Grutzen Watches is a start-up watch producer and distribution company. Its strategy is to serve the upscale niche markets of the watch industry. It will capitalize on the German engineering and manufacturing used to build the watches. There are many untapped potential markets within this industry that desire high-quality, stylish goods, but do not think they can afford them or do not know where to purchase them.
It is the firm’s intention to build and export its products to the United States and to make Grutzen Watches the number one selling European watch in the Western U.S. To do this the company’s long-term goals are to to achieve a 20% market share in the U.S, build brand image and brand equity through marketing, achieve a sustainable 55% profit margin, and eventually produce luxury watches in addition to the initial, moderately-priced line.
Grutzen Watches is a privately-held international corporation. Production takes place in Germany and sales and marketing are focused on the United States – California – for the short-term future.
Ownership is divided among three principal individuals who are putting up the initial investment. These include: Franz Grutzen – head of production department, Henry Winster – head of American division and sales and marketing division, and Walter Young – vice president of American division.
The German factory is located at 210 Autoroute 17, Frankfurt, Germany. The factory is 1,000 square meters and should be large enough for the first three years of the company’s growth. The watches will be shipped to and distributed from Henry Winster’s house at 343 Palm Avenue in Los Angeles, California. The watches will be initially sold in upscale watch stores in Los Angeles and San Francisco.
Grutzen’s sales force will consist of Henry Winster and two freelancing sales representatives. Order processing will be achieved through communication between Henry Winster in the U.S. and Franz Grutzen in Germany.
The initial product line will be elegant analog watches with sporting characteristics, able to be used to depths of 100 meters under water. The company plans to release two versions, the “sport” watch and the “night” watch.
The pricing strategy will be to initially undercut our main competitors by 10%, using a market penetration strategy. Then, pricing will be adjusted to be directly competitive with the other major competitors. The price per watch is expected to be around $100-$200.
Entry into the high-end watch industry comes at a propitious time. Over the past two years, the purchase of mid-level and high-level European watches has increased by 50 percent in the U.S. and this trend is expected to continue.
One of the most important recent trends is that potential watch buyers are willing to spend higher amounts on watches because of the enhanced image appeal. Therefore, a company that can build a substantial brand image in this industry gains a significant competitive advantage. It is the aim of Grutzen to capitalize on its high quality and reasonable price while pursuing the innovative styles necessary for brand building.
The company’s start up costs will be ~$226,000. Owners’ equity will provide $171,000. Another $30,000 in funding will consist of short-term borrowing, and the rest will be long-term loans. The majority of the start-up costs will consist of rent, research and development, initial inventory, and a strong cash account. The Break-even Analysis shows Grutzen Watches will be able to make a steady profit by the second year.
- To make Grutzen Watches the number one selling European watch.
- To eventually produce luxury watches in addition to the moderately priced line.
- To achieve a 55% profit margin.
- To achieve a 20% market share in the U.S.
Grutzen Watches is a watch company that produces wrist watches for sale in the United States – initially in California. The company will build its image as a quality watch first, and then will begin selling higher profit, luxury watches.
1.3 Keys to Success
To succeed Grutzen Watches must:
- Build and sell high quality products.
- Achieve 100% customer satisfaction.
- Build brand image and brand equity through marketing.