It also supplies movements and components to third-party watchmakers in Switzerland and around the world. The group has a global presence, which provides it a distinct competitive advantage in the market place. However, intense competition may erode the group’s margins and reduce its market share. Strengths| Weaknesses| * Global market presence * Strong brand portfolio * Extensive product offering| * Unfunded employee post-retirement benefits| Opportunities| Threats| Strategic acquisitions and partnerships * Emerging luxury products market in China| * Intense competition * Exchange rate risk| SWOT analysis details Strengths Global market presence Swatch has a global presence through its distribution network spread across Europe, Americas, Oceania, Far East, Middle East and Africa. The group has presence in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, The Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, the UK and Ireland.
Swatch also has its operations in Brazil, Canada, Mexico, Panama, the US, Australia, China, Hong Kong, India, Japan, Macau, Malaysia, Singapore, South Korea, Taiwan, Thailand, UAE and South Africa. Furthermore, it also has a major position in the production and supply of watches, movements and components with 156 production centers. The group has maintained its leadership position during FY2011 in most of the segments through its product launches, as well as investments in renovation and new store openings, thus expanding and improving its worldwide network.
Swot Analysis Essay Example
Strong market presence provides the group a distinct competitive advantage in the market place and increases its sales. Strong brand portfolio Swatch is the world’s largest manufacturer and distributor of watches. It owns major watch brands such as Breguet, Glashutte-Original, Blancpain, Leon Hatot, Jaquet Droz, Omega, Longines, Rado, Union Glashutte, Tissot, CK, Balmain, Certina, Mido, Hamilton, Swatch, Flik Flak and Endura. Each brand enjoys strong recognition various markets. For instance, Omega was ranked 10th in the list of Best Swiss Brands in 2012 by an industry source specializing in brand valuation.
Breguet was ranked 21st on the same list. Omega was also ranked seventh in the list of top 50 Swiss brands in 2012 by another industry source and Breguet was also ranked among the Top 100 French Brands in 2012. A strong brand portfolio helps the group to attract new customers across geographies and widen its customer base. Extensive product offering Swatch, together with its subsidiaries, is engaged in the manufacture of watches, jewelry, movements, components and other products. The group offers watches in all price and market categories.
The group also manufactures mechanical and quartz movements, and is active in the design, production and marketing of electronic components. EM, the group’s business, produces standards as well as customer specific integrated circuits for applications in the field of consumer and industrial electronics, automotive, telecommunications, and computer peripherals industries. It also produces modules and liquid crystal displays. The group also provides data processing and timekeeping services at international sporting events.
Swatch offers advanced timing systems which enhanced Swiss Timing’s traditional sports timing and measurement services. Swatch is one of the world’s leading information providers at sports events. The most recently introduced Ircos timing system is an innovative television commentator information system (CIS) that enables all the judges’ marks and all the positions to be displayed in real time. An extensive product offering presents the group with access to wider end-markets and increases its sales. Weaknesses Unfunded employee post-retirement benefits The group has significant unfunded pension obligations.
Swatch provides retirement benefits for most of the employees, either directly or by contributing to independently administered funds. In FY2011, the group’s pension benefit obligations stood at CHF3,704 million (approximately $4,191. 4 million) as compared to the planned assets of CHF3,195 million (approximately $3,615. 5 million), resulting into an unfunded status of CHF509 million (approximately $576 million). Unfunded pension obligations will force the group to make regular cash contributions to bridge the gap between pension assets and liabilities, pressurizing the liquidity position of the group.
Opportunities Strategic acquisitions and partnerships Swatch has made strategic acquisitions in the recent past. In April 2012, Swatch acquired Simon Et Membrez SA, a manufacturer of watch cases. In addition, Swatch also acquired the related 60% holding in Termiboites SA (case polishing) in Courtemaiche. Simon Et Membrez’s operations complement Comadur, Manufacture Ruedin and Lascor, the companies active in the production of watch casings within the Swatch Group. Furthermore in January 2013, Swatch acquired 100% of the shares of the US company HW Holdings, owner of Harry Winston.
Swatch acquired the brand and all the activities related to jewelry and watches, including the production company in Geneva, Switzerland. This acquisition complements the prestige segment of the group. The acquisition will help Swatch compete against Cie. Financiere Richemont’s Cartier brand in the market for high-end jewelry and watches with precious stones. Earlier, the group had signed a long term partnership with The International Olympic Committee in the areas of timing, scoring and venue results services for the Olympic Games.
With this agreement, the group will be the official timekeeper and results service partner for the Olympic Winter Games in Sochi in 2014, Olympiad in 2016, Olympic Winter Games in 2018 and the Olympiad in 2020. Strategic acquisitions and partnerships such as these provide the group strengthen its operations and product lines further as well as increase its reach across regions. Emerging luxury products market in China The luxury goods market in China is steadily growing. Rising income levels are expected to increase the demand for premium goods.
This is likely to translate into higher demand for the products sold by the group. According to industry sources, China will be the top contributor to growth in global luxury sales and Chinese tourists are fueling demand in key global cities, accounting for more than half of China’s spending on high-end brands. Chinese customers are expected to purchase high-end products in domestic and overseas markets worth CNY570 billion (approximately $88. 1 billion) by 2015. Swatch generates more than half of its revenues from Asia.
The group continues to expand its presence in China. In 2011, Breguet opened boutiques Macau, in Beijing and in Ningbo, China. Longines increased its international presence with new boutiques in China. The group also launched new products such as Rado D-Star in China. China is one of Swatch’s most important markets. Therefore, the growing demand for luxury products in China will help the company generate more sales from the region. Threats Intense competition The luxury goods industry is characterized by high degree of competition.
Swatch competes with numerous designers and manufacturers like Citizen Holdings Company, Compagnie Financiere Richemont AG, LVMH Moet Hennessy Louis Vuitton, Tiffany & Co. , and Guess Inc. Some of these competitors are significantly larger and have substantially greater resources than Swatch. The group has decided to cut back its sales of the inner workings to competitors to focus on producing watches with higher profit margins and to make sure it has enough supplies on hand for its own brands. This decision was approved by Switzerland’s competition authority.
However, Swatch is being challenged in court by nine watch companies. The final verdict is still pending. If the ruling is not in favor of Swatch, the group will continue to supply components and movements to its competitors. This could also limit the group’s growth prospects. Intense competition threatens to erode the group’s margins and reduce its market share. Exchange rate risk Swatch conducts business in many foreign countries. The portion of its assets and liabilities that are denominated in various currencies is exposed to risks from fluctuations in foreign currency exchange rates.
The foreign exchange risks arise mainly from fluctuation of currencies against the Swiss Franc, primarily the Euro, the US Dollar, the Chinese Yuan and the Japanese Yen. While preparing the financial statements the revenues generated from abroad will have to be converted into local currency. During this process if the value of the Swiss Franc strengthens against the value of, local currency the group’s earnings could be negatively impacted. The adverse currency fluctuations will have an impact on the financial performance of the group.