Project #94823 - puig doria 2

The Perplexing Case of Puig Doria

 

Writing Assignment: Fully answer all the following questions:

1. What has made Puig Doria successful in Barcelona? What do you see as the firm’s key success factors? Are they exportable?

2. Evaluate Puig Doria’s previous attempts at exporting (silver jewelry and the Geneva retail outlet).

3. What has been C. Itoh's contribution in the attempt by Puig Doria to export to Japan? What is the cost of C. Itoh's services?  Should Puig Doria continue using C. Itoh? Why or why not?

4. Who controls the whole export-import process in this relationship? What does control mean in this context? What objectives does each partner or stakeholder have?

5. Examine, from Puig Doria's point of view, what has been done so far with C. Itoh and Daimatsu. Has any real progress been made? How do you evaluate the situation received by Puig Doria and Villar in August 1985?

a. Should your evaluation be Positive- that is, if you feel that Puig Doria is on the right track- prepare a list of specific recommendations for consolidating the relationship with Daimatsu and to progressively increase the sales volume to the Japanese market.

b. Should your evaluation be Negative- that is, if you feel that Puig Doria is on the wrong track- be ready to articulate the reasons why you think so. Describe what you see as specifically wrong (the export strategy, the implementation, or both); explain how Puig Doria should have acted in a different way to start exporting to Japan; outline the alterative courses of action that are open; and recommend one of the alternatives.

 

Objective:

  • Assess anecdotal and hard data to create an effective market entry strategy for Puig Doria’s jewelry
  • Gain experience with important writing skills--summarizing information, giving succinct recommendations, and assessing the strengths and weaknesses of said recommendations

 

Keys to Success:

 

  • As you read the case, begin prewriting by underlining and annotating information that seems to be essential to understanding the case.
  • Do not ignore the hard data at the in Table 1!  It is crucial for making concrete recommendations for the case.

 

 

Requirements:

  • Font: Times New Roman, 12-point, double-spaced
  • Format: Answer each question in the order they are asked.  Put the number of each question and the question itself before your answer.
  • Length: 3-4 pages.
  • Grammar and Coherence: your writing must be error-free, intelligible, and on-topic.

 

 

The Case:

In August 1985, one week before the arrival of representatives of Daimatsu and C. Itoh-Japan[1], Miguel Villar and Josep Maria Puig Doria[2] sat down to discuss how negotiations with the Japanese had gone to date. It had been almost two years since Puig Doria was first approached by the Japanese, who were interested in selling his designs in Japan, yet both Villar and Puig Doria were somewhat uneasy about the way things had developed. The worry stemmed from Puig Doria's deep personal feelings about his jewelry. He was reluctant to put his designs in hands that had not proven their ability to recreate the aura he demanded for their display and sale. At the same time, the Japanese represented a great opportunity if handled correctly.

Puig Doria had commented: “I don't want to relinquish too much control over the marketing of my jewelry!  It's just too important, a rather Integral part of the Puig Doria image. Yet, I approve of what they have done so far and I don't want to give in to my feelings prematurely.”

A tremendous amount of prestige was attached to successfully exporting to Japan, not to mention the sales that would result from having access to a market of 120 million affluent people. Considering Puig Doria’s feelings, however, it was worth asking if anything more could be done to protect his interests while at the same time solidifying the fragile bond that existed with the Japanese.

 

Background

 

Puig Doria is a prestigious jewelry establishment located on Avenida Diagonal in Barcelona, Spain, the Fifth Avenue of the city, where it is surrounded by other retail outlets featuring the products of several internationally known designers, such as Cartier and Yves St. Laurent. Its proprietor, Josep Maria Puig Doria, started designing jewelry in the 1950s. By 1968, his international reputation was firmly established and his designs were being featured in some of the world's most famous showrooms including Saks Fifth Avenue, Bloomingdale's, and Van Cleef & Arpels. The proprietor's growing renown had prompted him to open the large and elegant showroom on Avenida Diagonal, which was the exclusive showroom for his designs and the location of all of Puig Doria's administrative and commercial activities.

