Executive Summary
Tiffany & Co engages in jewelry retail in the UAE as well as internationally. Over the years, the company has worked towards the establishment of a recognized brand of luxury products. However, its operations in the international and local markets is still influenced by various factors such as political, economic, social, technological, legal and environmental factors. In each of the identified factors, the company has an opportunity to explore its business prospects and thus achieve success in operations. From the international perspective, the most influential factors include buy local policies and employment laws. At the local level however, the company enjoys advantages such as favorable economic conditions and tariffs. The company itself has various key competencies such as the focus on quality and innovation, effective marketing and brand management and key growth strategies among others. However, the company still faces challenges in planning global expansion and in product positioning. It is therefore recommended that the company should engage in diversification and focus on expanding into countries with bigger market potentials.
Tiffany & Company Market Research
Introduction
Tiffany and Company is a jewelry retailing company based in the UAE. The company operates internationally and is considered to be one of the market leaders in jewelry retail. The company deals in a wide range of jewelry products and accessories. Some of the materials include silver, platinum and gold, diamonds, wood, ivory and leather products. The products marketed by the company are classified as luxury products and the market size tends to expand as the prices go up. In the past few years however, the expansion of the jewelry market in the international arena has seen Tiffany & Co experience great competition from different quarters. Most of the company’s competitors also engage in sale of jewelry on a retail basis and receive products from the same suppliers as Tiffany & Co. Through collaborations with others in export, the company has however managed to build a strong brand presence in the companies within which it operates hence addressing the wider market needs. Presently, the company continues to expand into new markets in a bid to internationalize. Every collection offered under Tiffany and Co includes works of famous jewelry designers such as Paloma Picasso and Elsa Peretti. The company partners with several key players in the industry to offer the most exceptional customer experiences and subsequently to engage the customers at a more personal level. For instance, through the line of Tiffany Engagement, the company offers unique and exquisite engagement rings made of diamond. It is through such strategies that the company has managed to hold the interest of customers and intends to maintain its growth in the long run.
Despite the efforts made by Tiffany & Co. towards expansion, the jewelry market still poses significant challenges. The company itself engages in intensive internal and external marketing practices as well as in measures to set their products apart from the competitors. This may work but only if the company manages to create sustainable competitive advantage in the target market. Understanding the retail market dynamics in the jewelry industry is a crucial step towards understanding how sustainable profitability can be achieved. The company still works based on various key values and with some specific objectives which are supposed to guide it towards prolific growth in its target market. In studying the external trade environment, one of the most beneficial tools that the company may use is the PESTLE analysis. Similarly, consideration of the company’s key limitations and core competencies can help Tiffany and Company to work with the available resources for greater economic growth and expansion in business.
Since Tiffany & Co is an internationally operating company, exploration of external factors affecting trade will be two-fold. There are those factors that come into play only during international trade and those that are confined to the national operational level. In either of them, the objective is to understand how Tiffany can work towards achieving its economic objectives in spite of the prevailing challenges. In the ensuing study, Tiffany and Co is analyzed in lieu of its external and internal trading environments. The objectives of the study therefore include:
- To determine the factors that influence Tiffany and Company in the international jewelry market
- To find out which political, economic, social, technological, environmental and legal factors influence Tiffany and Company operation in the UAE
- To find out the key competencies that the company can take advantage of to maintain sustainable growth
- To develop an understanding of the company’s limitations which may hinder its growth and to recommended practices that can help the company move forward in the long run.
To effectively address these study objectives, it will be necessary for the research to take a multidimensional outlook to the problem in question. This implies that both primary and secondary studies will be taken at the discretion of the researcher.
