Tissot has been able to achieve a double digit growth in 2011 in its 160 markets in which the brand operates. This is the sixteenth consecutive year the brand is travelling on the continuous growth path. Tissot has been able to drive a huge investment in its headquarters in this year itself. In the international timing competition Tissot won in the ‘classic enterprise’ category. Tissot introduced its racing watch which has been a revolution. In 2011 Tissot joined hands with 500 sports events. This provided Tissot to showcase their products. These new partnerships cemented the position of the organisation as the watch brand in disciplines of two wheeler sports. The company took steps to invest in the new automated warehouse facility. This system has the ability to cater almost everything from unpacking and registering the products to the dispatching of orders. The newly installed quality standard system ensures watches of highest standards and specialized soft ware’s can locate a watch anytime anywhere. Tissot came out as the brand of heritage which cannot be forgotten by innovation of techniques in the watch manufacturing industry (The Swatch group annual Report, 2011, pp. 60-62). Economic growth: The increase in per capita income or an increase in Gross National Product is referred as economic growth. Switzerland’s economy is characterised by highly skilled labor, low rate of unemployment and with GDP rate that is one of the highest in the world. Watch manufacturers or all industries are likely to be benefitted because of economic growth. Tissot is also likely to be benefitted from economic growth as this will increase exports and increase the demand of watches. This will act to increase the revenue of the organisation and hence the organisation will be able to accrue profits. However the negative impact of economic growth is that the economy can be at a level from where the growth possibilities stabilise. The organisations which already have made their long run plans are likely to get penalised. Unemployment: A situation characterised by unemployment can have diverse effects on the success of Tissot. If Tissot is not using all its resources then it will operate below the production possibility frontier and are worse off in this situation as it could have levels of output if all its resources would have been utilised optimally. There is a trade off between economic efficiency of a certain organisation (Tissot in this case) and unemployment as if the frictionally unemployed labour forces are offered their first job, they will operate at below the skill level and in that case this would reduce the efficiency of the economy and for Tissot as well. Inflation: Inflation with create uncertainty in the market and businesses will dealt away from investment causing organisation like Tissot to suffer. It will also raise the rate of interest. Inflation will lead to rise in the input prices, which in this case are the raw materials, required in manufacturing the watches which is reduce the profit margin. Inflation also has its effects on trade. If Switzerland has higher inflation than its competitor then the prices in Switzerland will rise above the imported price and demand will leak out of the country. This will have a detrimental effect on Tissot as the organisation is dependent on trade (Bowett n.d.). Balance of Payments: Healthy balance of payments position boosts the confidence of investors and the money can be diverted to research and development which will provide long run benefits for Tissot. Variations in balance in payments will lead to reductions in demand in circular flow and there will be reductions in aggregate demand which is not fruitful for Tissot. There will be simultaneous dip in business confidence and reductions in the pressure of inflation. Business Cycle: There are four phases in business cycle namely prosperity, recession, depression and recovery. In prosperity phase there will be high levels of effective demand along with high levels of output and trade which will be fruitful of Tissot. Recession and depression phases are unwanted for Tissot as success is likely to suffer due to fall in volume of output and demand. In recovery phase the demand expansions takes place and production increases. There is also increase in the level of investment and this will bring fortunes for Tissot after the early phases where results were below expectation. The profits will start to rise and expansion of business occurs. References: Gautschi K, 2005. The Swiss Luxury Watchmaking Industry, [Pdf]. Available at: http://www.hec.unil.ch/cms_irm/gautschi.pdf [Accessed 7th March, 2012] Gold M, Godsey L, Cernusca M, 2003. Eastern Redcedar Market Analysis, [Pdf]. Available at: http://www.centerforagroforestry.org/profit/redcedar/analysis.pdf [Accessed 7th March, 2012] Adler, P. And Shenhar, A., 1989. Assessing The Company’s Technological Base, [Pdf]. Available at: http://www-bcf.usc.edu/~padler/research/Technological%20Base-1.pdf [Accessed 7th march, 2012] Biz/ed, 1998, Price Elasticity and Pricing Policy, [online]. Available at: http://www.bized.co.uk/learn/business/accounting/busaccounts/notes/pl.htm?page=14 [Accessed: 7th March, 2012]. 2011, The Swatch Group Annual Report [Pdf] Available at: http://www.swatchgroup.com/en/content/download/3250/121194/version/8/file/2011_annual_report_complete_en.pdf [Accessed: 7th March, 2012]. Bowett R., External environment-business and inflation, [online]. Available at: http://tutor2u.net/business/external/economy_inflation.htm [Accessed: 7th March, 2012]. Read More