THG Answers

Strategy Presentation
Alan
Sunday, July 11, 2010
::
Athena
::
Chris
::
Chris
::
Qin Liang
A gen da
03
08
12
35
B AC K G RO U N D
AC T I O N P L A N
S T R AT E G I C A N A LY S I S
CONCLUSION
The Hour Glass Limited
Background
60 BRANDS
25 BOUTIQUES
9 CITIES
Cu r re n t I ssues
3 R D Q UA RT E R N E T- L O S S O F S $ 7 . 0 8 M I L
L U X U RY M A R K E T I S S L OW I N G
C O N C E N T R AT I O N R I S K
Cu r re n t I ssues
Luxury Market Growth (%)
9
6.75
4.5
2.25
0
-2.25
-4.5
-6.75
-9
2006
2007
Source: Bain & Companys Luxury Goods

Worldwide Market Study
2008
2009
Cu r re n t I ssues
Cu r re n t S t rat eg i es
R E LY O N R E TA I L & M E R C H A N D I S I N G E X P E RT I S E
F O C U S O N P R E M I U M B R A N D S & H I G H - G R A D E WAT C H E S
M A X I M I S E P RO F I TA B I L I T Y P E R S TO R E & K E E P C O S T S L OW
Present State
Revenues (mil)
Operating Income (MIL)
500
50
375
37.5
250
25
125
12.5
0
FY2004
FY2005
FY2006
FY2007
FY2008
FY2004
FY2005
FY2006
FY2007
FY2008
Process Flow
10
Y- Tre e
S T R AT E G Y
GOALS
ENHANCE BRAND
R E P U TAT I O N
INCREASE REVENUE
C AG R B Y 1 6 . 6 6 %
I N C R E A S E O P E R AT I N G
I N C O M E C AG R B Y
45.66%
AT L E A S T 5 % S H A R E I N
B OT H C H I N A & I N D I A
INCREASE
O P E R AT I N G
EFFICIENCY
E X PA N D I N TO
EMERGING MARKET
11
F o re c a s t e d S t a t e
Revenues (MIL)
1100
R
G
A
C
825
Operating Income (MIL)
%
6
6
.
16
300
225
550
150
275
75
0
FY2004
FY2006
FY2008
FY2010
FY2012
FY2014
R
G
A
C
FY2004
FY2006
FY2008
%
6
6
.
45
FY2010
FY2012
FY2014
12
Tac ti cs
S T R AT E G Y
ENHANCE BRAND
R E P U TAT I O N
TA C T I C S
INCREASE
O P E R AT I N G
EFFICIENCY
A L I G N O R G A N I Z AT I O N C U LT U R E
W I T H B R A N D VA L U E
R E I N F O R C E C O R P O R AT E VA L U E &
B E H AV I O R S
I N T E R AC T I V E C R M
S E D U C T I O N S I G N AT U R E E V E N T
E X PA N D I N TO
EMERGING MARKET
AC Q U I R E M O R E E X C L U S I V E
DEALERSHIPS
13
A l i g n O rg C u l t u re Wi t h B r a n d Va l u e
BRAND MISSION
D e ve l o p & P ro m o t e C o n t e m p o r a r y
H o ro l o g i c a l C u l t u re
D e l i ve r E x t r a o r d i n a r y C u s t o m e r S e r v i c e
P ro v i d e E x c l u s i ve , H i g h Q u a l i t y &
I n n o v a t i o n P ro d u c t s
EXCELLENCE
PA S S I O N
BRAND VALUES
CREDIBILITY
14
Brand Values
EXCELLENCE
C re a t e E X C E L L E N C E Wo r k G ro u p s
E n c o u r a g e E m p l oye e s To S e t C a re e r
Goals & Action Plan
15
Brand Values
PA S S I O N
Establish Common Wiki Platform
R e c o g n i z e E m p l oy e e E f f o r t s W h e n
M i l e s t o n e s A re R e a c h e d
I n v i t e P a r t n e re d R e n o w n e d Wa t c h
A r t i s a n s To S h a re E x p e r t i s e
16
Brand Values
CREDIBILITY
I m p l e m e n t J o i n t - Tr a i n i n g P ro g r a m s
U n d e r Wa t c h m a ke r s o f S w i t z e r l a n d
Tr a i n i n g & E d u c a t i o n P ro g r a m
A p p l y To B e C e r t i f i e d - Te s t e r U n d e r T h e
Fleurier Qualty Foundation Course
17
Brand Values
Inventory Turnover
Employee Turnover Rate
140
135
130
125
120
2008 2009 2010 2011 2012 2013 2014
2008200920102011201220132014
18
Re i n f orce C o rp o ra t e Valu es & B ehaviors

