“Beyond streamlining operations and introducing cost innovations, a second lever companies can pull to meet their target cost is partnering. In bringing a new product or service to market, many companies mistakenly try to carry out all the production and distribution activities themselves. Sometimes that’s because they see the product or service as a platform for developing new capabilities. Other times it is simply a matter of not considering other outside options. Partnering, however, provides a way for companies to secure needed capabilities fast and effectively while dropping their cost structure. It allows a company to leverage other companies’ expertise and economies of scale. Partnering includes closing gaps in capabilities through making small acquisitions when doing so is faster and cheaper, providing access to needed expertise that has already been mastered.” –From the book Blue Ocean Strategy, written by Professor W. Chan Kim and Professor Renée Mauborgne, pages 133 – 134.
The world’s leading watchmaker, Swatch, which transformed the functionally driven budget watch industry into an emotionally driven fashion statement is one of the most well-known examples of successful Blue Ocean Strategy in action. And even with year-on-year sales growth of 20%, Swatch continues to Value Innovate. Most recently, a Business Week article highlights how Swatch’s Blue Ocean may be further expanding as it forms a strategic partnership with the number one name in jewelry.
Swatch Group shares rose as much as 5.5% Dec. 6 after the watchmaker unveiled an alliance with Tiffany the day before. Citibank upgraded Swatch to "buy," noting "it has gradually become a significant luxury player, not the mass-market consumer company some view it as. We believe it is an attractive, long-term growth story.
The deal with Tiffany to design, manufacture, market, and distribute Tiffany brand watches through a new Swiss-based, Swatch-owned company should prove a boost to Swatch on a relatively small investment. The company is investing nearly US$ 4 million to expand its production capacity, Chairman Nicolas Hayek said Dec. 5 at a press conference in New York.
"With Tiffany, they clearly have a really strong brand—they're the No. 1 player in jewelry worldwide—and a real potential [exists] to sell watches under the Tiffany brand," says Patrik Schwendimann, an analyst at Zurich Cantonal Bank.
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[Image via Watari Goro 渡五郎 .]