.... Tiffany and CO. A case study presented by: Ben Turkia Emna For MGMT 6000: Marketing management Harvard summer term Synopsis Prince charming on his white horse, Cinderella and her glass shoes, princesses, fairy tales…. Are strong definers of pop culture and perception. Those symbols learned and adopted during a girl’s childhood translate into brands and product as that girl becomes a woman some brands have done a very good job capturing these concepts and translating them in a marketing proposition: the Vera Wang dress, The Louboutin shoes and of course the tiffany’s six prongs setting diamond ring are part of the myth they are part of every women’s dream wedding. Like everything born in New York tiffany has a strong mythic history founded in 1837 by Charles Tiffany, the brand became since its first day a destination for luxury and uniqueness, reinforced by its founder commitment to high end unique world renown pieces such as the tiffany’s yellow diamond – a 28 carat unique stone- or the French crown jewelry he acquired the brand gained very quickly a unique identity associated with the world’s best pieces of jewelry. The tiffany’s brand today: In 2012 tiffany launched a new product Rubeto to celebrate its 175th anniversary this new metal called rose gold is in the fact a composite made only from 31% of gold and a mix of other metals featuring essentially copper. Despite its very low concentration in gold the Rubeto collection retails for over 7000usd a piece. (FORBES) ...
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...History of the Company The 1830s in New York City were a time of dynamic growth and high taste for fashion. With this in mind; Charles Lewis Tiffany and John B. Young saw an opportunity and in 1837 opened Tiffany & Young, a “stationery items and fancy goods” store with a $1,000 advance from Tiffany's father. That same year, the visionaries introduced their signature Blue Box which became the symbol of the company. Opposite of the opulence and extravagant taste of the time, Tiffany and Young were inspired in nature, offering clean and harmonious patterns creating a new “American Style” expressed on silver hollowware, flatware and later jewelry. In 1845, Tiffany published its first “Blue Book” catalog, which is still being published today showcasing its collection of fascinating couture jewelry, custom- designed pieces and most breathtaking jewels. Tiffany was the first company to introduce the 925 sterling silver standard of purity and mostly because of the efforts of Charles Lewis Tiffany; this ratio was adopted by the United States Congress as the American sterling silver standard. The company was awarded the grand prize for silver craftsmanship at the Paris Exposition Universelle in 1867, making Tiffany the first American design house to be honored by a foreign institution. By 1900 Tiffany & Co. had become America's leading supplier of jewels and timepieces as well as luxury personal, table, and household accessories. Tiffany’s reputation was not limited to the United...
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...relevant factors of the macro-environment that affect the attractiveness of the U.S. jewelry industry? Specifically, are general and industry economic conditions and socio-cultural factors favorable to Tiffany & Co.’s business situation? According to the PESTEL Analysis, the strategically relevant factors are: political factors, economic conditions, socio-cultural forces, technological factors, environmental force, and legal/regulatory factors. Economic conditions and socio-cultural factors have not been favorable to Tiffany & Co. Economic hardships and the recession have led to revenue declines between 2006 and 2010. Retail jewelers in the U.S. were affected by these poor economic conditions and stores dropped from 62,000 in 2007 to 56,000 in 2011. In 2006, the price of gold increased from $600 per ounce to $1,600 in 2011. This resulted in the industry average profit margin to decrease to 5.1 from 2006 – 2011. In term of socio-cultural factors, the aging population, and the reduced number of weddings has affected the industry average profit margin. Consequently, the number of weddings in the U.S. has dropped from 2.3 million per year to 2 million between 2001 and 2010 and dropped again in 2009 and 2010. 2. How strong are the competitive forces confronting Tiffany & Co. and other retail jewelers? Which once of the five competitive forces is the strongest? Do a five-forces analysis to support your answer. Threat of Entry: The threat of entry is strong because...
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...Key issue: Tiffany and Co concluded an agreement with its Japanese Distributor, Mitsukoshi Limited. Tiffany & Co Japan assumed management responsibilities of the operation of 29 boutiques and was now responsible for millions of dollars of inventory that was previously sold wholesale to Mitsukoshi Limited. Tiffany & Co Japan now faces the risk of foreign currency fluctuations previously borne by Mitsukoshi Limited. Tiffany & Co Japan must now make the decision between basic hedging alternatives: Entering into forward agreements to sell yen for dollars or purchasing a yen put option. Exposure As Tiffany & Co’s receivable cash flows are now denominated in ¥ due at future date the firm now faces the foreign exchanges risks with uncertainty of the dollar equivalent of cash flows. Tiffany & Co. now face transaction, translation and operating exposures. Transaction exposure risk is observed in Tiffany’s deferred payment to Mitsukoshi of $25 million as this denominated in USD and cash inflows from Tiffany Japan will be denominated in yen. Translation risk represents foreign assets on financial statements as of July 30 1993 Tiffany & Co showed $7.7million in foreign assets. The most significant exposure that Tiffany will experience is operating risk due to the high amount in ¥ inflows. Tiffany & Co. will need to limit this exposure hedging these inflows in the medium term; however major currency movements will be factored in to the retail price in the...
