Develop and Use Emotional Intelligence

Question: Discuss about the Richmont Pte Ltd for Luxury Watches. Answer: Introduction This paper focuses on the business analysis of the Richmont Pte Ltd, a luxury goods company that supplies its products to different parts of the world. While every aspect of the business analysis of the company is essential for analysis, the paper only presents detailed analysis on the PESTEL analysis of the company about the effect the factors has on the company. It also focuses n the Porters Five Forces analysis of the competitive environment of the company. It then provides suggestions to the management recommendations that can be adopted by the company so as to uncover its PESTEL and Porters analysis factors. Description of the Company Compagnie Financire Richemont SA (Richmont Pte Ltd) was formed in 1988 as a spin-off from the Rembrandt Group. The company specializes in the producing luxury goods with major strengths in accessories, luxury watches, and jewelry. It has its headquarters in Switzerland and several branches located in the different market location of the world. Through its subsidiaries, the company business is mainly in the manufacturing, development, and distribution of different luxury products with retail as its major distribution channels. The distribution channels supply the products in the global market with the Europen market as the largest market. Richmont Pte Ltd generates the largest profit proportion from the timepieces and him luxury jewelry it produces. Like many other companies in its category, Richmont Pte Ltd has been building an in-house capacity in anticipation of its shifting supply lines in the matchmaking industry of Switzerland. It good progress and high market competitive strate gy have given it the leeway to the Chinese market with a strong Chinese demand for its products. The company is also known to have strong, well-known brands that encompass clothing, writing instruments, jewelry, and notably many watchmakers. Considering the market and consumer consideration, the unpegging on the Swiss Franc (CHF) is one of the major macroeconomic issues affecting the company operations. In his study, Sinclair (2015) denotes that CHF has a resulting customer appreciation that potentially leads to a big loss in the revenues for the company. Research (2010) reports note that the company issued a profit warning in the April 2016 as a result of the losses on the contract hedges and derivatives linked to the exchange rate issues. As a result, the recent stock price has recorded a downtrend despite the fact that the profit warning is not considered as a long-term concern by the companys internal audit system. On the other hand, the new Apple Watch has seen a positive uptake as good customer reviews that pose threats to other competitors and Swiss watchmakers. The Asian market is the largest consumer base for the Richemont by country majorly China and Hong Kong. Policies such as the anti-corruption crackdown and drive on luxury Xi Jinping as well as the Hong Kongs democracy issues, as well as the cooling Chinese economy have affected the luxury sales in these markets. However, Tajeddini and Trueman (2008) reports that the positive brand image of the Swiss watches together with the strong endorsement from other celebrities such as Gong Li, its long-term horizon will be positive at any moment the Chinese economy will pick up to embrace the foreign products. Pastels Analysis PESTEL analysis is used primarily used by different companies and business organizations to have a track record of the environment and the nature of the market in which the business operates. The abbreviated word PESTEL is an acronym for Political, Economic, Social, Technology, Ecological as well as the Legal factors in the business environment in which the company operates. The PESTEL business structure that influences the business includes the factors in the diagram below according to Humair, Siegrist, and Kueffer, (2014). Figure 1: PESTEL framework in a general Business Environment The Political Aspect According to Wamrack (2014), the political aspect of Richmont Pte Ltd is majorly from the high taxation charges from the Swiss government as well as the federal states where the other branches are located. It as well includes the customs duties which are imposed on the raw materials that are purchased by the company for the production of the jewelry, watches, clothes, among other products. The resulting effect is a limited scale of sales as a result of the increase in the cost of production. Political instability in different federal states has also affected their distribution channels as a result of weakened international relations. It has thus resulted in the reduction of the production as well as the business unit market share for the products of the company (Jack, 2015). Economic Aspect In their market analysis, Wamrack (2014) points out that Banks in Switzerland indicates a possible increase in the interest rates offered to different businesses from the current rates the banks charges. The resulting effect is the increase in borrowing cost as well as the eventual rise in the cost of production thus limiting business expansion to other potential global markets such as China, Kenya, South Africa, etc. The economic status of Switzerland also