SOLUTION: MKT 271 Arizona State University Swiss Army Case Study

For the restricted use of P. Cameron, 2016. W14574 SWISS ARMY: DIVERSIFYING INTO THE FRAGRANCE BUSINESS Professor Ilan Alon, Associate Professor Marc Fetscherin and Claudia Carvajal wrote this contingency simply to collect symbolical for class discussion. The authors do not hint to interpret either conducive or inconducive handling of a managerial birth. The authors may have disguised incontrovertible seduces and other identifying advice to fortify confidentiality. This divulgation may not be catching, photocopied, digitized or inadequately copyd in any constitute or by any resources externally the license of the copyright holder. Reemanation of this symbolical is not trained beneathneathneath authorization by any reemanation rights organization. To prescribe copies or petition license to copy symbolicals, touch Ivey Publishing, Ivey Office School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e); Copyright © 2014, Richard Ivey School of Office Foundation Version: 2016-03-04 In 2005, Victorinox, the moldingr of the illustrious Swiss Army Knives, extraneous its main emulator, Wenger S.A. The merit to-boot intervening Wenger’s knives, notees and its effluvium dedicate. By acquiring Wenger, Victorinox became the cosmos-people’s main moldingr of the illustrious Swiss Army Knife as well-behaved as a key player in sales of the Swiss Army Note (some smaller emulators sold notees beneathneathneath the “Swiss Army” or “Swiss Military” dedicate). Urs Wyss, guide of chaffering at Victorinox, was asked to assess how to treat the extraneous effluvium office separate. Should Victorinox cunning a office policy to enter the effluvium perseverance? Should Victorinox variegate into the effluvium office and, if so, how? Should the customary force to make-aggravate its pungent-muscular infamy attributes to effluvium issues or should it dispose-of effluviums underneath another infamy seduce? Urs Wyss was asked to exhibit a artfulness to Carl Elsener, the CEO of the company, touching how best to negotiate delay the newly extraneous effluvium office separate. COMPANY ORIGINS In 1884, Karl Elsener, the great-grandfather of the ordinary CEO, opened a cutlery workshop in IbachSchwyz, Switzerland, to utter knives to Swiss Army legion. He cunninged a issue that intervening ununfailing capacitys and utensils, all in one plain and easy-to-carry knife. Gone then, Victorinox had been responsible for the numerous innovative features of the illustrious “Swiss Army Knife.”1 Millions of majority throughout the cosmos-majority associated Victorinox delay ordinary Swiss prizes such as reversal, reliability, functionality and power. For aggravate 120 years, Victorinox had stayed gentleman to its band-arms, which was the driver subsequently the company’s amelioration and orientation: “to collect our equal anthropological living-souls all aggravate the cosmos-majority delay skilled, functional, reasonably priced and top-power issues.”2 Victorinox was identified and public by its infamy seduces, “Victorinox” and “Victorinox Swiss Army” (the two umbrella infamys). In the dynamic global chafferplace, where issues were neat increasingly common and imitations of reversals were test trial, a pungent-muscular infamy could amplify its own orientation, making irrelativeiation potential. Therefore, each issue dispose and its voter issues separateed a calcurecent of nucleus guild prizes: quality, reversal, capacityality and iconic cunning (see Exhibit 1). Victorinox was the bigst employer 1 “Ibach-Schwyz (Switzerland), 2012,” Victorinox,, accessed February 6, 2014. 2 Ibid., accessed March 7, 2014. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 2 9B14A066 in the canton (state) of Schwyz, as courteous-behaved-behaved-behaved as the bigst knife moldingr in Europe. Encircling 28,000 Swiss Army Knives and 32,000 Multi-Tools were effected daily, regulative to an estimated annual entirety emanation output of six favorite Swiss Army Knives and suniform favorite Multi-Tools. In restitution, 60,000 common and authoritative knives were contrived daily. Approximately 90 per cent of Victorinox’s entirety issueion was indigenous cosmos-peoplewide. ACQUISITION OF WENGER S.A. Since 1893, Wenger’s guidequarters had been in Delémont, which is located in the northwestern nook of the French-speaking territory of Switzerland. Wenger to-boot effected multifunctional knives, posing serious competition for Victorinox. Wenger S.A. (acronym for “Société anonyme” in French, sense “incorporated”) had immediately customary a amitelling emulatency due to its reversal, exactness and ungathered craftsmanship. In 1997, the guild extensive its issue portfolio to consequence notees, which were in lofty seduce-for accordingly of their reliability and multi-functionality.3 Furthermore, the guild customary office relationships delay ununfailing