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...THE MAIN STRATEGIC PROBLEMS PROBLEM: ‘Tiffany’ was very focused on their brand name. In most of the cases it is very good for a company and for Tiffany it would be right decision as well but the management preferred to do it starting from the bottom point. In my opinion, it was wrong decision. The company put very high prices on jewelries which do not have very high value according to the materials, and furthermore the company did not have the name what would attract people to buy its products. The company had chosen fundamental strategy to keep their name up and make it more famous. The second strategic fault, in my view, was the licensing the Tiffany brand to an Italian fashion-eyewear manufacturer – it means they have no control over the products which are produced by other company, so most probably the quality also will not be the same. It can be the reason for sales to fall down. Solution 1: I think they should have licensed the name for other sphere of production – this point would assure people that the products they used to buy from Tiffany are still made by the same way, and quality is going to be saved as usual. Solution 2: I would enhance the range of the products, and at the same time to have a control over of their quality. I think, in this case the sales would go up with the income. Recommendation: In my opinion the second solution would be better for this case. According to the Tiffany’s history: in most of the times the company was making decision exactly...
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...the Tiffany Story Tiffany & Co. is created by Charles Lewis Tiffany and John B. Young (then known as Tiffany & Young, a stationery and fancy goods emporium at 259 Broadway in New York). All items were marked with a non-negotiable selling price, which was a first at that time. The first day’s sales total $4.98. 1837: Introduction of the Tiffany Blue Box The well-known shade of blue was chosen to symbolize the company’s renowned reputation for quality and craftsmanship. The colour is well known globally and widely used on Tiffany & Co. boxes, catalogues, shopping bags, brochures and in their advertising mediums. Today, it has become Tiffany & Co’s trademark colour. No box can be taken out of a Tiffany & Co. store except with an article which has been sold by them. This adds to the exclusivity of the brand. The tradition of the famed Tiffany Blue Box has endured over the years as its contents are unsurpassable in quality and design. 1845: The First Blue Book The first ever Tiffany catalogue is published. This tradition still continues at present day. 1851: The Heritage of Tiffany Silver Tiffany becomes the first American company to use the 925/1000 sterling standards which is later adopted as the United States Sterling Standard. Tiffany’s silver designs also start capturing attention worldwide. 1853: Tiffany & Co. is “Officially” Named Charles Tiffany assumes control of the company and renames it. 1867: Tiffany & Co. at the Paris Exposition Universelle Tiffany & Co...
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...Tiffany & Co. Equity Valuation and Analysis Valued at April 1, 2005 Chelsea Fitzgerald: chelsea.fitzgerald@ttu.edu Whitney Valdes: whit2884@hotmail.com Eric Richardson: ericwrichardson2000@yahoo.com Sean Bancroft: seanbancroft@yahoo.com Kristen Weaver: kristen.m.weaver@ttu.edu Tiffany & Co. Valuation Table of Contents Executive Summary Business/Industry Analysis Accounting Analysis Ratio Analysis/Forecasting Cross Sectional Analysis Forecasted Financials Valuation Analysis Cost of Capital Intrinsic Valuations Appendices Appendix A Appendix B Appendix C Appendix D References 2 5 14 25 28 37 41 44 46 57 57 60 66 69 72 -1- EXECUTIVE SUMMARY Investment Recommendation: Over-valued, Sell TIF – NYSE 52 week range Revenue (2004) Market Capitalization Shares Outstanding Dividend Yield 3-month Avg Daily Trading Volume Percent Institutional Ownership Book Value Per Share (mrq) ROE ROA Est. 5 year EPS Growth Rate Cost of Capital Est. R2 Ke Estimated 5-year .3175 3-year .5676 2-year .4929 Published Kd WACC Beta 2.59 2.17 2.86 2.071 $33.37 $27.00-41.63 $2.2 Bil. $4.86 Bil 145,730,000 .72% 1,186,500 90.29% $2.84 19.36% 11.81% 11.30% Ke 12.34% 12.34% 11.13% 10.11% 10.79% 3.09% 8.77% EPS Forecast FYE 1/31 EPS 4/1/05 2004(A) $1.48 2005E $1.66 2006E $1.89 2007E $2.12 Industry 14.11 12.09 .96 1.51 Ratio Comparison Trailing P/E Forward P/E Forward PEG M/B Tiffany 16.02 19.22 1.49 2.89 Valuation Estimates Actual Current Price Ratio Based Valuations P/E Trailing...
