What vintage are you Strategic Analysis Fossil Inc

What vintage are you? Strategic Analysis Fossil Inc. Module Leader : Dr. EMANUEL GOMES Presented by: Pearl Global Consultancy AARATHI A. PANIKKAR DINESH SUBBIAH JAYAKRISHNAN K. NAVEEN KUMAR NEELI What vintage are you?

COMPANY PROFILE › Fossil Inc. was founded in 1984 is known for its MD 3 › Specializes in wrist watches, which are accountable for 65% of its total sales › Licensing is a major strength, which accounts for almost 35% of revenue › First American watch-maker to bring value and style together › Fashionable, innovative and high quality watches based on vintage theme › Popular product lines are PHILLIP STARK and FRANK GEHRY What vintage are you? › First company to develop a fully functional PDA watch › 354 retail stores all over the world

PEST ANALYSIS (1/2) • Taxation, customs duties and quotas • Foreign trade regulations P • GDP, inflation • Disposable income • Unemployment • Business cycles E T S • Change in lifestyle • Consumerism • Distribution of income What vintage are you? • New patents and policies • Technology • Internet

PEST ANALYSIS (2/2) (1 - Least favourable , 2 - Less favourable , 3 - Neutral, 4 -More favourable , 5 - Most favourable ) What vintage are you?

STRATEGIC GROUP ANALYSIS (1/2) What vintage are you? Price range (US$) Fossil brands Competitors 1500 -20, 000 Michele Cartier, Omega, Rolex, Piaget 300 -3000 Armani, Zodiac, Burberry Gucci, Movado, Raymond, Tag Heuer 70 -500 Fossil, DKNY, Diesel Swatch, Guess, Kenneth Cole 7 -74 Allude, Callaway, Trophy Casio, Timex, Armitron 15 -75 (Sports) Adidas Nike, Reebok

STRATEGIC GROUP ANALYSIS (2/2) Style and design Michele Gucci Timex Fossil Swatch Guess DKNY Casio Trophy Price What vintage are you? Omega Rolex Tag Heuer Armani Zodiac Citizen

LIFECYCLE ANALYSIS (1/2) What vintage are you?

LIFECYCLE ANALYSIS (2/2) • Product range – Watch, Apparel, Jewelry, Footwear • 2000 Apparel, 2006 sports with ADIDAS • 2005 Taiwan & Sweden, 2007 India & Korea • 2007 Cold weather accessories • 2009 Men's & women's footwear • 2009 SAP Financial Hong Kong What vintage are you?

Support activities VALUE CHAIN Administrative, finance, infrastructure Warehouse (Texas and Germany), SAP interface (2003), Retail back office, Ability to finance foreign operations – 4 Human resource management 7, 900 employees, trade union, work council, long-term plans, work stoppage, acquisitions risk – 4 Product and technology development Diversified network of products, specialised designers, products offered in airlines, cruise ships, resource planning system – 4 Procurement Long-term relationships, Common stock buy back programs, quality specification, forward contracts – 4 Primary activities Inbound logistics What vintage are you? • Assembling centre • Manufacturing unit in Germany, China, US and Hong Kong – 5 Operation • Distribution channels • Internal creative team – 5 Outbound logistics Sales and marketing • Delivery system • Dispatch system • Warehouse • Invoicing and finished goods – 4 • Diversified market • Different segments • Growth in sales – 4 Servicing • Long-term warranty • Reliable repair service • Brand image and emotional connection -- 5 Profit margin

SWOT ANALYSIS Strengths • In-house creative team • Licensing • Breadth of brands and prices • Brand strength • Customer service • Cost of production • Innovation technology • New product development • New market development • Cost control procedures • Saturated domestic market • Fluctuation in pricing • Change in fashion trends Opportunities What vintage are you? Weaknesses Threats

RESOURCE AUDIT (1/2) (1 - Least favourable , 2 - Less favourable , 3 - Neutral, 4 -More favourable , 5 - Most favourable ) What vintage are you?

RESOURCE AUDIT (2/2) Financial Year What vintage are you? 2009 2008 2007 2006 Net Sales ($) 1, 548, 093 1, 583, 242 1, 432, 984 1, 213, 965 Total Assets ($) 1, 276, 483 1, 087, 296 1, 122, 628 852, 597 Total Liabilities ($) 62, 791 74, 964 66, 432 22, 914 % Retail Value RSP Company 2009 2008 2007 2006 Timex group 23. 7 24. 6 26. 3 27. 6 Fossil Inc 11. 9 11. 7 11. 3 Movado Group 10. 5 10. 3 11. 6 11 Rolex 4. 5 5. 3 6. 3 5. 7 TAG Heuer 2. 3 3. 1 2. 7

ORGANISATIONAL PURPOSE Vision › The brand which brings value and style together to its customers Mission ›To create authentic and fashionable products with modern vintage style ›To be leader in the design and licensing business ›To expand international business ›To diversify into new products Analysis ›Customer – Wants to develop innovative products for customers ›Products and services – Aspires to create more innovative and vintage style products for the customers ›Geographic regions – Global business ›Growth and profitability – Aspires to be leader in its field, spread the business worldwide and improve business and thereby profitability What vintage are you?

