GROUP B

PORTERS FIVE FORCES

Rivalry
(High)
Bargaining power of
suppliers
(High)
Threat of new entrants
(Low)
Threat of substitutes
(Moderate)
Bargaining power of
customers
(Low)
Counterfeits
Jewelry
Luxury mobile phones
Other luxury products
Exclusive brand image
Patented technology
High capital
Access to distribution


Retailers influences
customers decision
Brands control
distribution
Swatch dominates
components
High cost vertical
integration
Innovation
M&A
Luxury Brands
Attractive
Industry
ACCESSIBLE LUXURY
EXCLUSIVE LUXURY
A
E
S
T
H
E
T
I
C
S

T
E
C
H
N
I
C
A
L

DIRECT COMPETITORS
PATEK PHILIPPE
THE WORLD LUXURY WATCH
INDUSTRY AT A GLANCE
Continued strong Growth until 2008
The crisis of 2009 mainly involved the accessible luxury segment
Recovery in 2010 and expected record sales in 2011
Asia fastest growing market
China grew 47% in 2009, 57% in 2010
Continued Growth expected in China and India
0
5
10
15
20
2005
2006 2007 2008 2009
2010
Total value (CHF bb)
Countries Value 2010 increase % Share %
Hong Kong 3185,5 46,90% 19,70%
USA 1674,4 13,80% 10,40%
France 1167 20,50% 7,20%
China 1099,5 57,00% 6,80%
Italy 923,3 2,60% 5,70%
O. Countries 8108,4 15,50% 50,20%
Total 16158,1 22,10% 100,00%
LAST TRENDS IN THE LUXURY
WATCH INDUSTRY
Trends in taste and design
- Moving away from extravagance and
excess
- Move towards nostalgia and the past
- Highlighting original Swiss savoir - faire
- Understated Luxury/ Neoclassic

Other trends
- Attempt to vertical integration from other players
- Consolidation (Richemont, LVMH)
- New entrants from fashion world
- Diversification
- Higher attention to Asian tastes (automatic watches)
- Modern technology to attract younger targets (touch screen)
- Increasing counterfeit market
1839 1844 1851 1932 2009
2 Polish immigrants,
AntoniPatek
(Businessman) and
FranciszekCzapek
(Watchmaker) found
Patek, Czapek&Cie
Geneve
Mr. Patek met
French
watchmaker, Mr.
Adrien Philippe.
Pioneering stem
winding and
setting system by
the crown
Mr. Philippe
officially
associated with
the company,
Patek Philippe
&Cie
Company was
purchased by
Charles and
Jean Stern.
Patek Philippe
S.A.
Presidency transmitted
from the 3rd to the 4th
generation: Mr. Thierry
Stern became
president
Family owned company
Flexibility & creativity
Completely integrated
Total quality control
Tradition
Aspirational brand / Lifetime value
Brand museum
Controlled distribution:
Salons in Paris, Geneva and London
500 carefully selected retailers
Independence, Tradition, Innovation, Quality and Workmanship, Rarity, Value,
Aesthetics, Service, Emotion, Heritage
PATEK PHILIPPE
10
STRATEGY COMPETITIVE ADVANTAGE
KEY RESOURCES
Patents
Skilled workforce
History and reputation
Advanced technology
CORE CAPABILITIES
Heritage and expertise
Internal production of all
components
Culture of innovation
Pursuit of perfection
Emotional value of the
brand (family transmission)
HERITAGE MANAGEMENT BENEFITS
ESSENCE, NATURE, MEANS
Functional
-Time keeping
- Precision
- High technology
Essence Means Nature
Client
Business Company
Emotional
- Piece of art / Exclusive
- Family Values /Heritage
- Brand r recognition
BENEFITS
Quality
Trust
High techonoligy
Respect of traditions
Aligns with values of customers
Lasting value is
both material and
emotional
HERITAGE
Highly populated
Competition on technology
High negotial power of
supplier
New trends
Vertical integration
Innovation effort
Understand Industry&Customers
Management Supply&Retailers
Family business/independence
MANAGEMENT
SWOT