chaffer players that undisputed other consequencers to molding issues underneath Wenger’s seduce. Unfortunately, the terrorist attacks of September 11, 2001, negatively impacted the global economic and gregarious environments as courteous-behaved-behaved-behaved as interdiplomatic relations. After 2001, Wenger, which was less diversified than Victorinox, was imtotally current due to the melomelodramatic lessen in knife sales. This led Wenger to the loophole of bankruptcy and collectd an convenience for Victorinox to befit the imtotally Swiss Army Knife consequencer in the cosmos-people. Due vigilance and negotiations took a while, but in 2005 Victorinox extraneous its emulator. The “Genuine Swiss Knife” was Wenger’s most gainful issue; by 2005 its knife sales entiretyed $16 favorite, followed by its note and effluvium issue lines, at $3.6 favorite and $9.4 favorite, respectively. The Swiss Army effluvium was imtotally advantageous in the Confused States and Canada. (See Exhibit 2.) VICTORINOX PRODUCT PORTFOLIO Victorinox was one of the few companies telling to make-aggravate their infamy attributes of power, reversal, functionality and iconic cunning to other issue categories.4 The features of the guild shaped the guiding concepts for its issue amplifyment and chaffer mode in its five issue categories: Swiss Army Knives; common and authoritative cutlery; timepieces (watches); luggage (tramp ownership); and fashion. Despite the differences inchoate these issue categories, they had one monstrosity in common: they were all an countenance of the philosophy and prizes subsequently the legendary grave “Swiss Army Knife.” They entiretyly lofty power delay ungathered reliability, capacityality, reversal, purification and iconic design. The guild was characterized by its extensive issue portfolio due to its mutability policy.5 (See Exhibit 3.) Swiss Army Knives, Common and Authoritative Cutlery This issue dispose intervening the grave Swiss Army Knife as courteous-behaved-behaved-behaved as common and authoritative cutlery. The issue collocate intervening aggravate 360 issues delay up to 80 capacitys. Aggravate the last few decades, Victorinox had added uniform past features, peculiar capacitys and models such as the Swiss Champ, delay 33 3 “History,” Wenger,, accessed March 7, 2014. J. Melik, “Swiss Army knife adapts to stay a cutting-edge utensil,” BBC, 2012,, accessed February 2, 2014. 5 Ibid.; L. Zonco, “On the Cutting Edge,” Swiss Style,, accessed February 3, 2014. 4 This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 3 9B14A066 functions, the SwissFlash USB steal knife, delay up to 8-Gigabyte storage emulatency, a steal knife delay the smallest laser pointer in the cosmos-people. In restitution to the grave Swiss Army Knife, Victorinox effected encircling 540 irrelative common and authoritative cutlery models chiefly targeting commons or authoritative chefs and butchers. This cutlery was of the loftyest power and was ergonomically cunninged for relishment of handling. The selected cutlery trained a extensive collocate of standout collations of entiretyly balanced bastard knives. Timepieces (Watches) For aggravate 400 years, Switzerland had been the cosmos-people’s bigst moldingr of notees. After a elder crisis in the 1970s, the Swiss note perseverance was telling to recaggravate its constituteer good-natured-fortune.6 It was estimated that the kingdom accounted for encircling half of the cosmos-people’s issueion of lofty-power notees,7 inchoate which Victorinox’s notees were a elder player. Victorinox notees were attentively cunninged using the lofty standards the guild was public for uttering: power, capacityality and innovative and distinctive designs.8 There were aggravate 180 irrelative models, disjoined into the aftercited portions: Active styles targeting dynamic majority delay novel, erratic lifestyles Classic styles targeting sporting- and dainty-oriented customers Professional styles targeting those who seduce-fored the unroot in act and capacityality as courteous-behaved-behaved as technically deceased movements The Swiss Army Note infamy was begetd and inaugurated by Victorinox’s American associate in 1989. The Swiss Army infamy relished a infamy awareness plane of aggravate 90 per cent in the Confused States. However, in other chaffers Victorinox relished loftyer infamy awareness for issues other than notees. After integration of the Swiss Army infamy into the Victorinox infamy portfolio, the guild used the entiretyly seduce Victorinox Swiss Army, which increasingly gained interdiplomatic confession and infamy awareness. The manufacturing of the notees was effected in the guild’s own facilities, which were located in the canton of Jura, which was the feeling of the Swiss note-making territory. Luggage (Travel Gear) The Victorinox luggage collations intervening a big collocate of luggage, lifestyle bags, office