Although Puig Doria took exclusive responsibility for the design of his jewelry, he relied on independent craftsmen to realize the jewel itself, as this eliminated much of the administrative burden associated with maintaining in-house production facilities and provided Puig Doria with a great degree of flexibility relative to production capacity. Although production went on all year long, Puig Doria formally presented his new collection for the coming year in November in time for the Christmas holiday season when the demand for jewelry was at its peak. While some of the designs were reproduced many times for sale, one-of-a-kind pieces were designed and sold at a premium. These were often created with a particular woman in mind. In that case Puig Donna insisted on seeing or meeting her; he hoped to capture her essence in his work.

For Puig Doria, jewelry was a very personal form of expression:  “When someone wants to buy one of my jewels I often get emotional. It is a very special moment when I must part with something that I value. Sometimes I feel tempted to embrace my client. I am awfully sentimental. After all, each one of my jewels is a part of my soul."

Puig Doria extended the care he put into the design of his jewels to the environment in which they were displayed and sold. He felt this was just one of many important details surrounding the creation and sale of a high-quality jewel. As a result, the Puig Donna store was color-coordinated in grey and chestnut and each jewel elegantly displayed in individual, carefully lit exhibits set into the walls throughout the establishment. The store staff was also elegantly dressed in grey and chestnut, wearing shirts especially designed to show off jewels they might be asked to model by a potential client. In addition, a section of the store had been recently devoted to a line of accessories, which included ties, briefcases, umbrellas, and scarves in Puig Doria colors, each discreetly displaying the Puig Donna insignia.

 

Export Activities

 

In 1971 Puig Doria designed a line of economical silver jewelry to be produced in quantity for export to the United States and West Germany under the Puig Doria name which, by 1977, was selling overseas in sufficient volume to justify a continuing effort. Puig Doria was compelled, however, to seriously curtail export activities when in a serious breach of company loyalty, a former employee began producing and selling copies of the designs without any licensing agreement. Puig Doria was strongly affected by this incident and began to feel that this particular type of export activity made his designs particularly vulnerable to piracy.

As a result, he began to believe that it might be more appropriate to export not just his designs but the Puig Doria concept as a whole which was defined by its prestige, its elegance and its unique style all well represented in the showroom in Barcelona. The idea then developed to license the name “Puig Doria” to suitable retail establishments in major cities throughout the world. They would in turn adopt the commercial focus characteristic of Puig Doria Barcelona.  These establishments would be provided with Puig Doria wrapping paper, ribbon and a variety of other sales amenities that would provide consistency to the image. Ideally these franchised showrooms would sell only Puig Doria designs produced in and exported from Barcelona. In this way, the proprietor hoped to control not only where but how his designs were sold.

In 1978, Puig Doria authorized the opening of a Puig Doria store in Geneva. The store was forced to close in 1982, however, after an unsuccessful search for suitable management. Although the firm had not engaged in any export activities since then, Puig felt that international activity was an important element of prestige in his field. He stated in an interview with "Aurum": “I’m still trying to develop my business on an International level. Actually, I would like to find someone who could market my jewelry in the United States and Japan."

 

Contact with C. Itoh

 

C. Itoh, the fourth-largest general trading company, or Sogoshosha in Japan maintained a branch office in Madrid that was primarily involved in trading commodities in Spain, principally aluminum. Because the margins earned in commodity trading were extremely low, it was decided in 1981 to investigate the possibility of diversifying into higher margin businesses in Spain. One result of this investigation was the decision to search for a jewelry supplier who could provide high-quality, branded jewelry with exclusive  designs at a price of between $500 and $1000 per piece and who also offered a full range of complementary accessories.

