The Channel Market, Competition, and Distributions Patterns of Rolex Company - Research Paper Example

? Research Paper of the Contents Contents 2 Introduction 3 Company 3 Products 4 Product Distribution System 4 Geographic coverage 4 Distribution Channel Market 4 Distribution pattern 5 Marketing Strategy 5 Economic drivers 7 1. Inflation 7 2. Interest Rate 7 3. Monetary policy 7 4. Exchange Rates 8 Business Drivers 8 1. Demographic Shifts 8 2. Innovation 9 Competition 9 References 11 Introduction Rolex is one of the leading name in luxury wristwatch industry and is considers as a status symbol worldwide. Since the company has been successfully meeting demands of its consumer and consistently introducing creative and innovative designs in the market, the management and distribution strategies followed by the wrist watch manufacturer is of great interest. One of the critical aspects in quality management is logistics and supply chain as well as channel management. In the present research, various channel management strategies of Rolex will be evaluated. The research will throw light on the distribution patterns and various marketing strategies. Competitor analysis and business drivers will also be discussed. Company Description Rolex is a private watch manufacturing conglomerate involved in production, distribution and service of wristwatches under Tudor and Rolex brands. It was founded in the year 1905 in London, England by Alfred Davis and Hans Wilsdorf. The current headquarters is situated in Geneva and it has its distribution arms worldwide. Gian Riccardo Marini is the current CEO and by 2010, the total revenue earned by the watch manufacturer was 5.1 billion dollars. The company has over 2000 employees and produces more than 2000 watches every day (Yahoo, 2013) A Rolex watch on the wrist of a customer is expected to enhance the personality and style of that person. It has become a symbol of great taste and fashion. Since these watches are exclusively designed for upper class segments, not many of the people get the opportunity of owning this prestigious brand. In the year 2007, Rolex was announced as 71 on a list of 100 most valuable brands of the globe by Bloomberg Businessweek (Businessweek, 2007). During its tenure the company has achieved many milestones in terms of innovation and creativity. In the year 1926, Rolex introduced waterproof watch and became the first brand to do so. All Rolex watched are designed and manufactured with materials of dine quality and with much detail so that chances of error and mistakes are minimized. Focusing on developing well-designed and realistic marketing and channel distribution strategy is crucial in order to build a successful brand. Products The major brands produced under Rolex SA are Tudor and Rolex. There are three watch lines for Rolex; Professional, Oyster Perpetual and Cellini. Some of the famous modern and well-known models of the Rolex brand includes submariner, Yacht- Master, Day-date, Daytona, Day-just etc. Few of the famous Cellini models include Quartz Mens, Cellinium, Cestello Ladies etc. Retail pricing varies according to quality, materials used and models. Accordingly, Rolex watches can range from 650 dollars to 80000 dollars. Product Distribution System A distribution strategy is used in order to make products available to the target customers. Rolex has a worldwide presence. Naturally, the company has been using a comprehensive distribution strategy in order to reach its customers residing in various ends of the globe (Kerin, Hartley & Rudelius, 2011).The overall product distribution system includes geographic coverage, distribution channel market and distribution patterns. Geographic coverage Rolex is an international brand. The brand name Rolex was developed so that it can be easily pronounced in various languages. Having a famous Swiss background has made the brand easily recognizable in North America and Europe. The brand covers 28 worldwide affiliates and has around 4000 watchmakers working in more than 100 countries round the globe. The brand has established retail distribution in almost every continent, except Antarctica. The major target segments of Rolex brand include high-end customers and luxury buyers. Apart from Europe and America, which consists of its major markets, the brand is also gaining market in emerging economies such as China and India. With the increase in living standard and trend towards luxury shopping, scope of Rolex in these emerging economies is huge (Dibb, 1998). Distribution Channel Market The brand follows a concentration strategy to distribute its products in the market. Unlike other watch brands that follow multi-segment strategy, Rolex follows the strategy of concentrating into only one segment of the market (Lankarani, 2009). This helps them in focusing all of their efforts in one particular area. Since it is a luxury segment, it does not require placing its products in every corner of the city. Few of the popular luxury stores and exclusive outlets get the opportunity to sell Rolex through their franchisee. In order to keep its brand equity intact, the company only targets those stores and outlets which are visited by high-end customers. Most of the stores having Rolex are located in big cities and the stores are established in prime locations. Distribution pattern In this topic of distribution pattern of Rolex brand, logistics, Physical distribution and electronic distribution patterns will be discussed. While talking about international distribution system, selection of quality suppliers is the first priority. Since it is a luxury segment, maintenance and precautions while travel is crucial. Thus, the company makes sure that only best supplies are selected for the company’s distribution system. The inventory management estimates and determines production and manufacturing of watches, according to the current and forecasted demand. Because of the sensitivity of the consumer preferences, the inventory management team is closely associated with the market research and development team (Venard, 1996). Since the volume of production is quite low compared to other everyday brands, overhead costs are minimum. The