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Waterford Wedgwood Case Study Waterford

Last reviewed: June 11, 2009 ~32 min read

Waterford Wedgwood Case Study

Waterford Wedgwood plc is a designer, manufacturer and marketer of branded luxury home products including: high-end crystal, fine bone china, fine porcelain, earthenware, and premium cookware. Employing nearly 10,000 people, Waterford Wedgwood is headquartered in Dublin, Ireland. Their primary operations, other than Ireland, include the United Kingdom, Indonesia, Germany, and Asia.

The company's primary brands include: Waterford Crystal, Wedgwood China, and Royal Doulton.

The three brands have come together to form one of the premier lifestyle product manufacturers in the world. This paper gives an analysis of Waterford Wedgwood, its internal and external environment and their strategies.

Waterford Wedgwood Case Study

Executive Summary:

The company's primary brands include: Waterford Crystal, Wedgwood China, and Royal Doulton.

The three brands have come together to form one of the premier lifestyle product manufacturers in the world.

Established in 1783, Waterford Crystal was first established in the heart of the Irish harbor town by the same name, by two brothers, William and George Penrose, to produce the finest crystal for the home. More than two centuries later, Waterford has merged with Wedgwood and Royal Doulton to form WWRD Holdings plc.

Josiah Wedgwood, known as the founder of pottery, founded his Wedgwood Company in 1759. In 1986, the company became a division of WWRD Holdings.

The youngest of the three partnering companies, Royal Doulton, was formed in 1815 and became known globally for their fine tableware, gifts and collectibles. Distributed through premium department stores, independent retailers and wholesalers, Royal Doulton is sold primarily in the United States, United Kingdom, Japan, Canada, Australia, and Ireland.

Other product lines included under the WWRD Holdings umbrella include: Rosenthal, Coalport, Mason's, Johnson Bros., Franciscan, Thomas Rosenthal Group, Hutschenreuther, Minton, Royal Albert, Marquis, Stuart Crystal, Edinburgh Crystal, WC Designs, and Spring

. Rosenthal employs approximately 150 artists to manufacture their fine porcelain tableware and ornamental wares. Most of Rosenthal's products are sold in Central Europe. WC Designs is a manufacturer of luxury table and bedroom lines, as well as decorative accessories for the home. WC Designs brands include: Royal Palace, Waterford Linen, Wedgwood Linens, Wilton Court, and Susan and Sarah Collection. Lastly, Spring is a high-end manufacturer of serving ware, chafing dishes, and assorted cookware.

The company has not had a vision statement since its inception. However, the following is the recommended vision:

Waterford Wedgwood plc strives to design and manufacture the finest quality crystal, ceramics, and luxury lifestyle products to beautify the home and provide long lasting value to their customers around the globe. With the partnership of leading designers and celebrities and the highest commitment to customer service, Waterford Wedgwood stands apart from its competitors.

In addition, although there is a mission statement available, it is lacking many of the critical components necessary in an effective mission statement. As such, the following mission statement is recommended:

To continue to be the world's leading portfolio of luxury lifestyle products with particular emphasis on tabletop, gifting and the home, for global customers who appreciate the quality pieces to beautify their home. Manufacturing processes and technology are employed to ensure the highest levels of quality, to create high-end pieces that provide a lasting value. To this end, Waterford Wedgwood employees are the lifeblood of the organization and will be provided an environment in which they are motivated, informed and can work in a safe and healthy environment.

All in all, the company has achieved a remarkable level of success over the last two hundred years. However, like the missing vision and inadequate mission statement, there are components of the strategic puzzle that could be honed to fit better into the big picture. Waterford Wedgwood has developed strategies to address many of their opportunities and threats, specifically threats. Of particular importance is the companies lack of strategy change in response to the economic downturn not only the U.S. But the world itself know this. Weaknesses too seem to be lacking in strategic direction. As such, a strategy of developing a new product line, under the core brands umbrella, with a lower-priced protect it from many of the threats the company faces, while taking advantage of their strengths and opportunities and warding off their weaknesses.

