The rich also cry

What's the luxury jewelry industry for you? Shine, gloss and glamour?

For us it's something beyond it! We can see through the brand. Let me tell you a secret, that was discovered by Michael Poter. It's called Poter's 5 forces and it's a tool that shapes strategies of every company in every industry.

Porters model of competitive forces assumes that there are five competitive forces that identify the competitive power in a business situation can be used as a tool to assess a company’s position in its industry. These five competitive forces are:

1. Threat of substitute products
2. Threat of new entrants
3. Competitive rivalry within the industry
4. Bargaining power of suppliers
5. Bargaining power of buyers

So let's look in details how these forces influence the activity of Bvlgari and Chopard (and their competitors-check out previous posts).

Rivalry among existing firms is extremely HIGH in this type of industry:

1. Economy of scale: a few large groups dominate.
2. Strong brands: image of every brand was thought over (ex. Carla Bruni in the advertising campaign of Bvlgari) in accordance with brand heritage (Chopard's magic was embodied in Disney collection).

Threat of new entrants should be considered as LOW, because of the following barriers:

1.  Brand loyalty: luxury brands as Bvlgari and Chopard have extremely loyal customers, that are obsessed with specific brand and don't want to change their preferences.
2. Capital requirements: investments to build a new luxury jewelry brand are huge and unrecoverable in case of failure.
3. Suppliers and distributors databases: it is hard to get in touch with suppliers that protect competitive advantage of brands they supply to. Top level distributors will not deal with new unknown companies in order not to damage their reputation.
4. Brands concentration in few groups: almost all luxury brands are own by big groups. Bvlgari is a part of LVMH and Chopard represents a giant group itself. Small new companies will not be able to compete with such luxury monsters. 

Threat of substitutes is at the MODERATE level too. 

1. Mid range brands that pretend to be premium. For example, everybody knows Place Vendôme in Paris where are almost all luxury brands located. A bit further from this place there is a shop of Maty jewelry that is not high end brand, but due to the location could be considered by people as part of Place Vendôme community.  
2. Counterfeit: could be a serious threat to Bvlgari and Chopard (not only in terms of watchmaking, people also buy fake wedding bands with Bvlgari logo on them).
3. Other luxury brands, that gives the same feeling of belonging to the nobility (Hermes bags or Louboutin shoes).

Power of suppliers is from MODERATE to HIGH due to the following reasons:

1. Exclusive skills suppliers: Both Bvlgari and Chopard have strong commitment to quality and propose unique style of their jewelry. It could be hard to make big list of suppliers, that can support them in their engagements.
2. Exclusive materials (b.zero collection of Bvlgari and Happy diamonds of Chopard). 
3. Competitive advantage: suppliers are acquired to protect it outright.

Buyers don't have a strong bargainig power, that's why this force is LOW. 

1. Loyalty: customers emotionally attached to the brand.
2. Exclusivity: unique products that are considered as masterpieces (collection of Bvlgari jewelry that belonged to Elizabeth Taylor).
3. Increasing number of buyers: wealthy people from China and other asian countries.

So "may the force be with you".

Kristina Voskivarova

Sources:

1. http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/

2. http://www.notesdesk.com/notes/strategy/porters-five-forces-model-porters-model/
3, http://s3images.coroflot.com/user_files/individual_files/500267_H_jxIO2eTaViTyLAB_HuQdS8I.pdf
4. http://prezi.com/ms7_bvysprei/corporate-strategy-luxury-industry/
5. http://fr.slideshare.net/vy1230/luxury-goods-industry-analysis-2013
6. http://fr.slideshare.net/mraldang/louis-vuttion-moet-henness
7. http://www.blog-bisontin.fr/?2012/01/01/34-maty-bijoux
8. http://diary.chopard.com/the-enchanting-disney-princess-collection

Jewelers' competitors

“The jeweler allows me to wear the sapphire blue lake on my finger, the emerald green leaves around my neck, and take the citrine sunset with me wherever I go. Jewelry has become my daytime link to nature in an office with no windows. And if I have to work late, there’s nothing like diamonds stars and pearl full moon against an onyx night sky. “  Astrid Alauda, “Office with no windows”

The global crisis and the change in the world’s economy, especially the increase of luxury goods sales in countries like China and India, as well as the transformations we expect from this industry ( consolidation of core players, changes in the channels)  have and will  create a very competitive and potentially even more profitable market in the future.

Bulgari and Chopard, being in the Top Ten best jewelry brands in the world face a fierce competition, in the face of each other, but of course from other companies as well. Searching to discover which over companies will better suit as their closest competitors we uncovered the following names:

• Tiffany & Co
• Cartier SA
• Piaget
• Chaumet

Tiffany is an American multinational luxury jewelry and specialty retail, sells jewelry, sterling silver,china, crystal, stationery, fragrance, personal accessories. The company is particularly known for its diamond jewelry and of course its trademark blue box, which contain the purchased articles. Today the company has 167 stores in 22 countries.

Cartier is a French multinational which designs, manufactures and sells jewelries and watches. The company is known as the “jeweler to kings” and currently operates more than 200 stores in 125 counties.

Piaget is a Swiss manufacturer of jewelry and watches and is one of the most prestigious jewellry brands in the world with shops all around the globe.

Chaumet is a French manufacturer of jewelries and watches. The company has more than 70 boutiques in the biggest cities: Paris, Moscow, Tokyo, Hong Kong, etc.

The competition is very vivious in the jewelry market, therefore the companies have to be present in various countries, close to their competitors in order to fight for their consumers' share, like in the case of Paris, where most of the jewelry brands can be found either on Champs Elysées or Place Verdôme. The competition goes not only by presence all around the world, but of course in terms of new collections,  new ideas, consumers' satisfaction of their hedonic and materialistic values, communication and brand perception.

TP

Sources:

1. http://www.quotegarden.com/jewelry.html

2. http://en.wikipedia.org/wiki/Jewellery#Modern

3. http://www.jckonline.com/blogs/chain/2013/05/13/jewelry-industry-in-2020

4. http://topbrandsandproducts.com/2013/09/05/top-10-luxury-jewelry-brands/

5. http://en.wikipedia.org/wiki/Tiffany_&_Co.#Stores

6. http://en.wikipedia.org/wiki/Cartier_(jeweler)#Accessories

7. http://www.cartier.com/maison/history-and-stories/cartier-jeweler-kings

8. http://www.montblanc.com/fr-fr/flash/default.aspx/#/corporate

9. http://en.wikipedia.org/wiki/Piaget_SA
10. http://en.wikipedia.org/wiki/Chaumet

11. http://www.chaumet.fr/

12. http://en.piaget.com/