Fiyta Case

Fiyta is facing a new dynamic in the market. For the last years, this company has been growing as a traditional watch brand in its country, selling technologically advanced products, developing new features with high quality. In addition, it has a forward integration at the retail level, with a chain of stores for brand’s watches: Harmony World Watch Center.

The domestic sales are decreasing in the short term, but the high-level segment is expected to grow because of new trends in consumers that associate status and lifestyle with accessories like those. The price competition in the low/.medium level segments indicates less profit in a highly competitive market.

The following is a comparison between the market structure and the company sales structure, divided by 3 segments depending of the price of the watch for 2006:

MARKET (Values) FIYTA (Values) FIYTA (Units)

High-Level 50% 18% 3%

Medium-Level 40% 48% 31%

Low-Level 10% 34% 66%

According to the table, the structure of sales of the company is the opposite of the market behavior, nevertheless, the strategy of the communication and differentiation of the company, doesn’t seem to be focused on the Low-level segment, which is, the less profitable of all. They have developed an astronaut watch, specially designed for being used in the outer-space, which means the brand is associated with high-tech, quality and exclusivity, creating a huge opportunity for them to focus on a High-level segment, specially, when they have a poor penetration in this market.

Regarding to the three pronged strategy, I would disagree with it, even if it will let him to increase its portfolio, this approach won't let the company to focus on the resources into a potential market like the high-level one, but to attack different segments including the decreasing ones. Also, it’s possible that the image of the brand would be affected since it’s low-level target is using the same brand than the high-level too. The differentiation must be with competitors but also with self segmentations too. Since the low-level is not profitable, the key would be to sell as much units as possible, which is a risk when we analyze the forecasted operating capacity, and at some point it won't be reached for markets issues, then the cost of exit will be even higher.

It’s right that doing nothing would be even worst, because Fiyta will be left behind by competition, and will loose its position even in the mid-level segment. Then, the best option is using its competences of innovation, development, distribution and communication, into a segment of opportunities like the high-level one, penetrating and taking a higher market share with profits which will let the company being sustainable in the long term.

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