Waterford FINAL

November 25, 2010

STRATEGICMANAGEMENT

WATERFORD WEDGWOOD PLC-2008

Group Members | Ameer Taimur Ali, Muniba Shoaib, Natasha Farooq, Shumail Arzu

Waterford Wedgwood PLC-2008 P age |2 History Wedgwood has been an international company for over two centuries Founded in 1759 upon the highest standards to uphold these essential factors in maintaining its leading position throughout the markets of the world. The founder, Josiah Wedgwood (1730-1795), who is remembered as the Father of English Potters, was born in Burslem, Staffordshire, in the heart of the English potteries , He served his apprenticeship as a potter before setting up his own business in 1759. By 1766 he had prospered sufficiently to build a new factory, which he named Etruria. Josiah was to sow the first seeds of the innovative spirit, which continues to be an integral part of Wedgwood. During his lifetime he invented and produced what remain today three of Wedgwoods most famous ceramic bodies Queens Ware (1762), Black Basalt (1768) and finally Jasper (1774). In the nineteenth century, important progress was made at the Wedgwood factory in the use of new machinery, the introduction of the first colored earthenware bodies and, most importantly, the manufacture of bone china. Wedgwood bone china tableware was to grace the tables of many illustrious homes throughout the world, including the dinner service which President Theodore Roosevelt ordered for the White House. During the 1930s, Wedgwoods success continued and in order to increase efficiency, the fifth Josiah Wedgwood decided to build a new factory. A country estate near the village of Barlaston was purchased and a new, modern factory was built. Production started in the 1940s and has continued at the site ever since. Here, Wedgwood continues its living tradition of progress in design, in production methods and in the skills of its many craftspeople. In 2000, a modern visitor centre was added to the complex to cater for the huge interest Wedgwood.

Wedgwood the Brand Story Josiah would no doubt be thrilled by every single one of Wedgwood's achievements. For two and a half centuries strong our company has grown and our product range has blossomed all under his enduring ethos. Wedgwood now employs more than 2,000 people, distributes to 90 countries in the UK, North America, Western Europe and Japan, all the while holding high a reputation as purveyors of luxury goods.

Waterford Wedgwood PLC-2008 P age |3 Wedgwood Timeline

The Wedgwood company is founded by Josiah Wedgwood I

Six First Day's Vases were thrown by Josiah Wedgwood I himself, to mark the official opening of the new Etruria factory.

Josiah presents Empress Catherine the Great of Russia with the 952 piece dinner set commissioned by her, known as the Frog Service.

Josiah perfects his Jasper body. After thousands of experiments Josiah perfects the world famous ceramic.

Waterford Wedgwood PLC-2008 P age |4

Wanting to awaken the public to the injustice of the slave trade, Josiah produces the Slave medallion in Jasper. Sends on to Benjamin Franklin.

Copying the ancient Barberini Vase, Josiah painstakingly reproduces the Portland Vase in Jasper to great success.

Bone china is produced for the first time in the Wedgwood factory.

White Jasper joins the Jasper family, making it possible to produce three-color ornamentation.

1,282 fine bone china Wedgwood pieces are commissioned to Grace the table of President Theodore Roosevelt.


The Wedgwood Factory moves from Etruria to a 300-acre estate in Barlaston. It remains today as the company's headquarters.

Queen Elizabeth II's Coronation banquet is served on a 1,200-piece Wedgwood Persephone design dinner service.

Wedgwood's luxury credentials were enhanced by merging with Waterford, the Irish Crystal producer, becoming known As the Waterford Wedgwood group.

The Russian Government orders a staggering 47,000-piece fine bone china service.

Wedgwood celebrates 250 magnificent years of business.

