Swach Case

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Swach Case

Five Forces Model of Michael E. Porter on the case of Swatch
1. Bargaining Power of Supplier:
• Moderate number of suppliers, concentration in Switzerland and Japan
• There is no substitute for quartz in the industry
• Switching to another product is very costly
• Product is very important for Swatch
• No supplier brand influence
• High role of quality
• Suppliers need continuous development – possibility to rise prices
 Neutral supplier power

2. Bargaining Power of Buyer:
• Big number of customers (from specialized watch shops to supermarkets/grocery shops), huge number of consumers
• Main consumers are young and active people interested in fashion – interest to the product changes over time and customers’ status/income
• Product by its nature is sold in low quantity per purchase (1 item per purchase)
• Consumers are young and changeable and can switch to alternative supplier – licensed fashion brands such as Benetton, Guess, Republic and etc. with zero switching costs
• Product is not highly important for the customers/consumers
• Consumers are highly price sensitive
• High role of quality
 High buyer power

3. Threat of Substitution:
• Number of substitution, for example clock in mobile telephone, non-watch accessory
• In case of price increase consumers may switch to substitutes however with real and psychological switching costs (substitutes are not perfect)
 Low threat of substitution

4. Threat of New Entry:
• High economies of scale
• High customer’s loyalty to Switzerland brands and to Swatch in particular
• Moderate entry costs, especially for companies which are not direct competitor at the moment but in fashion business (high technology investments, continuous research and development but concept is easy to copy)
• Easy access to distribution channels by competitors
• No barriers for entry
 Moderate threat of new entry

5. Competitive Rivalry:
• A number of big competitors among watch production industry,...

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