Ecosystem Analysis and Scenario Planing of Bvlgari

-Yu TANG

One Saturday morning, you wake up early in your Bvlgari luxury apartment, which is one of the most expensive real estates in Dubai. After a quick breakfast and washing up, it takes quite a while for you to choose which piece of Bvlgari necklace to put on. You take your Bvlgari handbag and rush to the parking garage, meanwhile you turn on the Bvlgari Vault App and tap the cellphone with your Bvlgari Diagono Magnesium Intelligent watch, the system identification unlocked on both the cellphone and watch, before you reach your car, the car opens the door and starts up automatically. You are now driving to airport to take the flight to Bali, because today is your best friend’s wedding day. In 9 hours, you will arrive at Bvlgari resort in Bali. You give your friend a box of Bvlgari chocolate and the latest accessory from Bvlgari as wedding presents. Now you and all the guest all toasting to the new couple.

This is not a future story, it happens in 2017.

Background—History, Industry 1

Bvlgari is one of the oldest Italian jewelry houses dating back to 1884. Company was founded by Sotirio Voulgaris (later renamed to Bvlgari) who is Greek immigrant to Italy. Word “Bvlgari” is a phonetic version of Voulgaris’s name. According to some sources, it also believed that this name belongs to ancient Bulgarian family of jewelers that operated in Greece between 15th and 18th centuries. Letter “v” in the company name is a brand move to reinforce the roots of Greek culture in the company goodwill. It took four generations of hard and creative work to bring Bvlgari to 230 retail locations worldwide. Today Bvlgari produces the expanded product line of handbags, watches, fragrances, eyewear, hotels, real estate, chocolate and one App - Bvlgari Vault.

On 6 March 2011 French luxury group LVMH Moet Hennessy Louis Vuitton SA announced that it was acquiring Bvlgari SpA in an all-share deal for €4.3 billion ($6.01 billion), higher than LVMH had offered for any other company. Under the deal, the Bvlgari family sold their 50.4 per cent controlling stake in exchange for 3 per cent of LVMH, thereby becoming the second-biggest family shareholder behind the Arnaults in LVMH.

Bvlgari launched a campaign of Save the Children in 2009, the world’s largest independent organization for the protection and promotion of children’s right. The goal of this campaign is to ensure a quality education to 8 million children who live in war-torn countries. To date, the campaign has laid the groundwork for long-term improvement in the lives of nearly 6 million of them. Thanks to “Rewrite the Future”, schools have been built, books and educational materials have been provided, and millions of children have been protected from violence of every kind. Until 2016, $50 Million was Raised for 1 Million Beneficiaries across 33 Countries.

Material in this section is drawn from company documents and the Wikipedia. website, http://1

www.bulgari.com/en-us/from_the_origins, https://en.wikipedia.org/wiki/Bulgari

In 2015, Bvlgari launched Diagono Magnesium Intelligent watch and the Bvlgari Vault mobile application.

The combination of Diagono Magnesium Intelligent watch and the Bvlgari Vault app allows users to securely backup your data online using WISeKey Cyber Security technologies and data storage on Swiss Alps. With virtually limitless applications to a number of verticals, the Diagono Magnesium Intelligent watch using this unique secure wearable technology represents a huge value proposition to all Bvlgari ecosystem members. You can use the cryptographic key that is stored on the Diagono Magnesium intelligent watch for many other usages such as activation of your smartphone, unlocking doors and electronic locks at home and at work, unlocking and activate your alarm system, your car, your boat, etc. Tap your Diagono Magnesium Intelligent watch to your smartphone or tablet to unlock your Bvlgari Vault app or pay for goods with NFC (Near Field Communication) enabled contactless payment systems.

