I have developed this report to focus on the strategic analysis of the future of smartwatch industry and the Swiss watchmaker Tag Heuer. The report discusses the following major areas: • Describes the attractiveness of the smartwatch industries using the Porter’s five forces model and the future KPIs of Tag Heuer to contribute in this industry. • The fictional future scenarios planning to stress test the existing structure of the organization. • Discusses thee cultural and operational strategic for between google and Tag Heuer using McKinsey 7S framework. • Developed alternative ways to enable Tag Heuer enter the smartwatch Industry by understanding the market segment of both the industries • Discusses and analysis of the H. Mintzberg’s classification of strategy to this alliance. • The report ends with recommendations and conclusion from the analysis.

1. STRATEGIC ANALYSIS
OF TAG HEUER AND
SMARTWATCH
INDUSTRIES
Presented to Dr.Konstantinos Pitsakis
Strategic Decision Making
Student Name Pragnya Sahoo
Date of Submission -22/03/2015
KU ID- K1359395

2. Contents
Executive Summary .................................................................................................................2
Introduction..............................................................................................................................2
The Attractiveness of the Smartwatch Industry.........................................................................2
The Critical Success factors in smartwatch industry. ................................................................5
Scenario Planning: ...................................................................................................................6
Scenario-1 -lack of Nutrition:................................................................................................9
Scenario-2 -World War –III .................................................................................................10
Scenario- 3 – Low sexual compatibility ratio. .....................................................................10
Scenario -4 BLUE OCEAN STRATEGY ..............................................................................11
The Cultural, operational and strategic fit of Google and Tag Heuer..............................11
Will this alliance be a successful one? ..................................................................................13
Other Alternatives for Tag Heuer to enter into smartwatch industry. ............................13
Defining TAG HEUER in smartwatch Industries..............................................................14
Mission statement.................................................................................................................14
Vision- ..................................................................................................................................14
Objective...............................................................................................................................14
Goal:.....................................................................................................................................14
H. Mintzberg’s classification of strategy .............................................................................14
Conclusions.............................................................................................................................15
Work Cited .............................................................................................................................16
Appendices..............................................................................................................................17
Appendix-1...........................................................................................................................17
Appendix-2- McKinsey 7S framework................................................................................19
Appendix -3 Stakeholder groups and their expectations......................................................21
Appendix-4...........................................................................................................................21
Appendix-5...........................................................................................................................22
Appendix-6...........................................................................................................................22
Appendix-7...........................................................................................................................23
Appendix-8...........................................................................................................................23

3. Executive Summary
I have developed this report to focus on the strategic analysis of the future of
smartwatch industry and the Swiss watchmaker Tag Heuer. The report discusses
the following major areas:
 Describes the attractiveness of the smartwatch industries using the Porter’s
five forces model and the future KPIs of Tag Heuer to contribute in this
industry.
 The fictional future scenarios planning to stress test the existing structure
of the organization.
 Discusses thee cultural and operational strategic for between google and
Tag Heuer using McKinsey 7S framework.
 Developed alternative ways to enable Tag Heuer enter the smartwatch
Industry by understanding the market segment of both the industries
 Discusses and analysis of the H. Mintzberg’s classification of strategy to
this alliance.
 The report ends with recommendations and conclusion from the analysis.
Introduction
Tag Heuer, founded in 1860 in Switzerland, is a leading Swiss watch
manufacturing company. The company describes their watches absolutely
emotional and incredibly fashionable.. The technical companies are not the best
one to figure that. So the alliance between the software giant google and the high-
end leading watchmaker, Tag Heuer would give fast-forward generation an
essence of emotions and technology.(The Guardian ,2015).
To frame the discussion further, an analysis of the alliance is taken into
consideration by applying theories and various frameworks.
The Attractiveness of the Smartwatch Industry
The attractiveness of the smartwatch industries is analyzed using the Porter’s
five forces framework. Figure 1.1 demonstrates the various elements of the five
forces with respect to the smartwatch industry.