contingencys, tramp accessories, backpacks and identical leather amiables. Each element was cunninged to treat intensive tramp and shining out for its loftyly amplifyed technology, capacityality and durability, all of which were nucleus infamy prizes of Victorinox. Underneath a licensing covenant, Victorinox Tramp Ownership was contrived by the TRG Group, which was guidequartered in St. Louis, Missouri. The guild, which focused on quality, reversal and vigilance to point,9 had been pliant a big collocate of luggage and bags for Victorinox gone 1999. Victorinox Tramp Ownership brought individualedly in a unin-one concept the Swiss lays of innovation, capacityality and durability delay models for ununfailing lifestyles, activities and tastes. The products were advantageous in past than 90 countries throughout the cosmos-people. 6 P. Feubli, E. Gachet, P. Hänggi and D. Künzi, “Swiss Note Industry,” Credit Suisse Global Research, 2013,, accessed February 6, 2014. 7 “Watches,” Federal Department of Foreign Affairs, Closeness Switzerland,, accessed February 3, 2014. 8 J. Pitsch, “Interview: Victorinox Timeelement Division CEO Alexander Bennouna,” Authoritative Watches, 2013,, accessed February 2, 2014. 9 TRG Group,, accessed February 3, 2014. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 4 9B14A066 With its reversals and collision of the past technologies, Victorinox, in collaboration delay the TRG Group, had befit the regulative innovator in the luggage chaffer. At times it held encircling 60 pending or registered patents, including the ergonomically cunninged deflexed treat arrangement and the matchless 360-degree rotating swivel treat. The TRG Group had common numerous awards for its innovative chaffer act. To a big distance, symbolicals used in manufacturing the Victorinox Tramp Ownership originated in Asia. Production was carried out by the cosmos-people’s regulative moldingrs in Asia beneathneathneath Victorinox’s supervision of their slip teams. This guaranteed that the guild’s loftyest power tests were maintained. Fashion In 2001, courageous and fecourageous form collations were amplifyed that could be used throughout all seasons of the year. Each collation offered new symbolicals and colours for tramp and act-friendly outerwear for a collocate of environments and births. Victorinox’s courageous and fecourageous customers were erratic and engaged, and they seduce-fored twain flexibility and power. Functional cunning entiretyly delay innovative materials ensured refreshment and relishment as the wearer chosen in tramp, office or freedom activities. The innovative and durtelling symbolicals and attentive manufacturing acquiescent their daily needs. Victorinox worked closely delay wonderful moldingrs from encircling the cosmos-majority to amplify and beget new styles and materials. Textiles and patterns catholicly came from Europe and Japan. The cosmos-people’s regulative textile manufacturers effected clomonstrosity beneathneathneath Victorinox’s supervision. Sales Victorinox’s sales took locate in a big calcurecent of shop-in-shop hawk colonizations. These sales were supplemented by a newly opened Victorinox infamy stock in New York. Victorinox had sales subsidiaries in eight countries and division associateships in aggravate 100 countries on five continents (see Exhibit 4). The division of Victorinox forms was restrictedly carried out through attentively selected sales channels. Furthermore, division associates were restricted hawkers as courteous-behaved-behaved-behaved as e-commerce sites for dainty issues (see Exhibit 5). AN OVERVIEW OF THE GLOBAL FRAGRANCE INDUSTRY10 The global effluvium perseverance saw a momentous delaydraw in produce during the future 2000s due to the underact of the American rule resulting from lofty unemployment and fears of war.11 In addition, fluctuations in the prices of grave issues, such as oil and chemicals, monstrous its profit margins. However, there were definitive industrial forecasts due to the growing intermediate classes in emerging markets. As their allowance increased, consumers in these chaffers were telling and ready to expend money on non-necessary issues, such as effluviums. The BRIC countries (Brazil, Russia, India and China), delay big populations ranging from encircling 140 favorite (Russia) to 1.2 billion (China), all had pungent-muscular economies and growing intermediate classes. Furthermore, seduce-for for effluviums was eagerly growing inchoate consumers in their recent teens to intermediate age (Generation Y), who were increasingly animated in exquisiteness issues, 10 “Global Cosmetics Manufacturing,” IBISWorld, 2013,, accessed February 21, 2014. 11 “Retailing: Specialty,” Test & Poor’s, 2003, 0303.htm (login required), accessed July 11, 2014. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 5 9B14A066 including effluviums. Delay the growing covet in consumers to exhibit rectify self-images, exquisiteness issue manufacturers had working to relish a growing seduce-for for their issues. One peculiarity of these buyers was their “brand-consciousness” (amitelling power for low prices), sense that seduce-for for issues that boasted a “amitelling prize for the price” was growing eagerly, chiefly inchoate the rectify-public infamys. In open, delay the separation of incontrovertible separate countries, the effluvium perseverance as a polite was not very regulated. There were no global tests for effluviums; consequently, companies had to wait by local rules that numerous by kingdom. Such rules and regulations were catholicly cognate to the components in the products, the dedicateing advice and the packaging symbolicals. In restitution, in the effluvium perseverance most exposed countries did not set tariffs as barriers. However, in emerging economies some tariffs existed. As for technological advances, the perseverance required a temperate plane of technology, and a big collocate of chemicals was used in the molding of identical solicitude issues and cosmetics, such as cleansing agents, waxes, fats, oils and surfactants. Reversal was grave due to the ripeness of the perseverance and the eagerly changing consumer behaviour. The effluvium perseverance required real start-up funds. It was reserved to substantiate relationships delay distributors and consumers gone the elder players already had a pungent-muscular closeness and relationships. In addition, new infamys of cosmetics and effluviums were not eagerly annexed by consumers gone the elder brands relished pungent-muscular infamy fidelity.12 The power of ingredients was very grave, gone the issueion of effluviums required peculiar chemicals that were expend for use on the skin. Compared to big manufacturers, suppliers of grave symbolicals were small; consequently, customary relationships were grave in prescribe to admit “better” comaspect and protect the best ingredients. As for advertising, in prescribe to construct infamy awareness and beget infamy fidelity, moldingrs advertised quickly to consumers. Therefore, hawkers repeatedly crowded up on favorite infamys. However, perfumes were seen as dainty (nonnecessary) items, and there were lower-priced substitutes, such as deodorants and organization sprays, which were past frank to price-sensitive consumers, as courteous-behaved-behaved-behaved as fabrication issues, chiefly in emerging markets.13 The global effluvium perseverance generated revenues of encircling $23.5 billion in 2005 (see Exhibit 6). In 2005, the bribe effluvium chaffer accounted for a entirety of $15 billion, and the majority effluvium chaffer accounted for $8 billion (see Exhibit 7). In this competitive perseverance, companies used pricing, promotion and division strategies as courteous-behaved-behaved-behaved as innovative packaging to target consumers and seize chaffer divide. Department stocks and peculiarty stocks were the most dominant division channels, constituting aggravate 50 per cent of sales (see Exhibit 8). Moreover, the chaffer was dominated by sundry key players, such as L’Oréal, Coty, Procter & Gamble, Avon and LVMH, which by the end of 2005 had seized almost 40 per cent of the global chaffer, followed by numerous smaller niche players, such as Liz Claiborne, Mary Kay, Revlon and Bulgari (see Exhibit 9). WHAT SHOULD BE DONE NEXT? In the lapse of 2005, Carl Elsener, CEO of Victorinox, designated a contravention of his top conduct and posed to Urs Wyss and his team the aftercited challenging questions: What should they do delay their newly extraneous effluvium office separate? Should they veritably variegate into the effluvium office? Should they force to make-aggravate pungent-muscular infamy attributes or should they annex a new infamy to chaffer their perfumes? Finally, how could they best emulate and aspect themselves in this grown and competitive perseverance in which they had no previous trial or infamy awareness? 12 13 IBISWorld, op. cit. Ibid. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 6 9B14A066 EXHIBIT 1: KEY MILESTONES IN THE HISTORY OF VICTORINOX Source:, accessed October 30, 2014. EXHIBIT 2: WENGER’S SALES Wenger’s Sales by Issue Category, 2005 Million CHF Million USD (est.) Knives 22 16 Watches 5 4 Fragrances 13 9 Total 40 29 2005 Conversion Rate US$1 = CHF1.3822 Note: CHF stands for “Swiss franc.” Source: Guild files. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use of P. Cameron, 2016. Page 7 9B14A066 EXHIBIT 3: PRODUCT PORTFOLIO Examples of Swiss Army Knives Examples of Cutlery Knives Examples of Swiss Army Watches Examples of Luggage Examples of Swiss Army Fashions Source: “Ibach-Schwyz (Switzerland), 2012,”, accessed February 6, 2014. This instrument is identified for use imtotally by Preston Cameron in 2016. For the restricted use ...
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