Waterford Wedgwood PLC-2008 P age |6 Mission and Vision Statement Vision The company has no vision statement Proposed Vision Statement "Create the finest quality crystal and objects of beauty for the home which represents Luxury, Elegance & Hard work Mission To continue to be the world's leading portfolio of luxury lifestyle brands with particular emphasis on tabletop, gifting and the home Mission Statement Evaluation Matrix Customers P&S Tech Employee Public image Growth Survival Profitability No Yes No No No Yes No No No Self concept Philosophy Markets

Proposed Mission Statement We Offer our customers and consumers lavishness, innovation & high-quality, of the world's greatest ceramics and developing a true English style that is able to transcend global fashion boundaries to bring beauty into the lives of our customers

Waterford Wedgwood PLC-2008 P age |7 SWOT Analysis Strengths Recognized brand; very popular among households Products have modern designs Diversified household luxury products Collaborative and cooperative relationships with famous designers and internationally known chefs Ceramic groups generating more than 67% of the revenue Has the goodwill of Waterford that has been in the market for 225 years Code of corporate conduct reflects the companys concern for investors, directors, and employees. Thus, fits into the criteria for being a socially responsible firm and has made this information available to the general public and therefore has established good public relations Trained craftsmen Handmade unique, crafted crystal pieces Standard production procedures Multichannel distribution network (including wholesalers and arrangements with select retail and department chains) High quality products being offered Acquisition of Stuart Crystal Ionic image of the brand is so strong that the company doesnt rely heavily on advertising

Weaknesses Increasing trend in the negative NI from 2006 to 2007 Negative 270.8 million Euros net income for 2007 Declining Revenue from 772.6 million euro to 741.5 million euro No special efforts made on advertising, in order to reinforce the image of their products they will be needing a new advertising strategy In a state of balance sheet insolvency; a deficit pertaining to long term Liability resulted No vision statement Centralized production Products are considered as heirlooms which is reducing the companys sales Brands being marketed individually, affecting the companys financial performance Markets luxury home wares only, targets niche market only

Waterford Wedgwood PLC-2008 P age |8 Opportunities Explore Asian markets Opportunity of entering into low cost generating markets of European countries Decentralize manufacturing Product line extension More distribution network Tradition of quality might help in acquiring new product lines and distributing channels Collaboration with retailers like Bed, Bath and Beyond and Robert Mondovi Further enhancing its public image by adding something about ethically produced products to its CSR policies Threats Potential threat for competition from low cost European countries Lack of innovation Exchange rate fluctuation Cost management Due to the dispersion of Sales, the company is highly sensitive to the exchange rates all over the globe where its functioning Impact of the recent credit crunch No mention of how ethically the product is produced, might make the consumer to buy or prefer another brand over Waterford Wedgwood Crystal Competitive Asian Companies might pose a major threat if they decide they want to go international Threats from the competitors in the form of highly diversified products and better distribution channels


Financial Ratios

Current Ratio Quick Ratio Debt to Equity

2.18 0.77 -7.6 The valye for total equity was negative

Debt to assets Fixed Assets turnover Total Assets Turnover Inventory turnover Gross profit margin Net Profit Margin Operating profit margin ROA/ROI ROE

1.16 4.799 1.10 2.9 47.7% -9.6% because of negative NI -2.3% -0.106 Euros or 10.6% 0.65 Euros (both NI and OE were negative)

Growth in NI

62.3%

Negative Income decreased from 188.9m Euros to 71.2m Euros

Growth in Sales

-4%

Sales decreased by 4%

Waterford Wedgwood PLC-2008 P a g e | 10

SPACE Matrix W.r.t Competitors Competitive Advantage (CA) (-6 worst -1 best) y y y y y y Market Share Product Quality Latest Technology Brand Recognition -3 -1 -3 -2 y y y y y y Industry comparison Industry Strength (1 worst 6 best) Growth potential 3 Profit Potential 1

Financial stability 1 Resource utilization 4 Ease of entry into market 3 Productivity, Capacity utilization 3

Distribution Channels -4 CSR Programs -2

Average score -15/6 = -2.6 Total X axis score = -0.1

Average Score 16/6 = 2.5

Financial Strengths (FS) (1 worst 6 best) ROI Leverage Liquidity 1 1 5

Environmental Stability (ES) (-6 worst, -1 best) Technological Changes -3 Rate of Inflation -3 Demand Variability -1 Price Range of Competing products -3 Competitive pressure -2 Price Elasticity of Demand -1

Working Capital 2 Cash Flows 3 Inventory Turn Over 3 Receivable Ratio 5

Average score: 20/7 = 2.8 Total y axis score: 0.7 Position: -0.1, 0.7

Average Score: -13/6 = -2.1


1.5

(-0.2, 0.7)

