Strategic Appraisal of Rolex: Internal, External Analysis and Issues

This report presents a comprehensive strategic appraisal of Rolex SA, a prominent luxury watch manufacturer. It begins with a company profile, highlighting Rolex's history and current standing. The external environment is analyzed using PESTEL and Porter's Five Forces frameworks, examining political, economic, social, technological, environmental, and legal factors, as well as competitive forces within the industry. The internal environment is evaluated through VRIO and value chain analyses, assessing Rolex's resources and capabilities. A SWOT analysis synthesizes the company's strengths, weaknesses, opportunities, and threats. The report identifies key challenges, such as changing consumer behavior and competition, and concludes with strategic recommendations to enhance Rolex's market position and growth.

Running head: STRATEGIC APPRAISAL OF ROLEX
STRATEGIC APPRAISAL OF ROLEX
Name of the Student
Name of the University
Author Note

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Introduction
Strategic corporate appraisal is considered to be a vital function of many organisations.
Marketing strategists usually analyze the factors and the aspects of an organisation which has
a direct effect or impact on the corporate-wide strategy (Camilleri 2018). The corporate
appraisal is mainly concerned with the state of an organisation and how the culture of the
organisation can be changed for their survival. This paper will focus on analyzing the
company, Rolex SA and provide a detailed internal and external analysis and also identify
issues the company is facing with suitable recommendations.
Company profile
Rolex SA is Swiss luxury watch manufacturer and currently headquartered in Geneva,
Switzerland. The company was founded by Hans Wilsdorf in the year, 1905 in London,
England. In the year, 1908, the company registered the brand name, Rolex as the founder
wanted a short and simple name which would be easy to pronounce in any language (Rolex
2020). Currently, the CEO of the company is Jean-Frederic Dufour.
Rolex watches are highly expensive as they are crafted with the finest materials and then
assembled with attention to detail which gives people a sense of royalty. The components of
the watches are designed, produced and then developed in-house complying with the
standards.
External environment analysis
PESTEL
Political factors- Laws introduced in the country are often not favorable which can curb the
freedom of Rolex to operate according to their mission. High tax rates can restrict Rolex to

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expand their business and maximize their profits. Corruption is a huge issue and can have
negative impacts on the business however; low wage can help Rolex survive in the market.
Economic factors- The interest rates are becoming high day by day which can affect the
buyer behavior of the customers (Ries, Glock and Schwindl 2017). The currency in which the
company usually operates is highly stable which has positive effects on Rolex especially in
their expansion.
Social factors- Poverty and low income is becoming a huge issue almost all across the globe.
Thus, Rolex cannot market their watches to the general citizens and thus have to rely on
niche marketing. In recent times, climate change has become a huge issue where people these
days want to purchase products that operate in an ethical manner and thus, Rolex needs to
maintain and comply with the rules and regulations while manufacturing the watches.
Technological factors- Everyday there are new technological inventions and thus Rolex
needs to be updated and innovate their products to gain a competitive advantage.
Environmental factors- Global warming has become a concern and thus people have been
focusing on companies that do not add to the increase in global warming. Thus, Rolex needs
to operate maintaining the ethical standards. Governments have come up with laws where
large amount of fine needs to be paid if companies do not comply with the laws set by a
country which can put a financial strain on the company.
Legal factors- Countries these days have set up many laws like health and safety, no gender
discrimination laws which if not followed can affect a business in a negative way. Rolex
needs to follow all the laws and operate efficiently to avoid legal issues.

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PORTER’S FIVE FORCES
Threats of new entrants- The capital requirements that are needed are very high thus it will
become difficult for new entrants to establish their business. People these days look for
differentiation in products and there are very few innovations which can draw the attention of
the people when it comes to luxurious watches thus very few companies would try to
establish a business like Rolex. The government policies and regulations that have been
introduced are highly strict and thus getting a permission to establish a high business like this
will become difficult which shows the threat of new entrants for Rolex is relatively low.
Bargaining power of suppliers- There are many suppliers of Rolex because of the various
materials used in making the watch. The bargaining power of the suppliers are very strong as
the company uses unique and fine products which is not available in abundance which makes
it expensive for the company.
Bargaining power of the buyers- Rolex is a famous and luxurious brand and there are very
few companies like Rolex that offer the same type of watches. The watches by the company
are unique and are different. This differentiation of the product makes the bargaining power
of the buyers weak as they do not have many alternatives to choose from.
Threat of substitute products- There are very few companies who make luxurious watches
like Rolex and as the initial requirements of creating a business like this is very expensive
businesses do not invest on creating a company like Rolex. Thus, very few companies operate
in this market.
Industry rivalry- There are very few companies in this industry and thus the rivalry or
competition of the company is relatively low. There are few luxurious watch brands which
are more expensive than Rolex. The main rivalry in this industry is among the few companies

