SOLUTION: MKT 271 Arizona State University Swiss Army Case Study


For the detested use of P. Cameron, 2016. W14574 SWISS ARMY: DIVERSIFYING INTO THE FRAGRANCE BUSINESS Professor Ilan Alon, Associate Professor Marc Fetscherin and Claudia Carvajal wrote this fact solely to stipurecent embodied for class discussion. The authors do not indicate to make-clear either servicetalented or inservicetalented handling of a managerial situate. The authors may have hidden sure indicates and other identifying advice to vindicate confidentiality. This notification may not be communicated, photocopied, digitized or otherwise imitated in any devise or by any resources externally the dispensation of the copyright holder. Reorigination of this embodied is not proofd lower authorization by any reorigination rights organization. To appoint copies or crave dispensation to imitate embodieds, touch Ivey Publishing, Ivey Interest School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) facts@ivey.ca; www.iveycases.com. Copyright © 2014, Richard Ivey School of Interest Foundation Version: 2016-03-04 In 2005, Victorinox, the creator of the far-famed Swiss Army Knives, adventitious its ocean rival, Wenger S.A. The wages too average Wenger’s knives, waites and its redolence engrave. By acquiring Wenger, Victorinox became the cosmos-people’s ocean creator of the far-famed Swiss Army Knife as polite as a key player in sales of the Swiss Army Wait (some smaller rivals sold waites lower the “Swiss Army” or “Swiss Military” engrave). Urs Wyss, guide of chaffering at Victorinox, was asked to assess how to wield the adventitious redolence interest ace. Should Victorinox sketch a interest temporization to enter the redolence perseverance? Should Victorinox vary into the redolence interest and, if so, how? Should the steadfast seek to alienate its corporeal disgrace attributes to redolence emanations or should it dispose-of redolences lower another disgrace indicate? Urs Wyss was asked to introduce a guile to Carl Elsener, the CEO of the company, concerning how best to chaffer after a opportunity the newly adventitious redolence interest ace. COMPANY ORIGINS In 1884, Karl Elsener, the great-grandfather of the running CEO, opened a cutlery workshop in IbachSchwyz, Switzerland, to entrust knives to Swiss Army soldiers. He sketched a emanation that average diverse administrations and implements, all in one pure and easy-to-carry knife. Past then, Victorinox had been responsible for the multifarious innovative features of the far-famed “Swiss Army Knife.”1 Millions of bulk throughout the cosmos-bulk associated Victorinox after a opportunity illustrative Swiss rates such as novelty, reliability, functionality and virtue. For aggravate 120 years, Victorinox had accrueed penny to its sidearm, which was the driver forthcoming the company’s amelioration and orientation: “to stipurecent our correlative ethnical bulk all aggravate the cosmos-bulk after a opportunity trained, functional, reasonably priced and top-virtue emanations.”2 Victorinox was signed and notorious by its disgrace indicates, “Victorinox” and “Victorinox Swiss Army” (the two umbrella disgraces). In the dynamic global chafferplace, where emanations were graceful increasingly common and imitations of noveltys were gauge work, a hale disgrace could enucleate its own orientation, making unanalogousiation feasible. Therefore, each emanation predicament and its element emanations aceed a compute of centre crew rates: quality, novelty, administrationality and iconic sketch (see Exhibit 1). Victorinox was the bigst employer 1 “Ibach-Schwyz (Switzerland), 2012,” Victorinox, www.victorinox.com/us/content/Heritage_page_default, accessed February 6, 2014. 2 Ibid., accessed March 7, 2014. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 2 9B14A066 in the canton (state) of Schwyz, as polite as the bigst knife creator in Europe. Environing 28,000 Swiss Army Knives and 32,000 Multi-Tools were performed daily, immanent to an estimated annual completion origination output of six darling Swiss Army Knives and swell-balanced darling Multi-Tools. In importation, 60,000 well-acquainted and administrational knives were fictitious daily. Approximately 90 per cent of Victorinox’s completion emanationion was exported cosmos-peoplewide. ACQUISITION OF WENGER S.A. Since 1893, Wenger’s guidequarters had been in Delémont, which is located in the northwestern recess of the French-speaking clime of Switzerland. Wenger too performed multifunctional knives, posing serious competition for Victorinox. Wenger S.A. (acronym for “Société anonyme” in French, aim “incorporated”) had promptly periodical a amitalented estimation due to its novelty, exactness and unappropriated craftsmanship. In 1997, the crew distant its emanation portfolio to profit waites, which were in proud ask-for owing of their reliability and multi-functionality.3 Furthermore, the crew periodical interest relationships after a opportunity diverse chaffer players that allowed other profitrs to manipulation emanations lower Wenger’s indicate. Unfortunately, the terrorist attacks of September 11, 2001, negatively impacted the global economic and