Company Overview
Since its establishment, Tiffany has been one of the leading companies in the production of luxurious jewelry around the world. However, this status changed when competition stiffened owing to the entry of various retail companies into the jewelry market. One of the factors that helped the company retain its competitive advantage and customers’ loyalty is the insistence on brand protection. The company has a strategy that aims at maintaining its brand at high standards to avoid compromising the products’ quality.
In 1837, Charles Tiffany and John B Young founded the company and operated it under the principle of non-negotiability of prices. The policy favored the company since it engaged in the production of luxurious commodities that require high pricing as a show of value (Kotler et al. 116). The company’s mission was to produce exceptional jewelry that would attract customers from all over the world. Until 2007, the company operated under a strategy known as “growth without compromise” that aimed at protecting its brand. Under the strategy, the company was reluctant to open new stores. Besides, management controlled the introduction of new products.
Moreover, the company limited sales of its lowly priced products coupled with being reluctant in sublicensing marketing stores to use the “Tiffany” trademark. However, in the year 2007, the company changed its policy to increase the shareholders’ value. The new approach entailed the “growth without compromise” strategy by eliminating conservatism in the opening of new stores. Additionally, the company sublicensed other marketing companies to operate under the “Tiffany” trademark. The change in strategy caused a sharp decrease in the company’s profits due to the increased operating costs and poor quality products from inexperienced staff members in the newly opened stores.
Reasons for the continued success
Protection of the brand
Branding is a key success factor in businesses since it distinguishes a company’s products from those of the competitors. This aspect makes it easy for customers to differentiate such products from those produced by competitors. The production of high-quality products coupled with exceptional branding helps a firm to create customer loyalty, thus leading to high profits (Adrian 242). Ever since its establishment, Tiffany’s mission was to produce high-quality products, which are sold at non-negotiable prices. The high pricing strategy was healthy for the company since it operated in the production of jewelry, which is considered luxurious.
Therefore, such products are attractive when the prices are high. The company adopted the growth without compromise policy that limited the opening of new stores to protect its brand. New stores were only opened upon the mobilization of all the required resources. The main reason for limiting the number of news outlets was to ensure that each new store was staffed with experienced employees who would guarantee the quality of the products.
Hiring inexperienced staff members to operate the new stores would have compromised the quality of the products. This move would have derailed the company’s mission. The company ensured that 50% of the employees in the new stores were drawn from the existing experienced staff members to avoid compromising the quality of products.
Employee development and motivation
Human capital is an important factor of production that requires effective management if a business is to achieve its objectives. Human resource management can go a long way in helping a business attain its set goals. Successful management of labor is realized after examining both the business and the marketplace environments coupled with creating employment and profit opportunities.
Tiffany invested heavily in its employees by offering development opportunities to enhance their capability and overall performance. One of the development opportunities available for the firms’ employees included training, which was achieved through a non-discriminative program accessible to the entire workforce. Training employees not only motivates them but also advances their skills, thus making them highly resourceful to the firm.
In addition to promoting continuous training of its workforce, the company ensured a low staff turnover rate by compensating the workforce competitively coupled with the provision of healthy working conditions. This aspect ensured that the company retained the best talents and reduced the operating costs due to savings in terms of recruitment and training costs. The promotion of staff members to senior positions was done based on merit. In this case, the best performing employees were promoted to higher positions as a way of encouraging commitment and devotion to the company’s mission.
The set policies allowed employees to acquire shares in the company to motivate them to work towards the achievement of the outlined goals. Therefore, about 50% of the company’s employees owned stock in the company. Encouraging employees to acquire stocks in a company instills a sense of ownership, and thus they are compelled to work industriously to maximize the annual dividends. Besides, the company adopted IT technology in the management of its human resources, which facilitated easy performance appraisal and enhanced accountability.
Innovation
Since its establishment, the company has focused on providing high-quality products and it invested heavily in research to come up with exclusive products. The firm introduced a non-discriminative training program for its line employees to improve their skills and competence. Besides, this move ensured that innovation was achieved continuously. In addition to training its employees, the company rewarded the best-performing workers especially those who came up with viable suggestions regarding product improvement.
This move encouraged innovation together with motivating the workforce to work towards achieving the company’s mission of ensuring that the brand was exceptional and customer centered. Each year, the company improved the existing products or introduced different lines of products. Even though the company mainly produced jewelry made from diamonds, it introduced silver, gold, and platinum assortments to increase choices for the customers.
Furthermore, the introduction of new products ensured that the company’s wares were accessible to the middle-class groups, which increased turnover. The introduction of such products into the market was done following comprehensive research to avoid failure. Records indicate that the company managed new product development and rollouts over a period of 18 months. However, the company only implemented the most viable ideas. The company priced the jewels made from silver and platinum to avoid compromising the sales of the main products that were mainly made from diamond. A case in point is the company’s decision to raise the prices of its silver products to avoid saturation in the market and retain the notion that the product was of high quality hence the high prices.
Vertical integration
Another factor that contributed greatly to the success of the company was its vertical integration policy aimed at discouraging outsourcing. The strategy is evidenced by the decision to acquire ownership rights to diamond mines as well as diamond cutting and polishing facilities. The company produced about 58% of the products, thus adding up to its profits due to the avoidance of the outsourcing costs.
In addition to the diamond mines, the firm owned the real estate for its various stores to avoid rental expenses. According to the company’s management, outsourcing would lead to a compromise of the brand, hence customer dissatisfaction. Moreover, outsourcing would increase the operating costs in terms of the increased cost of sales, which would in turn hurt the profitability of the firm. Thus, the benefits of vertical integration by the company were twofold. Firstly, it ensured that the company managed its brand fully, thus providing high-quality products to its customers. Secondly, it ensured that the company avoided outsourcing costs hence increasing its profitability.
Designer licensing and good Customer relation
Due to the huge market share that the company had established in the global market, it benefited from exclusive designer licensing. Designers such as Elsa Peretti and Paloma Picasso are just examples of the many professionals who had licensed the company to use their trademark on its products. The company’s operations were guided by the principle of customer-centered services. In this case, it aimed at creating customer loyalty to establish a greater market share over its competitors.
Therefore, the company encouraged innovation and exercised full control of its brand to avert chances of compromise on the quality. Additionally, the company embarked on policies aimed at increasing sales by convincing customers to buy its products. The company always came up with solutions to various hitches that threatened its relationship with customers. For example, it came up with the idea of encouraging customers to make purchases and celebrate their life events through the slogan “Celebrate your special events with Tiffany” (Ngai and Cho 260). This slogan was developed in response to the knowledge that most customers did not buy the products for personal use.
Apparently, in most cases, they purchased the products as gifts to friends during special events such as birthdays, weddings, and graduations among others. The slogan was meant to persuade customers to buy the products for their use. This strategy was used skillfully to increase the firm’s turnover. Education regarding the company’s products was another strategy adopted to win customer loyalty.
Through its “a Diamond” and “Pearl Authority” campaigns, the company produced brochures explaining which qualities to look for in each stone before making a significant purchase. This aspect meant that the educated consumer would choose Tiffany. Customer management was done through IT, which ensured that the right marketing decisions were made in different situations.
Works Cited
Adrian, Angela. “Intellectual capital in the world of information economics.” Journal of International Commercial Law, and Technology 3.7 (2008): 242-246. Print.
Ngai, Joann, and Erin Cho. “The young luxury consumers in China.” Young Consumers 13.3 (2012): 255-266. Print.
Kotler, Philip, Kevin Keller, Fabio Ancarani, and Michele Costabile. Marketing management, New York: Pearson, 2014. Print.