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Analysis Click Me?
Team 6
Jessica Aragon
Raynee Bradley
John Cayo
Cole Naylor
Jessica Wilson
Brandy Wolfe
Tiffany and Co.
In New York City in 1837, Charles Lewis Tiffany
and John F. Young founded Tiffany and Young, a
store dedicated to selling stationery and costume
jewelry.
In 1845, began selling real jewelry.
It was not until 1853 that the store became
known as Tiffany and Company.
During the late 1940s it added silverware,
timepieces, perfumes, and other luxury items.
Throughout history they have managed to solidify
their position as the leading competitor in the
jewelry industry through creating a brand that
shows value, quality, superior design, and
exclusivity.
Tiffany and Co.
Strong brand name and customer loyalty.
Infamous Tiffany Blue Box
One of Tiffanys main goals is to ensure the
long-term integrity of the companys brand
by creating a feel good experience.
Mature stage of the product life cycle.
Experienced large growth for the past thirty
years.
The jewelry industry relies heavily on consumer
spending, which in turn relies on a strong
economic climate.
Tiffany and Co.
Even during this highly volatile economic
downturn, Tiffany and Co. is a highly attractive
company and the leading competitor.
The strong position that they have established
in the marketplace is not likely to disappear,
and it will only continue to grow once they
counteract the changing environment with
implementing a strategy that reiterates their
founding vision.
According to Louis Cona, publisher of Vanity
Fair, There will always be a luxury consumer,
and theyll continue to spend whether there
are wars or diseases or whatever.
Current Strategy
Launching new, lower-priced products to take
advantage of the growing number of consumers
demanding quality goods at lower prices.
Target: Middle income - introduce products with
prices ranging from $100 to $250
Affordable luxury and Exclusive luxuryMix?
Must assure its affluent customers that the quality
of its products and service has not lessened even
though its brand has become more affordable.
Has created mass amounts of short term revenue,
but in the long run it could be detrimental to the
once timeless, exclusive brand.
Accounting/Financial
Strategy
Accounting Criteria
Tiffany and Co. is consistently conservative in its financial
and accounting practices.
As required by U.S. law, Tiffanys employs GAAP
accounting, but also maintains industry norms for choices
not specified by GAAP.
Tiffanys previously used the LIFO inventory method, but
has recently switched over to the Average Cost method.
The majority of competitors use the FIFO method.
Tiffanys follows the industry-wide trend of straight-line
depreciation of assets.
Due to FAS 142, Tiffanys reviews goodwill annually to
check for any impairments which may have occurred.
Tiffanys follows the point-of-sale revenue recognition
principle.
This practice does not recognize revenues until an actual
purchase has been made and maintained
Accounting Flexibility
The use of GAAP practices allows for
a great deal of flexibility in several
areas.
The options available for inventory
costing, depreciation, goodwill, and
pension accounting provide
companies with leverage and
flexibility in their financial
statements.
Flexibility in Inventory
Flexibility in inventory costing can change
margin, profits, and expenses.
Tiffanys previously employed the LIFO
costing method which creates the highest
inventory expenses of the three methods.
This also portrayed lower profit margins and
more conservative accounting
The switch from LIFO to Average Cost
inflated profits by lowering inventory
expenses.
Flexibility in Pension
Accounting
Pension accounting practices in the U.S. has
been recently scrutinized.
In order for Tiffany and Co. to more accurately
estimate pension expenses indices such as the
Merrill Lynch yields reports are referenced.
Tiffany and Co. also uses what is know as the
projected unit credit actuarial method for
financial reporting of pension expenses.
This method involves the use of a certified actuary
to estimate and attest to the estimated pension
expense to be realized by a company, and is
regarded to be the most accurate and reliable.
Net Sales/ Net Receivables
Net Sales/ Net Receivable
Explained
Taking sales and dividing them by A/R finds the
A/R Turnover Ratio. This gives the interested
parties a more visible picture of how many sales
are made on account while the rest are in cash. A
higher ratio is ideal because it shows a company
that receives cash instead of waiting on accounts
to be realized. Tiffanys ratio is underperforming
compared to its competitors. This does not work
in Tiffanys favor because it shows a low cash
flow from sales, which constricts the companys
flexibility in cash and drive potential investors
away. Reasons for this low ratio is fewer
customers coming in or not receiving payment of
accounts as quickly as expected.
Return on Equity
ROE Explained
Tiffany and Co. shows not only a greater
ROE than its competitors and the
industry, but also a more steady ROE over
the years. There are no drastic changes
like those experienced by Zales and
Tiffanys continues to maintain strong
numbers in the twenties and teens which
portray high profit returns from the
money invested by stockholders. This
makes Tiffanys attractive for investors.
Gross Margin
Gross Margin Explained
Gross margin is a useful tool for examining
a companys operating efficiency. Tiffanys
has a very strong and competitively high
gross margin portraying that Tiffanys is
more capable of profiting off of each sale
made than both its competitors and the
industry as a whole. However, this added
margin is most likely the result of price
mark-ups. This is not necessarily a bad
thing since most of the customers of
Tiffanys are willing to pay the extra price
for the Tiffanys brand name.
Marketing & Advertising
Tiffany Blue
Robins egg blue box
Target market
Upper-middle to
high income consumers
Advertisements
Pop culture
Something for everyone
Working for Tiffany & Co.
Who they hire
Commitment to being
environmentally and socially
responsible
Tiffany & Co. SWOT
Analysis
Strengths Weaknesses
Opportunities Threats
Expansion in retail outlets Counterfeit goods
Increasing online sales Increasing rental rates in
Growth in mens market US
New business venture Slowdown of US economy
Competitor SWOT
Blue Nile
Strengths Weaknesses
Strong direct selling strategy Decline in cash flows
Strong balance sheet Lower return and profit margins
Growth of E-commerce Limited offerings
Lack of physical stores
Opportunities Threats
Expansion in retail stores Counterfeit goods
Increasing online sales Slowdown of US economy
Increasing brand recognition
Bulgari
Strengths Weaknesses
Strong direct selling strategy Decline in cash flows
Broad offerings Lower returns and profit margins
Strong balance sheet
Opportunities Threats
Expansion in retail outlets Counterfeit goods
Increasing online sales Slowdown of US economy
Increasing brand recognition
Key Success Factors and Core
Capabilities
Key Success Factors
Introduction and execution of e-commerce
Understand economic conditions and reacting
Aspects of consumer spending
Core Capabilities
Ability to select and display high-end jewelry to create a
sustainable advantage
Constantly strive towards innovation
Commitment to the highest standards for
social and environmental responsibility
Overlap of Tiffanys key
success factors and
core capabilities
Relative Competitive
Strength
How does Tiffany & Co.
measure up against their
competition?
Resources
Financial stability
Large stores in expensive areas
Store expansions here and abroad (206
locations)
Famous designers
Disadvantages
Only a short-term fix
May compromise the integrity of the brand
Could drive away the upper-class consumers
Creates long-term profit loss
Option 2: Focus on Brand Image and
Exclusivity
Disadvantages:
Risk riding out the recession
Short-term loss of profits and market share
Favorable Option
We feel that option 2 is the most favorable
option for the company.
image?
Tiffany should devote a high
amount of time and effort to its
marketing and advertising
strategies.
Tiffanys is a lifestyle; it is a
luxurious, exclusive group of
consumers. This needs to be
preserved by bringing in loyal
customer that can afford Tiffanys
quality jewelry.
Tiffany and Co.
We believe that Tiffany and Co. should
continue to emphasize their original vision and
grow their timeless, legendary brand image.