Tiffany & Co Case Study
1163 WordsFeb 27th, 20125 Pages
Tiffany Case Study
Tiffany was founded in September 18, 1837 and for about 170 years, the brand has been successfully opening several stores and establishing the brand as the top place to buy fine jewelry of high quality. The brand has been dedicated to provide their customers with original designs as well as the ultimate in-store experience. They know that their customers expect nothing less than top quality in jewelry and services and Tiffany’s has done just that for the past fifty-three years when Charles Lewis bought the company and named it as Tiffany & Company. The company mission and values evolves more than creating fine, high quality jewelry, in fact the company believes that their products are…show more content…
Or does it have a duty to grow faster? Why?
I don’t think that Tiffany & Co. need and should change its strategy as long as it sustains growth. A constant and sustained growth will make sure that the company continues on being leader in the jewelry business.
Should Tiffany open new stores faster? Why?
Tiffany’s major preoccupation has to do with producing high quality products and not with the number of stores opened in time. One example of this thought can be taken from the case: "preferred to staff a new store with 50% current employees and 50% experienced local salespeople from fine jewelry store in the new area" ("Tiffany and Company", page 4). So, no Tiffany should not open new stores faster, and we can prove by computing the annual increase in the number of stores opened in the U.S and other countries.
Annual increase = Number of stores in the Present year minus Number of stores in the previous year. Example: Annual increase in stores for 2001 = 44 minus 42 equals 2 By observing the table below, we can that from 2000 to 2006 the company has opened more stores in the U.S than in any other country in the world.
|Table 1. Growth of Tiffany Retail Stores, Concessions, and Boutiques |
Tiffany & Company 1993
HEDGING THE RISK:
To reduce exchange rate risk on its yen cash flows, Tiffany has two alternatives: 1)
To enter into forward contract: that means to sell yen to the counterparty for dollar at a predetermined price in the future, having short position in the contract. Both parties have obligations to carry out the agreement at expiration. In exhibit 6 there are different forward and spot rates are given. Let's suppose we are standing in June 30, there are two forward rates available in the market, one month forward rate is 106.355 yen per dollar and three month forward is available at 106.330 yen per dollar. No transaction cost is involved in this contract. 2)
To buy yen put option: this option will give tiffany the right but not the obligation to sell a yen at predetermined price in future. From exhibit 8(c) strike prices of put exchange rate are given and premium prices are also given. One month July put option is available at price 1.26 with strike price of 94.0 (that means you will sell 106.3yen for 1 dollar) and another one month put option at strike price 93.5 is sold at 1.22 premium, three month put option is available at 2.06 with strike price of 93.5.