Ikram Thesis Old

Research study of Tiffany Co
&
Its Strategic Management
A thesis submitted to Sarhad University
By
Ikram Hussain
Dissertation submitted in partial fulfillment for the degree of BBA
Faculty of Business
Dissertation Supervisor
SIR KHURAM AMIN
NOV-2013
The Sarhad University
i
Strategic Management
IN THE NAME OF ALLAH MOST GRACIOUS
AND
MOST MERCIFUL
Acknowledgement
I would like to thank the people who participated and helped me a lot from the beginning of
my research to its end. I would like to thank my father Mr. Tariq who helped me throughout
the research and give me different references and books to refer from.
Then I would like to thank my Professor Mr. Khuram Amin who on every step guided me
and gave me a lot of motivation and support for my research. I am also very thankful for his
valuable suggestions.
Then most importantly I am really thankful from the depth of my heart to The Sarhad
University that gave me the opportunity to make the research on motivation. I am also very
thankful to the university for the way they helped me to complete my bachelor and I am
hoping to take master degree.
I was advised and guided by different people and I want to thank all those people for helping
me successfully complete the research.
Finally I would like to thank all the companies and other professional who gave me chance to
conduct the research. I dedicate this dissertation as an excellent achievement of my
educational life to all members of my family, especially to my dearly parents and wife who
were so patient and helpful.
Abstract
The purpose of this research is to discuss about the industry of jewelry retail leader Tiffany &
co. We will emphasize on its history and progress through the years. The main purpose of this
paper is to find out the main aims and objectives of this enterprise. We will also look at other
aspects like its organizational structure and working. We will also be discussing the range of
different products that tiffany and co has to offer.
Strategic issues will and problems will also be addressed in this page. Advertising, marketing
and strategy will be another main focus of discussion. Tiffany & co is a leading enterprise in
the jewelry retailer group. Likewise we will enlighten the readers about the most authentic
sort of structures and plans that are used.
Tiffany & co.s human resource management and planning will also be discussed in this
paper. How it works? How it plans? How it has progressed in the world? All of these
questions will be answered and discussed in an extensive manner.
The Foreign policy for this trade also needs to be kept in mind and pondered upon. This trade
is very regulative. Therefore all the rules and regulations need to be applied and kept in mind
before doing any sort of business. The slightest of mistakes can lead to hefty fines and
closure of the organization. Like conflict jewels cannot be brought in or out for sales. As they
do not have a proper trail or following.
We will also be discussing the importance of strategy. Strategies that involve cost, marketing,
revenues and profits etc. having a strategy is very important factor in an organizations
success and prosperity. If there is no strategy to implement then there cannot be any sort of
success. There has to be a strong plan for working and maintaining an organizations success.
Without a proper strategy any organization will lose its way and wont be able to succeed.
We will further emphasize on the competition and rivals in the market. How tiffany and co
keeps themselves competitive in the market. How they keep their margins of profit up and
what is the main threat to them from these competitors.
Contents
Acknowledgement............................................................................................................iii
Abstract.............................................................................................................................iv
Chapter 1....................................................................................................................................1
Introduction................................................................................................................................1
1.1 OVERVIEW................................................................................................................2
1.2 Mission Statement.......................................................................................................2
CHAPTER 2..............................................................................................................................3
Introduction to Company Profile...............................................................................................3
Introduction to Tiffany and CO.........................................................................................4
2.1 TIFFANY & CO..............................................................................................................4
2.2 PRODUCTS....................................................................................................................5
2.3 HISTORY........................................................................................................................6
CHAPTER 3..............................................................................................................................7
Strategic Issues and Problems...................................................................................................7
Identifying Strategic Issues and Problems.........................................................................8
3.1 Strategic Issues and Problems.........................................................................................8
3.2 Internal Environment Scanning.......................................................................................8
Marketing...................................................................................................................................8
3.3 Advertising.......................................................................................................................8
3.4 Products...........................................................................................................................9
3.5 Target market...................................................................................................................9
3.6 Human Resource..............................................................................................................9
CHAPTER 4............................................................................................................................11
Strategy....................................................................................................................................11
4.1 Strategy..........................................................................................................................12
4.2 Grand strategy................................................................................................................12
4.3 Levels of strategy...........................................................................................................12
4.4 Corporate level strategy.................................................................................................12
Business level strategy.........................................................................................................12
Functional level strategy......................................................................................................12
Cost Strategy........................................................................................................................13
FOCUS................................................................................................................................15
Differentiation......................................................................................................................17
Benefits of differentiation....................................................................................................18
Cost leadership.....................................................................................................................19
Differentiation......................................................................................................................20
4.5 Cost Structure................................................................................................................20
4.6 Key Success Factors and Core Capabilities...................................................................20
Key Success Factors............................................................................................................20
Core Capabilities.................................................................................................................20
CHAPTER 5............................................................................................................................21
PESTEL...................................................................................................................................21
PESTEL...........................................................................................................................22
5.1 External Environmental Scanning.................................................................................22
Foreign Trade Regulations...................................................................................................22
Pressure From Government on Environment......................................................................22
Government Stability...........................................................................................................22
Economic growth.................................................................................................................22
Increased consumer spending..............................................................................................23
Higher discretionary spending through credit card use.......................................................23
Economic integration (Globalization).................................................................................23
Social-Cultural.....................................................................................................................23
Human rights.......................................................................................................................23
Evolving demographic markets...........................................................................................24
Technological.......................................................................................................................24
Increasing Internet usage and e-commerce..........................................................................24
New Communication technologies......................................................................................24
Rapid rate of product innovation.........................................................................................25
Environmental......................................................................................................................25
5.2 Implications...................................................................................................................25
Predominance of opportunities............................................................................................25
Potential threats all arising from suppliers..........................................................................25
TABLE 5.1, Industrial Analysis........................................................................................26
TABLE 5.1, Industrial Analysis...........................................................................................27
CHAPTER 6............................................................................................................................28
Posters Forces.........................................................................................................................28
Posters Forces.................................................................................................................29
6.1 Porters 5 Forces............................................................................................................29
6.2 Bargaining Power of Buyers (Low)...............................................................................29
6.3 Bargaining Power of Suppliers (Moderate)...................................................................29
6.4 Threat of New Entrants (Low).......................................................................................30
6.5 Threat of Substitutes (Moderate - High)........................................................................30
6.6 Rivalry among competitors (High).............................................................................32
6.7 Implications..................................................................................................................32
CHAPTER 7............................................................................................................................33
Competitive analysis................................................................................................................33
Competitive Analysis...........................................................................................................34
7.1 Competitive Analysis.....................................................................................................34
Current Situation...............................................................................................................34
Competitors..........................................................................................................................35
Competitive Positioning Map..............................................................................................36
Implications.........................................................................................................................37
(a) Tiffanys brand positioning needs maintained................................................................37
Recommendations:..............................................................................................................37
(b) A major problem is having the lowest average purchase amongst its competitors........37
CHAPTER 8............................................................................................................................38
Strategic analysis.....................................................................................................................38
Strategic Analysis................................................................................................................39
8.1Strategic Group Analysis....................................................................................................39
8.2 Implications...................................................................................................................40
(a) Gucci and Coach are indirect but emerging threats.......................................................40
Recommendations:..............................................................................................................40
CHAPTER 9............................................................................................................................41
SWOT Analysis.......................................................................................................................41
SWOT Analysis...............................................................................................................42
9.1 SWOT Analysis.............................................................................................................42
Strengths..............................................................................................................................42
Weaknesses..........................................................................................................................42
Opportunities.......................................................................................................................43
Threats.................................................................................................................................43
CHAPTER 10..........................................................................................................................44
Recommendation.....................................................................................................................44
Recommendations................................................................................................................45
10.1 Recommendations........................................................................................................45
References........................................................................................................................46
Books & Publications..........................................................................................................46
Electronic references...........................................................................................................48
Chapter 1
Introduction
1
1.1 OVERVIEW