Analysis:

Waterford Wedgwood has a long history of success; however, their strategic direction is not honed for the economic challenges of today's world. As a result, the company has experienced continuing revenue and profit decline. The company does not currently have a vision statement to inspire the organization as it moves forward through murky economic waters. Their mission statement is lacking in many important aspects. Their objectives are unaggressive and do not fully capitalize on the opportunities and strengths at their disposal. Lastly, their strategies are more focused on maintaining the status quo as opposed to growth, in a time when the previous status quo simply can no longer be profitable.

While evaluating the external factors affecting Waterford Wedgwood, it becomes clear that their strategies in this area are just about average. This moderate rating is negatively impacting their profitability and their growth. Although the company has implemented strategies to take advantage of the benefits of restructuring and continues to be a leader in new product development, there are still other areas where their strategies do not address these opportunities and threats. Partnerships with top designers and celebrities have boosted corporate sales; however, current strategies do not appear to be capitalizing on developing new partnerships to continue growth. Merging with complimentary companies too has proved successful, in the past, therefore it would seem logical that the company employ this strategy again. Yet, there are not plans to do so that have been released to the public. Brand repositioning, as a whole, simply would not work for the company, in that they entire company image and philosophy is centered on luxury goods; however, there may be a position for developing a new product line under an already established brand's umbrella.

Again, Waterford Wedgwood appears not to have taken the current economic turmoil into consideration when developing their strategies. Threats such as reduced availability of credit, reduced demand for luxury goods, and continued softness of the U.S. dollar are important to consider when formulating strategies. Yet, the company's 'business as usual' attitude seems to ignore these potentially devastating factors.

Internal factors, for the company, are taken more into account in their current strategies; however, there are still some of these factors that fail to make it into the organization's strategic planning.

After reviewing the variety of strategic analysis tools it is decided that one strategy Waterford Wedgwood should undertake is the development of a new product line, featuring lower prices. This one alternative takes advantage of many of the company's strengths, like their core business unit. It also wards off weaknesses and threats, including those caused by economic upheaval not only here in the United States, but around the globe as well. Although there are some potential risks to this strategy, such as poor acceptance by customers and low-priced products negatively affect other brand images as well, the benefits far outweigh the risks. Increased revenues, especially from a demographic that they may not have reached before, increased profitability and possible entry into new geographic markets all are reason why Waterford Wedgwood should adopt this strategy immediately.

Existing Vision, Mission, Objectives, and Strategies:

Waterford's first vision was to "create the finest quality crystal for drinking vessels and objects of beauty for the home."

Today, with the merger of the three companies, the mission statement is surprisingly similar. "To continue to be the world's leading portfolio of luxury lifestyle brands with particular emphasis on tabletop, gifting and the home."

Working with top designers including Versace, Vera Wang, and Marc Jacobs, Waterford Wedgwood has been able to transform a more than two hundred year old vision, to a guiding, multi-company mission statement that is still relevant today.

The organization's strategies to achieve the objective of being the world's leader in luxury lifestyle brands, has centered on the development of a portfolio of brands. This arsenal of high quality brands include: Waterford Crystal, Wedgwood, Royal Doulton, Rosenthal, Spring, and WC Designs. However it is the co-branding relationship that Waterford Wedgwood has developed that has really set it apart from other manufacturers of lifestyle products. Working with top designers and leading celebrities, Waterford Wedgwood has expanded their product lines to include a variety of well-known partners. These include: Emeril Lagasse, Versace, John Rocha, Terence Conran, Marc Jacobson, Jasper Conran, Zandra Rhodes, Vera Wang, Martha Stewart, Barbara Barry, Gordon Ramsay, Dr. Andrew Weil and the Andy Warhol Foundation.

Yet, these current strategies are being enacted in a time unlike anything else the company has ever experienced.

The economic challenges faced today have a unique impact on Waterford Wedgwood's strategies to complete their objectives. As Sir Anthony O'Reilly, Chairman of Waterford Wedgwood, noted in a recent speech that they are operating against a "backdrop of unprecedented broad-based economic uncertainty."

This economic uncertainty has had a global impact. From the high rates of business bankruptcies in the United States, to the financial collapse of one of the previously richest countries in the world -- Iceland, to the 11.2 million percent inflation rate of Zimbabwe, no corner of the globe is untouched by the massive liquidation cycle in which the global economy appears to be.

