COMPETITIVE ADVANTAGE AND VALUE CHAIN OF ROLEX

The Rolex Story

Hans Wilsdorf and his Amazing Watch

 Hans Wilsdorf was born in Bavaria (Germany) in 1881 to a successful, middle-class family of iron mongers. At age 12, circumstances made young Hans an orphan. His charge was given to an Aunt and Uncle who promptly placed him in a Boarding School in Coburg, Germany about 25 miles away from his home. It was a dreadful existence and Hans was very unhappy. He focused on his school work to survive and became quite proficient at reading, writing and speaking English. This would later become quite useful!

One day, Hans decided he had had enough and left the boarding school for Geneva, Switzerland. He found a job working for a pearl merchant. He learned the business and noted that the company actually did not create anything and still made a great profit! The company purchased pearls from various markets then sorted, graded and packaged them for sale to jewelers. This would also prove to be a great lesson to young Hans.

Ultimately, Hans got a job with a growing watch company called Cuno-Korten in Switzerland. He was hired because he could read and write English and could answer correspondence from The British Empire and America, the richest nations in the World at that time. While at Kuno-Korten Hans became fascinated with watch movements and their accuracy. This was the beginning of his life-long passion.

Hans later found a partner, Alfred Davis, and together they opened their own watch company, Wilsdorf and Davis. Hans convinced a small watch movement manufacturer in Bienne, Switzerland , Aegler, to produce watch movements for him small enough to wear on the wrist. A great visionary, Hans saw the trend to move away from Pocket Watches. Their new watches proved to be very successful.

Wilsdorf and Davis first registered the Tradename Rolex in 1908. It means absolutely nothing and is thought to have been inspired by George Eastman who in 1884 decided against naming his camera the Eastman 25 in favor of Kodak. Mr. Eastman is quoted as saying I knew a tradename must be short, vigorous, incapable of being misspelled to the extent that will destroy its identity, and, in order to satisfy the trademark laws, must mean nothing. The brand name Rolex was born!

Mr. Wilsdorf continued to be innovative with his watch and was intent upon its high level of accuracy. Then, in 1926 he added a new level of distinction he made it water-proof and deemed it the Oyster. He coined the term due to his frustration in trying to open a tightly closed Oyster!

 In 1927, Mr. Wilsdorf was looking to make his Rolex watch known around the world. He employed the services of a young London typist named Mercedes Glietz who at the time was attempting to swim the English Channel. Hans announced to the world media that she would be wearing his water-proof Rolex Oyster watch and that she would emerge from the water and his watch would be perfectly on time. This had never been done before. When Miss Glietz stepped from the water, exhausted, after swimming for over 15 hours, her Rolex was right on time. She and her Rolex Oyster made headlines around the world!

Rolex has continued to stay in the forefront of the watch world with classic design and innovation, to this day. If you would like to learn more of this incredible watch and its history, I highly recommend the book, The Best of Time, by Mr. James M. Dowling and Mr. Jeffery P. 

Introduction

Rolex is a brand of Swiss wristwatches and accessories renowned for their quality and exclusivity, as well as their cost (from a few thousand to more than one hundred thousand U.S. dollars). The watches have become status symbols of the rich and famous as well as the upwardly-mobile career-minded individual. Although a symbol of success, Rolex has earned its strong reputation through innovations in design and function over many decades.

Rolex is one of the top global brands for over a century. The crown symbol is recognized throughout the world. Rolex watches are designed to exceed expectations. It takes more than a year to assemble over 220 minute pieces. This is done systematically by hand and is extremely detailed oriented. In fact about 400 operations are conducted only on the main plate. The assembly is put through rigorous testing and retesting. So rigorous in its testing that if the movement deflects for less than one second, the entire assembly is often disassembled and the entire process is restarted from the beginning. Due to high standards and excellent quality control, Rolex is the brand that will continue to be the leader in luxury wristwatches.