Employee & Mgmt
Blogs
Weekly
Newsletters
Forums
d
Company &
Industry Updates
C re a t e I n t r a n e t C o m m u n i t y To E n h a n c e
C o m m u n i c a t i o n s B e t w e e n M a n a g e m e n t & E m p l oy e e s
19
I nte r ac ti v e CR M
98% of HNW Consumers Research Their Purchases Online Daily
S o c i a l N e t w o r k i n g & V i r a l M a r ke t i n g C a m p a i g n s
Source:Value Partners Analysis Report 2008
20
S o c i a l N e t w o r k i n g & V i r a l M a r ke t i n g C a m p a i g n s
21
SEDUCTION
S E D U C T I O N F a s h i o n E ve n t
22
A c q u i re M o re E x c l u s i v e D e a l e r s h i p
Audemars Piguet
Piaget
Vacheron Constantin
Harry Winston
IWC
Breguet
Rolex
Patek Philippe
Franck Muller
Ulysee-Nardin
23
A c q u i re M o re E x c l u s i v e D e a l e r s h i p
Audemars Piguet
Piaget
Vacheron Constantin
Harry Winston
IWC
Breguet
Rolex
Patek Philippe
Franck Muller
Ulysee-Nardin
24
Im p a c t o n R even u e
Without Improvement
With Improvement
Revenue
%
4
.2
1000
R
G
750
14
CA
500
250
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
25
Im pa c t o n O p erat i ng I nc o me
Without Improvement
With Improvement
Op Income
%
4
.2
200
R
G
150
33
CA
100
50
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
26
Tac ti cs
S T R AT E G Y
ENHANCE BRAND
R E P U TAT I O N
E X PA N D I N TO
EMERGING MARKET
TA C T I C S
INCREASE
O P E R AT I N G
EFFICIENCY
A N C H O R I N G O F N E W R E TA I L S PAC E
H E D G I N G W I T H D E R I VAT I V E S
DIVEST INVESTMENT ARM
27
Anchor New Retail Space
D i f f i c u l t F o r N e w c o m e r s To
D u p l i c a t e M a r ke t D o m i n a n c e
Overnight
28
FX Risk Reduction
N o t E x p o s e d t o F o re x G a i n / L o s s
B u l k O f I t s P u rc h a s e s F ro m S w i s s
Brand Principals
Source: Bloomberg
29
Divest Investment Arm
3 RD Q u a r t e r N e t - L o s s O f S $ 7 . 0 8 M i l
30
Im pa c t o n Rev e nu e
Without Improvements
With Improvements
Revenue
%
6
.6
1100
R
G
825
16
CA
550
275
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
31
I m p act o n O p era t i n g Inc ome