Consumer confidence has declined. Banks have lost faith in one another. Currencies around the world, such as the American dollar, weakened considerably.

And, despite Waterford Wedgwood's more than two hundred years of setting industry standards, the organization must now operate in an economic environment that appears to work directly against their primary products -- luxury lifestyle items.

Yet, despite these trying times, O'Reilly is optimistic about the future mission of the organization. O'Reilly surmises that Waterford Wedgwood has both the right team and the right brands, in place to succeed in their current objectives. These objectives include remaining "the world's leading marketer of premium branded products for tabletop, gifting and home and retain (their) number one or two market positions in the U.S., UK, Canada, Australia, Germany, Ireland, and Japan."

In addition to maintaining and developing their industry leadership position in their selected geographic markets, Waterford Wedgwood's other objectives include maintaining their highest levels of quality, as well as providing the strongest customer relations, in the industry.

Current funding strategies for the company are developed to ensure that Waterford Wedgwood has adequate liquidity to meet these objectives. "As a result of (their) growth, acquisitions and consolidation, (they) have become one of the leading designers, manufacturers and marketers of high quality crystal and ceramics, and one of the world's leading luxury lifestyle goods companies."

New Vision Statement and Mission Statement:

Waterford Wedgwood does not have a current explicit vision statement. Waterford's original vision of creating the finest quality crystal can be expanded, however, to develop a new vision statement appropriate for the multi-divisional, multi-branded lifestyle item conglomerate. The organization's new vision statement should mimic these original thoughts, but with an inclusion of the varied product lines the company now carries. In addition, the current economic environment must be taken into consideration when developing the new vision for the organization, as well as the globalized nature of the industry.

Manufacturing and designing of the finest quality lifestyle products will be an important part of this new vision statement. In addition, the continued partnering with leading designers and celebrities (something not envisioned two centuries ago) should also be part of this vision, as it is one of the aspects that has set Waterford Wedgwood apart from their competitors, in an increasingly competitive marketplace. Lastly, as mentioned, the current economic turmoil experienced and the globalized nature of today's industry must also be included when developing the new vision statement for the company, with a notation of the value a Waterford Wedgwood piece holds.

With these factors in mind, a new vision statement that can be a guiding light for Waterford Wedgwood into the future can be developed. This new vision statement should state:

Waterford Wedgwood's current mission statement is, "To continue to be the world's leading portfolio of luxury lifestyle brands with particular emphasis on tabletop, gifting and the home"

as mentioned. A new mission statement should take a variety of components into consideration in its development. These include: Waterford Wedgwood's customers, their products, the market, technology, future growth and profitability, the company's philosophy, their self-concept, concerns regarding the company's public image, and concerns for their employees. Without this mission statement, Waterford Wedgwood will be missing an important tool used to formulate, implement and evaluate their strategic activities. The following matrix demonstrates which critical components of a mission statement that Waterford Wedgwood is currently including or missing in their current mission statement.

Mission Statement Component:

Is it Met in Current Mission Statement? (Yes/No)

Customers

Products

Yes

Market

Technology

Future Growth & Profitability

Yes

Company Philosophy

Self-Concept

Yes

Public Image Concerns

Yes

Employee Concerns

Analyzing Waterford Wedgwood's current mission statement for these critical components helps in the development of a new mission statement. In the current mission statement, there is no mention of who the company's customers are, which is a key directional component in strategy formulation. The products the company provides are overviewed adequately, however. The geographic market in which the company operates is missing completely, as is any mention of the company's technological capabilities. Waterford Wedgwood's concern for growth and profitability is addressed in their stated desire to remain the world's leading provider in their industry; however, the corporate philosophy (the soul of the company) is missing. Their self-image is shown in their belief that they are a luxury lifestyle goods manufacturer, and clearly this is a public image concern they have, yet there is no mention of their concern for the people who have made their company a success that has spanned centuries -- their employees. With these in mind, the missing components need to be developed for the new mission statement.

Waterford Wedgwood's customers are those who appreciate the quality and fine design of a luxury lifestyle piece that will beautify their home. The company operates globally with a strong presence in the United States, the United Kingdom, Canada, Australia, Germany, Ireland, and Japan.

