Porter's
5 forces is an important tool to understand the the $60
billion-a-year watch market and the competition.
The
watchmaking industry is very secretive and the Swiss watch industry
remains the number one even if the most watches are made in the
Middle Empire.
Threat
of New Entry:
The treat of new
entrants in this maket is quite high.
For
swiss-made watch, there are high cost entry and Swatch can increase
them even more y cutting down watch part supply. But for watches
made in China, costs are low. New rivals can easily produce their
watches in low-labor-cost countries which means that they can easily
produce and sell watch and make great margins. The
design is easy to imitate as Ice Watch did with the Swatch watches.
The only thing
that can save the existing brands are brand equity and customer
loyalty.
Threat of
Substitution:
Nowadays,
we can't live without our phone which is multitasking. We are
constantly with our phone and looking at him. Mobile
phone dependence is a reality, there is even a name for the phobia
of being without a phone: Nomophobia. People do not really need a
watch to have the time, a watch a now more associated with social
status. Even if you don't need a watch, you need it to express your
personnality, your social status; your success... A watch is also a
fashion accessory. Watch have subsitutes in smartphones, MP3,
tablets or any electronic device but watch are more than a giving
time advice.
“People
buy watches for a variety of very complicated emotional reasons, of
which telling time is often just a precept or an alibi,” says Bill
Geiser, a former executive at Fossil and currently the CEO of
smartwatch startup Metawatch.“
(Quartz
)
Buyer
Power:
The number of groups and
brands of watches is so huge that buyers have no power over watch
manufacturers. consumers have different criteria when buying a
swatch:
price: from a $70
Swatch to a $50,000 Patek Philippe
reputation
quality
longevity
style:
classic with leather bracelet or stainless-steel , original like
the one in plastic or unique
solid-gold
watch ...
Complication:
few or no complication at all (annual calendar or a stopwatch,
moon-phase indicator)
options: water
resistant, Swiss-made...
Competitve
Rivalry:
Competition is fierce in
this sector.
Swatch group, by owning
a company named ETA, is the world largest manufacturer of watch
movement and balance springs.
Watch movement is the
internal mechanism of a watch and the Swatch group manufacture 70%
of all the swiss watch movement sold to the world. Swatch group also
control 90% of the market of balance spring, a watch component
produce by its Nivarox FAR company. This situation of monopoly has
been permitted by the government for years. But it is really a ideal
situation for the group ? In fact no, Swatch Group is supplying his
competitors with essential parts they can not manufacture by
themselves. That is why Swatch is trying to stop its supply to other
watchmakers, which will certainly increase the costs and cut down
the margin of its competitors and even push some rivals out of
business. The Swiss competition commission allowed Swatch to reduce
its supply over the year, leading to supply storage and a huge
change in the watch market.
Watch
movement made by ETA
The three major groups
in this market are Swatch Group, Richemont and Rolex with 43.1% of
the world watch market.
Supplier
Power:
For
the Swiss-made watches, the
major supplier of most watch manufacturers for some components are
ETA and Nivarox, two units owned by the Swatch Group along with 156
production factories. Swatch has no problem of bargain with supplier
as this group has done vertical integration and is the larger watch
producer. For the other brands of swiss-made watches, the supplier
power is very high and a huge amount of investment in R&D has
been made to counter the strategy of the Swatch group.
So, Swatch is the
supplier of the watch market for most of the brands of Swiss watch
manufacturers. Given this fact, supplier of other parts of watches
are no power.
But this is another
story for the other watches. Indeed while a swiss watch price is
around $600, a Chine one is only $2. In 2011, 1.2 billion watches
were made worldwide when Switzerland made only 31 millions watches.
Worldwide, suppliers are easy to find with very low cost product. In
this case suppliers have few power.
Elodie
Soudan
Source pictures:
http://online.wsj.com/news/articles/SB10001424127887323820304578410710485921932
http://www.swatchgroup.com/en/brands_and_companies/production/eta
http://www.wthejournal.com/en/pages/swiss-watch-industry-figures
Source:
http://swisswatchwire.com/2013/02/how-the-swatch-group-dominates-the-swiss-watch-industry.html
w.ijcm.org.in/article.asp?issn=0970
0218;year=2010;volume=35;issue=2;spage=339;epage=341;aulast=Dixit
http://www.gq.com/how-to/fashion/200704/gq-guide-buy-a-watch-slideshow#ixzz2lEeLZeOdh
http://www.wthejournal.com/en/pages/swiss-watch-industry-figures
http://qz.com/147199/apple-and-samsungs-smartwatches-are-going-to-be-way-too-cheap/