4. Figure1.1 Porter’s five forces.
THREAT OF NEW ENTRYS
The threat of new entrantsin this industrycould be LOW. Because of the
following reasons:
• The technology investment needed to competein this fast and innovative
industryis vast.
• This market requireshigh technologycapabilities that makes it difficult
for the new comers to participate.
• The newcomers requirea long time and high cost especially in research
and development to compete.
• Protection through patented technology makes it difficultto start
business in these markets.
• The exiting leaders in this field areaggressively competing with each
other like apple, Motorola, Samsung, pebble, google.
THREATSOF SUBSTITUTES-
The threat of substitutes could be explained as follows:

5. • UNIQUENESS: - LOW THREAT –To create a wearable device is very
challenging and highlyinnovative. It is easily accessible and visible to the
user.
• FASHIONALABLETREND- HIGH THREAT-Thesmartwatch being wearable
device is fashionableand smartbut could be outdated in the future.
• SMARTER SMARTPHONES?- HIGH THREAT-thesmartwatch is companion
device to the smart phones. It is not independent. The continuousR&D
and innovation to create better smartphones could weak the
smartwatch industry.
BARGAINING POWER OF THE SUPPLIERS:
• KEY SUPPLIERS-MEDIUM THREAT -The Big branded companies reply on
their key suppliers for the quality components at competitive prices.
• LIMITED SUPPLIERS: HIGH THREAT-The microchip suppliers are quite low
there by giving more power to the suppliers to control the prices. There
rea limited number of suppliers for dedicated smartwatch processorslike
TEXAS INSTRUMENTS, STMicroelectronics,NXP Semiconductors are the
key players.
• SWITHCING COST-HIGH THREAT- switching from one technology to
another needs adaptation to different suppliers this increases the cost.
• OPEN SOURCE OS-LOW THREAT- companies use their self-developed
software like android OS which reduces the dependency on the suppliers.
BUYERS POWER- MEDIUM
• Smartwatch industry is market driven and attractive market. It has taught
its customers a new lifestyle of using smart devices.
• With wide variety of smartwatches available in market. Customers have
major brand choices and don’t mind paying for a smartwatch which has
value for money.
• The consumersaretechnically awareand areeducatewith the latest trend
in market. They hold a power to comparebrandsand the features offered
by them.

6. The Critical Success factors in smartwatch industry.
A wearable technology matching the latest trend in fashion could be marketing
driving. A smartwatch being companion device, I would analyze the major critical
success factors as follows:
High on Fashion trendsandstyle: Styleis oneof the major critical Success factors
in the smartwatch Industry. Watches are not only a partof our personality but a
way to stay modern. Smartwatch could be one of the leading fashion accessory
in the future.
2014 sawa hype on smartwatches. Could smartwatch really bring a revolution in
the technology wearables? Well, the future lies in innovation.
Continuous Innovation is one of the CSF which would lead the smartwatch
industryahead than other wearables. Largeinvestmentsin R&Dcan contributein
better innovation of smartwatch industries.
This is the technological era, where consumers are closely connected and are
dependent on various devices for the daily activities. But as of now, I see the
smartwatch as companion device morethan being independent. Let’snot forget
the iPad was also a companion device at its early stage but now it is very
independent. Similarly, the smartwatches could replace the smartphones in the
coming years which can be a real revolution. Instead of carrying a phone, we can
just wear a watch. A smartwatch should also replaceotherwearable devices like
fitness bands. An improvisation the voice recognition methods and other user
interface techniques can make major advances in this industry. As watches are
unobtrusive, I could predict the future smartwatch would know what its
consumer is doing. It could be used to know the health status, ongoing and
upcoming activities, and emotional state, help in tracking time and fitness.

