Challenges and PESTEL Analysis of Luxury Watch Market

This article discusses the challenges faced by the luxury watch market due to COVID-19, strategic overhaul, and economic stagnation. A PESTEL analysis is conducted to determine the external factors affecting the industry, including political, economic, sociocultural, technological, environmental, and legal factors. Recommendations are provided to help the company overcome these challenges and increase its global operations.

Assessment

Contents
INTRODUCTION AND CONTEXTUAL BACKGROUND........................................................1
MAIN BODY..................................................................................................................................2
PESTEL Analysis........................................................................................................................2
REFERENCES................................................................................................................................5

INTRODUCTION AND CONTEXTUAL BACKGROUND
Luxury watch refers to the premium quality product produced with high- end substances and
materials and has comparatively high price than other watches. Switzerland is the biggest leader
in watch market. Luxury watch market is experiencing increment in growth of approx. USD 1.78
billion since 2020. The word Luxury itself defined comfort, elegance, ease and status so market
and target audience for these watches are limited (Donzé, 2018). These watches are truly reliable
and long lasting and are mainly preferred by celebrities, rich, royal and wealthy consumer groups
who have high income compared to others. Some of the key market trend of luxury watch market
is increasing demand of Luxury watches, Competition etc.
Figure 1 Number of Swiss watches exported worldwide in terms of price
Source: Statista
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MAIN BODY
Luxury watch market faces many issues in different sectors. Some of these issues has been
highlighted below-
 Covid-19 - The pandemic has affected all the business markets adversely. One among
these markets is luxury watches market, a decline has been witnessed in this market as
pandemic has affected countries like USA, Europe and Asia and these countries deals in
watches market frequently and has high consumer groups demanding luxury watches
(Konstantin, and et.al., 2020).
 Strategic Overhaul - As market for luxury watches has been gradually increasing, a
frequent change in strategies, creative ideas and innovation is required to cope-up with
the demands of the buyers.
 Economic Stagnation - As luxury watch market target specific audience due to which
there is slow or negligible growth in the market industry (Hoffmann, Ramirez and
Lecamp, 2016).
PESTEL Analysis
PESTEL Analysis refers to the analysis of external factors that influence the business
enterprise in one or the other way. These factors are Political factors, Economical factors, Socio-
cultural factors, Technological factor, Environmental factor and Legal factor. This analysis is
important to determine the effect of these factors (Hoffmann, Ramirez and Lecamp, 2016.).
PESTEL Analysis of watches of Switzerland has been discussed below -
 Political factor - Political factors refers to the influence of government plans and policies
on the market. These factors consist of Trade policy, Fiscal policy, National income,
Taxes and Government policies etc. Market of Watches of Switzerland is affected by
changes in government plans such as changes in currency exchange rates, rates of exports
and imports etc. Economic Factors - Economical factors refers to the factors that determine the economic
environment in which business is operated. These factors include, Inflation, Wages,
Price, Interest rates, Income, Demand and Supply etc. Watches of Switzerland has been
affected by several factors such as inflation, demand and supply etc. Watches of
Switzerland has helped the country to increase its GDP. The interest rates determine the
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investment portfolio of the company. When it comes to the overall output generated by
this sector, the Switzerland watch industry contributes the highest value in terms of watch
supply and this industry is quite lucrative accounting for roughly 2.5% of the world’s
timepieces (Swiss Watches Industry Continues to Lead the Global Watch Market in 2018,
2022)
 Socio-cultural Factors – These factors refer to the social factors that has influence on
the society. These factors include Size of the family, Buying habits, Customer taste and
preference and Education. The watches of Switzerland are socially responsible. The
company treated their employees with equality, dignity and respect.
 Technological Factors – These factors refer to the factors that are required for
technological upliftment and advancement. Some of the technological factors are high
tech machinery, marketing and production techniques etc. The latest technology that has
evolved in luxury watch market is Block chain technology (Donzé, 2018)
 Environmental Factors - These factors refer to the factors that tells about the effect of
environmental factors on the business. Some of the environmental factors are air, water,
whether, food and natural calamities etc. Watches of Switzerland takes care of
environment.
 Legal Factors – These factors refer to the factors that tells effect of law on the business
enterprises. Some of the legal factors are Intellectual property laws, Employment laws
and Health and safety laws etc. Companies should formulate separate legal teams to keep
a check on all the legal issue of the organisation.
On the basis of the above conducted PESTLE analysis and the issues identified for the
industry in which watch makers Switzerland operates, the following recommendations have also
been formed to further help the company.
 COVID-19 has also given opportunities for luxury watchmakers as producers of these
watches get enough time to prepare for future, bring creative and innovative variants,
adapt the changes and became stronger in the industry. These watch industries should
start hybrid working so that they can grasp more such opportunities and can utilise these
in an effective manner (Bendoni and Bashutkina, 2018)
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 Company can overcome strategic overhaul by importing more designer watches or by
designing more fancy watches or by forming more innovative strategies according to the
choices, taste and preference of the consumers. Disruptive innovation has played a key
role in making Swiss watch market world renowned and the firm Watches of Switzerland
should look towards focusing on such new innovations (Čukman, 2021)
 Economic stagnation can be overcome by raising capital and funds in share market or by
investing more in fixed assets and by increasing public expenditure, and by focusing on
personal benchmarking
 The company is also recommended to increase its global operations and exports of the
luxury watch product lines and start chartering into territories which the Swiss watch
market has not made huge waves in evidenced by the graph below.
Figure 2 Export zones of Swiss fine watches as of 2019
Source: FHS
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REFERENCES
Books and Journals:
Donzé, P.Y., 2018. The Watch Industry. In Oxford Research Encyclopedia of Business and
Management.
Hoffmann, J., Ramirez, R. and Lecamp, L., 2016. Turbulence in the Watchmaking Field: A
socioecological approach to strategizing. Saïd Business School WP, 5.
Donzé, P.Y., 2018. The Swiss Watch Industry. In Oxford Research Encyclopedia of Business
and Management.
Bendoni, W.K. and Bashutkina, M., 2018, July. Cognitive computing and dynamic marketing to
personalize for the next generation of luxury Swiss watch customers. In 2018 Global
Marketing Conference at Tokyo (pp. 444-449).
Konstantin, B., and et.al., 2020. Swiss trade during the COVID-19 pandemic: an early appraisal.
Swiss Journal of Economics and Statistics, 156(1).
Čukman, M., 2021. The role of disruptive innovation in the development of luxury watch
industry (Doctoral dissertation, University of Zagreb. Faculty of Economics and
Business. Department of Marketing).
Online referencing
Swiss Watches Industry Continues to Lead the Global Watch Market in 2018, 2022 [online]
available through https://blog.bizvibe.com/blog/fashionaccessories-footwear-supplies/
switzerland-leads-global-watch-industry
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