major channel distribution occurs through intermediaries and selected retailers who sell Rolex brands directly to the customers. Marketing Strategy Researchers have agreed that brand awareness is one of the best ways to measure the strength of a brand. Thus, building positive brand awareness is the first step of the luxury watch brand in creating an effective marketing strategy. High brand awareness is a result of positive brand associations which ultimately results in positive consumer perception. Thus, brand awareness can be considered as antecedent to brand loyalty. Together these attributes have the capability to influence consumer perception in a positive way. Marketing strategy is a vital part of any business or non-business organization and has been continuously playing a significant role in overall business of firm. Marketing strategies are essential part of the overall marketing mix. In the current business environment elements such as publicity and interactive marketing also play a vital role in overall marketing communications (G.E. Belch & M.A. Belch, 2007). In fact, many critiques have argued that marketing communication is an essential function connecting the consumers with the company, influencing stakeholder’s activities such as information processing and overall building of the brand (Blythe, 2006). The need of marketing communication arises as a result of various changes in markets, consumers as well as corporations. As a result of product and brand proliferation brand loyalty is decreasing and price sensitivity among consumers is increasing. Thus Rolex consumers are now demanding more. Consumers now expect for better services, lower prices and better qualities. Consumer lifestyle has become diversified and customer empowerment is forcing the luxury watch maker to introduce quick changes and bring new communications strategy on board (Barnes, 2007). Apart from the external factors, contribution of internal factors is also critical for the successful implementation of integrated marketing communication. The brand is now facing cost inefficiencies and brand communication inconsistencies as a result of increasing departmentalization and increased global reach. This has complicated the overall communication channel between different department and functions in the organization. The two major elements of Rolex’s marketing strategy are conservatism and tradition. Though the company has been following this strategy for years, recent changes in economy and shifts in consumer preferences have forced the company to look into new strategies for communication. However, the ‘mystery element’ created by the brand has worked well. Previously, Rolex was an all men brand but slowly it penetrated into female segment. The major advertisement strategy follows by Rolex include sponsorships and celebrity endorsement. The major mediums used in this regard are newspaper ads, magazine ads, billboards and television commercials (Paswan, Blankson & Guzman, 2011). In-store Experience is one of the most common and majorly used strategies to build positive customer experience. Recent enhancements through mobile and digital technologies have increased the user experience (Atwal & Williams, 2009). A strategic in-store experience added with a tailored approach has been the most basic approach for the brand to attract new customers as well as keep loyal customers visiting the store again and again. Though internet marketing is on the rise, in case of luxury watches such as Rolex, personal touch and physical evaluation are important characteristics of customers before final purchase decision. Economic drivers Economic drivers are factors having material affect either on organization’s earning or its stick prices. There are few economic drivers which affect almost all industries. However, the extent of impact differs from sector to sector. Few of the important economic drivers and their influence on brand Rolex will be discussed. 1. Inflation A rise in general price level of services and goods of an economy over a time period is termed as inflation. With the rise in price level of general items, fewer services and goods are bought by unit currency. Thus over time, it also reflects erosion of overall purchasing power. Inflation can be cost push or demand pull. In case of Rolex, both drivers will have affect. A rise in general consciousness among people and cutting costs especially in luxury items will have an effect on the sales of Rolex. Falling customer sentiments might further reduce sales and overall profit. Increase in operational costs such as wages, transportation, equipments and raw materials have forced the organization to increase pricing of few of its brands. This in turn has reduced overall traffic flow to Rolex outlets. Thus, it is very important for Rolex to keep a track on the inflation changes and upgrade its system so that strategies can be matched and customer sentiments can be restored. 2. Interest Rate Interest rate is the cost paid to a lender by a borrower for a particular sum of money known as principle, to be paid within a certain period of time. Interest rates can have major impact if they are not assessed correctly. In order to avoid miscalculations, the brand should always remain alert of the changing interest rate policies. Few assessment strategies such as checking the viability of current business plans, assessing external as well as internal conditions and resource availability as well as evaluating those factors that might be impacted during change of loan terms, might go a long way. 3. Monetary policy The Process by which a particular country’s monetary authority controls the supply of money is termed as general monetary policy. This is done majorly by changing short term interest rates. The aim is to achieve stable economy by targeting specific growth regulators. Stringent monetary policies will have particular effect on the company’s operations. In the present economic conditions, the brand will have to be alert in case of deadlines and submission of important papers. Failure to comply with any regulations might hamper the overall relationship of the company and the national government. 