ORGANISATIONAL PURPOSE Objectives 1. The company's primary objective is to create value by building the FOSSIL brand name. 2. To expand internationally, building brand name recognition, and strategic diversification 3. The recent objective of the company is stock repurchase program Evaluation › Achieved by allying Fossil with most popular brand retailer in New York city (Macy's) › The objective is achieved through licensing agreement between the companies which made Fossil brand more popular in the market and the distribution channels. › By utilizing their strong balance sheet, including $435 million in cash and cash equivalents at the end of the second quarter of fiscal 2010, and future cash flows funding of this program will be carried out What vintage are you?

PORTER’S 5 FORCES (1/2) Competitive rivalry • Backward integration by buyers • Forward integration of the buyers by the organisation • Low switching cost • Product differentiation • Forward integration by suppliers • Backward integration by the suppliers • Long-term relationships • Low switching costs • Buyers of industry becoming customers to suppliers • Large number of competitors • Price competition • Low market growth rate • Strong distribution channels • Competitor’s differentiation in products • Customer loyalty HIGH MEDIUM HIGH Substitutes Buyer’s power • Licensing strength • Wide market range • Differentiation and design • Customer loyalty base • High relative price and performance • Low switching costs • Brand loyalty • Product differentiation • Low disposable income • Willingness of buyers MEDIUM LOW What vintage are you? Supplier’s power New entrants

PORTER’S 5 FORCES (2/2) X axis = Competitive forces (1 - Highest threat, 2 - High threat, 3 - Medium threat, 4 -Low threat, 5 - Least threat ) What vintage are you?

PORTFOLIO ANALYSIS Watches 10 Stars Accessories Question marks • Build brand name • Promote the products 5 0 Cash cows Dogs Harvest -5 Build market share -10 2 1. 5 1 0. 5 Watches What vintage are you? 0 Accessories Year Sales ($m) Growth 2009 1022 -4% 2009 526 1% 2008 1061 9% 2008 522 14% 2007 975 2007 458

COMPETITIVE STRATEGY High Best Offer Good offer Value for money Fossil DKNY Swatch Guess Excellence Premier quality Zodiac, Michele, Armani, Omega, Gucci, Rolex, Tag Heuer Good price Value for money Too expensive No value for money Nonsense Trophy Casio Timex QUALITY Low price Low What vintage are you? PRICE High › Neither pure classic nor ultra trendy › Differentiation pertaining to vintage theme › Middle positioning attracts more age brackets than Guess and Swatch › Compete on value and style

DEVELOPMENT STRATEGY Existing products Existing markets New markets What vintage are you? • 1984 Inception • 1988 Department stores • 1989 Wooden boxes • 1993 Public offering of shares • 1995 Outlet stores • 1996 Accessories stores • 1997 Licensing New products • 2001 Brain (7 alarms, 30 messages, 5 memos) • 2001 Titanium • 2002 Blue (underwater watch) • 2005 Chronograph • 2006 Sports watches • 2008 Wrist PDA Market penetration Product development Market development Diversification • 1993 International expansion • 1993 ‘Fossil East’ established • 1996 E-commerce • 2001 Airport &Cruise • 2001 Zodiac • 2004 Michele • 2005 Taiwan and Sweden • 2007 India and Korea • 2009 Hong Kong • • 2000 Jewellery 2000 Apparels 2007 Sunglasses 2008 Footwear

CONCLUSION › One of the major brands which range from mass market to luxurious market segments › Licensing strength wide variety of brands under its wing › New market penetration by acquisitions and company owned stores › Stable market share since 2001, during economic downturn and declining watch industry › Extensive promotion strategy by advertising through website, catalogues and in-store presentations › Brings differentiation in its products by incorporating various designs and innovation with its dials, cases, bracelets and watches › Creating value for the customer with its excellent customer service, quality, warranty services, price flexibility etc. › Opening 50 company-owned stores in 2010 What vintage are you?

RECOMMENDATIONS › Focus more towards accessories market by investing maximum of the revenues generated by its watches segment into branding of accessories › Open more company-owned stores for accessories › Try to gain licensing power of more watch and accessory brands to increase its market share in overall industry › Effective implementation of promotional strategies like bundling, free returns etc. › Invest part of its revenues in diversifying into new international markets as a long-term growth strategy What vintage are you?

Thank you What vintage are you?