7. A decade from now, the smartwatch industries will be flooded with varieties
giving a blow to prices. Itwould have a competitiveand affordablepricematching
the consumer demand.
Tag Heuer is a passionatemechanicalwatchmaker which is very accurateeven in
measuring the one hundredth of a second. The brand is known for accuracy,
reliability, technology and performance. The future performancekey indicators
could be derived fromtheir passion to be the leading brandand workingwith the
right talent. The following describes the future KPIs.
To be a leader in smartwatches, the company needs to be highly adaptability to
the growing technical environment. Adopting new technologies like Android
which is an open sources could help them to develop their own expertise.
They would hire and work with the right talent to innovate. They have high
craftsmanship and skills. But they need to hire the skilled engineers who could
help them to develop new rangeof watches fordifferentcustomer segments and
penetrate into the smartwatch industries. The company needs to develop
software skills to understand he software and lessen the dependency on other
firms. Other KPI is to form alliances with other industries like fashion and fitness.
Thiscould givethe companya chanceto enter newmarketsbymaking itself more
visible to wide audience. It could launch its smartwatches in the ramp shows as
well as a fashion accessory.
Scenario Planning:
The following section analyses the four fictional futuristic scenarios that is
developed to help Tag Heuer improve their business strategy and create a
competitive advantage. An analysis of the factors affecting the future scenarios
is discussed to generate the suitable scenarios Figure 1.2.

8. Figure1.2 Factors affecting the industry

9. Few factorswe selected from the above and were plotted in the graph to
estimate the likeliness and its impact on the business. The following diagram
shows the factor selection grid. Figure 1.3
Figure 1.3 Factors Selection grid
The top two impactfuland uncertain factorsformed the axis on the
quadrangleproviding set of influences such as brand value and innovation in
which the scenarios were designed. Figure1.4

10. Figure1.4 Scenario Analysis
Scenario-1 -lack of Nutrition:
Scenario- Theworld witnesses a decline in the nutrition ratewhich would lead
to an increase in physically challenged population.
Tag Heuer strategic move – The company should see this as an opportunity to
enter the field of medical science. The best feature of smartwatch is it contact
with wrist. This capability gives an added advantage to read the pulse rate. It
could be also designed to be a companion o the physically challenged people.
Like for the blind people, it could send voice commands about the surrounding
activities. A smartwatch configuredwith the wheelchair could give directionsand
avoid traffic to the disabled. This enhances the CSR of the brand.
LVMH contribution: The LHVM could help to create CSR for Tag Heuer. It could
help in conducting training programsand workshop to teach people how to use
their smartwatches effectively.

11. Scenario-2 -World War –III
Scenario- The world war-III creates a demand of sophisticated weapons and
devices. The watch manufacturersduring the First World War had huge profits,
explained Military historian, Peter Doyle.
Tag Heuer strategic movemightbe- Itshould identify the new requirements and
strategically align and design its smartwatchesto enter the defense industry. No
one is ever a winner in a war. Though the profits would be less with more
investments, to would enjoy a big brand reputation in a sophisticated and critical
industry. The competitive advantage would be the critical features that would
help the military troopsin the war frontlike spy cameras, radar system, wireless
communication, satellite calls and incoming threats from intruders.
LVMH contribution: The LHVM could provide the TAG Heuer with financial and
technological investments in R&D. The parent companycould help in setting up
labs and establishing relationships with defense industry.
Scenario- 3 – Low sexual compatibility ratio.
Scenario-Low sexual compatibility is a threat to healthy lifestyle and also
relationships. In the coming years, the sex life would be more complicated than
what it is of today.
Effecton Tag Heuer: As a brand, it does not have any effect of low sexual
computability of individuals. So, the question would arises, if there is no effect
on Tag Heuer then why would it react? A smart business is the one that
identifies the market and penetrates into it. A smartwatch is a very personal and
emotional device says the general manager of Tag Heuer. This could be a
chance to be create a smartwatch with features that could help improving
lifestyle and health. It creates customer loyalty and increases the brand value.
The magic is the emotional touch.
Tag Heuer strategic move might be- Identify various medical issues
impacting the lifestyle and health of individuals and create features that could
control problems like abortions, menstrual cycles and find sexual compatibility
ratios by reading the pulse rate.
LVMH contribution: The parent company could help in the marketing strategy
by forming partnerships with condom companies to create awareness.