The company employs manufacturing technology that ensures the highest level of quality in all of their products. In addition, Waterford Wedgwood's company philosophy centers on creating high-end pieces that provide a lasting value that customers will be proud to display in their homes and give as gifts. Lastly, Waterford Wedgwood realize the importance of their employees to their continued success. As such, working conditions are provided and maintained to be a safe and healthy environment. In addition, employees are motivated and kept informed on matters that concern them through consultative procedures.

With these missing factors in mind, Waterford Wedgwood's new mission statement should read:

EFE Matrix:

The External Factor Evaluation (EFE) matrix is used to assess business conditions affecting the organization. It can be used to prioritize the opportunities and threats which Waterford Wedgwood faces.

Weight:

Rating:

Weighted Score:

Opportunities:

Restructuring to improve profitability

13%

0.52

Brand repositioning to increase market share

0.10

New product development to increase market share

13%

0.39

Potential partnerships with other companies

0.32

Merger of other complimentary companies

11%

0.22

Threats:

Declines in luxury goods demand due to economy

13%

0.26

Increased competition in the luxury gifts sector

0.15

Falling value of the American dollar

0.18

Reduced availability of credit due to economy

13%

0.39

Reduced trader confidence due to economy

10%

0.20

Poor (1), below average (2), above average (3), superior (4)

TOTAL WEIGHTED SCORE

2.73

The weighted score of 2.73 indicates that Waterford Wedgwood's current strategies are about average when addressing the external factors affecting the organization, their profitability, and their growth. The most important opportunity factors in this matrix were: restructuring to improve profitability and new product development. The company has taken significant strides to restructure by shifting production of their Johnson Bros. line to China and new product development has been a mainstay of the organization's success. Both of these factors can have a significant impact on the company through a better bottom line and increased revenues. Merger with complimentary companies too is of significant value as it allows the company to enter new markets with increased efficiency and efficacy. Potential partnerships, as the company has done previously with the likes of Versace, Emeril, etc., can have a positive effect; however, the significance with partnering with known designers and celebrities doesn't address the challenges of the current economic challenge. Lastly, brand repositioning may be a possibility; however, Waterford Wedgwood brands are known as luxury brands and repositioning these as anything else may negatively impact the company as entry into medium-grade or lower quality lifestyle goods is intensely competitive.

The most important threat factors in the matrix are declines in luxury goods demand and the reduced availability of credit. Both factors will seriously impact Waterford Wedgwood's available capital to use in for future growth and daily operations. Reduced trader confidence will also negatively impact available capital, for the company's use. With one of Waterford Wedgwood's primary markets being in the United States, a falling U.S. dollar can negatively impact the organization's profit base. Lastly the reduced demand has increased competition as manufacturers seek to decrease costs to remain profitable.

Competitive Profile Matrix:

The competitive profile matrix (CPM) below compares Waterford Wedgwood with its two top competitors -- Lenox Group, Inc. And Tiffany & Company. This matrix demonstrates where Waterford Wedgwood is doing well in comparison to their competitors and where it is not doing well.

Waterford Wedgwood

Lenox Group, Inc.

Tiffany & Company

Critical Success Factors

Weight

Rating

Weighted Score

Rating

Weighted Score

Rating

Weighted Score

Advertising

0.10

2.5

0.125

0.10

Product Quality

25%

1.00

0.75

1.00

Customer Loyalty

20%

0.80

Price

0.05

0.15

0.05

Brand Recognition

20%

0.80

0.60

0.80

Market Share

10%

0.30

0.10

Financial Position

15%

0.15

0.60

Poor (1), below average (2), above average (3), superior (4)

Total

3.2

2.875

3.45

The seven factors chosen for this matrix are those that are the most important aspects of competitiveness in the industry. Given the luxury status of Waterford Wedgwood's products, product quality is obviously a significant concern. Customer loyalty and brand recognition also are critical factors that drive sales in the industry. Financial position affects whether or not a company is able to financially take advantage of strategies needed to remain competitive, such as new product development and new market entry. Market share is a direct correlation to an organization's ability to take advantage of economies of scale. Advertising is a factor in building brand recognition and generating demand especially for new products. Lastly, price, although not a primary driver in the luxury lifestyle goods sector, is becoming increasingly important in today's turbulent economic times.