Type ..Public

Traded as ..NYSE: TIF S&P 500 Component

Industry .Jewelers, Silversmiths

Founded..September 18, 1837

Founder(s)..Charles Lewis Tiffany, Teddy Young

Headquarters.727 Fifth Avenue ,New York ,USA

Area servedWorldwide

Key people. Michael Kowalski(Chairman)

Total assets .US$ 3.10 billion (2009)

Total equity US$ 1.59 billion (2009

Employees9,800

Ranked 73rd in the top 100 Brands by Interbrand
1.2 Mission Statement
To enrich the lives of its customers by creating enduring objects of extraordinary beauty that
will cherished for generations.
Brand overview
CHAPTER 2
Introduction to
Company
Profile
Introduction to Tiffany
and CO
2.1 TIFFANY & CO
In New York City in 1837,
Charles Lewis Tiffany and John
F. Young founded Tiffany and
Young, a store dedicated to
selling stationery and costume
jewelry. In 1845, began selling
real jewelry. It was not until
1853, that the store became
Tiffany and Company. During
the late 1940s, it added
silverware, timepieces,
perfumes, and other luxury
items.
Throughout history, they have
managed to solidify their position as the leading competitor in the jewelry industry through
creating a brand that shows value, quality, superior design, and exclusivity goods were sold
as wholesales to third-party distributors. Tiffany is renowned for its luxury goods, especially
for its diamonds: diamond jewelry, and especially its diamond engagement rings. Tiffany
markets itself as an arbiter of taste and style. Tiffany sells jewelry, sterling silver, crystal,
fragrances, personal accessories, as well as some leather goods.
Even during this highly volatile economic downturn, Tiffany and Co. is a highly attractive
company and the leading competitor. The strong position that they have established in the
marketplace is not likely to disappear, and it will only continue to grow once they counteract
the changing environment with implementing a strategy that reiterates their founding vision.
According to Louis Cona, publisher of Vanity Fair, There will always be a luxury consumer,
and theyll continue to spend whether there are wars or diseases or whatever. Such famous
US families as the Athletes, Hollywood stars, and even European royalty wore Tiffany
designs.
2.2 PRODUCTS
Tiffany is offering following products to its valuable customers:
Jewelry
Gifts
Watches
Accessories
Handbags
Sunglasses
Leather Goods
Scarves
Sterling accessories
Writing instruments
Elsa Peretti
Key rings
Designer Collections
Gifts
2.3 HISTORY
Charles Lewis Tiffany and Teddy Young in New York City founded it in 1837 as a "stationery
and fancy goods emporium. The first Tiffany's mail order catalog, known as the "Blue
Book" published in 1845 in the United States.
Tiffany & Co. supplied the Union Army with swords (Model 1840 Cavalry Saber), flags and
surgical implements. In 1845, began selling real jewelry. It was not until 1853 that the store
known as Tiffany and Company. In 1867, Tiffany & Co. was the first US firm to win an
award for the excellence in silverware. In 1878, Tiffany won the gold medal for jewelry and a
grand prize for silverware at the Paris Exposition.
In 1902, after the death of Charles Lewis Tiffany, his son, Louis Comfort Tiffany became the
company's first official Design Director. In 1919, the company revised the Medal of
Honor on behalf of the United States Department of the Navy. In 1956, legendary
designer Jean Schlumberger joined Tiffany. In 1968, US First Lady, Lady Bird
Johnson commissioned Tiffany to design a White House china service. In November 1978,
Tiffany & Co. sold to Avon Products Inc. for about $104 million in stock. In August 1984,
Avon sold Tiffany to an investor group led by William R. Chaney, for $135.5 million in cash.
Tiffany went public again in 1987 and raised about $103.5 million by selling 4.5 million
shares of common stock.
In 2000, The Tiffany &