4. Exchange Rates Exchange rates generally occur between two countries. It is the rate at which currency of one country is exchanged for other. Exchange rate of a country can be influenced by many factors such as interest rates, inflation, economic outlook and balance of payments. Currencies of nations having high inflation rates are likely to deteriorate. Thus, any long term deal with foreign economies might have a direct impact on the revenue general of Rolex. Also, financial forecast might be difficult as a result of fluctuating exchange rates and might result in a derogatory growth. In order to stay away from the impact, the brand can engage itself in short term financial deals in order to decrease overall risk. Business Drivers A business driver can be condition, process or resource that is essential for the continued growth and success of the business. Identification of business driver is critical as these drivers should be monitored and controlled. Since operations and internal business processes are more complex than ever, identification of business drivers have become all the more difficult. Various business drivers have been identified which have a direct impact on the overall external and internal operations of Rolex Brand. 1. Demographic Shifts Changes in demographics have never been so rapid and continuous. As a result of the shrinking workforce and ageing population, global employers are facing major challenges. Rolex is a multinational brand having its presence in more than 100 countries. Recruiting best people for its services and targeting the right demographics are major challenges which the company faces today. Increasing number of women and young employees are filling the present gap (Roberts, Kossek & Ozeki, 1998). The shift in demographics is also a sign that Rolex will have to adjust its targeting and marketing strategies in order to match the growing demands of its target market (Erdem, Swait & Valenzuela, 2006). As the talent market is increasingly becoming mobile and global, a number of career oriented individuals are exploring opportunities overseas. Thus the company has also got options of hiring talented individuals from different nations and culture, thereby increasing cross-cultural development. 2. Innovation Innovation has always been a key business driver for every organization. Technological innovations have always had a greater impact on society and business. In case of Rolex technological innovation has always provided an edge over competitors. However, emerging markets are increasingly becoming innovation hotbeds and they have successfully made strategies in order to reach the low income global customers as well as growing middle class. This provides an opportunity for the luxury watch brand to spread its arms in these emerging economies. Competition In order to understand the competition, it is essential to evaluate the luxury segment in which Rolex Falls. As luxury is differentiated into many categories according to its affordability and necessity, luxury customer profiles also differ according to the purchase pattern (Vigneron & Johnson, 2004). Luxury customers can be differentiated into three categories, absolute, trigger and bandwagon customer. Absolute customers are those who fall in the 0.5 percent of the population in terms of wealth. Economic downturn has little or no effects on these consumers. They always look for most expensive items and seek exclusivity in the products they purchase. Trigger consumers are characterized by high education and high disposable income. These are trend setters as well as sensitive to luxury brands (Dibb, 1998). It has been observed that most of the trigger consumers in emerging markets are younger and seek to flaunt their wealth. The third and last, bandwagon group can be characterized by those consumers who aspire and want to imitate the lifestyle of the richer classes. During early days, Rolex was targeting only absolute customers. But as a result of increasing trigger customers, the company has also started targeting them. Looking at the distribution and brand loyalty, the major competitors of Rolex are Movado, LVMH, Hublot, IWC and Panerai. Most of these luxury watch brands target both high end men and women and have its branches in majority of developed countries. However, Swiss watches have got an unprecedented advantage of sophistication and style and because of this the company is recognized as one of the most likable luxury brand worldwide. References Atwal, G. & Williams, A. (2009). Luxury brand marketing – the experience is everything. Journal of Brand Management, 16(5/6), 338-46. Barnes, S. (2007). Virtual worlds as a medium for advertising. Advances in Information Systems, 38 (4), 45-55. Belch, G. E. & Belch, M. A. (2007). Advertising and promotion. New York: McGraw-Hill. Blythe, J. (2006). Marketing. London: Sage Publications. Businessweek. (2007). Best global brands. Retrieved from http://www.businessweek.com/stories/2007-08-05/best-global-brands. Dibb, S. (1998). Market segmentation: strategies for success. Marketing intelligence & planning, 16(7), 394 - 406. Erdem, T., Swait, J. & Valenzuela, A. (2006). Brands as signal: A cross-country validation study. Journal of Marketing, 70(1), 34-49. Kerin, R. A., Hartley, S. W. & Rudelius, W. (2011). Marketing. Boston: McGraw-Hill/Irwin. Lankarani, N. (2009). Special report: Watches. New York: New York Times Publishing. Paswan, A.K., Blankson, C. & Guzman, F. (2011). Renationalise in marketing channels and marketing strategy. European Journal of Marketing, 45(3), 311 - 333. Roberts, K., Kossek, E. & Ozeki, C. (1998). Managing the global workforce: Challenges and strategies. Academy of Management Executive 12(4), 93–106. Venard, B. (1996). Vietnamese distribution channels. International Journal of Retail & Distribution Management, 24(4), 29 - 40. Vigneron, F. & Johnson, L.W. (2004). Measuring perceptions of brand luxury. Journal of Brand Management, 11(6), 484-506. Yahoo. (2013). Rolex financials. Retrieved from http://finance.yahoo.com/quotes/Rolex,R;_ylc=X3oDMTIzN2x2MXZnBGtleXcDUm9sZXgsUgRtaWQDbWVkaWFxdW90ZXNzZWFyY2gEc2VjA2dldHF1b3Rlc2J0bgRzbGsDbXVsdGlfcXVvdGU- Read More