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Tiffany Case Study

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1. What are the strategically relevant factors of the macro-environment that affect the attractiveness of the U.S. jewelry industry? Specifically, are general and industry economic conditions and socio-cultural factors favorable to Tiffany & Co.’s business situation?
According to the PESTEL Analysis, the strategically relevant factors are: political factors, economic conditions, socio-cultural forces, technological factors, environmental force, and legal/regulatory factors.
Economic conditions and socio-cultural factors have not been favorable to Tiffany & Co. Economic hardships and the recession have led to revenue declines between 2006 and 2010. Retail jewelers in the U.S. were affected by these poor economic conditions and stores dropped from 62,000 in 2007 to 56,000 in 2011.
In 2006, the price of gold increased from $600 per ounce to $1,600 in 2011. This resulted in the industry average profit margin to decrease to 5.1 from 2006 – 2011.
In term of socio-cultural factors, the aging population, and the reduced number of weddings has affected the industry average profit margin. Consequently, the number of weddings in the U.S. has dropped from 2.3 million per year to 2 million between 2001 and 2010 and dropped again in 2009 and 2010.
2. How strong are the competitive forces confronting Tiffany & Co. and other retail jewelers? Which once of the five competitive forces is the strongest? Do a five-forces analysis to support your answer.
Threat of Entry: The threat of entry is strong because to enter this industry, new entrants did not have to have a large amount of capital. On the other hand, online jewelry retailing requires a great deal of capital.
Bargaining Power of Supplier: The bargaining power of supplier is moderate because the cost matrix of jewelry threatens the profitability of the industry. The fact that gold and diamonds are so…...

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