Known to be the world's bestselling watch company, with over 100 years of history, Rolex could be written as the definitive textbook in branding, with an emphasis for luxury items. Unfortunately, for many customers today, branding has taken on a negative nuance. Pop culture ads that rely on fashion and polling trends, naming right battles, mass production that sacrifice quality through outsourcing – these are some of the different means that companies use to gain success. However, Rolex has stood its ground and has not resorted to any such means in building its image. It let's its quality products speak for itself. Hence it stands as the standard in the wristwatch industry. 

Quality, performance, innovation and stability are the four pillars that Rolex has built its brand, since the inception of the history of wristwatches. The company first sold pocket watches and folding watches called travel clocks when it was first formed in 1905 as Wilsdorf & Davis. Interestingly, until this time, it was only women who wore wristwatches. Later it became popular when people realized how impractical it was to have pocket watches, this was during the Boer War of South Africa (1899-1902) when they noticed the soldiers with wristwatches.

Seeing the opportunity in this new market, Hans Wilsdorf, along with his brother-in-law, William Davis formed the company and began producing high quality watches. Around three years after W & D was formed, the company's name was officially changed to Rolex, a name that was trademarked by Wilsdorf. Somewhere during that time, the benefits of having a logo and brand name to distinguish a product from its competitors was just being discovered, and Wilsdorf capitalized on this opportunity. In essence they wanted a name that was easy to pronounce by all, had no meaning as such in any European language and something that was short and easy to spell. Another example of simple brand name was George Eastman naming his camera Kodak.

Quality

It was from Herman Aegler's Rebberg firm that Rolex got their mechanics in a watch. As a teenager Wilsdorf worked at Cuno Korten with Aegler, a watch exporter in Switzerland. Quite often Wilsdorf would set up 15 watches and check them each for accuracy and it was here at Cuno Korten that Wilsdorf's obession with accuracy began. Also he would submit the most accurate ones to the Neuchatel Observatory for testing without permission. However this was overlooked since all the testing passed and he received much praise from his seniors. Much later Aegler's company came to produce exclusively for Rolex, as it does today. Aegler's descendants still run the company, although owned by Rolex.

With his new company, Wilsdorf's obsession for accuracy continued. He was awarded the world's first chronometer award for a wristwatch, after sending the first Rolex movement to the School of Horology in Bienne, Switzerland. Rolex began to gain a worldwide reputation for the finest quality watches, with this award. Rolex watches went on to win a number of awards. Rolex received numerous awards. In 1914, Rolex received the Class A Certificate of Precision award from the Kew Observatory in England, previously only given to marine chronometers. During the testing the watches were subjected to three temperatures and five positions. This entire testing lasted for 45 days. After, Wilsdorf insisted that all Rolex watches would be sold only with an Official Timing Certificate and all their watches would be subjected to a similar testing.

Industry Overview

Value Chain

Mapping of Business Processes
mapping the business process is useful for analyzing the specific activity in ROLEX company so later to get the value and benefits specific to a company. The specific activity that occurs in ROLEX company  can be described as can be seen as the image below.

The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.

The primary value chain activities are:

·         Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required.

·         Operations: the processes of transforming inputs into finished products and services.

·         Outbound Logistics: the warehousing and distribution of finished goods.

·         Marketing & Sales: the identification of customer needs and the generation of sales.

·         Service: the support of customers after the products and services are sold to them.

These primary activities are supported by:

·         The infrastructure of the firm: organizational structure, control systems, company culture, etc.

·         Human resource management: employee recruiting, hiring, training, development, and compensation.

·         Technology development: technologies to support value-creating activities.

·         Procurement: purchasing inputs such as materials, supplies, and equipment.

Focus Differentiation of Rolex: Serve highest end of wristwatch market (premium pricing & image)

A Market Analysis for the Watch Manufacturer Rolex

Rolex was founded in 1908 by Hans Wilsdorf in Switzerland. Rolex has leaded the luxury watch industry with its innovations and strong hold in quality. In spite of other luxury watch competitors, Rolex always acquired top notch position.With a strong heritage of quality and dominance in the watch industry, company is facing a downward trend in the sales and revenue. Recession is not only reason for the decline in sales but the important factor is not aligning with the changes in the consumer behaviour.