Co. Foundation
established to provide
grants to nonprofit
organizations working in
the environment and in
the arts. In June 2004,
Tiffany sued eBay,
claiming that it was
making profits from the
sale of counterfeit
Tiffany products. Tiffany
lost at trial and on appeal
on 28 January 2008
It announced that the Japanese mobile phone operator Softbank and Tiffany & Co. had
collaborated in making a limited 10 model-only cell phone.
Organizational structure
Organizational structure is a design according to which a company performs and achieves its
aims and objectives. Given below is the organizational structure of tiffany & Co.
Competition
CHAPTER 3
Strategic Issues
and Problems
Identifying Strategic
Issues and Problems
3.1 Strategic Issues and Problems
The main strategic issues that Tiffany and Co. must consider involve
The state of the economy
Whether they should take a short-term or long-term approach to stabilizing

their current condition.
The best way to determine how to address these issues is through environmental scanning.
Environmental scanning
o External environment
o Internal environment
o
3.2 Internal Environment Scanning
Marketing
3.3 Advertising
After the initial "Blue Book" Tiffany catalog published in 1845, Tiffany continued to use
their catalog as an advertisement strategy. Tiffany still has a catalog for subscribers, but their
advertisement strategy no longer focused on its catalog. Tiffany also has a corporate gift
catalog each year. Tiffany places its advertisements in many locations, including bus stops,
in magazines, newspapers, and online.
3.4 Products
Diamonds
Fragrances
In the late 1980s, Tiffany & Co. ventured into the fragrance business. Tiffany for women
was launched in 1987, a floral perfume for women by perfumer Francois Demachy. Two
years later, Tiffany for Men launched in 1989 and developed by perfumer Jacques Polge.
Pierre Dinand designed the bottles for both the men and womens fragrance. In 1995, Tiffany
launched Trueste perfume for women, which later discontinued. Currently, Tiffany continues
to produce the core fragrance product for men and the product for women.
Sports awards
Tiffany's is the maker of the Vince Lombardi Trophy, make annually to be award to
the NFL team that wins the Super Bowl that year. Tiffany & Co. also made the 2010 World
Series Rings for the San Francisco Giants. The MLS championship trophy, won by the Los
Angeles Galaxy in 2011, also made by Tiffany & Co.
3.5 Target market

The target market of Tiffanys is Upper-middle to high-income consumers who can afford
Tiffanys products.
Upper class
Upper-Middle class or aspirational buyers
Revenue model:
Tiffany is providing an extensive range of Diamond accessories of guaranteed quality

They generate revenue through sales and business transactions.
3.6 Human Resource
Tiffany recognizes the importance of human resource and human capital investment in
order to sustain its competitive advantage. Therefore, the company strongly believes
in providing product, technical, leadership and professional development training for its
employees such as the Retail Management Associate Program .Additionally, tuition
reimbursement and a forgivable loan program are also available for employees who pursue
continuing education.
Employees given benefits such as:
Income Protection & Security
Financial Savings & Retirement Benefits
Rewards & Recognition
Personal & Professional Fulfillment
This elucidates the companys sincerity in building employee relations as well as honing
their life skills and well-being.
CHAPTER 4
Strategy
4.1 Strategy
4.2 Grand strategy
There are three types of grand strategies
Growth
Stability
Retrenchment
They are following the growth strategy. They are increasing the number of their stores all
over the world.
4.3 Levels of strategy

Functional-level strategy: How do we support the business level strategy?
Business-level strategy: How do we compete?
Corporate-level strategy: What business are we in?

4.4 Corporate level strategy

Tiffany is renowned for its luxury goods, especially for its diamonds: diamond jewelry, and
especially its diamond engagement rings. Tiffany markets itself as an arbiter of taste and
style. Tiffany sells jewelry, sterling silver, crystal, fragrances, personal accessories, as well as
some leather goods.
Business level strategy

GUCCI is a competitor of Tiffany so Tiffany have to retain quality to compete with its
competitors and for that purpose; they are trying to penetrate the market by opening new
outlets and by achieving cost leadership. They are offering the high quality products as
compare to its other competitors.
Functional level strategy
They can support their business level strategies by improving their marketing and
promotional strategies. They should also need to invest more money on the maintenance of
their outlets. They should offer some discount to the registered customers to enhance their
sales. They should have good relationship with their suppliers.
Cost Strategy
There are three types of cost strategy:
Cost Leadership
Differentiation
Focus
As strategy is, first a broad and complex concept. In an attempt to provide a definition,
Porter (1996) states: Strategy is the creation of a unique and valuable position, involving
a different set of activities. The essence of strategic positioning is to choose activities
that yield superior profitability because they are different from rivals and thus
create a sustainable competitive advantage. Note that a competitive advantage is not
necessarily enduring, that is why strategy distinguishes from operational effectiveness.
Both elements can generate competitive advantage, which improves performance, but
operational effectiveness is relatively easy to imitate and, consequently, the competitive
advantage risks eroding. In fact, Saloner, Shepard & Podolny (2001) mean that the major
threat to the sustainability of a competitive advantage is that rivals can diagnose and
duplicate or make obsolete the competitive advantage.
Traditional academic research had made number of contributions to the business-

strategy field, starting in the1970s, and follow up by a large numbers contribution by
pragmatics in the late 1970s and the 1980s. Before the development of concepts for
competitive positioning, researchers considered that two identical strategic settings never
occur. This means that the research field of business business-level strategy was
complicated to study.
In the view of that, the introduction of the term strategic groups, first coined by Hunt
(1972) was a great step towards facilitating research. By assigning businesses that employ
similar strategies (or positioning) to a strategic group, the vast array of combinations
reduced. In other words, by identifying businesses with distinct, consistent, and
recurring patterns of strategic behavior, researchers can limit their studies to observing a
number of different combinations, equal to the number of identified existing strategic
groups, instead of the number of existing firms.
Strategy types have been identified in a number of several industries, e.g. Galbraith &
Schendel (1983) in consumer products and industrial products, Hatten et al (1978) in
brewing, Newman (1978) in chemical process, Fiegenbaum & Thomas (1990) in
U.S. Insurance industry). However, Miles & Snows (1978) and Porters (1980) generic
strategic typology classification schemes have come forth as the most popular and
widely used. Their appeal springs from the fact that generic strategies, by definition, are
not limited to any particular industry or context. In particular, Porters (1980) model of
generic strategies has outperformed all other contributions in terms of the impact on
business-strategy formulation.
Porter considered by many as the most influential strategist in the field of business-
strategy. Eng. (1994) for example estimates that the arguments underlying the
generic strategies advocated in Porters, Competitive Strategy (1980) have influenced
much of the current thinking in strategy formulation. In effect, Porters model has been
widely tested (e.g. Hambrick, 1983).
Dess & Davis, 1984; Akan et al, 2006; Reitsperger et al, 1993; Calingo, 1989) but despite
criticism and efforts to modify, expand or combine the strategy typology with others the
original model has remained the most commented, analyzed and tested contribution. It is
has been praised for being easy to understand, appropriately broad without being vague,
and building upon previous findings.
Porters (1980) model of generic strategies addresses practitioners with an analytical