gregarious environments as polite as interpolitical relations. After 2001, Wenger, which was hither mixed than Victorinox, was imfully forthcoming due to the gesticulatory lower in knife sales. This led Wenger to the loophole of closing and stipulated an convenience for Victorinox to behove the merely Swiss Army Knife profitr in the cosmos-people. Due diligence and negotiations took a opportunity, but in 2005 Victorinox adventitious its rival. The “Genuine Swiss Knife” was Wenger’s most advantageous emanation; by 2005 its knife sales completioned $16 darling, followed by its wait and redolence emanation lines, at $3.6 darling and $9.4 darling, respectively. The Swiss Army redolence was merely profittalented in the Obscure States and Canada. (See Exhibit 2.) VICTORINOX PRODUCT PORTFOLIO Victorinox was one of the few companies talented to alienate their disgrace attributes of virtue, novelty, functionality and iconic sketch to other emanation categories.4 The features of the crew shaped the guiding concepts for its emanation enucleatement and chaffer way in its five emanation categories: Swiss Army Knives; polite-behaved-mannered-behaved-acquainted and administrational cutlery; timepieces (watches); luggage (excursion ownership); and fashion. Despite the differences unordered these emanation categories, they had one monstrosity in common: they were all an countenance of the philosophy and rates forthcoming the doubtful principal “Swiss Army Knife.” They thoroughly proud virtue after a opportunity unappropriated reliability, administrationality, novelty, sublimation and iconic design. The crew was characterized by its indelicate emanation portfolio due to its variation temporization.5 (See Exhibit 3.) Swiss Army Knives, Well-acquainted and Functional Cutlery This emanation predicament average the principal Swiss Army Knife as polite as polite-behaved-mannered-behaved-acquainted and administrational cutlery. The emanation rove average aggravate 360 emanations after a opportunity up to 80 administrations. Aggravate the last few decades, Victorinox had adventitious polite-behaved-mannered-balanced past features, specific administrations and models such as the Swiss Champ, after a opportunity 33 3 “History,” Wenger, http://int.wenger.ch/en/company/history, accessed March 7, 2014. J. Melik, “Swiss Army knife adapts to reocean a cutting-edge implement,” BBC, 2012, www.bbc.co.uk/news/business-18005145, accessed February 2, 2014. 5 Ibid.; L. Zonco, “On the Cutting Edge,” Swiss Style, www.swissstyle.com/victorinox-cutting-edge, accessed February 3, 2014. 4 This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 3 9B14A066 functions, the SwissFlash USB crib knife, after a opportunity up to 8-Gigabyte storage accommodation, a crib knife after a opportunity the lowest laser pointer in the cosmos-people. In importation to the principal Swiss Army Knife, Victorinox performed environing 540 unanalogous polite-behaved-mannered-behaved-acquainted and functional cutlery models oceanly targeting polite-behaved-mannered-behaved-acquainteds or administrational chefs and butchers. This cutlery was of the proudest virtue and was ergonomically sketched for readiness of handling. The separated cutlery experienced a indelicate rove of standout gatherings of fully balanced false knives. Timepieces (Watches) For aggravate 400 years, Switzerland had been the cosmos-people’s bigst creator of waites. After a elder crisis in the 1970s, the Swiss wait perseverance was talented to recaggravate its deviseer good-tempered-fortune.6 It was estimated that the country accounted for environing half of the cosmos-people’s emanationion of proud-virtue waites,7 unordered which Victorinox’s waites were a elder player. Victorinox waites were scrupulously sketched using the proud standards the crew was notorious for entrusting: virtue, administrationality and innovative and distinctive designs.8 There were aggravate 180 unanalogous models, disconnected into the forthcoming portions: Active styles targeting dynamic bulk after a opportunity introduce, free lifestyles Classic styles targeting sporting- and effeminacy-oriented customers Professional styles targeting those who ask-fored the greatest in work and administrationality as polite as technically past movements The Swiss Army Wait disgrace was originated and launched by Victorinox’s American accomplice in 1989. The Swiss Army disgrace relished a disgrace awareness equalize of aggravate 90 per cent in the Obscure States. However, in other chaffers Victorinox relished prouder disgrace awareness for emanations other than waites. After integration of the Swiss Army disgrace into the Victorinox disgrace portfolio, the crew used the thoroughly indicate Victorinox Swiss Army, which increasingly gained interpolitical avowal and disgrace awareness. The manufacturing of the waites was performed in the crew’s own facilities, which were located in the canton of Jura, which was the disposture of the Swiss wait-making clime. Luggage (Travel Gear) The Victorinox luggage gatherings average a spacious rove of luggage, lifestyle bags, interest facts, excursion accessories, backpacks and separate leather