GROUP B

PORTER’S FIVE FORCES

Rivalry(High)

Bargaining power of suppliers

(High)

Threat of new entrants (Low)

Threat of substitutes(Moderate)

Bargaining power of customers

(Low)

CounterfeitsJewelry

Luxury mobile phonesOther luxury products

Exclusive brand imagePatented technology

High capitalAccess to distribution

Retailers influences customers decision

Brands control distribution

Swatch dominates components

High cost vertical integration

InnovationM&A

Luxury Brands

Attractive Industry

ACCESSIBLE LUXURY

EXCLUSIVE LUXURYAESTH

ETICS

CONNOISSEURSTE

CHN

ICA

L

SPORT

LIFESTYLE

JEWELRY

FASHION

DIRECT COMPETITORS PATEK PHILIPPE

THE WORLD LUXURY WATCH INDUSTRY AT A GLANCEContinued strong Growth until 2008 The crisis of 2009 mainly involved the accessible luxury segment Recovery in 2010 and expected record sales in 2011 Asia fastest growing market China grew 47% in 2009, 57% in 2010 Continued Growth expected in China and India

02468

1012141618

2005 2006 2007 2008 2009 2010

Total value (CHF bb)

Countries Value 2010 increase % Share %

Hong Kong 3185,5 46,90% 19,70%

USA 1674,4 13,80% 10,40%

France 1167 20,50% 7,20%

China 1099,5 57,00% 6,80%

Italy 923,3 2,60% 5,70%

O. Countries 8108,4 15,50% 50,20%

Total 16158,1 22,10% 100,00%

LAST TRENDS IN THE LUXURY WATCH INDUSTRY

Trends in taste and design- Moving away from extravagance and excess- Move towards nostalgia and the past- Highlighting original Swiss savoir - faire- Understated Luxury/ Neoclassic

Other trends- Attempt to vertical integration from other players- Consolidation (Richemont, LVMH)- New entrants from fashion world- Diversification- Higher attention to Asian tastes (automatic watches)- Modern technology to attract younger targets (touch screen)- Increasing counterfeit market

1839 1844 1851 1932 2009

2 Polish immigrants, AntoniPatek (Businessman) and FranciszekCzapek (Watchmaker) found “Patek, Czapek&Cie” Geneve

Mr. Patek met French watchmaker, Mr. Adrien Philippe. Pioneering stem winding and setting system by the crown

Mr. Philippe officially associated with the company, “Patek Philippe &Cie”

Company was purchased by Charles and Jean Stern. “Patek Philippe S.A.”

Presidency transmitted from the 3rd to the 4th generation: Mr. Thierry Stern became president

Family owned company Flexibility & creativity

Completely integrated Total quality control

TraditionAspirational brand / Lifetime valueBrand museumControlled distribution:

Salons in Paris, Geneva and London500 carefully selected retailers

Independence, Tradition, Innovation, Quality and Workmanship, Rarity, Value, Aesthetics, Service, Emotion, Heritage

PATEK PHILIPPE

9

STRATEGY COMPETITIVE ADVANTAGE

KEY RESOURCES• Patents• Skilled workforce• History and reputation• Advanced technology

CORE CAPABILITIES• Heritage and expertise• Internal production of all

components• Culture of innovation• Pursuit of perfection• Emotional value of the brand

(family transmission)

HERITAGE MANAGEMENTBENEFITS

ESSENCE, NATURE, MEANS

Functional-Time keeping- Precision- High technology

Essence MeansNature

Client BusinessCompany

Emotional - Piece of art / Exclusive- Family Values /Heritage- Brand r recognition

BENEFITS

QualityTrust

High techonoligyRespect of traditions

Aligns with values of customers

“Lasting value is both material and

emotional”HERITAGE

Highly populatedCompetition on technology

High negotial power of supplier

New trends

Vertical integrationInnovation effort

Understand Industry&CustomersManagement Supply&RetailersFamily business/independence

MANAGEMENT

SWOT

OPPORTUNITIESUse scarcity to increase exclusivityExpand the brand (jewelry)Supply movements to other manufacturersNew targets: women, younger peopleNew markets: Asia

THREATSChange in consumers’ tasteNew entrants (luxury brands)M&A: new colosses with higher financial resourcesScarcity might prevent gaining market share in Asian countries, leaving room to competitors

SWOT

INCREASE EXCLUSIVITY

(grow through price)

EXPAND TO ASIACONQUER WOMEN

APPEAL TO A YOUNGER TARGET

BRAND EXTENSION BRAND + MARKET EXTENSIONS

PRODUCT

MARKET

SAME

NEW

SAME NEW

CAPABILITIES ? POSSIBLE BRAND DILUTION

PEOPLE WILLINGNESS TO

PAY MORE(Crisis)

EXPAND TO ASIAProd. capacity

Knowledge of the market

Right target ?

APPEAL TO A YOUNGER TARGETAcquisition of new

technologyMove away from

tradition (microcomponents)

Brand dilution

PATEK PHILIPPE ALTERNATIVES

POSSIBLE BRAND DILUTION

CONQUER THE WOMEN

Risk to alienate menBrand dilution

RECOMMENDATIONS

Maintain exclusive positioning

Raise online brand awareness

Enhance women’s business

Measured approach towards China

MAINTAIN EXCLUSIVE POSITIONING1

• Maintain their exclusive positioning• Focus on core resources and capabilities• Growth through price not volume• Focus on innovation and branding

Objective

• The only independent watchmakers in Geneve• Unique positioning and perpetuating the ‘legend’Rationale

• Collector’s edition watches (priced above 100k Euro)• Exclusive membership clubs• Propose updated versions of old models• Unique service: engraved customer’s initials, free extendend repair service

Suggested Tactics

RAISE ONLINE BRAND AWARENESS•Reinter

pretate traditional values of the brand in a modern way

•Engage brand advocates, communicating 360º

•Attract new potential customers

•Reach good positioning also on online media

Objective

•Part of the Patek Philippe customers use Internet to seek information about luxury watches. Need to build loyalty also on the net

•Patek Philippe’s technological edge is consistent with the use of interactive media

Rationale

• Revamp company and museum website•Specific

SNS’ targeting HNWI

•Proprietary social media platform (Membership, Benefits)

•Create the myth of Patek Philippe on traditional social networks

•Interactive videos: collections, watchmaking process, etc.

Suggested Tactics

2

RAISE ONLINE BRAND AWARENESS2

ENHANCE WOMEN’S BUSINESS3

• Increase sales from women’s collectionObjective

• Women’s watch market is growing• Risk: a feminine brand image may alienate male

customersRationale

• Women designs should share sober traits of men’s collection• Communication should relate more to a feminine

audience , without “feminizing” traditional brand image• Message focused on values rather than gender (heritage)

Suggested Tactics

MEASURED APPROACH TOWARDS CHINA 4

•Avoid brand dilution by appealing the Chinese new rich

•Remain an object of desire among the upper-crust in China

Objective

•China is potentially the most lucrative market for Patek Philippe

•New rich are currently seeking for status only and may not fully appreciate the Patek Philippe’s brand

Rationale

• Study evolution of the market • Slow and selective distribution (main cities, top retailers)•Build

awareness and communicate through Chinese brand advocates / ‘friends’ of Patek Philippe

Suggested Tactics

“You never actually own a Patek Philippe. You merely look after it for

the next generation”

Q&A

GROUP BLIA BUDIMAN

LUCIA CALDERON ADRIAN CHAN CHUN

DEBORA CURBIHOWARD CUSHING VALERIA DESERTO

CARLOS FERRISSURYANATA HATTA