reports a great reduction in the inflation rate hence resulting in an improvement in the purchasing power of the consumers with the stability of the currency exchange rates. It thus poses a great deal of opportunity to Richmont Pte Ltd to improve on its production and so as to meet the demands of the customers. Socio-Cultural Aspect The significant increase in the world population is coupled with advancement and technological innovations and change in lifestyles as denoted by Yayici (2014). As a result, Richmont Pte Ltd has the opportunity and an increase in the reciprocating demand of digital accessories which has a ready market with the digital error as the target customers. It is because the increasing population as mostly identified with the digital error, which is an opening for the company to increase its innovation strategies and flood the market with customer-winning digital accessories so as to maintain it's competitive and large market share. The noted positive reviews on its innovations, especially in CHF, is also an opening for the market preference for the company coupled with positive remunerations as well as better welfare to the customers and the employees according to Frommer (2014). Technological Aspects Richmont Pte Ltd like any other business organization has adopted the use of the modern technology in the production, advertisement and distribution process. The increased stakeholders spending in search of better technological models to improve its economics of scale has also resulted in its market expansion to different parts of the globe. On the other hand, the company also embraces the use of social media platforms such as Facebook as advertisement platforms to increase its customer base. Legal Aspects Legal laws and policies such as the safety standards, labor laws, ethical demands, as well as environmental and natural conservation procedures have a great effect on the production and distribution process of the company. With the increase in the economic status of the global market, Graw (2011) notes that many businesses are affected by the strict consumer laws that affect the production and the general sales of the products. As a result, Richmont Pte Ltd has to adjust to the legal policies with the aim of the conservation of both human and environmental factors that have become the major concern of the global conservation industries for the sake of the future generation. Environmental Aspects Conservation of natural resources, as well as the environmental issues such as global warming and climate change, calls for every business to ethically consider the use of the natural resources for their production purposes. However, most of the products of Richmont Pte Ltd are environmentally friendly and poses little or no threat t to the environment. It is attributed to the effective waste management by the company that strongly pioneers the production of environmentally safe products. It is hence a great opportunity for the products of the company as they comply with the environmental regulations. Five Forces Porters Analysis The porters five forces analytical tool is used by businesses and companies to ascertain the competitiveness of the organizations in relations to the forces from its competitions. It thus helps in understanding the nature and level of competition the company so as to examine what makes it stands out amidst the stiff global market competition. The tool thus involves the bargaining power of the buyers and suppliers, threat of new entries, competitive revelry, as well as the threat of substitution (Perman, 2016 and Citizen Holding report, 2016). Threat of Substation There are several companies that also embrace the production of watches as well as other jewelry such as Swatch Group, LVMH, and Rolex. As a result, there exist threats of the company facing threats of product substitution by the customers. In the struggle to maintain its market position, Richmont Pte Ltd ensures it maintains the uniqueness of the product features so as to hold their customers from switching to the other products from other manufacturers within the market. Brandimarte (2012) denotes that the company survives the market threats by adopting a wide and vibrant networking with the customers as well as proper inter-organizational coordination (Gretler, 2016). Competitive Rivalry According to Frommer (2014), Apple Watch has a dramatic impact on the Swiss watch industry forcing Richmont Pte Ltd to rush in figuring out its smartwatch strategies. With the uniqueness of the company products, Richmont Pte Ltd has revived the Swiss watch industry that was pronounced dead in the early 1970s. It has thus made a huge comeback and a stiff competitor to the Chinese markets as a result of the diversity in accessories and not only dependent on the watch making. While expensive and mechanical watches are having an increase in their popularity, Richmont Pte Ltd still manufacturers cheaper and affordable quartz-based watches that are preferred by most customers (Rae, 2015). Threat of New Entry The number of established firms or industries in the luxury jewelry and accessory production is low resulting in low threats in the new entrants. The low entry is attributed to the high risks involved in the process of manufacture and production as well as the distribution of the