technique for gaining understanding of industries and competitors. By practitioners
Porter implies managers seeking to improve the performance of their businesses,
advisors to managers, teachers of management, security and analysts or other
observers trying to understand and forecast business success or failure, or government
officials seeking to understand competition in order to formulate public policy. The
reason why strategic planning is a primary concern to business managers in particular but
also other practitioners is that it may lead to significant benefits for a firm. In effect, an
explicit process of strategy formulation can determine a firms long-run competitive
strength and generate a persistently higher rate of profit than its rivals generate by
creating a sustainable competitive advantage. However, in order to compete successfully
in the end, a firm must first choose an appropriate positioning. Porter proposes three
different approaches to gaining or strengthening competitive advantages, (competitive
strategies) proposed: 1.Overall cost leadership, 2.Differentiation, and 3.Focus. (Figure as
follows:
Figure # 3.1, Porters typology of generic strategies
FOCUS
All three strategies have the potential to result in above-average profits; however, not all
three strategies may be equally suitable for a firm. The reason is that the three strategies
differ on a number of dimensions and pose different requirements, for example in terms of
resources, skills, organizational arrangements, control procedures, incentive systems and
management style. Profitability may vary depending on the wellness of fit between
the firm and the selected strategy, which make the decision of which strategy to adopt
key to the benefits of strategic planning and requires that the choice well founded. The
challenge lies in selecting the strategy that best suits the firms strengths and resources and
is least replicable by competitors and this in turn necessitates knowledge about the firm,
its business environment and competitors. With an explicit technique for analyzing
industry structure and competition, practitioner may gain better understanding and
knowledge of both elements. Porters (1980) model facilitates the decision- making
process and improves the probability for a firm that chooses an appropriate strategy.
Low cost relative to competitors is the theme running through the entire overall cost
leadership strategy and the objective is clearly overall industry cost leadership. Attaining
cost leadership typically requires aggressive construction of efficient scale facilities and
vigorous pursuit of cost reductions through experience, tight cost and overhead control,
avoidance of marginal customer accounts, and cost minimization in areas like R&D,
service, sales force, advertising, etc. When attempting to achieve an overall cost leadership
position, low cost relative to competitors is the theme running through the entire strategy.
To understand how overall cost leadership strategy may generate superior profitability, it
is necessary to identify the benefits of a low-cost position. As suggested by Porter gives a
firm a defense against rivalry from competitors, because its lower costs mean that it can
still earn returns after its competitors have competed away their profits through
rivalry. A low-cost position defends the firm against powerful buyers because buyers can
exert power only to drive down prices to the level of the next most efficient competitor.
Low cost provides a defense against powerful suppliers by providing more flexibility to
cope with input cost increases. The factors that lead to a low-cost position usually also
provide substantial entry barriers in terms of scale economies or cost advantages.
Finally, a low-cost position usually places the firm in a favorable position vis-a-vis
substitutes relative to its competitors in the industry. Because scale economies and cost
advantages tend to defend a firm against powerful buyers and suppliers and provide
substantial entry barriers, achieving a low overall cost position often requires a high
relative market share. In other words, cost advantages can create value for a firm by
reducing the five threats of entry, rivalry, substitutes, suppliers and buyers.
More specifically, Barney & Hesterley (2006) mean that there are six main cost
advantages or, sources of cost advantages for firms that successfully adopt cost
leadership:
1. Size differences and economies of scale,

2. Size differences and diseconomies of scale,
3. Experience differences and learning-curve economies,

4. Differential low-cost access to productive inputs,
5. Technological advantages independent of scale, and
6. Policy choices.
Further, the authors explain that the ability of a valuable cost leadership strategy to create a
sustainable competitive advantage is conditional upon the strategy being rare and costly to
imitate. The above-mentioned sources of cost advantage classified into two categories
according to likelihood of rarity. Leaving-curve economies of scale differential low-cost
access to productive inputs and technological software are generally considered likely-
to-be- rare sources of cost advantage, while economies of scale (except when efficient
plant size approximately equals total industry demand), diseconomies of scale,
technological hardware and policy choices are generally considered less-likely-to-be-rare
sources of cost advantage. Similarly, the sources of cost advantage are more or less
replicable. Creating a sustainable competitive advantage also require that competitors
cannot easily imitate the strategy. Sources of cost advantages that tend to be difficult thus
costly to duplicate include differential access to cost productive inputs and technology
software. Learning economies and technological hardware may be costly to duplicate if they
are proprietary.
Organizing to implement a cost leadership strategy requires particular consideration to the
organizational structure, management controls, compensation policies, and implementing
cost leadership strategies. The organizational arrangements and implementation tools
should not only fit but also reinforce the strategy. Porter (1980) has divided requirements of
overall cost leadership strategy into commonly required skills and resources and
Common organizational requirements. Commonly required skills and resources when
implementing overall cost leadership are sustained capital investment and access to capital,
process engineering skills, intense supervision of labor, products designed for ease in
manufacture, and low-cost distribution systems. Common organizational requirements
constitute of tight cost control, frequent, detailed control reports, structured organization
and responsibilities, and incentives based on meeting strict quantitative targets.
According to Barney & Hesterley (2006), few layers in the reporting structure, simple
reporting relationships, small corporate staff, and focus on narrow range of business
functions are elements of organizational structure that allow firms to realize the full
potential of cost leadership strategies. Management control systems that support the
implementation of cost leadership include tight cost control systems, quantitative cost
goals, close supervision of labor, raw materials, inventory, and other costs, and a cost
leadership philosophy. Examples of good compensation policies are rewards for cost
reduction and incentives for all employees to be involved in cost reductions.
Differentiation
Differentiation consists in differentiating the product or service offered by the firm, in other
words, creating something that perceived industry-wide as being unique. Differentiation can
be achieved in various ways, for example through design, brand image, technology, features,
customer service, and dealer network. Bases of differentiation are sort into three categories.
Firstly, to implement differentiation, a firm may focus directly on product (or service)
attributes, i.e. product features, product complexity, timing of product introduction, or
location. Secondly, a firm may focus on the relationship between itself and its customers,
for example through product customization, consumer marketing and product reputation.
Finally, differentiation implemented by focusing on the linkage within or between firms,
which includes linkage within functions of a firm, linkage with other firms, product mix,
distribution channels and service support. Ideally, the firm should differentiate itself along
several dimensions. There may also be other ways for firms to differentiate than the
examples mentioned above. In fact, Barney & Hesterley (2006) argues that, product
differentiation is ultimately an expression of the creativity of individuals and groups within
the firms. It is limited only by the opportunities that exist, or that can be created, in a
particular industry and by the willingness and ability of firms to creatively explore
ways to take advantage of those opportunities.
Benefits of differentiation
According to Porter, differentiation may generate superior profitability for the reason that
[it] provides insulation against competitive rivalry because of brand loyalty by
customers and resulting lower sensitivity to price. It also increases margins, which avoids
the need for a low-cost position. The resulting customer loyalty and the need for a
competitor to overcome uniqueness provide entry barriers. Differentiation yields higher
margins with which to deal with supplier power, and it clearly mitigates buyer power,
since buyers lack comparable alternatives and are thereby fewer prices sensitive. Finally,
the firm that has differentiated it to achieve customer loyalty should be better positioned
vis--vis substitutes than its competitors.
Besides reducing the five threats of entry, rivalry, substitutes, suppliers and
buyers, differentiation creates value by enabling a firm to charge a premium price that is
greater than the extra cost incurred by differentiation.
As for overall cost leadership, successful differentiation requires that the strategy be rare
and costly to imitate and rare and costly bases for differentiation are sources of sustainable
competitive advantage. As mentioned earlier, Barney & Hesterley (2006) mean, The rarity
of a differentiation strategy depends on the ability of individual firms to be creative in
finding new ways to differentiate their products. In short, creative firms will always
manage to differentiate themselves from competitors. As rivals try to imitate these firms
last differentiation move, creative firm will already be working on new moves and
therefore they always remain one-step ahead of competition. In general, bases for
differentiation that are costly to duplicate include links between functions, timing, location,
reputation, distribution channels, and service and support. Product mix, links with other
firms, product customization, product complexity and consumer marketing may be costly
to imitate depending on the circumstances.
Organizing to implement a differentiation strategy requires particular consideration to the