External Company Analysis: International Market
Political factors
The analysis of the jewelry market in the international scene can best be described through various factors. The PESTLE analysis used herein is one of the methods through which market dynamics can be studies and understood. The first in consideration is the Political factors. Political factors influence the operation of any company in the international markets. For Tiffany & Co, some of the factors include geo political factors e.g. the presence of trading blocks in the Middle East and beyond; political surveillance; international trade policies; employment laws; and import and export laws (Treadwell, 2016). The geopolitical factors determine the countries which can be accessed by Tiffany & Co through free trade regulations as well as those whose markets cannot be accessed by the company. It is thus crucial for Tiffany & Co to understand the regulations that guide the operations of such trade blocks in order to effectively take advantage of arising opportunities. Similarly, international trading policies such as buy local regulations also influence the operations of Tiffany & Co. according to a study carried out by McDonald and Wilson (2011) the presence of buy local regulations threaten the expansion of businesses into certain markets. The company has to know the markets where buy local regulations persist and as such restrict expansion plans to areas where their operations would be welcomed. Any efforts to expand into such markets would only be met by losses to the company.
Employment laws in different countries also have to be explored where the company intends to expand. Each country has different requirements of employers. Tiffany & Co has to maintain the conducts befitting of the country’s employers in order to satisfactorily explore the existing business opportunities. Similarly, import and export regulations also have an essential role to play in the business of Tiffany & Co. While it may be easy to establish expansion opportunities in different countries, ensuring that the business meets profitability is dependent on the regulations guiding import and export operations. With a single production plant, it is crucial for the company to ensure that the laws and expectations during import and export operations are not limiting its operations.
One of the ways through which the company can take control of the international trade environment is through joining lobby groups with the objective of monitoring and initiating positive changes in policies. It would be beneficial to the company if the initiated policies encourage international trade and minimize the requirements from the traders. On the other hand, one factor that the company may find effective in helping its growth in the international market is the subject of political surveillance. While this appears to have nothing to do with jewelry business, it can be beneficial to Tiffany & Co in that such surveillance improves security hence the company is assured of the safety of their products.
Economic Factors
Economic factors play an essential role in Tiffany’s international trade prospects. The most crucial economic factors in Tiffany & Co’s business relates to the taxation and inflation conditions of the international markets. While inflation increases the risk of business loss due to low purchasing power of products, taxation determines the profitability margins within which the company has to operate. Stringent taxation laws and high government charges imply lower profitability (Campbell & Craig, 2012). For a high luxury market, the company has an operational cost margin within which it can operate. Wise choice of markets is therefore a crucial aspect in the choice of expansion prospects for the company. In addition to this, other factors that may be considered under the economic conditions of the market include: the cost of living in different countries, import and export duties, exchange rates and the international economic trends. In any intended expansion, the objective of the company is to see an increase in the product sales. It is therefore expected that any conditions that would result in lower profitability would hamper the achievement of the company’s objectives.
Social Factors
Across the globe, different social factors exist for the company intending to infiltrate international markets. Social dispositions such as cultures and religious beliefs guide the use of jewelry in a country. Additionally, the population distribution in the country, education levels, and employment rates all impact the purchasing powers of different citizens in country (Campbell & Craig, 2005). Expanding the Tiffany & Co business strategy would mean delving into markets with such social uncertainties. Exploring the income distribution is a very important process where expansion is intended. Operating in countries with lower recorded income levels means that the company will have to work with consumers with a low purchasing power. This would result in irrational product pricing through the provision of discounts. This can however result in economic losses to the company. Other social factors mentioned by Sammut-Bonnici (2014) include consumer perception on brands and psychography. While understanding the company’s perception in the international markets may be crucial, it may also prove to be difficult to obtain such information especially in countries where Tiffany & Co are not yet providing the company’s products.
Technological factors
The company competes with various other key players in the jewelry international markets. To effectively provide the requirements of the customers and to satisfy the company need for profitability, it is essential for certain technological factors in the extern environment to be considered. Innovations form the key concepts in technological factors (Sirmon et al., 2010). For instance, the contemporary times are characterized by innovations in operational techniques in the jewelry industry. Emergence of new electrical and mechanical systems is making work much easier in the hospitality industry. Through taking advantage of such innovations, Tiffany & Co can improve their profitability. In addition to this, innovations in the product designs, product pricing and product distribution strategies are also taking the market by storm. Engagement in the international markets depends on the ability to take advantage of the opportunities presented by each of these technological as well as other factors.