The market is changing at a rapid rate. Earlier it was said that if you don’t own a Rolex at the age of 50, consider yourself as a failure. But now the trend has changed and along with it the buying behaviour of consumers. The increase in price since 2006 imposed a strong threat to the revenue of the company. The buying power of the customers has decreased due to recession. ‘’Starting in 2007, Rolex put in substantial price increases, between 13 to 20 percent, that impacted middle- to upper middle-class clients already squeezed in the recession,” said Mr. Crowley, who has worked closely with watch retailers since 1980.

Apart from recession company is also facing the rising sales of illegal replica watches and the sales of second hand watches. The second-hand Rolex specialist has registered a 40 percent year-on-year rise in turnover in the past six months as more retailers turn to pre-owned watches as an alternative revenue stream.  This all shows the major changes in the buying habits of consumers. The youth is ready to buy the luxury watch but according to present economic situation the prices rose too high that they are satisfying their prestige needs by other means.

A present study has revealed that the luxury watchmaker Omega is taking over the Rolex market. Omega sells luxury watches 60% cheaper than Rolex. Current buyer finding the Omega watches as newer and trendier while the Rolex is termed as old and traditional. To overcome the hurdles posed by competition, illegal copies and decreasing interest of consumers in the Rolex, company has to remap its marketing plans according to the changing taste of consumer behaviour.

Consumer behaviour is defined as the behaviour that consumers display in searching for, purchasing using, evaluating and disposing of products and services that they expect will satisfy their needs.

Consumer

‘Market segmentation is the process of dividing a market into subsets of consumers with common needs or characteristics.Consumer behaviour is greatly shaped by the external and personal factors of consumers. The buying behaviour has been changed a lot in past 15-20 years. World has become a global village with diminishing boundaries. Multinational companies have made it possible that one can get any product in any country irrespective to the country origin of the product. This has also made the consumer more brands aware. More exposure of the brands has provided more options to the consumer. Now the consumer has a complete shift in their buying behaviour. Consumer behaviour is comprises of different factors and every factor has a small or big impact on it.

The various factors which influence behaviour of consumer can be divides into three groups:

a.       Cultural factors

·      Culture

‘Culture is defined as the sum, total of learned beliefs, values and customs that serve to direct the customer behaviour of members of a particular society. Culture has a wide impact on the consumer behaviour. Consumers buy certain things as they feel that it is right thing to buy according to their culture, e.g. sex toys or sex related products are considered as a big taboo in most of the Asian countries due to their culture rather than in the western culture which is considered as an open culture. Though there are sub-cultures but they share basics of the country’s culture. Culture is communicated to the members of the society through commonly shared symbols. The consumer behaviour is greatly shaped by the culture of certain region. For example serving turkey on thanks giving day or on New Year evening raises the sale of turkey. Consumers save money for weekend games like football games on weekend. Rolex brand has created a culture of luxury watches which shows the higher status of its wearer. Rolex is considered as a traditional symbol of prestige and superiority. According to the new culture people want to enjoy luxury before getting old. Now the youth is spending more in luxury items as they are getting more options than the past. Now the young people are more independent and getting better pay to bear the cost of luxury. The study reveals that Luxury spending has held up remarkably well despite the global downturn in the UK market. This is the reason Omega kept its prices lower than Rolex to capture the young market. To overcome this shift in culture Rolex has to position itself as a dynamic and in the reach of young sophisticated consumer

.·         Sub culture

Sub culture is defined as ‘a distinct cultural group that exists as an identifiable segment within a larger, more complex society.

Sub cultural analysis enables the marketers to segment their market to meet the specific needs, motivations perception and attitudes shares by the members of a specific sub-cultural group. The consumers have strong affinity to the goods and services attached with their sub-culture. These sub-cultures are dynamic.