Without Improvements
With Improvements
Op Income
300
%
6
225
R
G
150
6
.
5
A
C
75
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
32
Tac ti cs
ENHANCE BRAND
R E P U TAT I O N
INCREASE
O P E R AT I N G
EFFICIENCY
E X PA N D I N TO
EMERGING MARKET
E X PA N D I N TO C H I N A & I N D I A
33
G D P G ro w t h
Singapore
Malaysia
(%)
9
6.75
4.5
2.25
0
-2.25
-4.5
-6.75
-9
2009
2010
Source: ISI Emerging Markets Forecasts
China
Thailand
2011
India
2012
Australia
2013
34
Re al D i sp osa b l e I nc ome
Singapore
Malaysia
(%)
8
6
4
2
0
-2
-4
-6
-8
2009
2010
Source: ISI Emerging Markets Forecasts
China
Thailand
2011
India
2012
Australia
2013
35
Cor por at e
No. Of HNWI
420
China
315
210
345
415
No. of HNWI
415,000
% Growth
20.3%
105
0
2006
2007
130
India
97.5
65
100
123
32.5
0
Source:World Wealth Report 2008
2006
2007
No. of HNWI
123,000
% Growth
22.7%
36
China
Reasons
Fundamentals are ver y sound
A l re a d y h av e a p re s e n c e i n C h i n a
L e v e r a g e o u r s t a t u s a s A s i a s
P re m i e r Wa t c h R e t a i l e r
37
Ind i a
Reasons
E x c e l l e n t K n o w l e d g e o f I n d i a s
L u x u r y R e t a i l M a r ke t
L e v e r a g e o u r s t a t u s a s A s i a s
P re m i e r Wa t c h R e t a i l e r
38
Im p a c t
Southeast Asia & Australia
Northeast Asia / Central Asia
Revenue (0000)
1500
1125
750
375
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
39
Im p a c t
China
India
No. of Stores
30
24
18
12
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
40
Co n c l u si o n
S T R AT E G Y
ENHANCE BRAND
R E P U TAT I O N
INCREASE
O P E R AT I N G
EFFICIENCY
E X PA N D I N TO
EMERGING MARKET
41
CO N CL U SI O N
S T R AT E G Y
ENHANCE BRAND
R E P U TAT I O N
INCREASE
O P E R AT I N G
EFFICIENCY
GOALS
INCREASE REVENUE
C AG R B Y 1 6 . 6 6 %
I N C R E A S E O P E R AT I N G
I N C O M E C AG R B Y
45.66%
AT L E A S T 5 % S H A R E I N
B OT H C H I N A & I N D I A
E X PA N D I N TO
EMERGING MARKET
QUESTIONS & ANSWERS
Alan
::
Athena
::
Chris
::
Chris
::
Qin Liang
BACKUP SLIDES
Alan
::
Athena
::
Chloe
::
Chris
::
Qin Liang
44
PEER ANALYSIS
45
WORLD DISTRIBUTION
46
Vir t u ou s C ommu n ic at ion s C y c le
47
Market Opportunity
Market Opportunity (Out of score of 10)
2009 2010 2011 2012 2013

China 8.2
8.1
8.1
8.1
8.1
India 7.6
7.6
7.6
7.6
7.6
Source: Economist Intelligence Unit
48
F o re c a s t e d We a l t h G ro w t h
Source:World Wealth Report 2008
49
SWOT Analysis
50
S W O T TO O L S
The timeframe 2000s was chosen as that was the period when the luxury watch
retailers were able to benefit from the booming luxury watch market underpinned by
the rising affluence in Asia which was well supported by a high level of employment.
The SWOT analysis shows that Hourglass is a clear winner when it comes to
internal management of the firm. Hourglass has the most numbers of exclusive
distributor/dealer rights and most of the exclusive brand relationship has been
ongoing for over a decade which are supported by a strong recognition of Hourglass
shrewd execution luxury watch retailing. Hourglass astute business strategy has
proven to be more effective as compared to its peer evidence of the company ability to
achieve industry leading earnings momentum (a five-year earnings CAGR of 63.5%
versus 15% for Sincere and 1.3% for Cortina) and doubling up of its operating
margin to 5.5% while ensuring active cost management. All these gave Hourglass
more business opportunities through first-hand strategies which its peers have not
been able to do so.
51
SWOT PLOT
OPPORTUNITIES/THREATS (EXTERNAL)
300
200
HOUR
GLASS
SINCERE
100
CORTINA
0
0
100
200
STRENGTHS/WEAKNESSES (INTERNAL)
300
52
Porter s 5 Analysis
53
Key M i l est ones
54
Blue Ocean
Reduce
Decrease COGS
Through hedging of
forex exposure
Eliminate
Non-core business
(investment
securities)
Sole agent of
Luxury brand
Raise
Foothold in
emerging markets,
China & India
Create
Online platform
for watch lovers
55
Pressures to Lower Costs
Global Market Competivity
Global Strategy
Transnational Strategy
International Strategy
Multi-domestic
Strategy
Pressures For Local Adaptation
56
Business Standard

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Strategy Presentation

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Luxury Market Growth (%)

Source: Bain & Companys Luxury Goods

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Operating Income (MIL)

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Operating Income (MIL)

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Employee Turnover Rate

Sunday, July 11, 2010

2008 2009 2010 2011 2012 2013 2014

The Hour Glass Limited

Re i n f orce C o rp o ra t e Valu es & B ehaviors

Sunday, July 11, 2010

The Hour Glass Limited

98% of HNW Consumers Research Their Purchases Online Daily

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010

The Hour Glass Limited

Anchor New Retail Space

Sunday, July 11, 2010

The Hour Glass Limited

Sunday, July 11, 2010