THE HOUR GLASS CASE STUDY:

PRESENTED BY:

MBA-IBM(2010-2011)

ESC-Chambery

MISSION:

To be the world leader in retailing, wholesaling and manufacturing of luxury

and lifestyle products/services by providing legendary internal and external

customer service and after sales service, while fostering a caring, sharing and

supporting family culture with personal learning, commitment, communication,

training and development.

THE SUCCESS OF THG:

The success of THG mainly attributed to the following factors:

Accurate timing Exact location Focussed in quality, fashion & trends , prospective consumers

The time: The growing trend of elaborate use of watch as an accessory more than a necessity was identified and likewise, new stylish patterns were included in the outlet with major suppliers in the market.

The location: The outlets were opened in the most attractive tourist centres and also industrial and business areas.

Focussed: The smartness in pinpointing the growing trends in the society, fashion and trends and also ensuring quality in service and product was also a main success factor.

Focus on the buying capacity of the wealthy consumers and tourist flocking to Singapore was also a notable strategy.

(NB: Asia was a big market for expensive watches which made Singapore the most favourite place for shopping sprees of rich customers in neighbouring countries.)

One step ahead......

THG was the pioneer in catering to the elite society there by identifying

and targeting customers . The forecasting ability of Mrs Tray, who saw a

market even when it did not physically exist at the time of start up of this

business, gave THG an early start and a unique monopolistic existence.

Core competencies of company:

According to Mrs Jannie Tay, “managing a business was about people, relationship and feeling “

Organisational policiesi. Training and staff development

ii. Extensive communication within management (staff & management).

iii. Flat organisational structure iv. Empowerment through information sharing.

(NB: At THG, everyone is encouraged to involve in decision-making to reach company’s goal, to have increased self respect and self-confidence, to be incentive to stay long time with THG and to work happily together. However, THG’s employees are improved by the training courses about techniques knowledge of the various products and brands, service skill of internal and external customers…)

Marketing Strategy

Integrated marketing plan comprising of 4 major marketing strategies:

Catering to a wide range of market segments.Boutiques are located in prime shopping locationsDistinguished look for THG boutiquesLaunched targeted image advertising.

(NB: Positioned as elegant watch boutique in a luxurious setting, association with premium brands, cultivate image as elegant watch boutique, displayed watches in gallery, trained professional sales people with product knowledge, high level service to suit customer’s lifestyle and personality, included more popular lines, word of mouth was one of the major tool for THG, informal means of advertising- cocktail parties, events, exhibitions, sponsored charity acts)

Efficient Management Overseas expansion by establishing subsidiaries Corporate strategy— Integration into wholesaling and

manufacturing watches, Diversification into non watch-retailing sectors.

(NB: THG was into new ventures like properties, perfumes, restaurants, jewellery and much more. There were also new frontiers explored in overseas markets with joint ventures with foreign partners.)

Is THG`s Success related to Industry – Investment & competitors

Yes,,,, THG is very much related to industry.

It has integrated to manufacturing of its own , they were in market but family

business, which was later developed and diversified. So initially investment was

from family rather

than other sources of financing. Since it was an industry that did not require

huge amount of capital it did not have long gestation periods for return on

investment. Decisions were taken and cash flow from one business unit into

another was not a big problem. Since the Industry was relatively new, THG was

able to capture the market with No competition in the early days.

(NB: Earlier there were no exclusive boutiques catering to select people,

fashionable and this brand came as a status quo, later competition did enter.)

Segmentation of the Industry

Targeted customers were divided into 2 :

Basic( necessity) and

Elite( rich & trendy, as asset / collector’s) Markets.

THG diversified into related segments like:

Sports accessories,

Jewellery.

Perfumery

Property / Real estate etc..

Backward Integration & Vertical Integration

Corporate strategy & Diversification are key Contributors for THG`s Market

share.

(NB: Watches transformed into fashion accessories thus capturing the Elite

Market. Starting from retailing, THG integrated backward into both wholesaling

as well as making watches , giving it the unique distinction of being involved in

all aspects of making and selling watches. Apart from this THG expanded

through ventures and subsidiary branches....which are indications of industrial

growth, CSR is maintained throughout in all aspects of the organisation.)