12. Scenario -4 BLUE OCEAN STRATEGY
Scenario- Applecreatesa disruptive technology with its brand and high quality
features.
Tag Heuer strategic move might be-Tag Heuer being a high luxury brand
invests huge capital in its R&D. It should closely work with software giants to
develop the competitive softwarefor the smartwatches. It should create its own
market by developing its presence in critical industries such as defense and
Aeronautical.
LVMH contribution: Theparentscompanycould participate in decision making
and forming the rightteam by providing the rightresourcesand skills whenever
and wherever needed.
The Cultural, operational and strategic fit of Google and Tag Heuer.
Theculturaland operationalfitof both theorganizationswas carriedoutby using
the McKinsey 7-S frameworksFigure4. This frameworkhelped in generating the
areas where both the companies are culturally aligned and basing on the
discussions, I could come up with few recommendationstowardsthe end of this
report.

13. Figure -4 Mckinsey 7S framework
The shared values of tag Heuer is very high. They believe in being the top
performersand so do Google. They both excel in their respective fields and are
very passionate about their products. But Tag Heuer carries an old heritage of
values which has been passed on by generations and Google operates on being
innovative. Google culture is very diverse. So the shared value is not really
aligned.
Tag Heuer defines its Strategy to be the leaders by creating high brand affinity.
Its marketing strategy is quite high and the celebrity index is the most attractive
strategy. They endorse their brand with big celebrities like Leonardo DiCaprio,
Shah Rukh Khan and Cameron Diaz. On the other hand, Google’sstrategyis to be
as innovative as possible and create a brand value. It doesn’t invest in
advertisements. From the strategy point of view, both the companies are unfit.
To get brilliant with the defined strategies, the companies work with the value
equations to find the right skills for the companies. They both are highly
passionate and innovative. They mode of operations are strategically different.
One being leading watch Maker Company and the other is IT giant. The former

14. operates on highly critical environments with lot of time bounded activities
whereas the former is loosely coupled with time.
The structureof Tag Heuer could be described as a pyramid. Itshighlystructured
organization with lots of power distance. Even googleshares the same structure
but the environment in google is very flexible and casual. They have different
ways of interacting with staffs. Googlecreates a friendlyenvironmentwhere the
working culture is flexible. Employees have options to work remotely. But in
manufacturing organizations like tag Heuer, this work environment doesn’t fit.
Will this alliance be a successful one?
Even though there are differences in the culture and operationalbehavior, both
the companies stand firmly on their passion for being innovative leaders. This
passion to lead could be one key element in the successfulalliance. They respect
each other in their capabilities and the trust can be another key factor to
strengthen their relationship. I being a technically person, could predict this
venture as a very competitive advantage to both the companies. Google enters
the world of luxury watches and tag Heuer gets a hold on android OS and enters
the smartwatch industries. Both of them are very matured and professional
organizationand I believe they createa win-win situation for each other and lead
the path of innovation with style, technology and emotions.
Other Alternatives for Tag Heuer to enter into smartwatchindustry.
Tag Heuer is known to be a brand leading in the field of luxurywatches. They
accept they lack the technology, skills and infrastructureto develop
smartwatches. In such a scenario, the following are few alternatives that I could
derive.
 Form joint venture with Micromax. Itis one of the leading private
companieswhich holds a promising futurein the field of smartphones
and technological wearables.