products. The uniqueness of the Richmont Pte Ltd products also lowers the threats and changes in the production industry thus increasing the economies of scale of production for the new firms in the industry (Donze, 2012). Bargaining Power of Buyers Due to the uniqueness of the industry, it becomes very difficult for new firms to enter into the production of similar products despite the stiff global competition from other manufacturers. This, therefore, makes the industry enjoy the monopoly power in the production, thereby giving them authority in the market to dictate the market prices. This lack of very close substitute of similar products that meet specific customer specification, therefore, lowers the bargaining power of customers hence they act as price takers in the market Bargaining Power of the Suppliers In his study, Rae (2015) denotes that the suppliers power in the market for every business can only be felt through a proper input specification which needs to be obtained from other suppliers. Richmont Pte Ltd thus has the power of controlling the switching costs within the markets hence giving them a greater global market share. The strategy strengthens the competitive ability of the company and makes their products stand out in the market. It is also made possible by the power of suppliers has low force in controlling the market for every business to compete in the market effectively. Management Recommendations Despite the company enjoying a great market and competitive advantage from its cost leadership and management strategies, there is still a very stiff competition in the market that needs effective and relevant production strategies. According to Rae (2015), the major drawback of the management strategies is the fact that there are instances when the competitors lower the market price for the products as a result of the improved technology in different production sectors. It is thus necessary that the organization embraces different production while still maintaining the unique features. The accessories should as well be of different sizes and prices so as to meet the demand of the nature of the market where customers have different taste and preferences as well as financial stability. The product differentiation will also enable the company to increase its market share in different segments of the industry. Factors such as the design, size, shape, and interior layout are very essenti al and should fully be considered by the company as a strategy to stand out despite the stiff market competition (Yayici, 2013). Conclusion As evident from the PESTEL and the Porters five analyses, Richmont Pte Ltd has an outstanding performance in the Swiss market and across the borders. The good market position as well as the high customer base is attributed to the uniqueness of the products that the company produces. With other matchmaking and accessories industries increasing in the global market, Richmont Pte Ltd requires adopting unique production strategies that will result in the production of unique accessories. It as well requires proper distribution channels coupled with a well-monitored supply chain management strategy so as to maintain its customer base and market demand. References Brandimarte, P. (2012). Quantitative Methods: An Introduction for Business Management, Manchester: John Wiley Sons Citizen Holdings Co., Ltd. SWOT Analysis. (2016).Citizen Holdings Co., Ltd. SWOT Analysis, 1-7. Donz, P. (2012). The Comeback of the Swiss Watch Industry on the World Market: A Business History of the Swatch Group (1983-2010).Journal Of Strategic Management Education,8(2), 99-130. Frommer, D, (2014). Six things to know about the Swiss watch industry before Apple invades, Retrieved from https://qz.com/316064/six-things-to-know-about-the-swiss-watch-industry-before-apple-invades/ Graw, P. (2011). Business Analysis Formula, International Business Journal, Vol.6, no.1, pgs.24-26 Gretler, C. (2016). An East German Challenge to the Swiss.Bloomberg Businessweek, (4473), 24-25. Humair, F., Siegrist, M., Kueffer, C. (2014). Working with the horticultural industry to limit invasion risks: the Swiss experience.EPPO Bulletin,44(2), 232-238. doi:10.1111/epp.12113 Jack, V. (2015). Switzerland Declares War on the Apple Watch.Forbes,195(6), 114-116. Perman, S. (2016). Swiss Watches Are Getting More Affordable.Fortune.Com, 1. Rae, H. (2015). The Swiss and world watchmaking industry in 2015. International Business Journal. 7 (7) 24-26, Retrieved from https://www.fhs.ch/file/59/Watchmaking_2015.pdf Research, M. (2012). Swiss Watch Market: Industry Analysis Outlook (2016-2020) - Hong Kong and China Cause Plummeting Sales - Research and Markets.Business Wire (English). Sinclair, M. (2015). Connoisseurship as a Substitute for User Research? The Case of the Swiss Watch Industry.Journal Of Research Practice,11(2), 1-20. Tajeddini, K., Trueman, M. (2008). The potential for innovativeness: a tale of the Swiss watch industry.Journal Of Marketing Management,24(1-2), 169-184. Wamrack, W. (2014). The performance and Competitive advantage of small firms: A management Perspective, International Business Journal, Vol.1, no. 2, pg.15 Yayici, E. (2013). Business Analyst's Mentor Book: With Best Practice Business Analysis Techniques and Software Requirements Management Tips, Oxford: On Demand Publishing