Rolexs A Timeless Luxury Watches Marketing Essay

ROLEX S.A. is a Swiss private company that manufactures and sells luxury watches. The company is the undisputed market dominant, and a huge innovator, in luxury watchmaking. Rolex has attended an almost mythical status in the watch industry; a result of a combination of marketing, company culture, royal customers following, bordering fanaticism, and the fact that the company remains, surprisingly, secretive. Rolex products are sold worldwide and are popularly regarded as “status symbols”, mostly due to the craftsmanship, timeless design and quality materials and movements (the clock mechanism).

The History of Rolex

ROLEX was founded by Hans Wilsdorf in 1908 in La Chaux-de-Fonds, Switzerland. There is anecdotal evidence that the name ROLEX came from the French phrase “horlogerie exquise” (Rolex, 2012). Mr Wilsdorf was a visionary who understood the limitations of the mechanical watch mechanisms of the time and who also knew how to eliminate these limitations, innovate and bring watchmaking into the new century, by maintaining quality of craftsmanship. He was one of the first people to envision a practical and accurate wrist watch, as at his time most portable watches were pocket watches, and the revolution that this will bring to the industry. His vision started to materialise when in 1910 a Rolex became the first wrist watch in the world to receive a Swiss Certificate of Chronometric Precision (Rolex SA, 2012). From there on the awards kept coming for Rolex watches, strengthening the brand and laying the foundations for its myth.

In 1919, Rolex relocated to Geneva, Switzerland. As a highly innovative company, Rolex kept breaking boundaries and driving the entire watch industry forward. In 1931 the company introduces the world’s first self-winding mechanism, eliminating the need for manual wind and essentially creating a watch that can, ideally, keep ticking for ever (Rolex SA, 2012).

In 1944, after the death of this wife, Hans Wilsdorf established the Hans Wilsdorf Foundation, a charitable organisation, to which, upon his death in 1960, he left all his estate, with instructions what some the profits of Rolex will be used for charitable causes (Rolex SA, 2012).

The company that started in 1908 in a small office in a small village in Switzerland is now a giant watch maker, both the market dominant and market leader, with four manufacturing plans and THE most established and well recognised watch brand worldwide.

The Company

ROLEX S.A. is a private company, owned by the Hans Wilsdorf Foundation, with headquarters in Geneva, Switzerland. Although the company is owned by a charitable organisation, it is not a non-for-profit company, as some mistake it to be, and it actually has a very strong and steady flow of revenue, with good profits and with a substantial cash reserve. However, due to the charitable nature of the Foundation that owns Rolex, a portion of the company’s profits goes to charitable causes, as well as to the company’s employees and to an awards program, through the Rolex Awards Enterprise (Podarogiannis, 2012).

Rolex has nowadays achieved a market-leading level of vertical integration in its four, giant, manufacturing sites, displaying a remarkable degree of independence from suppliers, and competitors, as it manufactures the great majority of the components and equipment it uses in its watches.

All four manufacturing plants are located in Switzerland. In Geneva, Rolex is the city’s largest employer, ahead of UBS (Bank) and the country’s largest super-market chain (Migros). The site is located at Plan-Les Quates, where most of the company’s watches are designed in an eleven stores complex. Manufacturing of watch cases and bracelets is also taking place in this site. The sits workforce is approximately 1500 employees. The Bienne plant is the company’s largest manufacturing site, with 2500 employees working in it. It cost Rolex 235 million US dollars to build it and it is considered the world’s most state-of-the-art watch movements manufacturing facility. The Rolex watch dials are made in the company’s plant at Chene-Bourg, a five story glass building which is also the gem centre for the company, and “home” of 1100 employees (Podarogiannis, 2012).

Rolex’s headquarters are located in the Praille-Acasias district of Geneva. 1200 people work in this plant, which is where all the strategic, marketing, advertising and sales decisions are taken. Also, it is the company’s customer services and repairs centre (Podarogiannis, 2012).

The company is Switzerland’s largest consumer of gold and diamonds (Rolex SA, 2012).

Since 2011 the company has a new CEO in the face of Mr Gian Riccardo Marini.

It has to be noted here that, as stated above, Rolex is a private company, and a very secretive one. It is very challenging, to say the least, to find any official financial data, or in a matter of fact business data, about the company. This lack of data may be considered by some a problem in researching and writing this report, or even a failed choice in selecting the company analysed in this report. However, the author of this report approached this fact as a challenge and as something that make him think and act out-of-the-box, and not as a problem. Internet research is the norm nowadays, especially when it comes to secondary research, as it is fact, and sometimes, enough to provide general information about a company. However, primary research, although time consuming, it is a far more accurate and “exciting” method of acquiring information about a company and in the case of this report about Rolex. The author of this report would like to thank Rolex customer services for the time and information offered, without which this report would not had been possible to be completed.