Legal and Environmental factors
In the international markets, legal factors can only be taken to mean compliance with regulations guiding trade practice within the international boundaries (McDonald & Wilson, 2011). The ability to comply with various key regulations can make the difference between profitability and lack of such. The environmental factors on the other hand are dependent on environmental conservation laws applied in each country. Environmental regulations include laws that guide practices which impact the environment. In the recent times, operations in various countries have been under requisition to focus on environmental management through practices that foster environmental protection. For Tiffany & Co, the releases to the environment are fewer compared to other manufacturing companies. However, the company has to demonstrate through corporate social responsibility that it engages in within the business operations model. This has been addressed by Tiffany & Co both internationally and in the national context.
External Company Analysis: The UAE Market
Besides the focus on the international market, operations of the company must also be considered with respect to the national environment. The UAE is the mother country of Tiffany & Co. As such, the conditions of the country under review should be such that business is favored rather than hampered. According to Haapalainen and Skog (2011), the jewelry market in the international context is characterized by various key features. For instance, the expenses involved in the industry are high, particular at set up. This means that most of the companies operating in the industry have the need to consolidate with others in order to form larger companies. Decisions involving Tiffany & Co especially with regards to interactions with its partners are all aimed at accessing greater market potential. The market is also characterized by fragmentation, and the need for effective advertising to maintain profitability. Understanding the industry within the UAE as well as outside the country is thus crucial in order to develop a strong marketing strategy that can help achieve sustainable growth (Hisrich, 2009). Other challenges to the market include excessive supplier bargaining powers, presence of substitute products which increase the price elasticity provided by the high competition (Akpinar, 2009). Walker and Lancaster (2009) also describe the nature of the jewelry market in the world and in the UAE. Despite the various key challenges facing the industry in the international context, Tiffany reported an increased growth in sales over the year (David, 2009).
According to Balakrishan (2005), the UAE is described as an economic hub for those in transit. The UAE holds a crucial position in the international jewelry as well as in other markets. The country is also highly populous hence it is expected that Tiffany & Co may as well be operational in the UAE. The available trading conditions and regulations in the country also favor export and import businesses as well as local businesses. Although most of the country’s populations are Muslims, this does not imply that there are more stringent operation procedures for non-Muslims. As a matter of factor, the country has a strongly supportive laws and regulations on imports. After joining the General Agreement on Tariffs & Trades (GATT) in 1994, the UAE works towards adhering to the requirements of this agreement. The World Trade Organization recognizes the UAE’s commitment to an international trade despite the challenges facing the country; the UAE has managed to reduce expenses through tariff reduction from the WTO maximum of 15% to a low value of only 5% (The U.A.E Trade & Commercial Office, 2016).
An understanding of the trade environment in the UAE was enhanced further through conducting interviews with some players in the industry. In particular, the interview technique was chosen due to its effectiveness in acquiring personal information. While there are many interview strategies that could be used in the study, the face to face interview technique, proposed by Opdenakker (2006) was used. This particular technique has many key advantages hence forms the method of choice in the research. For instance, in this study, social cues are considered important in evaluating the accuracy of information collected. This makes the face to face strategy all the more interesting for the subject of study. In addition to this, the face to face technique gives the participant and the researcher an opportunity to reflect and request for more information from each other. The method is also easy to terminate. Tape recording was used as the key method for storing the information collected by interviews until reviewed and analyzed. While conducting the interviews, the researcher undertook to avoid biasness through early preparations to enable systematic interviews to be carried out (Jamshed, 2014).