organizational structure, management controls, compensation policies, and implementing
cost leadership strategies. As mentioned previously, organizational arrangements and
implementation tools should not only fit but also reinforce the strategy. Porter (1980)
suggests that strong marketing ability, product engineering, creative flair, strong
capability in basic research, corporate reputation for quality or technological leadership,
long traditional in the industry or unique combination of skills drawn from other
businesses, and strong cooperation from channels are commonly required skills and
resources for implementing differentiation. Common organizational requirements include
strong coordination among functions in R&D, product development, and marketing,
subjective measurement and incentives (instead of quantitative measures), and
amenities to attract highly skilled labor, scientists, or creative people. In addition,
Barney & Hesterley (2006) suggest that an organizational structure supporting
differentiation includes may be characterized by cross-divisional and cross-functional
development teams, complex matrix structures and isolated pockets of intense creative
efforts (skunk works). Broad management decision-making guidelines, managerial
freedom within guidelines, and policy of experimentation may be typical of a
management control systems that support differentiation. Rewarding risk-taking (as
opposed to punish failures), creativity, and multidimensional performance measures is an
example of compensation policy that reinforces differentiation.
Contrary to overall cost leadership, differentiation may imply a hinder to high market
share. The reason is that differentiation typically requires a perception of exclusivity that
is incompatible with high market share.
Considering that this paper focuses on the trade-off between overall cost leadership and
differentiation, it does not serve the purpose of the thesis to describe the focus strategy in
detail. In brief, the focus strategy aims at serving a particular target or segment of the
industry well, as opposed to both overall cost leadership and differentiation strategies
seek to achieve their objectives industry-wide. For example, a firm may choose to serve
a particular buyer group, segment of the product line or geographic market. Thus, a focus
strategy sets out to achieve a low cost or differentiation position, or both, from the
perspective of its narrow market segment.
The main cost in the jewelry industry, and thus experienced by Tiffany and Co. is the cost
of raw materials: diamonds, gold, platinum, etc.
Cost leadership
To launch new, lower-priced products to take advantage of the growing number of
consumers demanding quality goods at lower prices. Their target is middle income -
introduce products with prices ranging from $100 to $250. 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.
Differentiation
Must assure its affluent customers that the quality of its products and service has not
lessened even though its brand has become more affordable. Tiffany has created mass
amounts of short-term revenue, but in the end, it could be detrimental to the once timeless,
exclusive brand. The signature blue box which Tiffanys is known for differentiates it
from all other companies.
4.5 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 stronghold over diamonds
by companies DeBeers and Aber Corp. have forced Tiffanys into long-term contracts for raw
materials purchasing.
4.6 Key Success Factors and Core Capabilities
Key Success Factors

o Introduction and execution of e-commerce
o Understand economic conditions and reacting
Core Capabilities
o Ability to select and display high-end
o jewelry to create a sustainable advantage
o Constantly strive towards innovation
o Commitment to the highest standards for social and environmental
responsibility.
CHAPTER 5
PESTEL
PESTEL
Given below is a figure that shows the PESTLE structure
5.1 External Environmental Scanning
Foreign Trade Regulations

Asia Pacific Economics Corporation (AEPC) may provide impetus for a series of
bilateral trade agreements. In recent years, U.S and China signed a permanent Normal
Trade Relations (PNTR). Chinas deduction of diamonds import tax from 17% to 4%
.also promotes trade
Pressure From Government on Environment

Tiffany with regards by the federal antiquated laws to promote responsible mining has
.been actively promoting responsible mining for its minerals and metals
Government Stability
The price and availability is dependent on the political situations in diamond producing
countries. The weak political stability and security in Brazil, prevents Tiffany & Co. from
.expanding in the country
Economic growth
There has been a steady increase in the Gross Domestic Product (GDP)/ Gross National
Income (GNI) in Asia-Pacific in the recent year. (Euro monitors International, 2010). The
rising wealth in Asia hence indicates the increasing demand for fine jewelry and luxury
goods.
Increased consumer spending

According to the fore mentioned factor, there is an increase in consumers spending over
luxury items such as fine jewelry. It have been reported by Merrill Lynch that the luxury
goods market has always been solid with increasing sales and profits even in times of an
economic crisis.
Higher discretionary spending through credit card use
It has been reported that there has been a 40 percent growth in credit card adoption in China
(Euro monitor International,2010), as well as a surge of card transactions in Asia by 158
percent from 2004 to 2009,approaching nearly a quarter of global card volume (USA Today,
2010). In addition, It has been found that card use begets higher spending, as David
Robertson of Nilson Report commented, It's a proven fact that if you can make people move
from cash to electronic payment, then the average amount spent will increase, along with the
average number of transactions," (USA Today, 2010).
Economic integration (Globalization)