Both Waterford Wedgwood and Tiffany and Company scored below average in advertising. Neither company has strong advertising campaigns, outside select advertising venues such as high end magazines, and instead rely more upon reputation and word of mouth referrals to their products. Lenox has an average rating in advertising efforts, as their Department 56 product line often offers enormous displays in their retailers, as well as other more traditional print advertising campaigns.

Product quality for both Waterford Wedgwood and Tiffany and Company are rated superior. Both companies are known for their outstanding dedication to the finest products worldwide. Lenox scores above average as they too offer a consistently high quality piece. This consistent quality has helped develop a strong customer following for all three companies. For this reason, customer loyalty for all three manufacturers is superior. All three organizations have customers who are avid collectors of their pieces.

As mentioned, in today's economy price has become an increasingly important factor. Both Waterford Wedgwood and Tiffany and Company score poor ratings in the price category. Both of these companies cater to customers who typically are not as price sensitive. However, Lenox offers a wide array of pieces that are mid-range in the pricing department. Their combination of pricing and limited runs in product lines like the Department 56 line equates to great value for customers and increased demand.

Brand recognition for Waterford Wedgwood and Tiffany and Company are superior. Most people are familiar with Waterford crystal or Wedgwood ceramics, just as most are familiar with Tiffany's signature turquoise box. Lenox has above average brand recognition, especially in certain product lines, such as Department 56. This brand recognition has helped drive market share ownership for each of the companies.

Waterford Wedgwood and Lenox both score above average in the market share department. Both are leading manufacturers of luxury lifestyle products. Tiffany and Company, in contrast, controls a very small percentage of this market, instead their primary revenue stream is from high-end custom jewelry. As such, their rating for this category is poor.

Lastly, financial position differs in ratings for each of the three companies. Waterford Wedgwood's current financial position, due to declining sales and profits, is the reason they scored poor on this category. Lenox too scored poorly due to a 10% decrease in revenues for fiscal year 2007, compared to 2006.

In contrast, Tiffany and Company scored superior in the financial position category. Tiffany recorded revenues of $2,938.8 million in fiscal year ending January 2008, an increase of 14.8% over 2007.

The final weighted scores for each organization show Tiffany and Company holding a significant competitive lead, followed by Waterford Wedgwood and then Lenox Group, Inc.

IFE Matrix:

The internal factor evaluation (IFE) matrix is used to evaluate the primary strengths and weaknesses of an organization.

Weight:

Rating:

Weighted Score:

Strengths:

Strength of core brands

20%

0.80

Superior results from brand extensions

20%

0.80

Successful partnerships with celebrities and designers

10%

0.30

Global positioning

10%

2.5

0.25

Weaknesses:

Lower margins in ceramics due to unused capacities

10%

0.20

Johnson Brothers consistent underperformance

15%

0.20

Inadequate debt reduction

15%

0.30

Poor (1), below average (2), above average (3), superior (4)

TOTAL WEIGHTED SCORE

2.85

The weighted score of 2.85 demonstrates that Waterford Wedgwood id just below above average when it comes to utilizing their strengths and counteracting their weaknesses. The most important internal factors chosen include strength of core brands and superior results from brand extensions. Waterford Wedgwood has a long history of brand success. In addition, in fiscal 2003, brand extensions contributed to 43.6% of the companies sales, doubling their profits.

The company understands the significance of these two factors and as such have developed strategies that are superior when it comes to taking advantage of these strengths.

The next most factors are Johnson Brothers' consistent underperformance and the company's inadequate debt reduction. Johnson Brothers has faced challenges for the past several years, despite extensive cost cutting and investment in factory technology. In addition, despite being able to reduce net debt, the organization's indebtedness is still not small enough that the company will be able to fund their own working capital requirements effectively.

The company scored below average in these two areas due to the failure to address these challenges adequately.