The various sub-cultural traits are:

• Nationality                                                                                   
• Religion
• Race
• Geographic region
• Age
• Gender
• Occupation
• Social class

Consumers possess behaviour of buying costly goods on certain days which can be festival or a special occasion. These are the occasion to boost the sales. Like other companies promote their products as special for the occasion, Rolex has to be aggressive on those events. Rolex can promote its technologically advance and vibrant watches on valentine’s day, friendship day ,mother’s or father’s day. With this Rolex can be linked with the cultural values and this will keep the image of Rolex alive in the mind of consumer throughout the year.

Different subcultures possess different buying behaviour. Certain rituals are more important than festivals in some subcultures. The wedding and retirement party are considered as a milestone in the journey of life. The cultural belief with the marriage is lifetime relationship and with the retirement is that person has worked hard and now deserves a good life.

Rolex possess numerous qualities like a rich culture. Its long life commitment and a reward for hard work justify the cultural beliefs and values. Company has to market its product in relation to the sub-cultural events and beliefs.

·         National culture

Nationality is an important sub-cultural reference that tells about the value and buying behaviour of consumers. The national culture outlines the buying behaviour of the foreign brands. Countries which have high national identity are more inclined to their national brand rather than foreign. The consumers in strong national identity possess behaviour of strong likeness towards the local made goods. On the other hand a country like Japan has rich quality culture. They make goods of superior quality. So while buying a made in Japan item, consumer might consider a high end, high quality brand.

The national identity of Rolex is very strong. It is a Swiss company which are specialized in the watch making industry. The history of innovations and market leadership has earned the trust of the consumer. This is the unmatched strength of the company. The precise quality and sophisticated looks justify the price tag of the watch. It has to be marketed as first choice for the customers who fascinate about luxury watches.

 ·         Social class                                              

‘The overall rank of people in society; people who are grouped within the same social class are approximately equal in terms of their social standing, occupation and lifestyles.’

In a social structure it is just not important that how much money a person have but how money is spent. People who are grouped in a social class normally have similar type of occupations, similar lifestyles and common tastes. The relation between the Rolex and social status can be stated with the theory of Herzberg’s theory. His theory states that differentiate between the satisfier (factors that cause satisfaction) and dissatisfier (factors that case dissatisfaction). The absence of dissatisfier doesn’t mean is not enough, satisfier must be present to motivate.

In case of Rolex the motivating factor is the reflection of higher and sophisticated social class myth attached with the watch. It satisfies the prestige need of the people. The buying behaviors of different social classes differ to much extent. Higher social class buys the product by assuming the quality according to the brand without worrying about the cost. But middle class consumer is more inclined towards the quality and features. They chose the product which justifies the cost. Rolex is a mirror image of high class society. But due to change in the social cultural values and economic trends, the difference between social classes is diminishing. Due to this there a vast change in the buying pattern of the consumer. Now middle high class is considered as a vast market and predicts the future of the company. The buying behaviour of upper middle class is very much different from the higher class, even if they buy the same luxury product.

Middle class consumers save on the little things which are not much important to them and then spend on premium brands. Though they are earning big amount now days but due to recession their buying behaviour is less polarised and more concentrated on the lower end of the brand spectrum. In order to prevent the loss of market share various luxury brands has launched big discounting campaigns to attract those customers back.  Rolex is currently in reach of rich and sound people but the market is shrinking as the other luxury watch makers like Omega is producing attractive luxury watches at low prices than Rolex. According to my point of view if Rolex go with reducing prices of its brands in the market, it will hamper its image of prestigious brand. People who have bought the Rolex at sky touching prices will feel robbed.

The solution is to launch a special edition Rolex watch targeted to the upper middle class for a limited time of period. This will create bonding of the customer with the brand. And after that by updating the consumer with the advanced models, company can motivate them to buy the costly models also. With this strategy Rolex can also adapt itself with the different consumer behavior of different social classes.

a.       Social factors

This is the surrounding of a consumer which shapes, motivate or de motivate its buying behaviour. Friend circle, family, reference group/ opinion leader plays an important role in the selection of certain goods or services. Social classes are determined by the complex set of variables, including income family, groups and their opinions. Opinion leaders influence consumers socially. Family has a very close impact on the consumer behaviour.