Products

Rolex has one main product: wrist watches. In contrast with most of its competitors and other luxury accessories firms, Rolex does not sell cloths, furniture, pens or leatherwear. It just sales watches.

Of course the company offers a very wide range of wrist watches, consisted of 173 models, available in approximately 3,000 combinations and variations. The company claims that a single watch take about a year from start to end product and if the user looks after it, it will never stop working (Rolex SA, 2012).

The company has also, a number of subsidiaries, offering high quality watches, in more reasonable prices, under different brands. Brands like Tudor and Cellini are the property of Rolex. The watches produced under these brand-names have the same standard of quality Rolex is famous for, but a more affordable approach in their pricing.

Rolex is producing an estimate of 900,000 Rolex watches, 200,000 Tudor watches and 50,000 Cellini watches per year (Podarogiannis, 2012).

Rolex watches have “stood the test of time” and the company’s success is a testament of this statement. In financial crises times, Rolex has gone from strength to strength, expanding into new, developing markets (BRICS) and keep growing in established markets.

It is notable that in the age of “e-shopping” we live in, Rolex has chosen not to allow virtual-internet sales, no “second life” as the company calls its strategy, in order to safeguard the image of the brand and to combat imitations and copycats (Rolex Branding Strategy, 2012).

Finances

(Podarogiannis, 2012)

As mentioned above the company is secretive about its business, mostly due to the effect this has on its brand image and the fact that the company’s owner is a charitable Foundation.

For the fiscal year 2011, Rolex had approximate revenue of 6.2 Billion US dollars. A third of this came from the USA market and about another third from Honk Kong, with developing Countries markets, such as Brazil and India, also contributing strongly. The company operate with a profit margin, before tax, of approximately 35% to 40% and, amazingly for a company this size, has zero debt.

The company managed to recover a disastrous 2008, which saw sales drop almost by 40% in the USA and by 30% worldwide, and it is now back into growing stronger, with increased sales every year.

The biggest financial problem for Rolex, so far, has proven to be the very high exchange rage of the Swiss Franc. The power of the home currency against the US dollar and the euro, actually against the majority of the world’s currencies, has cause prices for Rolex watches to rise and rise fast, in contradiction with current trends and competitors, which due to the economic crises, kept prices constant or even reduced them. The price for a Rolex watch, model Submariner stainless steel, was $5.200 USD back in 2006 and today is $ 6,250 USD. This increase in the price of Rolex watches cause a general discontent among the brands followers and an alienation among the brands resellers, who is some case were forced to absorb the price increase by introducing special offers and discounts.

Unfortunately, Rolex would not disclose any information regarding the company’s cash reserves. However, the comment done on this issue by the company’s representative was that “Rolex could maintain its current production volumes and workforce for many years, without selling a single watch”. This is a rather strong statement, showing the financial strength of the company and the sound and very successful management involved.

New and Established Markets

Rolex is the most recognised luxury watchmaker in the world. The company has sale-points in 87 countries around the world with most rich and famous people wearing or owning one of its watches. Since 1994 Rolex has reduced its distributors by approximately 45% in an attempt to make the brand even more exclusive and to enhance its myth and status even further (Rolex Forums, 2012).

Europe and the United States of America are the two traditional markets for Rolex. In recent years, the USA has come to account for almost one third of the company’s entire sales and it is its biggest market nowadays. However, since 207, and due to the financial crisis, Rolex has been looking to new and immerging markers in order to keep growing (Rolex Forums, 2012).

Markets like Honk Kong, Singapore and India, are rapidly becoming the marketing focus of the company. Hong Kong is already, almost, as a big market as the entire USA and growing, with Singapore, were 1 in 6 residents is a millionaire, following to its steps and India is doubling Rolex watches sales every year for the last 3 years (Global Millionaires, 2012).

Now, the company is turning its attention to mainland China, with a limited number of resale points in order to maintain a high exclusivity image, Brazil, Russia and the rest of the BRICS countries. As Rolex is a luxury watches brand, it has to follow the redistribution of wealth, currently occurring globally, and focus its attention to the immerging markets. India’s millionaires have increased by 19.7% only last year and in combination with the country’s huge population has made it a prime market for Rolex (Global Millionaires, 2012).

