The Case of Rolex
History of the Brand
This Swiss brand under which watches and accessories are produced has long been closely associated by the majority of the world’s population with wealth and luxury. The company Rolex, SA is one of the most known and respected throughout the world. Its founder Hans Wilsdorf was convinced that the future belongs to the wristwatches, and dreamed of the establishment of their new production (Heel, 2014). In addition, the first such clock appeared in 1905 (Heel, 2014). The earliest models were distinguished as a luxury, and they were worn on the arm with silver or gold bracelets. Suddenly, this product was likened by conservative British consumers; the business was waiting for success. In November 15, 1915, the company name Rolex was officially registered and changed somewhat in 1919 to the Rolex Watch (Heel, 2014). The main emphasis in the manufacturing process has been on the quality, accuracy, speed, and exclusivity. From its very first days, Rolex produces wristwatches not for everyone. Brand Rolex is one of the hundreds of the most expensive in the world. It is the only company related to the world of luxury, producing up to 2000 hours daily (Heel, 2014). It owns such well-known watch brands as Cellini and Tudor (Heel, 2014).
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Today, the popularity of Rolex watches is so high that the number of fake products exceeds all conceivable limits. They are actively traded in various shops, on the Internet, and on the streets. Interestingly, in some cases, the quality of the fakes is so high that only specialists can distinguish them from the original watches, and only after opening the housing and inspection of mechanism. For over a century, the name of Rolex has been inextricably associated with the steady pursuit of perfection, so peculiar to the world of sports. Today, with the assistance of Rolex, the most prestigious competitions in disciplines such as golf, sailing, tennis, motor sports, show jumping tournaments are held. Taking into account the rich and long-term nature of Rolex’s relations with the world of sport and culture, the company is considered not just a sponsor, but also a real partner.
Rivalry of Competitors within the Industry
Within the last few years, the intensity of competition has increased significantly. Now, when the market requires permanent global solutions, large groups of brands began to fight for a small absorption. Each group wants to increase its portfolio of brands, thus buying more independent ones. Today, in the world of luxury, the main resource for influence is advertising. The competitors of the Rolex group are companies such as TAG Heuer and Breitling. These firms, along with Rolex, are now involved in a price war. In fact, brands are located in the accessible luxury segment even trying to improve its high-end image in order to increase their prices.
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Threats of New Entrants into the Industry and New Markets
In order to become a luxury watch manufacturer, business should belong to the brand or group of brands, which are considered as a luxury, and belong to the world of luxury. In fact, not everyone can afford a watch that costs more than a thousand dollars. Classic marketing is based on the abundance of goods, and luxury marketing goes to a deficiency. Thus, customers who purchase luxury products, feel their advantage, superiority, they are favorites, because they understand: this product is not for everyone.
Reputation in the market is the foundation, because the customer comes to the well-known, recognized brand. The strategies to promote around the world are an effective tool for specialized activities. In the segment of luxury, there is the simple and clear rule: never bargain about the price. If there is the need, there is the possibility to put the maximum value that is possible only because it determines the positioning. The cost is to be determined and announced individually and personally. This is the job of sales manager to present the product, and then inform the customer about the price. Fidelity to the distinctive features is also very important. Even extending the maximum range of branded watches, Rolex can be distinguished at first glance at it. In this case, the design serves as a reminder of the strategy, but rarely a differentiating tool.
Threat of Substitutes
According to the Federation of the Swiss watch industry, counterfeiting damages Swiss watchmakers for 800 billion USD (Heel, 2014). Therefore, the issue of counterfeit and fake products is for Rolex Company sharp enough. Now the Swiss watch Rolex is one of the attributes of a successful person, a luxury that not every mortal can afford to have. Like most prestigious brands of luxury goods, Rolex watches are extremely popular among the masters of copies and fakes. Not surprisingly, therefore, not only in China and Taiwan, but also in Europe, one can purchase a Rolex watch worth from $5 to $100 (Heel, 2014). According to the estimates of experts, more than 75% of all counterfeit brand watches manufactured every year are the copies of Rolex design (Heel, 2014). Even self-winding mechanisms are often copied with such accuracy that for the ordinary person it is difficult to distinguish the fake from the original. Due to the vast multitude of counterfeits, procedure for determining the authenticity of Rolex watches became part of the Swiss brand. Unfortunately, the popularity of mobile phones also caused damage to the segment of luxury brand watches. However, the true connoisseurs of Rolex remain firm supporters, and the old models go at auction for big money (Heel, 2014). Therefore, it is quite difficult now to judge whether there is a possibility to completely replace the product on the market, as the area of the watch industry cannot be characterized with a standard marketing procedure.
How it works:
Bargaining Power of Customers
Branded luxury watches are trying to present their products in the best shops worldwide, as well as in jewelry stores. The top jewelers, in their turn, also have to submit the top brands in their stores. Thus, both parties involved believe that their relationship is more or less like a partnership. As a rule, for luxury consumption, end-users are well aware of the different brands and already have a clue about what they want. However, the established brands like Rolex could put pressure on retailers when it comes to the new members in order to prevent their distribution. The luxury segment is very limited, giving little opportunity for retailers to switch from brand to brand.
Bargaining Power of Suppliers
Manufacturing a wristwatch includes the need for components such as the face, the glass, and the strap. Basic supplier of these components for manufacturers is the Swatch Group. Nevertheless, Rolex controls the production of parts for its watches from start to finish, thereby controlling the cost and quality. Anticipating the battle for the components of the watch, few years ago Rolex implemented a feedback strategy of vertical integration in order to be able to provide complete independence from the competition groups. This model shows through numerous seizures of suppliers that have taken place in recent years. Rolex began to develop its own parts to create its watches in order to avoid having to rely on its main competitors (Heel, 2014).