Opinion leadership

‘Opinion leadership is the process by which one person (the opinion leader) informally influences the actions or attitudes of others. ‘The key characteristic of the influence is that it is interpersonal and informal and takes place between two or more people, none of whom represents a commercial selling source that would gain directly from the sale or something. The opinion leadership is a very dynamic and powerful consumer force. The opinion leaders are considered as:

• Positive and negative product information
• Credibility
• Information and advice

Rolex has a very positive repo in the market. The Rolex bearer generally holds a high social status and has the ability to pursue the people. But Rolex has failed to capture their views. Now the consumers are money conscious and they select the branded item after discussing it with their friends. Unfortunately there is no official Rolex lounge on the internet where the consumer can read the personal reviews of their watches. There should be a link on the Rolex homepage where the opinion of the past owners and their experiences with particular watch models can be recorded. This will influence more consumers who are followed by opinion leaders. 

Family

Rolex has a strong heritage of family relations. The Rolex in a family inspire next generation to buy the latest model. But the negative side of the coin is now the new generation consumer thinks Rolex as more traditional and old. ‘When it came to choosing a new watch, Ma Jun had no hesitation in selecting a $6,800 Omega Constellation over a Rolex’. He has a business family background and he bought the Omega watch after seeing advertisements featuring swimmer Michael Phelps and actress Zhang Ziyi. This is a new shift in the consumer behaviour. Now the consumer buying behaviour has shifted from traditional to thrill and glamour. Youth now live far from their family and are more independent than the past times. By endorsing the latest player and top heroin Omega pictured itself as a brand for youth. While the Rolex ads are more attached towards the traditional values. To avoid this conflict Rolex can make a separate website targeting youth, satisfying the belief and buying characteristic of Personal factors. Personal factor influence the buying behaviour to much extent. Sometimes a consumer just care about what he like. Normally this depends upon his age and lifestyle.

Age

Age plays an important role in the consumer behaviour phenomenon. Teenagers are normally dependent on their parents for their expenses but kids of very rich families have very different culture. They enjoy all the luxury in their childhood. But in normal life an adult ages between 25 - 40 is an emerging market for Rolex. Now people are able to get high posts even in a short span of time. Those people want to enjoy luxury items in their adulthood rather than save and have luxury when they will get old.

Lifestyle

Lifestyle refers to a pattern of consumption that reflects a person’s choices about how they spend time and money, but in many cases it also refers to the attitudes and values attached to these behavioural patterns. Many people living in the same social circle may have the same lifestyle but there is a unique twist in the personality of each person. The most important factor in the lifestyle is how they do spend their leisure time, how consumers chose to dispose their disposable income. These choices in turn create opportunities for market segmentation and creating the strategies to cover that segment. Rolex is a mark of luxury lifestyle. Some people have lifestyle of showing off their wealth and some people just wear luxury for their comfort and for the unique benefits. to adapt with the changing lifestyle company has to make different type of marketing strategy for different type of lifestyle. This can be done by doing a market survey in the corporate sector and where people with good disposable income live. Then there should be advertising banners and posters in that particular area according the studied lifestyle of consumer living there. This will relate the company with the lifestyle needs of the particular consumer.

Positioning:

As consumer adopt new technologies their behaviour changes.

Online Brand positioning strategy:

Internet is a dynamic field and companies need to follow a flexible online branding policy, which can project a dynamic image of the product. This will also make the product more attractive and protect it from the label of outdated. Marketing on the internet has opened a whole new dimension to interact with consumers. This has enlightened the way for a brand manager as the number of consumers is enormous. Online brand management can be a good way to increase the brand loyalty and customer retention.