Toward the end of 1981, after being identified as a suitable supplier, Puig Doria was contacted by Yuichi Oka. C., Itoh’s Metals Department director in Madrid, to discuss the possibility of importing Puig Doria jewelry to Japan. When the person in charge of the discussions with Oka subsequently left Puig Doria, however, the relationship was abruptly broken and it was not until the end of 1983 that Oka once again attempted to make contact. He was then put in touch with Miguel Villar[3] who had had some previous experience exporting and knew of Puig Doria’s desire to commercialize his product in Japan. Oka proposed the following: while C. Itoh would actually purchase jewelry from Puig Doria, Daimatsu, a manufacturer of high-quality silk kimonos would choose the jewels and would be responsible for selling them to the public through retail outlets that handled, among other products, their silk kimonos and jewelry. This jewelry, by Spanish standards, would be considered medium quality relative to design. Daimatsu's intention was to, over time, open departments dedicated to Puig Doria in retail outlets located in ten of Japan's most important cities.  C. Itoh would obtain a letter of credit to pay Puig Doria for the jewels and would earn a commission from Puig Doria over the F.O.B. price of jewelry purchased. Essentially, C. Itoh acted as buyer and importer, reselling Puig Doria jewels to Daimatsu in Japan.  It was not known what, if anything, Daimatsu paid C. Itoh for this service.

At the same time, Daimatsu extended an invitation to Puig Doria to visit Japan and insisted it would be best if he became personally acquainted with Daimatsu, its management, its clients and Japan in general. Daimatsu hoped that Puig Doria would take an interest in promoting his products in Japan by making personal appearances at showings and becoming a live force behind his creations. Puig Doria, however, was reluctant to work with Daimatsu under the terms that they were suggesting. He made it clear to C. Itoh that while he was interested in selling his jewelry in Japan, he would work with Daimatsu only if they were willing to open retail outlets dedicated exclusively to Puig Doria products.  He described plans to grant concessions featuring the Puig Doria concept as a whole.  While Daimatsu was not immediately receptive to this idea, the negotiations were kept alive by C. Itoh of Japan who patiently persisted in trying to mediate an agreement.

Eventually, three purchases were made of Puig Doria jewels, chosen personally by representatives of Daimatsu who traveled to Barcelona for the first time in January 1984. The Daimatsu representatives had said they intended to use their purchases to test the Japanese market. But after the third purchase in December 1984, Puig Doria decided to discontinue the relationship for two reasons. First, each of the three purchases had consisted of only one unit of a particular piece of jewelry and Puig Doria was concerned that the Japanese might simply intend to copy his designs. Since his first experience with piracy, he had had other serious incidents of his designs being reproduced without consent and he was not unfamiliar with the stereotype of the Japanese as skillful copiers. Second, Puig Doria still wanted to export the Puig Doria concept as a whole through exclusive showrooms fashioned after his store in Barcelona and he felt that the negotiations with Daimatsu were not leading to this end.

Between December 1984 and March 1985 communication between Puig Doria and C. Itoh was minimal and it appeared the negotiations for the commercialization of Puig Doria jewelry in Japan had reached their end. In April 1985, however, C. Itoh forwarded two market studies to Puig Doria in an effort to persuade him to continue negotiating the sale of his jewelry through Daimatsu. The first of these studies was intended to demonstrate the difficulty in establishing new retail outlets in Japan. Among other problems, Japan suffered from a shortage of suitable rental locations, extremely high rents, and exorbitant overhead which could be attributed mostly to high wages. The second document was a market study on the Japanese gold jewelry market conducted by Intergold[4], which seemed to indicate that the buying habits of the Japanese were significantly different from those of Spanish Jewelry purchasers (Table 1). These two studies convinced Puig Doria that perhaps in Japan selling his Jewels through exclusive showrooms was not a realistic expectation. As a result, he decided to continue working with C. Itoh and Daimatsu, reluctantly reaching the conclusion that he must become more flexible in his demands if he wished to reach any agreement at all with the Japanese.

 

 

 

 

 

 


 

 

Table 1:  Summary of Significant Points of Japanese Market Study

 

A. Buying Habits of the Japanese

1. Unmarried young females purchase the greatest amount of gold jewelry

2. Seventy-five percent of gold jewelry purchased is without gemstones, of jewelry with gemstones, 40% contains diamonds.

3. Over 90% of females buy gold jewelry for themselves.

4. The most popular price range of gold jewelry is ¥20,000 to ¥40,000 (Pts 15,000 to Pts 30,000).

5. Over 60% of females purchase at a special discount or sale.

6. Japanese jewelry consumers tend to look for quality, placing great importance on the design. They are not concerned with the "name value of the famous brands."