The interview technique was founded on various key ethical principles as described by Resnik (2015). The interviews were conducted based on the core values of honesty, openness, confidentiality, and objectivity. Since it has been established that the study itself is theoretically driven, the interview provided an excellent opportunity to understand various key characteristics of the company, especially in reference to the political, economic, social, technological, environmental and legal factors. To effectively understand these factors and their role in the UAE jewelry market, the snowballing technique described by Edwards and Holland (2013) was used. The technique involves making contact with the initial participants through any ways possible and then getting other participants through the initial ones. This method has been proved effective where there is limited access to participants. The method helps to gain access to a homogenous sample population (DiCicca-Bloom % Crabtree, 2006). The participants in the interview process included five members of staff at Tiffany & Co Riyadh branch where they were interviewed. The face to face interview is considered desirable where transport towards the location of the interview is inconsequential to the benefits of the study. The strategy is also applicable in a broad social context hence relevant event in the present study (Creswell, 2013).
In order to establish the PESTLE characteristics of the UAE trade environment, the participants were asked ten questions each. The questions were formulated using neutral language to enhance objectivity in research as well as to be clear about the intended purpose of study. Based on the reports given by the participants, it can be argued that political factors such as national incentives, fiscal policies, permission, national planning, and licensing and corruption levels all influenced the decision to trade. For instance, most of the participants reported that the country had almost zero potential for corruption and that procedures involved in licensing of luxury products were challenging to starters. Similarly, in social characteristics, most of the respondents recognized the role played by the masculine society on access to jewelry. According to the participants, women in the UAE are well linked to beauty and the use of high quality jewelry hence increasing the market size for various types of jewelry. The economic context also brought out the significance of low tariffs on the market size and operational capacities of the company. Most of the participants did not however have any strong convictions on environmental and legal factors as they did not recognize the roles played by these factors in the jewelry market.
Internal Analysis: Tiffany & Company
Besides the international and the national conditions in the UAE, Tiffany & Co has individual characteristics which increase its potential for success in the market. According to a report by Tiffany & Co (2016), the company strives to operate based on core principles of global presence, commitment to quality, innovation, strong marketing and branding, intellectual property rights, supply chain effectiveness, and key growth strategies. Each of these principles has a role to play in ensuring long term sustainability of the organizational operations. For instance, the global presence principle is achieved through internationalization. Haapalainen and Skog (2011) recognizes internationalization as one of the principles and business strategies that companies that deal with jewelry retail can focus on to improve their market efficiency and competitiveness. While this strategy is considered beneficial and potentially profitable for the jewelry businesses, the mode in which it is applied affects the level of growth that the company can achieve. For instance, Wilcox et al (2007) discussed the undoing of Tiffany & Co, and mentioned overexpansion as one of the key limitations of the company. According to Wilcox and others, overexpansion does not simply imply expanding into many markets. On the contrary, it implies that the company focused its expansion efforts on not very profitable markets such as European and Asian markets where the level of competition is high.
Similarly, the company’s commitment to quality, innovations and supply chain effectiveness were all carried out with the objective of increasing profits. Some of the strategies that the company used to also increase profitability included opening stores in upscale locations and ensuring classic product positioning. The objectives of the company in so doing were mainly to enhance the exclusivity and luxury associated with the company. This was however only achieved minimally as Wilcox et al describe. Through their findings in 2007, Wilcox and others established that the company was failing to be recognized as the luxury brand that it intended to be. Instead, people generally associated the Tiffany & Co products with lower values than other jewelry retail outlets. The assignment of lower values gives the false perception that the company offers lower quality products than other companies. This greatly affected the operations of the company, making it necessary to come up with strategies for enhancing the recognition of the company as exclusive and luxurious.
Because of the challenges associated with the company and the different limitations associated with it, the company came up with a growth strategy that would help in enhancing its perception in the national and international markets and also improve its profitability. According to Agrawal (2016), this strategy is referred to as the special marketing strategy. This includes practices entailing enhancing cost awareness through marketing and public relations; increasing the productivity of each store through targeted advertisement; selective expansion into global markets; distribution of products without compromising on quality; development of new products; improvement of operating margins and improvement of service standards. Each of these strategies is directed towards greater profitability in the international jewelry markets.