Rolex’s approach to marketing and advertising its watches can be characterised as elegant, up-market and high-profile. The company “employs” celebrities from all over the world to wear and advertise its products; men and women who are excel in their fields, fields like the arts, cinema, scientists, astronauts, entrepreneurs and sports personalities. People like the tenor Placido Domingo the maestro Gustavo Dudamel and the writer Diana Krall. Of course Roger Federer is a Rolex man too, as is Jean Troillet, the most acclaimed alpinist of our time and Zara Phillips, the European and world horse-riding champion. The company also sponsors prestigious sports events world-wide, like the Kentucky three day, the Miami OCR, the Australian tennis open and the Monterey Motorsports Reunion. Every event and person sponsored by Rolex is specifically selected to compliment the image of the company and display luxury and technical superiority (Deloitte, 2011).

Important Influencing External Forces

One would expect the global and local economic climate to be the most important external force that influences Rolex’s financial performance. However this is, surprisingly, not the care. Rolex has displayed a unique resistance e to the global financial crisis and even recovered, with no problems, from an alleged 1 billion Swiss francs loss of investment to Bernard Madoff’s pyramid scheme (Andrew Goodman, 2010). It seems that as the company’s traditional markets stop growing, new markets emerge, eager to buy its products. Rolex’s myth as a status symbol remains ever stronger.

Switzerland is a very stable and strong economy, with a very stable taxation system and focused in helping and supporting its companies in bringing in additional wealth in the country.

Unfortunately, a result of this economic power and stability is what has the most effect in Rolex’s sales and growth; the Swiss franc exchange rate. When the global financial crises started in 2008, most national currencies started to loss their value, such as the US dollar and British pound and later the Euro, however, the Swiss Franc started to actually gain value, as most investors saw Switzerland as a safe-heaver from the financial superstorm. This causes Rolex watches’ prices to rise making them uncompetitive and casing problems to the company’s distributors. The problem exists even now, however, the image and legend of the brand has endured, in combination with special offers by the company and its distributors and the emerging of new markets.

In this report so far, the author has reputably stressed the power of Rolex’s brand. However, Rolex is not just a myth, is not just an image. Rolex is one of the top innovative companies world-wide, having thousands of pants and being the leading company in its field. Everything on and in a Rolex watch is an innovation, from the materials used; like ceramics and space-age metal, to the design and mechanisms. It is not just the company’s myth that makes Rolex grow even in such a bad financial environment. It is its products, arguably the greatest commercial watches in the world, that pave the way to success. In 1970 hundreds of Swiss watchmakers went out of business and about 62,000 people working in the watch industry lost their jobs, due to the “Quartz revolution”. Rolex kept innovating, kept producing timepieces that were not just aesthetically pleasant but also marvels of engineering, and still are (Quartz crisis, 2012).

Another “unique” factor about Rolex is that it managed to stay “in fashion” for more than 100 years. Changes in Treads can and have destroyed entire industry sections, as the “Quartz revolution” mentioned above were, the introduction of the very accurate, very cheap electronic watch mechanism was supposed to mean the end of the mechanical watch. However, Rolex is still a watch that anyone can wear, given that he can afford it, no matter his age and style (Andrew Goodman, 2010).

Main Competitors

There are many luxury watch brands around the world. Jaeger Lecoultre; owned by the Swiss luxury group Richemont, Hublot; a subsidiary of the French group LVMH moet Hennessy – Louis Vuitton S.A., and Omega; a brand of the Swatch group.

In reality, the main competitor of Rolex world-wide, or the closest thing to a competitor as some may say, is Omega and the Swatch group.

The swatch group is a Swiss company founded in 1983 by the merging of a number of Swiss watchmakers in order to be able to compete with the Japanese watch companies, following the onslaught of the Quartz mechanism. Nowadays the company employs approximately 24,000 people and has a turnover of approximately 6 billion Swiss Francs. The watches that the group produces range from fashion accessories to high end luxury watches. Omega is the luxury brand of the Swatch group, which through extensive marketing and advertising, James Bond 007 wears an omega watch, has been trying to place as a competitor to Rolex watches and take a share of their market (The Swatch Group, 2012).

The competition is even greater in emerging markets, where the legacy of Rolex is not so well embedded into the DNA of watch enthusiasts. For example, in China, Omega is sold only in 8 places in the country, in an attempt to make the brand extremely rare and thus extremely exclusive (The Swatch Group, 2012).

What the Future Holds

There is nothing that indicates that Rolex will stop growing as a company or that its watches will go out of fashion. On the contrary; the company’s sales are increasing and its products become even more innovative and even more soothe after. Rolex is a great business success story.