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which operate within this industry in terms of product differentiation and uniqueness (Graf
2018).
Internal environment analysis
VRIO
Valuable- It can be seen that the financial resources of the company are very valuable to
Roles because it invests in order to increase the external opportunities. The employees of an
organisation are considered to be the most important and valuable resources of an
organisation (Gondles 2018). The same goes for Rolex because the trained and skilled
employees are highly valuable which has contributed to the positive productivity of the
company. The distribution network of the company is very valuable as it helps in the
successful expansion of the company and helped in distributing the products to different
places which helps in generating revenues (Donze et al 2017).
Rare- The financial resources of the company are said to be rare because not all companies
possess a strong financial resource. The other thing rare is the employees as the employees
working for Rolex are highly skilled and trained which has resulted in the company coming
up with new products with unique designs which are usually not imitated by commercial
watch companies. Another rare resource is the distribution network of the company. This has
been mainly been possible as establishing a good distribution network would be very
expensive which other companies cannot afford making this a rare asset for Rolex.
Imitable- The employees of the company are not expensive to imitate because other
companies can train and help their employee gain the required skills needed to perform the
job. Other companies can also hire employees of Rolex by offering them better wages and
growth opportunities. The distribution network of the company is very expensive to imitate as
this has been created and developed by Rolex over the years. New entrants or other rival

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companies will have to spend a significant amount of money to imitate their distribution
system. The financial resources of the company are also difficult to imitate as they have
achieved this from the profits they have made and the companies need to generate profits like
Rolex which is difficult to achieve.
Organisation- The financial resources of the company have been organized successfully to
attain value as the resources are strategically used to invest in the correct places which helped
in creating opportunities for the company and curbing the threats. The distribution network of
Rolex is systematic and well organized as this helps the company in reaching out to many
customers by enduring their products are available everywhere which proves that the
distribution network of the company is one of the factors which gives the company a
competitive advantage.
Value Chain analysis
Firm Infrastructure- marketing policy, business strategy, market strategy.
Human Resource Management- market research, training of employees, recruitment of
employees, product development
Technology Department- transaction processing system, database marketing, internet sales
Procurement- raw materials, equipment
Inbound
Logistics
 Transportat
ion
 Production
or raw
materials
Operations
 Maintena
nce
 Productio
n of the
watches
 Storage
facility
Outbound
Logistics
 Vending
machines
 Retailers
 Wholesal
ers
Sales and
Marketing
 Events
 Promotio
n
 Advertisi
ng
Service
 FAQ
 Offici
al
websit
e
 Onlin
e

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 Fuel
 Pricing
 Delivery
time
shoppi
ng
 Onlin
e
feedba
ck
The primary goal of the activities mentioned in the value chain analysis of Rolex is to offer
the consumers of the customers a level of value which will exceed the cost of all the activities
which will help in resulting in a profit margin.
SWOT Analysis
Strength
 Value added products
 The history
 Product quality
 Product development
 Global presence
 Loyal customers
 The distribution network
Weakness
 Niche segment
 High price
Opportunities
 Innovation with the products
 Expansion of the business
 Changing the preference of the
customers
Threat
 Competition
 Changing buyer behavior of the
customers
It can be seen that Rolex has many strengths which has resulted in the company in becoming
a huge success in the market. They have a created a name for themselves because of the
quality and the luxury they offer to their customers which has garnered loyal customers.
However, the extremely high price of the products have become a weakness for the company
as there are very few people who purchase their products. Rolex has many opportunities
which if they consider then can enhance their business and also ensure that they become more
successful in the market. The company needs to expand their business in more companies,
make innovations in their products to gain competitive advantage and add more value to their
products and to change the preference of the customers as majority of the people these days

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want to spend on premium brands to get a sense of satisfaction. Rolex faces threat in the
market as well as Rolex does have a few competitions like Omega and Tissot (Porter and
Heppelmann 2014). These companies are said to sell more than Rolex which can be a huge
issue for the company and the other threat which Rolex can face is the changing behavior of
the customers. According to scholars, majority of the people believe in saving their money
and have given up on spending of expensive products rather search for duplicate products
which look the same but cost less (Jisana 2014). This behavior of the customers can make
people go for other brands which give the same luxurious look but cheaper in price which can
affect the sales of Rolex in the near future.
Challenges of the company
Rolex is one of the oldest, luxurious and the most popular companies since its inception and
it has been seen that the company has become very successful as a premium and luxurious
brands and thus many celebrities and powerful people like owning a Rolex however, one of
the biggest challenges of the company is the changing mindset and factors which influence
the buying behavior of the people and also the premium and high price of the products of the
company which has resulted in the stagnation in terms of growth of the company.
In recent times, it can be seen that the trend of fast fashion is at a rise. Designers and
companies these days have been replicating luxurious products of big brands and selling at a
very reasonable price (Caro and Martínez-de-Albéniz 2015). People these days are more
inclined to fast fashion rather than making a purchase of the actual and high quality product
because of the changing trends in fashion. This has become a huge problem which has
contributed to people buying less expensive watches rather than considering making a
purchase from Rolex. The premium pricing of the products is also why the company has been
stagnant in terms of their growth in sales and profits.

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Recommendation
Rolex is one of the most successful watch manufacturers and the company needs to make
some positive changes which will help in the growth of the company and also improve the
sales of the company. The company can consider doing the following:
 Rolex needs to expand their business in other countries as well
 Rolex needs to make partnership with online shopping websites that sell designer
products like NET-A-PORTER so that they can reach out to a wider range of
audience.
 The company should come up with innovative products with different and unique
materials of high quality which cannot be imitable or replicated by other brands which
will help the company in gaining competitive advantage in the market.
 Rolex should come up with seasons where they provide discounts so that it can be
affordable for some people to buy their products.

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Reference
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https://www.rolex.com/about-rolex-watches.html [Accessed 1 Mar. 2020].