The Hong Kong Jewellery Industry Essay

The Hong Kong Jewellery Industry is an attractive sector for bing retail merchants as the market has been turning steadily. Most gross is from mainland tourer. they are really powerful to the marketer.

and the determinations of them can hold a immense influence on the sale volume as they are about half the resources of gross.Tonss of Newspaper and websites think the market can still be develop farther and increase the gross revenues. With the rise of RMB exchange rates and Numberss of visitants. the industry is spread outing each twenty-four hours. Besides. menaces of new possible entrants and supplier are low. giving the industry a comparatively competitory environment which would profit the wellness of cherished jewelry industry.

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Imitation jewelry is a medium menace. there are both markets for clients who can afford and likely to purchase luxury jewelry or pay less for similar looking yet low-cost imitation jewelry. However. they might non belie each other. The attitude towards the development of the industry is positive and supportive.IntroductionThe jewelry industry is one of the major industries in Hong Kong ; it has been good developed since 1950s. Having decennaries of planing experience. being advanced and stylish.

with first-class quality control and warrant. makes Hong Kong a good known jewelry concern Centre. Many consumers. particularly tourers are attracted by Hong Kong jewelry and they would pass more than 20 % of their entire disbursement on jewelry! ( Hong Kong Census and Statistic Department. 2010 )Since the executing of CEPA in 2004. it has been hiking the local jewelry industry by allowing zero duties on Hong Kong made merchandises to China.

Mainland tourers are of import to this industry. harmonizing to a study by Hong Kong Census and Statistic Department. among all tourers visited the metropolis ; there were 55.

7 % of mainland tourers in 2010. And mainland tourers tend to purchase jewelry as keepsakes. therefore the Hong Kong jewelry industry has a large market potency and play an of import function in retail.

( Hong Kong Census and Statistic Department. 2010 )So what makes the industry so comfortable? In this study. I am traveling to analysis the cherished jewelry retail industry in Hong Kong by Porter’s Five Forces Framework and measure whether this is an attractive sector to vie in. Lastly. I will place the critical success factors which drive public presentation in the industry now every bit good as the close hereafter.Porter’s Five Forces ModelPorter’s Five Forces theoretical account is aimed to analysis industrial construction and measuring the net income potency of different industries.

The five forces are can assist to see a clearer state of affairs of the industry and do determinations or solutions.Potential EntrantsThere are certain barriers to come in jewellery retail industry in Hong Kong. It requires high capital costs of acquiring established in this industry.

Harmonizing to the one-year studies of local jewelry retail merchants. Chow Sang Sang Jewellery and Luk Fook Jewellery. the cost of 2010 was 9 million dollars and 1 billion dollars ( HKD ) severally ; possible entrants may confront troubles to such high entry cost. ( HKExnews. 2010 )Another major barrier is authorities policy. there are patent and hallmark protection and licensing demands serve as a barrier to entry of new entrants. they have to cognize really good about all the protected designs and be eligible for the licence of retailing or fabrication jewelry in Hong Kong which they might non be able to make. ( China Economic Net.

2011 )In order to allow the clients know about the new entrants. being able to place the trade name is important. It is really backbreaking to vie with the experient Hong Kong jewelry store. such as Chow Sang Sang Jewellery and Chow Tai Fook Jewellery Co.

. the former has over 70 old ages experience of selling jewelry while the latter has over 80 old ages. ( Chow Sang Sang. 2011 ; Chow Tai Fook. 2011 ) The experience provides established houses benefits in footings of cost of trueness. It was founded that stigmatization is going really of import to clients in China.

it represents their statues. makes them experience more confident and self-indulgent as the value of identifiable jewelry shows off their life criterions. It makes entry hard as their trade name would non be as noticeable or experient and the possible entrant power is low. ( Centaur Communications Ltd.

2007 )Substitute A product’s monetary value snap is affected by replacement merchandises – the presence of replacement merchandises can take down industry attraction and profitableness because they limit monetary value degrees. it typically impacts an industry through monetary value competition. The menace of replacement merchandises depends on the buyers’ willingness to purchase the replacement. the comparative monetary value and public presentation ratio and the costs of exchanging to replacements. In Hong Kong.

imitation jewelry has a high replacement ratio to cherished jewelry as the fidelity of imitation jewelry is comparatively high.There is a immense market for consumer. who can non afford luxury but still want to purchase jewelry. and harmonizing to a study done by China Economic Net. 45 % of the respondents attention about the design of jewelry alternatively of branding. and they would be willing to pay less for imitation jewelry that looks similar to a branded 1: lower monetary value. fulfilling public presentation. Besides.

the shift costs is comparatively low excessively. consumers can pay less for the same psychological satisfaction. ( China Economic Net. 2009 ) For cherished jewelry industry. the aforementioned study found that 55 % of respondents would still pay more for cherished jewelry as imitation jewelry can non replace the value and confident it gives the respondents.