amiables. Each concern was sketched to wield intensive excursion and intelligible out for its proudly enucleateed technology, administrationality and durability, all of which were centre disgrace rates of Victorinox. Lower a licensing concurrence, Victorinox Excursion Ownership was fictitious by the TRG Group, which was guidequartered in St. Louis, Missouri. The crew, which focused on quality, novelty and heed to element,9 had been conceding a spacious rove of luggage and bags for Victorinox past 1999. Victorinox Excursion Ownership brought contemporaneously in a solitary concept the Swiss legend of innovation, administrationality and durability after a opportunity models for diverse lifestyles, activities and tastes. The products were profittalented in past than 90 countries throughout the cosmos-people. 6 P. Feubli, E. Gachet, P. Hänggi and D. Künzi, “Swiss Wait Industry,” Credit Suisse Global Research, 2013, https://www.credit-suisse.com/media/production/pb/docs/unternehmen/kmugrossunternehmen/uhrenstudie-en.pdf, accessed February 6, 2014. 7 “Watches,” Federal Department of Foreign Affairs, Intercourse Switzerland, www.swissworld.org/en/economy/key_sectors/watches, accessed February 3, 2014. 8 J. Pitsch, “Interview: Victorinox Timeconcern Division CEO Alexander Bennouna,” Functional Watches, 2013, http://professionalwatches.com/2013/05/interview-victorinox-ceo-alexa.html, accessed February 2, 2014. 9 TRG Group, www.trgcorporate.com, accessed February 3, 2014. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 4 9B14A066 With its noveltys and contact of the ending technologies, Victorinox, in collaboration after a opportunity the TRG Group, had behove the immanent innovator in the luggage chaffer. At times it held environing 60 pending or registered patents, including the ergonomically sketched serpentine wield method and the uncommon 360-degree rotating swivel wield. The TRG Group had ordinary multifarious awards for its innovative chaffer work. To a big degree, embodieds used in manufacturing the Victorinox Excursion Ownership originated in Asia. Production was carried out by the cosmos-people’s immanent creators in Asia lower Victorinox’s supervision of their slip teams. This guaranteed that the crew’s proudest virtue gauges were oceantained. Fashion In 2001, manly and femanly usage gatherings were enucleateed that could be used throughout all seasons of the year. Each gathering offered new embodieds and colours for excursion and work-friendly outerwear for a rove of environments and situates. Victorinox’s manly and femanly customers were free and engaged, and they ask-fored twain flexibility and virtue. Functional sketch thoroughly after a opportunity innovative materials ensured self-approval and readiness as the wearer separated in excursion, interest or unoccupied-time activities. The innovative and durtalented embodieds and scrupulous manufacturing amitelling their daily needs. Victorinox worked closely after a opportunity famous creators from environing the cosmos-bulk to enucleate and originate new styles and materials. Textiles and patterns principally came from Europe and Japan. The cosmos-people’s immanent textile manufacturers performed clomonstrosity lower Victorinox’s supervision. Sales Victorinox’s sales took situate in a big compute of shop-in-shop dispose-of locations. These sales were supplemented by a newly opened Victorinox disgrace provision in New York. Victorinox had sales subsidiaries in view countries and disposal accompliceships in aggravate 100 countries on five continents (see Exhibit 4). The disposal of Victorinox usages was detestedly carried out through scrupulously separated sales channels. Furthermore, disposal accomplices were detested dispose-ofers as polite as e-commerce sites for effeminacy emanations (see Exhibit 5). AN OVERVIEW OF THE GLOBAL FRAGRANCE INDUSTRY10 The global redolence perseverance saw a forcible extricate in renders during the coming 2000s due to the underwork of the American rule resulting from proud unemployment and fears of war.11 In addition, fluctuations in the prices of principal emanations, such as oil and chemicals, abnormal its profit margins. However, there were confident industrial forecasts due to the growing average classes in emerging markets. As their allowance increased, consumers in these chaffers were talented and inclined to disburse money on non-necessary emanations, such as redolences. The BRIC countries (Brazil, Russia, India and China), after a opportunity big populations ranging from environing 140 darling (Russia) to 1.2 billion (China), all had hale economies and growing average classes. Furthermore, ask-for for redolences was eagerly growing unordered consumers in their recent teens to average age (Generation Y), who were increasingly ardent in comeliness emanations, 10 “Global Cosmetics Manufacturing,” IBISWorld, 2013, http://clients1.ibisworld.com/reports/gl/industry/default.aspx?entid=730, accessed February 21, 2014. 11 “Retailing: Specialty,” Gauge & Poor’s, 2003, www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/showIndustrySurvey.do?code=res&date=/res_0303/res_ 0303.htm (login required), accessed July 11, 2014. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 5 9B14A066 including redolences. After a opportunity the growing crave in consumers to introduce improve self-images, comeliness emanation manufacturers had proveed to relish a growing ask-for for their emanations. One idiosyncrasy of these buyers was their “brand-consciousness” (amitalented virtue for low prices), aim that ask-for for emanations that boasted a “amitalented rate for the price” was growing eagerly, distinctly unordered the improve-notorious disgraces. In public, after a opportunity the qualification of sure singular countries, the redolence perseverance as a polite-behaved-behaved was not very regulated. There were no global gauges for redolences; hence, companies had to restrain by local rules that multigenous by country. Such rules and regulations were principally connected to the components in the products, the engraveing advice and the packaging embodieds. In importation, in the redolence perseverance most exposed countries did not inflict tariffs as barriers. However, in emerging economies some tariffs existed. As for technological advances, the perseverance required a limited equalize of technology, and a spacious rove of chemicals was used in the manipulation of separate prudence emanations and cosmetics, such as cleansing agents, waxes, fats, oils and surfactants. Novelty was weighty due to the manliness of the perseverance and the eagerly changing consumer behaviour. The redolence perseverance required stanch start-up funds. It was trying to prove relationships after a opportunity distributors and consumers past the elder players already had a hale intercourse and relationships. In addition, new disgraces of cosmetics and redolences were not eagerly adopted by consumers past the elder brands relished hale disgrace fealty.12 The virtue of ingredients was very weighty, past the emanationion of redolences required specific chemicals that were misspend for use on the husk. Compared to big manufacturers, suppliers of principal embodieds were small; hence, periodical relationships were weighty in appoint to entertain “better” matter and ensure the best ingredients. As for advertising, in appoint to elevate disgrace awareness and originate disgrace fealty, creators advertised immediately to consumers. Therefore, dispose-ofers repeatedly multitudinous up on prevailing disgraces. However, perfumes were seen as effeminacy (nonnecessary) items, and there were lower-priced substitutes, such as deodorants and organization sprays, which were past liberal to price-sensitive consumers, as polite as sham emanations, distinctly in emerging markets.13 The global redolence perseverance generated revenues of environing $23.5 billion in 2005 (see Exhibit 6). In 2005, the recompense redolence chaffer accounted for a completion of $15 billion, and the bulk redolence chaffer accounted for $8 billion (see Exhibit 7). In this competitive perseverance, companies used pricing, promotion and disposal strategies as polite as innovative packaging to target consumers and apprehend chaffer distribute. Department provisions and specificty provisions were the most dominant disposal channels, constituting aggravate 50 per cent of sales (see Exhibit 8). Moreover, the chaffer was dominated by diverse key players, such as L’Oréal, Coty, Procter & Gamble, Avon and LVMH, which by the end of 2005 had apprehendd approximately 40 per cent of the global chaffer, followed by multifarious smaller niche players, such as Liz Claiborne, Mary Kay, Revlon and Bulgari (see Exhibit 9). WHAT SHOULD BE DONE NEXT? In the sink of 2005, Carl Elsener, CEO of Victorinox, determined a consultation of his top skillful-treatment and posed to Urs Wyss and his team the forthcoming challenging questions: What should they do after a opportunity their newly adventitious redolence interest ace? Should they unquestionably vary into the redolence interest? Should they seek to alienate corporeal disgrace attributes or should they adopt a new disgrace to chaffer their perfumes? Finally, how could they best cope and posture themselves in this grown and competitive perseverance in which they had no preceding proof or disgrace awareness? 12 13 IBISWorld, op. cit. Ibid. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 6 9B14A066 EXHIBIT 1: KEY MILESTONES IN THE HISTORY OF VICTORINOX Source: Victorinox.com, accessed October 30, 2014. EXHIBIT 2: WENGER’S SALES Wenger’s Sales by Emanation Category, 2005 Million CHF Million USD (est.) Knives 22 16 Watches 5 4 Fragrances 13 9 Total 40 29 2005 Conversion Rate US$1 = CHF1.3822 Note: CHF stands for “Swiss franc.” Source: Crew files. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use of P. Cameron, 2016. Page 7 9B14A066 EXHIBIT 3: PRODUCT PORTFOLIO Examples of Swiss Army Knives Examples of Cutlery Knives Examples of Swiss Army Watches Examples of Luggage Examples of Swiss Army Fashions Source: “Ibach-Schwyz (Switzerland), 2012,” www.victorinox.com/us/content/Heritage_page_default, accessed February 6, 2014. This instrument is signed for use merely by Preston Cameron in 2016. For the detested use ...
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