"The new Diagono Magnesium intelligent Watch perfectly embodies Bvlgari duality in the landscape of luxury watchmaking with its Italian origins, epitomized by Leonardo da Vinci, both a scientist and an artist, and allowing Bvlgari to fuse in a unique way contemporary and edgy timeless Italian design together with the best of Swiss watchmaking mechanical know-how and the most advanced Swiss technologies such as the WISeKey's. We have moved out of the watch, and into the application, all of the potential obsolescence issues. In a normal smartwatch, after two years you have generation two and after three years generation three. This is the story with the iPhone, so it will be the same with the Apple Watches. In our case there is no risk of obsolescence because the chip doesn’t need any upgrade; what does need an upgrade is the app. With luxury you cannot accept obsolescence. On the contrary, luxury has to be timeless. This is the only technological watch which is 100 per cent mechanical. It is respecting all the integrity of the high-craftsmanship Swiss watch " declared Jean-Christophe Babin, President of Bvlgari Group. 2

Ecosystem

A luxury ecosystem describes a confederation of partners assembled by a luxury brand and united over the long term by a shared vision of the future. The brand is an actively gravitational center; it orchestrates many of the partners’ actions and works to build and maintain trust among all parties . 3

http://www.thenational.ae/business/technology/Bvlgari-shows-an-intelligent-approach-to-high-2

tech-timepieces

https://www.bcgperspectives.com/content/articles/3

consumer_products_retail_luxury_ecosystems_controlling_your_brand_while_letting_go/

Trends and Uncertainty

Given the luxury sector’s reliance on high quality raw materials, we must understand the potential vulnerabilities that climate change will pose to them and be proactive in building resilience across our supply chains. Access to quality resources is extremely important . 4

The single most important driver in luxury industry is access to top-quality resources—in other words, large deposits of valuable stones and leather. If the volume and quality of a producer’s resources are comparatively high, then the producer will occupy a leadership position.

In this capital-intensive industry, scale is another key success factor. Both invest significant capital expenditure into development, facility construction, replacement projects and asset improvement—an amount that in both cases is considerably higher than their annual pretax profits. They are not likely to find themselves in an over-extended position.

http://www.bain.com/Images/PR_BAIN_REPORT_The_global_diamond_industry.pdf4

Real Estate Industry

Apparel and leather goods

Catering IndustryJewelry and Timepiece

Fragrance

Mobile Application

Winery Tourism

Animal Husbandry

Information security industry

Mining Industry

Luxury Beverage

Already exist industry

Not exist yet

Secure Wearable devices

Customers’ taste and attitude to luxury goods are changing rapidly, especially for those millennials. Millennials are not passive consumers. They are curators and creators, appreciating personalization and the ability to share their voice. A seamless digital experience must recognize and incorporate these desires to reach this active audience.

Refresh the brand image. Affluent consumers do not take brand messages for granted, so heritage brands must take their stories out of the usual luxury ad format and refresh their image. The best way to do this is to embrace and leverage the millennial drive for creation. By creating new approaches and cutting-edge social experiences, they can appeal to savvy millennials, offering a real substantive experience to back up the luxury name . 5

Bvlgari has more than 295 physical stores over the world, only in China they are operating online store on WeChat experimentally.

Government regulation might also be an impact factor, since many personal luxury goods are purchased as gifts, for instance, Bvlgari and many other luxury brands are subject to a great loss caused by the anti-corruption move in China.

The balance of openness and control. To be sure, embracing an ecosystem model means companies must relinquish some degree of control over their brands, something that luxury businesses, in particular, are reluctant to do. But the example of Apple and the universe of third-party apps built on top of its iOS devices demonstrates that, with the right frameworks in place, it's entirely possible to strike a winning balance between control and openness, enabling agile innovation while ensuring a seamless and high-quality brand experience.