Engaging brand with personality

Rolex has strong hold in the media. Currently company has two versions of online brand management. One is for those consumers who have high bandwidth of internet and second with low speed internet. Both are good source of product information but consumers have to chose the watch first before knowing the price on the website, which is completely opposite in case of offline positioning. Apart from differentiating the product design and material wise, the differentiation should be done by social class, attitude type and perception of the consumer about particular design. Instead of selecting watches by gold, steel, large and small it should be given a personality of its own. Human personality characteristics can be transferred to a brand, which then creates a brand personality. A gold watch with diamonds can reflect a personality of ‘outshine in the crowd’ or instead of positioning the  GMT Master watch for traveller it can be positioned as for people who love to explore the world at any time without the worry of time zones even in the space.

Use of social media

Using a social media to create brand image is still an extremely new phenomenon. It has proved more credible in way that people who share views about products with their friends are more trustworthy than the advertisements. Rolex has to create its own profile on various social websites. These profiles should be managed by a dedicated brand management team. People will get more influenced when they come to know that even their friend of friends have the special edition watch. They can share their views about the watch and can discuss which watch will be perfect for them. Team has to strictly monitor the fake pages associated with the name of Rolex. With this promotions and advertisements will reach to more people and the registered users can directly give ‘thumbs up and down’ to a particular product or advertisement. This will create the image of product more dynamic in the mind of consumer.

Blog management

Blogs are the best way to keep a fresh image of brand in the mind of consumers. Rolex can create a blog in which it can ask the top celebrities, politicians, and army people to write their experience with the Rolex. This will attract the consumers who have behavior of trusting their role models and this will also fuel their desire to buy same Rolex which their favorite star is wearing.

Offline brand positioning
The main motto of the offline brand positioning is to drive more online interaction. This is when consumers can get updated with the advertisement, promotion or special events through various offline media and then they go to website to check for more information. In case of online positioning sometimes it become very difficult for the brand to selectively choose to whom interacts Rolex has to go with wide selection of media for its offline brand positioning.The brand communication strategy should reflect the use of all available media.Encouragement is very important through offline brand positioning. Fashion magazines, top political magazine will encourage people with good disposable income

Impact of online brand positioning on consumer behavior

Online branding has created a culture of buying goods without any face to face conversation. People trust on the brand and assume that they will be worth of their cost by just reading their description

Brand’s Self image

Rolex present an image of superiority, luxury and high social status. The online branding has to reflect its characteristics to justify its image. This will influence the consumers with a sound taste of luxury

Competitive Advantage of Rolex

Another competitive advantage held by Rolex is their outstanding durability and reliability. Rolexes have been tested in the deepest parts of the ocean to the highest places on earth. A special edition of a Rolex watch was attached to the side of a submarine to the bottom of the Mariana Trench. Upon surfacing the watch was intact and keeping good time. Later the Explorer series was developed to help Everest Expeditions keep time and return back to base camp before they ran out of daylight.

No article on Rolexes can be complete with the mention of James Bond. James Bond was Rolexes marketing dream come true when he appeared on the movie screen wearing a Rolex Submariner. While the character in the books wore an Oyster Perpetual the producers felt the Submariner was a little more rugged for the well-heeled international man of mystery. We won’t go into the later James Bond films and their choice of watches let’s just say that the real Mr. Bond would only wear a Rolex.

COMPETITIVE ADVANTAGE OF MY SELF

Competitive advantage that I have is in the field of art one of them is I can play angklung. When senior high school, I've been following the show of angklung in Jakarta ahead of the people of Japan and taught them to play angklung.

Beside that, my abilities in math lessons. Each I met math lesson in college, I felt my brain become fresh. Previously, I've been following the competition math in junior high school and senior high school

REFERENCES

http://www.ukessays.com/essays/marketing/a-market-analysis-for-the-watch-manufacturer-rolex-marketing-essay.php

http://luxwatchman.hubpages.com/hub/Luxury-Watches-Rolexes

http://www.interwatches.com/rolex-history

http://www.watchmasters.net/the-rolex-story-hans-wilsdorf.html