1 0.5

-2.5

-2

-1.5

-1

-0.5

0.5 -0.5 -1

1

1.5

2

2.5

-2

A Firm that has a few competitive advantages and is not that financially stable in an industry that is not growing. It lies in the second quadrant of the matrix so it is conservative. The company should adopt the following policies; 1. Market Development: Should introduce its products into Asian countries as well 2. Product Development: More diversified products should be offered in the market it is competing to increase its market share


BCG Matrix Revenue in Millions Waterford Crystal Ceramics Group WC Designs 40.6 5.5% -4% 12% 501.5 67.65% 10% 60% 199.4 26.9% Revenue (%) Relative Growth 6% 30% Market Share

Ceramic group

Waterford crystal

Stars I

Question Mark II

W.C Designs

Cash Cows III Dogs IV

Waterford Crystals is the Question Mark for Waterford Wedgewood because of it relatively low market share. Its growth rate indicates that if more is invested in the division then by producing low cost and low-priced items a larger market share could be captured which would then turn it into a Star. Hence the concept of intensive strategies; market development, market penetration and product development can be applied here. Ceramics Group is obviously the star for the company as it has a high market share and a relatively higher growth rate. This division should consider Market development and Product development strategies

Waterford Wedgwood PLC-2008 P a g e | 13 W.C Designs is the Dog of Waterford Wedgewood Plc. As it has a negative growth rate which means the industry isnt growing and the division also has a seriously low market share. Considering Waterford Wedgwoods financial situation the company should go for divestiture.


Grand Strategy Matrix

RAPID MARKET GROWTH

WATERFORD WEDGWOOD PLC WEAK COMPETITIVE POSITION STRONG

II

I

COMPETITIVE POSITION

III

IV

SLOW MARKET GROWTH

The companys total weighted score in the CPM is 2.41, which isnt exactly satisfactory considering the high score if Baccarat (3.31). Waterford Wedgwood seriously needs to think about its current strategies as its positioned in the 2nd quadrant. Although the industry is growing the firm hasnt been able to maintain its financial position. It should consider all the intensive strategies like market development, market penetration and product development or growth strategy; horizontal integration. The last two options for the company would be divestiture of W.C Designs or liquidation.

Waterford Wedgwood PLC-2008 P a g e | 15 Reduce Prices QSPM Matrix Start manufacturing in untapped market; Market Development

Key Factors OPPRTUNITIES:dddddddddddddddddddddd1. 2.

Weights

AS

TAS

AS

TAS

Explore Asian markets Decentralize manufacturing

0.09 0.04

4 2

0.36 0.08

3 -

0.27

3. 4.

Product line extension Tradition of quality might help in acquiring new product lines and distributing channels

0.06

3

0.18

-

0.08

4

0.32

4

0.32

5.

Further enhancing its public image by adding something about ethically produced products to its CSR policies Opportunity of entering into low cost generating markets of European countries More distribution networks collaboration with retailers

0.07

2

0.14

1

0.07

6.

0.08

4

0.32

4

0.32

7. 8.

0.06 0.08

3 3

0.18 0.24

1 3

0.18 0.24

THREATS:1. Potential threat for competition from low cost European countries 2. Exchange rate fluctuation 0.08 3 0.24 4 0.32

0.02 0.04

3 3

0.06 0.12

4 4

0.08 0.16

3. Cost Management

4. Impact of the recent credit crunch

0.05

3

0.15

4

0.2

Waterford Wedgwood PLC-2008 P a g e | 16 5. Threats from the competitors in the form of highly diversified products and better distribution channels

0.09

4

0.36

2

0.18

6. Lack of Innovation 0.06 7. No mention of how ethically produced 3 0.18 2 0.12

the products are8. Competitive Asian companies that might

0.02

2

0.04

3

0.06

pose a challenge9. Due to the dispersion of sales, the

0.04

4

0.16

4

0.16

company would become sensitive to the exchange rates where ever it might operate

0.04

3

0.12

1

0.04

Total

1

STRENGTHS:1. Multichannel distribution network 2. Standard production procedures 0.06 0.05 4 4 0.24 0.2 2 4 0.12 0.2