Partnerships are crucial for luxury business. Choose partners whose complementary strengths can bring the new model to life. Luxury brands should adopt 'ecosystem models' to power a universe of external partnerships. Companies increasingly benefit by bringing in ideas and expertise from the outside. That is especially so in the luxury world, where future growth for many companies will depend on success in new market categories, locations, and channels — and where partnerships, when thoughtfully and carefully orchestrated, can make the difference between success and failure. The collaboration between Bvlgari and WISeKey is a good example. Luxury watches need to tell the time — but also be timeless, according to Jean-Christophe Babin, the chief executive of Bvlgari. Luxury watches need to tell the time — but also be timeless. It's the affirmation that there’s no contradiction nowadays between true luxury craftsmanship and the integration of some technologies, as long as they don’t jeopardize the integrity of the craftsmanship and that they are real and valuable for the consumer. WISeKey is predicting that Secure Wearable devices like the Diagono Magnesium Intelligent will move to the gravity center from application-centric to personal centric models where users will retake the control of their personal data. "Gone are the days of using so many physical and digital credentials and keys to open doors, with the Diagono Magnesium your key is on the watch and always with you. The trend WISeKey is launching this year at Basel world in cooperation with Bvlgari via the joint project is a special version of Bvlgari Vault based on WISeID Personal Clouds designed to develop a Bvlgari Trusted Ecosystem" 6

https://www.luxurydaily.com/luxury-is-meaningless-or-why-millennials-want-more-than-just-a-5

brand/

http://globenewswire.com/news-release/2015/03/20/717197/10125740/en/Bvlgari-and-WiseKey-6

launched-successfully-the-Diagono-Magnesium-intelligent-watch-concept-at-Baselworld.html#sthash.t07OCaAr.dpuf

Scenario planning and corresponding strategies

Resources crisis 1. Raise the price; 2. More integrated with high technology,

defining “Luxury”; 3. High source control; 4. Transfer the main business to more

experiential service; 5. Merger with resource company, e.g mining

corporate and breeding enterprise; 6. Avoid aggressive marketing strategy and

maintain friendly relationship with other brands;

7. Encourage cooperation with independent designer and studio;

Sustainable ResourcesUnsustainable

Resources

Negative attitude

Positive attitude

Expand within the brand elasticity 1. Expand in a broad business area; 2. Maintain luxury image of the brand; 3. Define the limit of the brand elasticity; 4. Invest in philanthropy, repay society; 5. Enhance customer experience and

incorporate digital elements to satisfy next generation;

6. Apply aggressive marketing and branding strategy to gain competitive advantages;

7. Focus on business innovation rather than investing in resources;

Elusory attitude 1. Customers retention; 2. Pay more effort on R&D, do more

analysis on customers, grasp customers’ appetite;

3. Expand channels, e.G omni-channel, build a seamless purchase experience for customers;

4. Change marketing strategy, e.g content marketing, appealing to millennial;

5. Create targeted experiences for the right audiences millennials;

6. Refresh the brand image;

Game Over? 1. Focus on customer experience enhancing

products; 2. Streamline the product portfolio and spinoff

non-core business; 3. redefine brand image and apply middle-

class friendly marketing strategy; 4. Animal friendly products; 5. New bio-technical material development; 6. More experiential oriented; 7. Improving digital engagement; 8. Reevaluate the customer-engagement

models;

Bvlgari is evolving proactively, it stands in the frontier of the luxury industry. The ecosystem formation of Bvlgari is very promising. With the scenario planning, Bvlgari is able to focus on the main driver to the business and foster innovation as well as stability.

The corporate strategy course gives me a brand new way of thinking and planning. It is a well organized logical process to prepare the modern company for the ever changing market. The era of focusing on only one field, expecting a major business success, is shifting. With the resource and success in one business area to expand and create a business Ecosystem will be the winning hand. As Ecosystem can be adapted to any industry and will be the “new normal” for our business world, the risk also lies with the excessive expansion of one's business area. Scenario planning is a reliable tool to monitor the process of Ecosystem formation, as it helps prepare the company for potential market evolvement. As a manager, it is critical to understand the risk and prospect of the business strategy, hence one can fine tune the tactics in order to achieve the desirable outcomes.

Personally, I think the strategy course not only enables us to assess the development prospects of certain company, but also allows us to evaluate various industries, serving our career target. From matters as back office operation to issues could affect the direction of one country, scenario planning will play a major role and effective tool to assist.