Although Cherished jewelry has its ain market ratio that can non be affected by replacement but it is difficult to increase the exchanging cost to maintain gross revenues volume in this sector. therefore the replacement power is medium in this industry. ( China Economic Net. 2009 )Buyer Power Bargaining power of purchaser is the ability to act upon the scene of monetary values ; their purchases represent a big portion of the supplier’s gross With mention to a research done by Hong Kong Census and Statistic Department. mainland china tourers was the cause of 63 % of entire jewelry retail gross revenues at 70 billion Hong Kong dollars in 2010. mainland tourers are the chief resources of gross revenues volume of the industry. The influence of such purchasers are immense to the industry. they are two 3rd of the gross revenues volume.

purchasers in such place can set force per unit area on the providers by demanding higher quality at lower monetary values. ( Hong Kong Census and Statistic Department. 2010 ) From Hong Kong Tourism Board. the chart below shows the visitants between 2006 and 2010 has been increasing steadily ; the per centum of growing from 2009 to 2010 was 21. 8. and the recorded growing for Mainland China is 26.

3 % in 2010.The followers is the chart of gross revenues of volume of visitants passing on Jewellery in Hong Kong by from 2007 to 2010.With the support of Report of Monthly Survey of Retail Gross saless demoing uninterrupted growing from October 2010 to September 2011.

there is a positive causal relationship between gross revenues volume and sum of visitants. when Numberss of visitant addition. the gross revenues volume does every bit good.

The visitants are chief purchasers ; they have high influence and bargaining power over the jewelry industry.Supplier Power Suppliers provide natural stuffs. labour. constituents.

and other supplies into the industry ; it can hold a important impact on a company’s profitableness. The dickering power of provider depends on certain standards such as presence of replacement inputs. distinction of inputs and supplier concentration.

etc. Hong Kong jewelry industry is confronting challenges. as the cost of natural stuffs. such as gold. are increasing. tonss of purchasers are call offing their orders.

taking to a loss of 10 % in entire gross revenues volume. Since many makers are located in China and currency of RMB has risen from $ 89rmb per $ 100hkd in 2008 to $ 81. 8rmb per $ 100hkd. the fixed costs rises every bit good. ( Hong Kong Census and Statistic Department. 2010 ) There are several providers in the market. when one raises its monetary value excessively much.

purchasers would easy travel to another providers. These are negative state of affairs for the industry and do the providers dickering power comparatively low.Degree of Competitive Rivalry For an industry.

the strength of competitory competition is the major determiner of the fight of industry. It depends on the construction of rivals. industry costs. degree of advertisement disbursal and high issue barriers.

etc. There are big sum of jewelry retail merchant aiming different clients: Cartier targets clients who can afford luxury ; Ma Belle targets clients who can afford sensible to luxury priced jewelry. However. they all are the same industry viing with each other and seek to publicize or cut down monetary value to pull clients.As mentioned before. there are a batch of rivals and this industry requires really high costs. Business adult male in the industry believes that the industry is still turning and has high potency ; hence.

the competition competition would be intense as retail merchants will vie with each other to increase the sale volume. Furthermore. when barriers to go forthing an industry are high such as the cost of shuting down mills. rivals tend to exhibit greater competition. ( Ming Pao.

2011 )DecisionThe above diagram is the overall position of the power of each force. There are two ways to see if this is an attractive sector to vie in. from the entrants’ point of position and from the bing retailers’ point of position.

For possible entrants. it is really hard to come in the market if without high investing capital or scheme. they are no menace to the bing houses that have decennaries of experience and repute. Since purchaser power is really high. it is necessary but difficult to pull clients to a new trade name in order to last.

so this is non an attractive sector for possible entrants. As for bing retail merchants. this is an attractive sector to vie in. the several studies mentioned above showed the tendency of increasing in jewelry gross revenues. and Commerce.

Industry and Technology Bureau announced the authorities will supply subsidy for them to develop better accomplishments and expand market. ( CITB. 2008 ) This sector has a long manner to travel.Critical Success Factor Convenience: Being easy accessible for purchasers is of import. for illustration: Luk Fook Jewellery has 31 subdivisions and Chow Sang Sang Jewellery has 38 subdivisions all over Hong Kong. ( Luk Fook Jewellery. 2011 ; Chow Sang Sang.

2011 ) The locations of the subdivisions are chiefly focused on tourer musca volitanss such as Central and Tsim Sha Tsui. Buyer can happen a shop around them without going excessively much. the clip and money saved may do them desire to buy more! Advanced and diverse design:A study done by China Economic Internet shows 45 % of the respondents attention about the design of jewelry alternatively of branding. There are different customers’ demands ; different designs coming up in the market must accommodate person. and the new coevals keeps developing different gustatory sensation in jewelry.

being able to supply modern design keeps the industry successful. Quality control and Guarantee:Jewelry produced in Hong Kong are celebrated for its quality. every jewelry produced passed the International Organization for Standardization ( ISO ) . cherished jewelry has their ain individuality.

clients are able to look into at the E-id System to guarantee the true and false. This gives the assurance to purchasers that the jewelry they buy from Hong Kong is in great quality and status. ( HKCD. 2010 ) Jewelry industry is a long life rhythm industry ; several researches commented there is a bright hereafter and growing foreseeable. The market will maintain holding new designs. continue constructing up repute and command the quality. the above success factors can be carried out in the hereafter.