The reduction in trade barriers and manufacturing costs such as logistics, labor costs and raw
materials in emerging countries such as China and Vietnam facilitates capital flow for
international business and encourages factories and plants to be set up there. This allows for
economic integration and globalization in international businesses.
Social-Cultural
Human rights
The recent widely reported debacle on human rights abuses in the Marange diamond
district of Zimbabwe in mid-2009 had brought about public attention to ethical means
of mining for diamonds (Human Rights Watch, 2009). Morally ethical consumers
might be apprehensive about the origins of the diamonds, unless responsible jewelers
provide assertion and reassurance that their diamonds purchased are not of Marange
origins, or conflict diamonds (Tiffany & Co., 2010; Amnesty International)
Evolving demographic markets

According to the Population Reference Bureau (2010), Asias share of population in
the world may continue over around 60 percent through 2050, Baby Boomers are
increasing in numbers due to the aging population and are typically high spenders in
the luxury market.
There is also a bridal market boom over the recent years prominent in Generation X
and Y. As the average age of people getting married is higher, these consumers
possess higher spending power and are more likely to purchase higher-priced
engagement and wedding rings .It also been reported by estimation that the female
labor force participation in Asia has been growing steadily over the last 5 years (The
Straits Times, 2009). Women found to be more emotionally attracted to products with
hedonic appeals, such as jewelry and perfume. This indicates that it serves as an
opportunity to the jewelry industry.
Technological
Increasing Internet usage and e-commerce
There are increased numbers of Internet users in Asia (Refer Appendix C and D).
China surpassed the U.S. in 2008 to become the largest nation of Internet users in
The world and by end 2009 was showing no signs of slowing
. down
New Communication technologies

QAD & MFG/PRO software allows for increased efficiency for inventory scheduling
management between customers and suppliers constantly. The ability to check for
real-time data would help consumers check for availability of online and suppliers
update stock availability with efficiency
Rapid rate of product innovation

Technology fuels Research and Technology of the fine jewelry industry to innovate
new product designs constantly. It allows jewelry designers to create pieces to suit
seasonal trends and generate consumer demand
Environmental
Environmental and social impact of mining industry
Cyanide contamination affects human health and created social problems
(International Cyanide Management, 2010). Environmentalists are concerned of the
side effects it caused to the human beings and it has raised calls for responsible
.mining operations
5.2 Implications
Predominance of opportunities
Tiffany can leverage on its core competencies and resources to implement strategies
.to earn superior profits
Potential threats all arising from suppliers

Tiffany needs to establish stronger relations with the government, environmental
.organizations and its consumers
TABLE 5.1, Industrial Analysis
Value Market worth $70 billion.
Worldwide
jewelers sales
of $185 billion.
Average 4.6%
Size & Growth Compounded

Annual
Growth Rate
(CAGR).
Size and growth bar chart
Surging global demand stimulated by rising wealth in
Asia.
China (13%) and India (12%) together will emerge as
market equivalent of US (26%).
Gender (Males, Females).

Age (Baby boomers, Gen X, Gen Y).
Income (High-income, Middle-income)
Market Segments
Highly competitive international brands.

Emerge in 3 forms:
1) Big Brothers: With a presence across various
segments of the value chain. E.g. LVMH (De Beers),
Richemont (Cartier).
2) Volume Players: Companies with depth and large
capacity in a single segment whether mining, diamond
Key Players manufacturing or retailing. E.g. Tiffany & Co.
3) Specialists: Companies that develop specialized
expertise in niche areas at various points in the chain.
E.g. Harry Winston, Bvlgari
Key Geographical
Consumer Markets:
Key Customers 1) US
2) Asia
3) Europe
Key customers pi-chart
TABLE 5.1, Industrial Analysis
CHAPTER 6
Porters Forces
Porters Forces
6.1 Porters 5 Forces
The Porters 5 Force Model recognizes the relative strengths of five competitive forces on the
fine jewelry industrys competitive intensity and profit potential.
6.2 Bargaining Power of Buyers (Low)

Fragmented Market
The consumers of fine jewelry are largely fragmented across geographical locations e.g. US,
UK, Asia-Pacific, thus their bargaining power is relatively low.
Product Differentiation
Products in the fine jewelry sector are highly differentiated. For example, affluent consumers
pursue exclusive designs by Tiffanys renowned artists Paloma Picasso and Frank Ghery;
while the younger consumers are attracted to collecting Charmed by Tiffany bracelet
charms. These factors result in the inability for consumers to switch to other products easily
thus lower bargaining power.
6.3 Bargaining Power of Suppliers (Moderate)

Vertical Integration
In most cases, the bargaining power of suppliers in the fine jewelry industry is strong due to
the importance of diamonds as raw materials. As Tiffany backward integrates to become its
own supplier, bargaining power of suppliers is reduced.
Other Suppliers Limitation

With global diamond jewelry sales soaring this decade, the dwindling supply level may
increase suppliers power towards jewelers for profitability by raising prices.
6.4 Threat of New Entrants (Low)
High capital investment
The high initial start-up costs required to acquire high quality diamonds serve as main entry
barriers for new entrants. In addition, the capital investment must be high enough to allow
the new entrant to enter on a large scale to enjoy economies of scale and to compete cost
effectively.
Limited Distribution Channels
As Tiffany has access to extensive distribution channels, new entrants lacking connections
with jewelry distributors and retailers face limited retail/ distribution channels thus they are
unable to produce substantial threat.
Product Differentiation
Product differentiation plays an essential role in reducing competition in the industry. New
entrants face difficulties in competing with Tiffanys strong brand heritage and unique
trademarked design collections.
6.5 Threat of Substitutes (Moderate - High)
Low Brand Loyalty

Compared to the strong brand loyalty in US, Asian consumers have a reputation for mixing
and matching conspicuous brands rather than sticking to one, the resultant low brand loyalty
increases the threat of substitutes.
General Consumer Goods