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...Buying Patterns 10 2.6 Product Offering 11 2.7 Keys to Success 11 2.8 Critical Issues 11 3.0 Marketing Stragegy 12 3.1 Mission 12 3.2 Marketing Objectives 12 3.3 Financial Objectives 12 3.4 Target Markets 12 3.5 Positioning 12 3.6 Marketing Mix 13 4.0 Financials 14 4.1 Break Even Analysis 14 4.2 Sales Forecast 14 5.0 Controls 14 5.1 Implementation 14 5.2 Contingency Planning 15 1.0 Executive Summary Tiffany & Company was established in 1837 as a quality jeweler. They use only the highest quality of resources, such as their trademark platinum, to handcraft classic everyday pieces as well as trendy special occasion pieces. While Tiffany & Company is a high end jewelry retailer, there is something for everyone within the various collections. Based in New York City, Tiffany & Company has become a household name within the United States. The eye-catching robin’s egg blue box has become a symbol of the sentimental collections representing beauty, strength, durability, style, and class. Tiffany & Company jewelry has a long-standing history of being associated with the special occasions in the lives of...
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...I. PENDAHULUAN Tiffany & Co didirikan di New York pada tanggal 18 September 1837 oleh Charles Lewis Tiffany dan Teddy Young dan pada awalnya merupakan pusat perdagangan stationery dan barang – barang mewah yang berpusat di 727 Fifth Avenue, New York City, USA 10022. Saat ini Tiffany & Co adalah perusahaan internasional yang bergerak di bidang retail, design, manufaktur dan distributor barang – barang luxury seperti perhiasan terutama berlian tetapi kemudian memperluas produk line mereka ke arah jam tangan, china ( barang pecah belah ), kristal, silverware, dan barang mewah lainnya. Pada tahun 1979, Tiffany & Co diambil alih oleh Avon Products, Inc dengan harga sekitar $ 104 juta dalam bentuk saham yang kemudian memperluas pangsa pasar Tiffany kearah pasar menengah yang lebih besar dari sebelumnya. Strategi diversifikasi ini menyebabkan kenaikan penjualan dari $ 84 juta pada tahun 1979 menjadi $ 124 juta pada tahun 1983 dan selain itu terjadi juga kenaikan biaya operasional dari 34% pada tahun 1978 menjadi 43% pada tahun 1983. Pada bulan Agustus 1984, Avon berencana untuk menjual Tiffany, dan tawaran paling menarik datang dari management Tiffany sendiri yang setuju untuk membeli kembali saham Tiffany dan gedung pertokoan Fifth Avenue dengan harga $ 135.5 juta. Pembelian dengan LBO ( leveraged buy out ) dimana semua equity dibagi ke 3 investor group yaitu 20% dimiliki oleh management, 49.8% dimiliki oleh Investcorp, the Bahrain and London , dan 25.7% dimiliki oleh General...
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...One of the world’s largest brands in the market of luxurious jewelry is the successful American brand Tiffany& Co. In the following analysis, the customer-driven marketing strategy including the market segmentation, targeting, differentiation and positioning are the ones I would propose in case I would take on the position of the leading marketing manager in the specific company, mostly focusing on a specific product, the famous diamond rings. 1. Suggest how to segment the market. The topic of segmenting the market is not an easy task to accomplish and it could be better defined as a compilation of multiple factors. Therefore, Tiffany& Co. should try through multiple variables to see which give the best segmentation opportunities. We are discussing the case of consumer marketing, so the major segmentation variables are geographic, demographic, psychographic and behavioral. The analysis of each category is vast, but it would be more advisable for the specific brand to narrow the analysis into the most concrete level as to reach our goal more accurately, which is no other but the utmost accurate market segmentation. Tiffany& Co. can segment its customer market based on geographic criteria, in other words divided into different geographic units, such as nations, regions, states, counties, cities or even neighborhoods. Being a brand originating by the United States of America, it could be argued that it targets solely the specific geographic market. This is...
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...Tiffany & Co. Facing Exchange Rate Risks Following Tiffany & Co. Japan’s new retailing agreement with Mitsukoshi Ltd. in July 1993, TiffanyJapan was now faced with both new opportunities and risks. With greater control over retail sales in its Japanese operations, Tiffany looked forward to long-run improvement in its performance in Japan despite continuing weak local economic conditions. However, Tiffany was now also faced with risks of exchange rate fluctuations between time of purchase from Tiffany and time of cash settlement that were previously borne by Mitsukoshi. Historical data warned Tiffany that the yen/dollar exchange rate could be quite volatile on a year-to-year and even month-to-month basis. Although a continued strengthening of the yen against the dollar was observed from 1983 to 1993, there was evidence that the yen was overvalued against the dollar in 1993, and thus a distinct probability that the yen may eventually crash suddenly. Managing Tiffany’s yen-dollar exchange rate risk. The predicted depreciation of the yen would have a potentially negative impact on Tiffany’s financial results. There are three main types of foreign exchange exposures are (1) transaction (short-term), (2) economic (medium to long term) and (3) translation exposures. For a company like Tiffany which has sales in numerous countries, there are a continuing series of foreign currency receivables and payables. Thus, Tiffany should have a foreign currency hedging program to cover...