3. Handmade unique, crafted crystal pieces 4. Trained craftsmen

0.06

3

0.18

2

0.12

0.04 5. Diversified household luxury products 0.07 6. Recognized brand; very popular among households

4 4

0.16 0.28

4 3

0.16 0.21

0.05

3

0.15

1

0.05

Waterford Wedgwood PLC-2008 P a g e | 17 7. Products have modern designs 0.04 3 0.12 4 0.16

8. Collaborative and cooperative relationships with famous designers and internationally known chefs 9. Ceramic groups generating more than 67% of the revenue

0.05

4

0.2

2

0.1

0.04

3

0.12

2

0.08

10. Has the goodwill of Waterford that has been in the market for 225 years

0.05

4

0.2

2

0.1

WEAKNESSES:1. Increasing trend in the negative NI from 2006 to 2007 2. Declining Revenue from 772.6 million euro to 741.5 million euro 3. In a state of balance sheet insolvency; a deficit pertaining to long term Liability resulted 4. No vision statement 0.05 3 0.15 1 0.05 0.05 3 0.15 4 0.2 0.05 3 0.15 4 0.2 0.09 4 0.36 4 0.36

5. No special efforts made on advertising, in order to reinforce the image of their products they will be needing a new advertising strategy 6. Negative 270.8 million Euros net income 0.06 4 0.24 4 0.24 0.04 4 0.16 4 0.16

for 20070.03 3 0.09 4 0.12

7. Centralized production 8. Products are considered as heirlooms

0.04

3

0.12

3

0.12

which is reducing the companys sales9. Brands being marketed individually, 0.04 2 0.08 4 0.16


affecting the companys financial performance10. Markets luxury home wares only, targets

niche market only

0.04

4

0.16

4

0.16

Total

6.76

6.51

The company should implement the market development strategy as its score is higher than the low cost leadership strategy, therefore the first strategy more desirable as compared to the other one


SWOT Matrix

StrengthS2. Products have modern designs S7. Trained craftsmen S8. Handmade unique, crafted crystal pieces

WeaknessW3. Declining Revenue from 772.6 million euro to 741.5 million euro W4. No special efforts made on advertising, in order to reinforce the image of their products they will be needing a new advertising strategy W1. Increasing trend in the negative NI from 2006 to 2007 W2. Negative 270.8 million Euros net income for 2007

SO Market Development Target new Asian markets and O7. Collaboration with retailers introduce their unique like Bed, Bath and Beyond and designs (S2,O1) OpportunitiesO1. Explore Asian markets Robert Mondovi O8. Further enhancing its public image by adding something about ethically produced products to its CSR policies

WO 1.Farward integration (W3,O7) 2.New marketing Strategy (W4,O8)

ST T9. Threats from the competitors Low cost leadership, low in the form of highly diversified cost best value (S7,S8,T8) Threatsproducts and better distribution channels T8. Competitive Asian Companies a major threat

WO 1.Farward integration (W3,O7) 2.New marketing Strategy (W4,O8)

Waterford Wedgwood PLC-2008 P a g e | 20 Recommendations Firstly and most importantly Waterford Wedgwood needs to reduce its production cost in order to stabilize its financial situation, and increase its market share. For this purpose one major category of production cost, namely; Labor cost should be reduced. The company trains its craftsmen for 10 years, plus in ensuring the quality the company incurs a lot of production cost, another method of ensuring quality should be formulated because the one company currently uses is very costly. Lastly, Debt cost should also be reduced. Set up a new venture in Asia, and establish its business in the untapped markets, this would increase its market share

Even though brand recognition is quite strong but the company needs to put some effort into advertising

The companys PR has been doing a great job but the criterion for being social doesnt only include the companys concern for employees and stakeholders but also for the environment. PR professionals should consider that point as recent studies have shown that being ethical pays off

Waterford Wedgwood PLC-2008 P a g e | 21 References

These are the sites that weve used to extract the financial data for the company www.frobes.com www.issuu.com us.etrade.com www.reuters.com

Waterford FINAL

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