15.  Android being open source could be accessed easily from any high end
computersand could be used to develop software. Tag Heuer could even
start its own software companyby hiring the best people from market. It
could look like a ploy. But is business. Instead of being insecure aboutthe
ventures, it can hire the resourceswith the matching skill set with high
salary.
 Another option is, it could outsourcethe development work to cheap
labor countrieslike India to develop the softwareand they can assemble
it in TAG Heuer manufacturing unit.
 It can also form alliances with Samsung, Motorola who arehigh on
smartwatches and are alreadythe leaders in delivering best technology
wearables.
Defining TAG HEUER in smartwatchIndustries.
Mission statement- Emergeas a global leader in creating style and passion with
emotions and technology, delivering the smartway to live and experience
beyond imagination.
Vision- To be the leading smartwatch manufacturer with high competitive
advantage, giving its customersthe best latest technologyat their wrist.
Objective: To create a marketwith wide rangesof luxurysmartwatches in every
aspect of human interaction.
Goal: Be innovative and develop smartwatches by closely working with software
firms that could create magnificent user experience and features in
smartwatches.
H. Mintzberg’s classification of strategy
According to H. Mintzberg’sclassification, this endeavor could be more suited as
strategy of position and ploy. The company was leading manufacturer in luxury
sport watch .In 2014, the luxury watch industry saw a decline of 25% in its sales.

16. Tag Heuer has repositioned itself after running a market loss, says Jean-
Christophe Babin, CEO of Tag Heuer. This repositioning strategy gave them a
chanceto analyze the industrybetter and collaboratewith softwaregiant google
and Intel. Though the move looks a win- win situation for Tag Heuer and Google,
it could be quite strategic. The Tag Heuer is lavish and works with high profile
celebrities to createa marketimpact.On theotherhand googleis onlyinnovation
and highin values. Thealliancelooks asa strategy ofPLOY to me. Tag Heuer could
destroy google watches completely and could dominate the market. It could
replicate the work of google internally to its employees. It could buy the
resourcesfrom google byoffering high salaries and develop its own software. It’s
good to be bad, says Dr.KonstantinosPitsakis, Modulelead of Strategic Decision
making, Kingston University.
Conclusions
The above analysis has provided Tag Heuer to focus it market positioning and
strengthening its futurestrategy. Though ithas lotof scopeto expand its market,
it needs to focus in developing the strategy to be a market driving in the field of
smartwatches. The following are few points to be considered.
 Itshould createa strongcorporatecultureof adaptingto newtechnologies
in the smartwatch industries thereby reducing its dependencies on other
firms
 It must invest and expand in the critical and demanding industries such as
defense and medical science.
 It must keep a watch on its competitors like Apple who not being into
watch industry has given a challenge to the existing leading players.
 Tag Heuer being a luxury watch should breakdown itself in order to come
up with designs and prices that would fit in its competitive advantage.

17. Work Cited
Tag Heur losing market in 2013 [online]. Available at
http://www.swissstyle.com/tag-heuer-takes-on-the-crisis/
Tag Heur Organization structure[Online]. Available at
https://shop-us.tagheuer.com/en/tagheuer/about
Tag Heur in the world of luxurywatches [Online]. Availableat
http://www.theguardian.com/technology/2015/mar/19/tag-heurer-release-
first-luxury-android-smartwatch
Porter, M.E, 1990. Competitive Advantage of Nation. New
York. Free press
Porter M.E, January 2008. The Five Competitive Forces that
shape strategy: Harvard Business Review
Kim,C.W . & Mauborgne, R.,2004. Blue Ocean Strategy.
Harvard Business Review

18. Appendices
Appendix-1

20. Appendix-2- McKinsey 7S framework

22. Appendix -3 Stakeholder groups and their expectations.
Stakeholders Expectations
shareholders A fair return on their investments.
Employees and Staff Industrystandard pay, bonus, good
and healthy working environment,
training
Customers Stylish smartwatches with latest
technology.
Partners, alliances Healthy business attitude, legal
contracts, abide by regulations
Suupliers Fair and ontime payments
Government Adherenceto legislations, regulations
taxation
Competitors Fair competition
Appendix-4

23. Appendix-5
Appendix-6

24. Appendix-7
Appendix-8