In times of economic downturn, consumers might substitute luxury fine jewelry and turn to
costume jewelry, cheap jewelry or even imitations. This is evident in the 5% decrease in net
sales during the 2008 global financial crisis.
Counterfeit Goods
Counterfeit goods are imitation designs sold at a fraction of Tiffanys prices. The
proliferation of counterfeit goods and inability to eradicate them has caused Tiffany to lose
millions of dollars each year.
6.6 Rivalry among competitors (High)
Direct Competitors
In view of Asias rising wealth and demand of jewelry, the large number of firms
consolidating in the market and offering more choices to consumers has intensified the
rivalry. The close competitors DeBeers LV, Cartier and Bvlgari compete for international
market share alongside countless other smaller national and international players. The rivalry
is so intense that Tiffany and its close competitors have adopted both product differentiation
and vertical integration.
6.7 Implications
Due to high barriers of entry, there is minimal competitive threat from new entrants.
Therefore, Tiffany only needs to focus its efforts on dealing with the intense rivalry amongst
the direct competitors in the industry.
Bargaining power of suppliers will increase as demand for diamonds continues to rise and
supply diminishes. In order to prevent suppliers from squeezing them for profitability,
Tiffany needs to find more suppliers and invest in mine operations to reduce its dependency
on a supplier.
Since counterfeit goods are inevitable and difficult to eradicate, Tiffany can counter the threat
of substitutes in three ways strengthening its brand positioning relative to substitutes,
building customer loyalty and raising switching costs of buyers.
Porters value chain
CHAPTER 7
Competitive
analysis
Competitive Analysis
7.1 Competitive Analysis
Current Situation
Competition is intensifying is $70 billion diamond jewelry market as rising wealth in
Asia increases demand for fine jewelry.
Demand will grow fastest in emerging markets like China and India. The trend
will benefit Tiffany because the nouveau riche will splurge on jewelry from well-
known brands to show off their wealth.
Tiffany is one of the leaders within the jewelry industry in terms of jewelry design,
number of stores and worldwide sales.
The market is highly fragmented and provides much opportunity for market share
capitalization.
Tiffanys primary competitors are specialty fine jewelers De Beers, Cartier, Bvlgari,
and increasingly from mainstream luxury labels with their own jewelry collections.
Tiffanys indirect competitors, such as Gucci Group and Coach, are angling to take a
significant bite out of the lucrative China market. Tiffany could lose its foothold in
the overseas market if it still does not affect its expansion plans.
Despite the strong brand image, which the Tiffany blue box portrays, the company
may dilute its luxury brand identity (valued at $3.64 billion) with its attempts to make
the blue box affordable for the middle income.
Competitors
Tiffany & Co
Signet
Bulgary
Zales
Blue Nile
Competitive Positioning Map
The below chart identifies Tiffanys positioning within the fine jewelry industry, in relation to
companies competing directly and indirectly with varying prices, product scope and
competitive strategies.
Implications
(a) Tiffanys brand positioning needs maintained.

It is more lucrative for Tiffany to maintain its current market position, instead of
aiming for a higher positioning but dense market to compete closer with Cartier,
Bvlgari and DeBeers.
The Universalist approach and middle- to high-end target market is wide and allows
Tiffany to capture more potential market share, but the caveat is that it may dilute the
luxury brand identity.
Recommendations:
Tiffany needs to build brand image and maintain its roots of quality fine jewelry.
Tiffany needs constantly innovate its product line to remain as the pioneer of fashion-
forward designs.
Tiffany needs to differentiate more and enhance the brand value in the consumers
mind to draw more revenue from them.
Identify a niche market to provide specialized products and services for, to charge a
higher premium and enhance brand image
(b) A major problem is having the lowest average

purchase amongst its competitors.
Tiffany is now middle-class compared to De Beers and Cartier.
While the average purchase of a Tiffany shopper is $180, only $30 more than in 1984,
the Cartier customer spends $3400.
.
CHAPTER 8
Strategic
analysis
Strategic Analysis
8.1Strategic Group Analysis
8.2 Implications
(a) Gucci and Coach are indirect but emerging threats.
These mainstream luxury labels are fast penetrating the China market with their fast
expanding number and size of stores.
Coach is even investing in intensive market research to determine the right product
mix for the Chinese market. Therefore, Tiffany could lose its foothold if it does not
expand fast and adapt to market demands.
Recommendations:
Tiffany needs to stop delaying and effect its plan to open 16 more stores this year.
Tiffany can also adopt a globalization strategy and adapt its products to appeal to the
Asia market
CHAPTER 9
SWOT
Analysis
SWOT Analysis
9.1 SWOT Analysis
Strengths
Strong brand recognition
Brand associated with romance
Blue Box recognition
Standard engagement ring setting named a Tiffany setting
Association with quality, sophistication and tradition
Ability to benefit from DeBeers diamond advertisements
Established relationship with suppliers
Increased market with more accessible price points
Diversified product lines (price points range from $30-$250,000)
Established relationship with well-known designers (Elsa Peretti, Frank Gerry)
Strong real estate locations
Entry threat by other firms very low
Better access to leverage because of public status
In markets all across the country
Weaknesses
Highly volatile industry that relies on excess disposable income

Highly seasonal sales
Does not have enough diamonds to have full selection of engagement diamonds in
each of its stores
Has lost perceived quality and mystique since going public
Growing concern about the diamond industry and association with conflict diamonds
Dual identity: both high end and lower end price points
Dual brand perception: too nice for average consumer, but too commercial for high
end consumer
Low switching costs for consumers
Limited brand loyalty
Opportunities
High growth opportunities in Asian and European markets
Erosion of the DeBeers cartel will lead to more competitively priced diamonds
Expansion of mens jewellery line
Partnership with Swatch to increase distribution of luxury watches in Europe
Building consumer loyalty by offering lower price point items that appeal to younger
consumers
Threats
Over-saturation of the US market
Repeal of Bush tax cuts hurts disposable income of target consumer Diamond supply
chain disruption because of local political conflicts
Possible destabilization of African diamond markets because of decreased DeBeers
control
Synthetic diamonds increasing in popularity
Possible perception of declining brand quality
Unpredictable exchange rate fluctuations
Changing consumer preferences
Counterfeit goods, especially lower price point sterling silver items
Numerous competitors at varying price points
CHAPTER 10
Recommendati
on
Recommendations
10.1 Recommendations
Tiffany needs to
Build brand image
Maintain its roots of quality fine jeweler.
Constantly innovate its product line
Differentiate more
Enhance the brand value in the consumers mind to draw more revenue from
them.
Identify a niche market
Appendices
Appendix 1. Tiffany and Co.s key financials from
2005 - 2009
in thousands 2005 2006 2007 2008 2009