STRENGTHS
Brand recognition
Autonomy and flexibility
Vertical Integration/quality control
Incomparable product complexity


WEAKNESSES
Perceived conservatism
Limited volume production
High product time to market
Poor design of website and other online
platforms
OPPORTUNITIES
Use scarcity to increase exclusivity
Expand the brand (jewelry)
Supply movements to other
manufacturers
New targets: women, younger people
New markets: Asia


THREATS
Change in consumers taste
New entrants (luxury brands)
M&A: new colosses with higher financial
resources
Scarcity might prevent gaining market
share in Asian countries, leaving room to
competitors

SWOT
INCREASE
EXCLUSIVITY
(grow through price)

EXPAND TO ASIA
CONQUER
WOMEN
APPEAL TO A
YOUNGER
TARGET

BRAND
EXTENSION
BRAND +
MARKET
EXTENSIONS
PRODUCT
MARKET
SAME
NEW
SAME NEW

CAPABILITIES ?

POSSIBLE BRAND
DILUTION
PEOPLE
WILLINGNESS TO
PAY MORE
(Crisis)
EXPAND TO ASIA
Prod. capacity
Knowledge of the
market
Right target ?
APPEAL TO A
YOUNGER TARGET
Acquisition of new
technology
Move away from
tradition
(microcomponents)
Brand dilution
PATEK PHILIPPE ALTERNATIVES
POSSIBLE BRAND
DILUTION
CONQUER THE
WOMEN
Risk to alienate men
Brand dilution
RECOMMENDATIONS
Maintain exclusive positioning
Raise online brand awareness
Enhance womens business
Measured approach towards China
MAINTAIN EXCLUSIVE POSITIONING
1
Maintain their exclusive positioning
Focus on core resources and capabilities
Growth through price not volume
Focus on innovation and branding
Objective
The only independent watchmakers in Geneve
Unique positioning and perpetuating the legend
Rationale

Collectors edition watches (priced above 100k Euro)
Exclusive membership clubs
Propose updated versions of old models
Unique service: engraved customers initials, free
extendend repair service

Suggested
Tactics
RAISE ONLINE BRAND AWARENESS
Reinterpretate traditional values of the brand in a modern way
Engage brand advocates, communicating 360
Attract new potential customers
Reach good positioning also on online media
Objective
Part of the Patek Philippe customers use Internet to seek
information about luxury watches. Need to build loyalty also on
the net
Patek Philippes technological edge is consistent with the use of
interactive media
Rationale
Revamp company and museum website
Specific SNS targeting HNWI
Proprietary social media platform (Membership, Benefits)
Create the myth of Patek Philippe on traditional social networks
Interactive videos: collections, watchmaking process, etc.
Suggested
Tactics
2
RAISE ONLINE BRAND AWARENESS 2
ENHANCE WOMENS BUSINESS 3
Increase sales from womens collection Objective
Womens watch market is growing
Risk: a feminine brand image may alienate male customers
Rationale

Women designs should share sober traits of mens collection
Communication should relate more to a feminine audience ,
without feminizing traditional brand image
Message focused on values rather than gender (heritage)

Suggested
Tactics
MEASURED APPROACH TOWARDS CHINA 4
Avoid brand dilution by appealing the Chinese new rich
Remain an object of desire among the upper-crust in
China
Objective
China is potentially the most lucrative market for Patek Philippe
New rich are currently seeking for status only and may not fully
appreciate the Patek Philippes brand
Rationale
Study evolution of the market
Slow and selective distribution (main cities, top retailers)
Build awareness and communicate through Chinese brand
advocates / friends of Patek Philippe
Suggested
Tactics
You never actually own a Patek
Philippe. You merely look after it for
the next generation
Q&A
GROUP B

LIA BUDIMAN
LUCIA CALDERON
ADRIAN CHAN CHUN
DEBORA CURBI
HOWARD CUSHING
VALERIA DESERTO
CARLOS FERRIS
SURYANATA HATTA