Findings and Implications
The first research objective was to determine the factors that influence Tiffany & Co in the international jewelry market. Through the PESTLE analysis, a range of factors have been identified and linked to the international jewelry trade prospects held by Tiffany & CO. For instance, political factors such as buy local policies, employment laws, import and export laws and consumer protection laws all affect the company operations. While some such as the buy local policies threaten the company’s thrift in other nations, other factors can be effectively played through taking advantage of the opportunities they offer and growing into the intended market. Other factors are economic such as availability of disposable income, inflation and taxation; social factors such as religious and cultural dispositions; technological factors such as innovations in product design and mechanical and electrical procedures; legal factors such as compliance with laws and regulations and environmental factors such as environmental conservation practices. While the impacts of some of the factors such as legal and environmental factors are minimal, the others are significant to the company’s operations and have to be analyzed effectively.
The second research objective, which involved examination of the PESTLE factors in the national context, was achieved through a combination of secondary study and an interview technique. From the secondary sources, it was established that the UAE has a favorable business environment with low tariffs of 5% relative to the 15% maximum recommended by the World Trade Organization. This makes the country a supportive economy for the benefit of companies intending to indulge in export and import businesses. In political contexts, the country offers a supportive environment through stable political structures and immigration policies. Others include fiscal policies, exchange rates and low corruption levels. These factors are advantageous to the company in that they give the company a chance to operate both within and without the country. The third objective was to determine the key competencies associated with Tiffany & Co. Based on the findings of this study, the core competencies of the company can be linked to the principles of operation. The company has a strong and effective growth strategy which when explored maximally can result in even higher potential for expansion. In addition to this, other principles such as focus on quality and innovation, recruitments and marketing and branding strategies also help the company to maintain sustainability in the jewelry market.
The growth strategies put in place by Tiffany & Co can be described as effective with respect to probability of achieving greater profitability. Improved service standards and improved operating margins go hand in hand as they depend on and influence each other. The most difficult concept would be to raise the perception of the population targeted by the advertisement from consideration of Tiffany & Co as cheap and commercial to recognition of the company luxurious and high quality products. It would thus be crucial for the company to take advantage of marketing opportunities to use the most available and accessible marketing strategies such as through social media. On the other hand, the company is negatively associated with unplanned expansion and wrong product positioning among others (Bogenreif, 2012). The fourth question on limitations is thus well explored through the strategic recommendations for the strategic growth of the company.
Recommendations and Conclusions
Based on the findings and the implications for the company, the first recommendation for the company would to engage in diversification. Haapalainen and Skog (2011) identify two major methods through which jewelry companies expand their market shares as internationalization and diversification. According to the authors, both of these strategies can be effective in the long run as the companies begin to be recognized for their diverse presence as well as diverse product ranges. In the case of Tiffany & Co, the concept of internationalization has been explored to a certain degree. However, the company offers a limited range of products which include gift items and Tiffany engagement. The company should thus focus on other jewelry ranges such as branded and tagged wedding jewelry as well as gender specific jewelry ranges. In addition to this, some of the company competitors such as Zabe are diversifying into other businesses such as product financing and insurance to enhance customer recognition. This will help the company to not only retain its customers but also to acquire new ones through incentives. For instance, funding is one of the ways through which customers can be attracted in the jewelry sector. Similarly, offering insurance covers for products bought at the company stores also ensures repeat purchases from the company.
Apart from diversification, it is also recommended that while the company is addressing the subject of internationalization, it should focus on the areas that offer greater potential in terms of market sizes and accessibility. Since the company intends to be viewed as luxury brand, the international operations should mirror this prospect by proliferating markets associated with luxury such as Paris, New York and London. The Middle Eastern Market also offers a great opportunity for the company due to the prevalent use of expensive jewelry in the countries. Saudi Arabia for instance is the greatest export destination for products from the UAE and the company should thus try to infiltrate this market.
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