Sales revenues 2 309 245 2 552 414 2 927 751 2 848 859 2 709 704
EBIT 270 593 294 615 369 999 232 155 265 676
Net profit 261 396 272 897 323 478 220 022 264 823
Total assets 2 817 344 2 904 552 3 000 904 3 102 283 3 488 360
Source: Annual report 2009-2010
Appendix 2. Tiffany & Co.s foreign sales percentage

from 2005 2009
Sales Revenue 2005 2006 2007 2008 2009

Domestic 1 378 166 1 510 833 1 645 712 1 458 598 1 283 869
Foreign 934 626 1 049 901 1 293 059 1 401 399 1 425 835
Total 2 312 792 2 560 734 2 938 771 2 859 997 2 709 704
Foreign Sales % 40,4 % 41,0 % 44,0 % 49,0 % 52,6 %
Appendix 3. comparison of average value Revenue
Growth from the leading companies in the jewelry
market
Revenue Growth 2005 2006 2007 2008 2009 Average RG 2005-2009
Tiffany 8,5 10,5 14,7 -2,7 -4,9 5,22
Zale -10,5 4,5 -0,1 -0,7 -16,8 -4,72
Blue Nile 20,1 23,8 26,9 -7,5 2,3 13,12
Signet 4,6 5,0 12,8 3,0 -8,8 3,32
Source: Adapted from company's annual reports
Operating Profit Margin 2005 2006 2007 2008 2009 Average OPM 2005-2009
Tiffany 11,7 11,5 12,6 8,2 9,8 10,76
Zale 7,6 3,3 2,9 -0,1 -13,6 0,02
Blue Nile 10,1 7,9 8,3 6,1 6,5 7,78
Signet 12,3 11,2 10,9 9,2 -9,8 6,76
Return On Assets 2005 2006 2007 2008 2009 Average ROA 2005 -2009
Tiffany 9,3 9,4 10,8 7,1 7,6 8,84
Zale 7,7 3,3 3,6 0,0 -15,4 -0,15
Blue Nile 9,5 10,7 10,9 13,0 9,8 10,78
Signet 8,9 8,3 7,2 6,1 -13,3 3,44
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Conclusion
In this research we have discussed one of the leading jewelry company in the world Tiffany
and co. we have discussed the history growth and progress over the years of this company.
We have discussed the best possibilities on running and maintaining the best possible
standards to stay at the top of the tree. There are four major jewelry retailers in the global
industry
Blue Nile Inc.

Signet jewelers Ltd
Tiffany & co
Zale corporation
We have emphasized on the organizational structure of tiffany & co and how it works. The
relationship between an organizations growth and performance is evaluated by the
calculating the level of diversification. It has overcome challenges from within the
organization and outside the organization. Its huge revenues enable it to undertake any sort of
project that will prove beneficial for them.
However not everything is perfect. Tiffany and Co seem to be more focused on the top line
and neglecting the progress and health of the bottom line. This has led to increase in revenues
and decrease in gross margins. Secondly they need to exploit any opportunity that emerges in
front of them. They should also expand their online presence because a lot of customers love
to shop online from their homes and do not prefer going to outlets physically.
The SWOT analysis of tiffany and co reveals that it they have decreased the amount of threat
in a huge manner. This will help them enhance their capabilities in the future. However in the
past the company has made mistakes like increasing the prices of its jewels and diamonds. It
increased the profits of the company but it lost a lot of customers that could not afford it
anymore.
Finally I would like to thank my parents, Teachers, Wife, Friends

and all others who helped me in completing my thesis. May ALLAH
shower their blessings and Reward them for their help and never
ending Faith in me

Ikram Thesis Old

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Research study of Tiffany Co

A thesis submitted to Sarhad University

SIR KHURAM AMIN

The Sarhad University

In 2000, The Tiffany &

The state of the economy

Whether they should take a short-term or long-term approach to stabilizing

3.5 Target market

Upper-Middle class or aspirational buyers

Tiffany is providing an extensive range of Diamond accessories of guaranteed quality

Employees given benefits such as:

Income Protection & Security

Financial Savings & Retirement Benefits

Rewards & Recognition

Personal & Professional Fulfillment

4.3 Levels of strategy

4.4 Corporate level strategy

Business level strategy

Traditional academic research had made number of contributions to the business-

Porters (1980) model of generic strategies addresses practitioners with an analytical

Figure # 3.1, Porters typology of generic strategies

1. Size differences and economies of scale,

3. Experience differences and learning-curve economies,

Organizing to implement a differentiation strategy requires particular consideration to the

4.5 Cost Structure

4.6 Key Success Factors and Core Capabilities

Key Success Factors

o Understand economic conditions and reacting

Foreign Trade Regulations

Pressure From Government on Environment

Increased consumer spending

Economic integration (Globalization)

Evolving demographic markets

New Communication technologies

Rapid rate of product innovation

Potential threats all arising from suppliers

TABLE 5.1, Industrial Analysis

Value Market worth $70 billion.

Size & Growth Compounded

Gender (Males, Females).

Highly competitive international brands.

Key customers pi-chart

TABLE 5.1, Industrial Analysis

6.2 Bargaining Power of Buyers (Low)

6.3 Bargaining Power of Suppliers (Moderate)

Other Suppliers Limitation

Limited Distribution Channels

6.5 Threat of Substitutes (Moderate - High)

Low Brand Loyalty

General Consumer Goods

Porters value chain

(a) Tiffanys brand positioning needs maintained.

(b) A major problem is having the lowest average

(a) Gucci and Coach are indirect but emerging threats.

Highly volatile industry that relies on excess disposable income

Build brand image

Maintain its roots of quality fine jeweler.

Constantly innovate its product line

in thousands 2005 2006 2007 2008 2009

Source: Annual report 2009-2010

Appendix 2. Tiffany & Co.s foreign sales percentage

Sales Revenue 2005 2006 2007 2008 2009

Ansoff, H.I. 1987. Corporate Strategy. London: Penguin. First

Akpinar, M. 2008. Lecture note: Corporate Strategy, Strategic