The Luxury Watch Market and RADO’s position
After severe difficulties in the 1970’s, the Swiss watch industry, Rado watches and its parent company, Swatch, have rebounded impressively and today the Swiss watch industry almost completely dominates the market. It is Switzerland’s third biggest exporting sectors and accounts for over 10 billion USD. But what exactly constitutes a luxury watch? The Pictet report “The Watch Industry, What makes it tick ?”, makes the following segments: exclusive luxury, accessible luxury, mid price and low price.
So when we talk about luxury watches we mean the first two segments, exclusive and accessible luxury. As we can see from the table above Pictet put Rado in the Accessible luxury segment, Swatch itself puts Rado in the High range division, a similar segmentation. A luxury watch is a watch over 500USD, and use mostly mechanical instead of quartz movements, Rado being a notable exception, as quartz movements are typically used in cheaper watches. They are produced using sophisticated technology, exquisite craftsmanship and jewellery making. Luxury is defined as “the comforts and beauties of life beyond what is really necessary” and this is certainly true for a high range luxury watch, as a 5 Dollar watch essentially does just as good a job in measuring time as the most expensive watch available. To analyze Rado’s position in the market in relation to others we will use Porters 5 forces:
It is relatively difficult to enter the luxury watch market for the following reasons: • Capital requirement: In order to be considered luxury a brand needs to establish its name and tradition, something that requires extensive investment and advertising. To be truly luxurious people need to know about the brand, which requires advertising to a very large audience as few people would invest thousands of USD if the brand isn’t known. Therefore capital requirement is a big obstacle to market entry. • Brand recognition:...