Strengths like successful partnering with celebrities and designers and global positioning both drive sales directly Lower margins in ceramics due to unused capacity too is a weakness of the company. The company scored above average in the partnership category, as this has been a mainstay for the company for quite some time. The global positioning rating is average as the company has expanded into several countries, yet there are so many more areas that Waterford Wedgwood has yet to explore. Lastly, the unused capacities scored below average because again the company has yet to fully address this issue.

Long-Term Objectives:

Objective for Waterford Wedgwood should include:

1. Continued brand extension through partnerships and support of current brand value through product quality and customer service, as these are the company's primary strengths.

2. Continued expansion into new global markets, as this is one of their strengths that they are not fully capitalizing on currently.

3. Review of Johnson Brothers brand and if performance is not able to be improved consider liquidating the assets to prevent underperformance from continuing to negatively affect the company, as this is a key weakness they have yet to address fully.

4. Debt reduction must be a priority to ensure the company has capital to fund its operations and future growth -- once again addressing a primary weakness.

5. Brand repositioning and new product development should be undertaken to take advantage of this opportunity the company has to expand their market share.

6. Expansion will also take advantage of another opportunity that lies in developing new partnerships and merging with complimentary companies. This will also help ward off the threat of economic downturn.

These objectives are more aggressive than the stated current objectives for Waterford Wedgwood. Their current objectives simply look towards maintaining their leadership position in their selected geographic markets.

Instead, it is recommended that the company look to further expand their market reach and product line to further take advantage of economies of scale. A more diverse product line can also buffer against the economic turbulence in which the company is currently operating.

SWOT Analysis Matrix:

A SWOT analysis matrix is a strategic analysis of both internal factors and external factors, for a company.

Strengths

Weaknesses

Opportunities

1. New product development in core brands

2. New product development in brand extensions

3. Merger of complimentary companies to enter new global markets

4. Partnership with companies to enter new global markets.

1. Restructure ceramics to reduce unused capacities.

2. New product development for Johnson Brothers line.

3. Merger with other company and liquidation of unneeded assets to facilitate debt reduction.

4. Restructure to improve profitability and reduce debt.

Threats

1. Core brand lower level product development.

2. Brand extensions into lower level product segments.

3. Partnering with celebrities & designers to develop lower level product lines.

4. Stronger positioning in foreign markets outside of the U.S.

1. Sale or liquidation of Johnson Brothers.

2. Use of currently unused ceramics capacities to produce lower cost line.

3. Transformation of Johnson Brothers line to lower cost line.

4. Increased focus of Johnson Brothers sales outside of the U.S.

By looking at Waterford Wedgwood's strengths, weaknesses, opportunities and threats, a myriad of possible strategies has emerged. The S-O strategy of new product development in core brands involves using the strength of Waterford Wedgwood's core brands and combining it with the opportunity that lies in new product development. The company can also take advantage of this same opportunity through product development in their other primary strength, their brand extensions. Expansion into new global markets, furthering their global positioning strength, can be facilitated with the opportunity of merger of a complimentary company or through the partnership of existing entities with ties in a new region.

Development of lower-level/lower-priced product lines in the core brand is the first S-T strategy. This takes advantage again of the significant strength Waterford Wedgwood has in its core brands and also addresses the threat that stems from reduced demand in the luxury product industry, due to economic downturn and the failing American dollar. Brand extensions, the other primary strength for the company, can also be used to develop a lower-priced product line which meets these same threats, as does the strength of partnering with celebrities and designers. The final S-T strategy involves stronger positioning in markets outside of the U.S., this takes advantage of the company's strength in their current global positioning and goes one step further. It also addresses the threat of a faltering American dollar.

W-O strategies begin with restructuring ceramics to reduce the current unused capacities. These unused capacities are a significant weakness for Waterford Wedgwood and this strategy would take advantage of the opportunity had in restructuring to be more profitable. By developing new products for the Johnson Brothers' line, the company again addresses a primary weakness, the unprofitability of the line, while also taking advantage of the opportunity new product development offers. By merging with another company and adding another series of brands to their umbrella, Waterford Wedgwood could liquidate any duplicate asses and use the proceeds to go towards debt reduction. Even restructuring to improve profitability, a key opportunity, could be used to offset the weakness of inadequate debt reduction.

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