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...The macro-environment can be the reason of the desirability to jewelry sales on the attractiveness of the US jewelry business. The US jewelry industry is mainly focused in the Southeast and Mid-Atlantic regions, which account for 45 percent of total industry sales. These concentrations are directly reliant on population and per capita income. The higher these two are, the more concentrated the retail merchants will be in that particular area. Tiffany & Co. produced their jewelry focusing on demographics areas with higher annual incomes. As noted in the case, Tiffany & Co. targets the more affluent population. Social forces have also affected the attractiveness of the US jewelry industry. The Tiffany & Co. focuses on the character of its goods produced to meet the customer’s needs and desires. Wealthy Americans are still willing to spend top dollar on the Tiffany brand because they know the recipient will see that much more value when it is given to them in the little blue box. Tiffany’s competitors focus on a much wider range of consumers to sell their jewelry. Signet Group operates in the jewelry retail segment through Jared and Kay Jewelers. These two subgroups have targeted two different sets of customers. Kay Jewelers based in mall locations and targets households that have a lower annual income and Jared targets a more luxurious retail segment. The threat of new entrants in the jewelry industry is low. There is no single dealer owning in excess of 10% of the total market...
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...Risk for Tiffany before agreement Before this agreement Mitsukoshi acted as a principal retailer of Tiffany products in Japan, purchasing selected goods from Tiffany- Japan on a wholesale basis. Since the wholesale transactions were denominated entirely in dollars, the yen/dollar exchange rate fluctuations had little impact on Tiffany’s cash flows. This risk was completely borne by Mitsukoshi as yen/dollar rate fluctuated in the time between the purchasing of inventory and cash settlement So Tiffany was not exposed to Exchange rate fluctuation risk at all Risks after the agreement Under the new arrangement Tiffany assumed management responsibilities in 29 Tiffany & Co boutique stores previously operated by Mitsukoshi. This would mean Tiffany would have to hold inventory in Japan, managing and funding local advertising programs and controlling local Japanese management. These would have to manage in Yen retail prices. Thus volatility in Yen/dollar will have direct bearing on the cash flows of Tiffany. Yen-Dollar Exchange rate movement From exhibit it is shown that yen is strengthening against dollar. In January 1993 the cost of 1 dollar was 124.73. It moved to 106.50 in June. Thant means in the period of just 6 months 14.61 %. Thus the yen denominated cash flows of Tiffany will increase if it keeps on strengthening and moves into the same direction. However there are some market insights that yen might eventually become overvalued and crash suddenly, just as US...
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...global retail sales amounting to $150 billion. Tiffany & Co. currently is the leader within the jewellery industry. Tiffany recognized the growing number of consumers demanding luxury at mid-level prices and decided to use this trend to its advantage by introducing items at a lower cost to be more appealing to these middle-income families. Upon realizing the strength of its brand and the image its blue box portrays, Tiffany also plans to continue launching new product lines, taking advantage of the growing popularity of branding among jewellery consumers today. However, with all of Tiffany’s current success, some analysts worry that the company may be devaluing their luxury image with the introduction of lower cost products, as this contradicts their “exclusiveness”, which is part of their brand. In order for Tiffany to not dilute its luxury image with its attempts to make the blue box accessible to the lower end the company must focus on assuring customers that the quality of their products have not lessened even though the cost has. This proposal discusses the fine jewellery sector within the luxury goods industry, focusing on Tiffany & Co.’s (“Tiffany”) position among its strongest competitors and fine jewellery consumers. The paper opens with an overview of the specialty retail industry and current trends within the specific sector of fine jewellery. The document progresses by describing the corporate structure of Tiffany, specifically the company’s products, financial...
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...Impromptu Essay This essay “Tiffany Stephenson—An Apology,” by Bjorn Skoquist is a story that dates back to Skoquist’s younger years and how he eventually found out how and where he fit in, in his new school. Unfortunately, the way he found himself making friends was at the expense of a young girl, Tiffany Stephenson. The bullying started out as threats and mean jokes, but as time went on and the other children in the class felt more power over Tiffany, things got worse. Skoquist described their actions towards the end of the year as, “weren’t especially foul, but they were inhuman” (Skoquist 13). Reading that sentence made me cringe, because I feel as if I have seen and been in situations like that. The bright side to this depressing story,...
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