B. Characteristics of Gold Jewelry Markets in Spain and Japan

     1. Source of purchase:

Spain: 82% of all gold jewelry is purchased in jewelry stores, 2% in department stores, and the balance in "other."

Japan: 39% of all gold jewelry is purchased in jewelry stores, 28% in department stores, and the balance in "other."

 

2. Purchaser profile as a percentage of all gold jewelry bought:

Spain: 56% of purchases are made by women, 44% by men.

Japan: 76% of purchases are made by women, 24% by men.

 

3. Categories of purchase as a percentage of all items bought:

Spain: Rings 38%, necklaces 26%. wrist wear 11 %. earrings 19%, watches 2%, and brooches 4%.

Japan: Rings 37%, necklaces 36%, wrist wear 18%. earrings 6%, watches 2%, and brooches 1%.

 

     4. Gifts and self-purchase as a percentage of all gold jewelry bought

Spain: 64% purchased as a gift, 36% self-bought.

  Japan: 18% purchased as a gift. 82% self-bought.

 

5. Occasion of purchase as a percentage of all gold jewelry bought

Spain: 71% purchased for a special occasion such as Christmas or birthday, 29% for no

            special occasion.

Japan: 35% purchased for a special occasion, 65% for no special occasion.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Future

 

In August 1985, Puig Doria had called Villar to his office to once again try to analyze his reluctance to commit himself to a commercial venture with C. Itoh and Daimatsu. Villar went over the document that had been the basis for the decision to continue working with the Japanese, pondering the prominent differences between the Japanese and the Spanish jewelry buyer. Because of limited knowledge of the Japanese market, Puig Doria had taken no part in choosing the jewelry that was being sent to Japan. He wondered, however, if they should somehow be more involved in creating a Japanese collection of Puig Doria Jewels. Puig Doria himself was studying the large color catalog that featured the collection of Puig Doria Jewelry chosen by Daimatsu during its trips to Barcelona. The catalog had been published in the fall of 1984 as the first step in launching Puig Doria in Japan, and the first 11 pages and the cover elegantly and professionally displayed the Puig Doria collection. Daimatsu had presented Puig Doria as the personality and the creative force behind the jewels by including a photo and some quotes about his work. Puig Doria had been satisfied with the presentation of his jewels, which was both creative and in good taste. While the remaining 41 pages of the catalog were devoted to Daimatsu's own collection of jewels, Puig Doria's high quality and exclusive design were clearly evident in contrast. It was obvious that Puig Doria was Daimatsu's most sophisticated line, intended to relay a sense of prestige to all the other products offered by Daimatsu.

Villar thought the catalog did justice to Puig Doria's work but he wondered who would read it. Was it offered for sale or free to customers of Daimatsu stores, or was it intended for the management of these retail outlets? Villar was in fact unclear about many things concerning Daimatsu. He did not know what Daimatsu's exact relationship with its retail outlets was or even how many of them there were, nor could he say for sure how Puig Doria's Jewels were being handled in Japan, aside from what he had seen in the catalog. While Puig Doria and Daimatsu had signed a statement outlining their intentions with one another, it was in no way specific. As a result of C. Itoh’s persistence, the interests of all three parties had come closer to being met, yet Mr. Villar worried that Puig Doria was risking too much.

At the next meeting Daimatsu's representatives, among other things, intended to choose several examples of a variety of jewels to take back to Japan. They had opened the first department dedicated to Puig Doria in a retail outlet in Nagoya and were beginning to get a feel for which designs would be successful in Japan and which would not. Villar knew they would also again extend an invitation to Puig Doria to visit Japan. As far as they were concerned, things were progressing just fine, but, like Puig Doria, Villar had the uneasy sense that the Puig Doria firm was not exploiting the situation as well as it might. He continued to ponder what, if anything, they should do about it.

 

 

 

 

 

 

 

 

 

Source: Copyright 1986 by Instituto de Estudios Superiores de la Empresa, Universidad de Navarra, Barcelona, Spain.  Prepared by Melissa Martincich, MED Alumni, under the supervision of Francesco Pares, Lecturer, and Professor Lluis G. Renart, February 1986.  This case was prepared as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

 



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