Buffer Analysis:

Market analysis was done based on PORTER’s five forces,

1. Threat of new entrants in market

2. Threat for substitute products

3. Rivalry within industry

4. Power of suppliers

5. Bargaining power of customers

Fig:1 PORTER’s MODEL OF FIVE FORCES

Depending on this , market was studied and contingency plan was made.

Forfeiting of products was checked by company, competitive products was studied.. & THG made sure to be innovative rather than being a follower.

Expansion was happening by acquisitions , ventures and establishment of subsidiary units, giving execution power to the units .

Diversification or multi business is also supportive at adverse conditions.

The business therefore witnessed a growth, i.e.30% of group turnover accounts for wholesaling alone.

(NB: Risk management was done depending on analysis done, status of other

prospective companies that can be included for expansion was identified ,also

the type of expansion ie acquisition/venture/ subsidiary that should be

undertaken by the company which is part of buffer analysis, so that no mistake

happens later ...................)

BCG Matrix and THG`s position in BCG :

END RESULT – CASH COW STATE OF THG

THG has scaled enormous growth in the first two decades showing great track

record in a very less time. So they had high market share in a fast-growing

industry. In the Early Period, THG was definitely a STAR because of their swift

rise to success.

CASH COW

Gradually THG diversified and took control of their cash. They entered the

CASH COW phase which supplies funds for future growth of the Organisation.

Due to the position of category Leader, THG was able to maintain its footing in

the CASH COW phase.

CONVERSION – questions to stars ( ? to *)

The Cash Flow from the cash cow phase was re-invested into many other

diversified lines. The Product Line varied by a great extent. THG was into new

ventures like properties, perfumes, restaurants, jewellery and much more.

There were also new frontiers explored in overseas markets with joint ventures

with foreign partners. Thus THG was successful in transforming QUESTION

MARKS into STAR areas in the BCG Matrix.

Fig:2 Pattern of business

As seen in the figure a decline phase is there for all business enterprises but

THG did not phase a tragic decline as they are diversified.

( NB: Since this business was taken over by Tay – a new era was seen in the

story of THG . Recovery of all the expense, i.e. return of investments was

obtained and reached the cash cow stage at a commendable pace.)

THG`s Competitive Advantage

THG`s Competitive Advantage accounts to the success of the company:

Quality -- product uniqueness, service efficiency

Focussed marketing- Identifying Potential Markets and foreseeing future

opportunities.

Market Analysis – Identifying the areas where watches can be sold –

Gifts/ accessories and fashion statements.

Human Resources – Effective and responsible Staff

Marketing Strategy - Look and feel , Market segmentation and Customer

satisfaction

Diversification – Different Product Lines introduced parallel

Global Presence – Overseas Markets and expansion through new

ventures....

CSR Company with responsibility on all the members.

Diversification and Its Problems

Diversification

The Strategy of spreading investments in different areas to penetrate more

markets is called diversification. Parallel introduction of products in market

simultaneously so that one can always have a steady flow of cash.

Reasons to Diversify

1. Maintain Life cycle of company

2. Risk Management

3. Market Share & investments

4. New opportunities.

Life Cycle

In 20 years after starting THG gained enormous growth. It crossed all the three

phases of Development, introduction, growth and maturity in a very short span.

When THG was matured in the watch industry, it has to diversify in order NOT

to go into decline phase. So to maintain healthy life cycle of the company

diversification was very essential.

2. Risk Management -

Diversification increases market scope and reduces the risk of total shut down

in all areas. Even if one industry is performing badly, there are other industries

that can help the company maintain its operating Profits. This also helps in cash

flow from one business unit to another.

3. Market Share & Investments

With more products , THG was able to obtain a significant market share of the

goods. More markets were penetrated and newer opportunities were exploited.

Problems in Diversification

THG Diversified with the help of Joint Ventures. It joined hands with many

foreign companies venturing into new markets. But there were unseen issues in

the beginning.

External Issues

These were the economic and market issues faced by THG

Depreciating value of Singapore currency leading to a loss of great

amount of money.

Joint ventures with companies not yielding expected results.

Asian crisis bringing down all the economies of the target countries

Internal Issues

Management was a big problem since the business units were getting bigger

and the sector was getting broader. It was no longer watches, fashion but

Lifestyle. So everything from resorts to perfumes came into this and the

Marketing strategy was not able to focus on the customers.

Management Issues

Rivalry among staff (Same office native staff and staff from

Singapore)

Unspecific Marketing strategies

Different Markets and Customer Behaviours.