Case Study:
Skagen Designs: becoming an international player in designed watches
Towards the end of 2006 Charlotte and Henrik Jorst can look back at 15 hectic but successful years. Their company was founded in an apartment in New York, from where its first marketing efforts took place. The two entrepreneurs started selling relatively expensive watches bearing a logo that American companies might use as company presents. During the Gulf Crisis however it was very difficult to sell watches in that price range. In 1990 Charlotte and Henrik visited a watch fair in Basel in order to find a manufacturer who was able to produce the watches at a lower cost price. They found a Danish-owned company, Comtech Watches, with headquarters in Aarhus and a clock and watch factory in Hong Kong. In 1992 Charlotte and Henrik had an annual turnover of US$800,000, primarily through an advertisement on the back page of a big mail-order catalogue for Father’s Day. Since then events followed each other in quick succession. In 1995 the chain store Bloomingdale’s included the Skagen Design watches in its assortment and other retail chains like Macy’s, Nordstrom and Watch World have followed. In addition, the watches are sold in big gift and design shops. In 1998 Skagen Designs had an annual turnover of almost US$30 million; in 2005 turnover had increased to approximately US$70 million. Skagen designs – the story in brief 1986 Party at Carlsberg. Even if Henrik Jorst has brought his girlfriend, he manages to make Charlotte Kjølbye his neighbour at dinner, and they fall head over heels in love. Shortly after the party Carlsberg sends Henrik to New York. From New York Henrik manages Carlsberg’s USA sales. Charlotte stays on for a year and a half in Denmark keeping in close contact with Henrik on the phone. 1986 Charlotte joins Henrik in the United States and reigns as Miss Carlsberg for the summer and fall months. After a Danish colleague sends them a few of his sample corporate watches to sell in the United States, Charlotte and Henrik embark on their dream of starting their own business and begin working in the world of watches. They are married in May. 1990 Henrik quits his job at Carlsberg. Charlotte walks New York trying to sell the Danish Jacob Jensen watches to watchmakers. They have hardly any money. Charlotte gives birth to their daughter Christine. 1991 The Jorsts design a few sample corporate watches and exhibit them at the New York Premium and Incentive Show in the Spring. At this fair, several retailers notice the watches and wonder why the two Danes present them as corporate watches and not branded goods. The retailers state that if the watches were available without the corporate logos they would purchase them for their stores. During the summer they produce 800 copies of four different watches with the name Skagen Denmark. A few months later all watches are sold out and an additional amount was produced. 1992 Sitting at the dinner table Henrik and Charlotte design 30 different models, all labelled ‘SkagenDenmark’. In a New York street Charlotte meets one of the managers from the mail order giant ‘The Sharper Image’. She takes a chance, and yes, he features the Skagen watches on the back page of the Father’s Day catalogue. Everything is sold out. From the apartment in New York Henrik and Charlotte have a turnover of US$800,000.
1993 There are not many states in the United States where business taxes are almost equal to zero. In Florida and Nevada this is, however, the case. One day they fly to Incline Village at Lake Tahoe – one of the world’s best ski resorts. They lose their hearts and buy a house that is much too expensive, but big. The company moves into every room from kitchen cupboards to garage. They still do it all by themselves. Charlotte gives birth to their daughter Camilla. 1995 Five years after starting the company. Now, it becomes really big. Bloomingdale’s takes the watches on trial. Sold out – on one single day. They engage employees in a small, rented office not far from their home at the lake. After a year the office is too small, and after another year the same happens again. 1998 The magazine Inc. puts Skagen Designs on the list of the 250 fastest growing, privately owned companies. During five years the turnover has increased by almost 1,200 per cent. Finally, the rest of the company moves out of the villa at Lake Tahoe. New headquarters are opened in Reno, Nevada. An office is opened in Denmark to handle European distribution and an additional 80 stores throughout Denmark begin selling the Skagen Denmark line. 1999 The number of employees is approaching 100. Inc. magazine’s ‘Inc. 500’ lists the company as one of the fastest-growing companies in the United States. Henrik gives Charlotte a horse as present for their tenyear wedding anniversary. The family moves from Lake Tahoe to a large house of 650 square metres on the outskirts of Reno. It is situated on the top of a hill with a beautiful view of the Sierra Nevada Mountains. Skagen begins its ongoing presence in major magazines such as InStyle and GQ. Distribution begins in the United Kingdom. 2000 Distribution begins in Germany and the Netherlands. 2001 Skagen Designs exhibits for the first time at BaselWorld – The Watch and Jewellery Show in Basel, Switzerland. 2002 Distribution begins in additional countries including Finland, Iceland, Ukraine and Kuwait. 2003 More countries join the Skagen Designs team and distribution begins in Belgium, Serbia, Montenegro, United Arab Emirates, Norway, France and Italy. 2004 To handle increasing growth, the European HQ office in Copenhagen moves to a larger facility. The European HQ targets large department stores in Germany and France. 2005 The former Director of Sales and Product Development, Scott Szybala is appointed as President. Scott’s responsibilities are to oversee the daily operations as well as the strategic direction for Skagen Designs, reporting directly to Charlotte and Henrik, who continue to be closely involved in the company’s product development and sales. 2006 Skagen Designs becomes an official sponsor of Team CSC, one of the best teams in professional cycling, with a record-breaking number of victories. Today, Henrik and Charlotte still approve all products that Skagen designs. 2009 Skagen continues its expansion into product (jewellery and sunglasses) and geographical markets, for example in Eastern Europe and the Far East. Internal policies Skagen Designs has its name from the Danish fishing village of Skagen; a popular retreat for artists from around the world. Many say this place has the perfect source of natural light and those who visit find its unique charm to be a mix between nature-given and man-made romanticism. This region has inspired not only the brand name, but also the Jorst design philosophy. The colours, shapes and simplicity inspire the design team. The design team is on the pulse of current fashions, with regular visits to design centres around the world including Switzerland, Italy, France, New York and Hong Kong. Skagen Designs tries to stay true to its classic design philosophy and is never content to follow established trends. The Skagen Designs’ logo symbolizes the meeting of the Skagerak and the Kattegat seas that surround the village of Skagen. Charlotte and Henrik have divided the work between them. Charlotte is primarily in charge of sales and marketing, while Henrik is in charge of the company’s finance and administration. In the United States the watches are sold at very competitive prices compared with other design watches: typically at a level of US$100–120. The core competences of Skagen Designs are assessed as follows: Development of new watch concepts following the fashion trend with ‘the finger on the pulse’. Human resource policy – both Charlotte and Henrik spend a lot of time walking around and communicating with employees and to let them feel that Skagen Designs is one big team with the same family-oriented values in all parts of the worldwide organization.
Quick and flexible management decisions. New products are introduced five times a year (November, January, March, May and August) providing retailers with seasonal updates and giving consumers the opportunity to update the style for each season. Well-developed partnerships with the ‘upstream’ specialists in the Far East who are in charge of the production at competitive prices. Marketing the watches In the United States Skagen Design products are launched through fashion papers like Vogue, InStyle and Accessories. TV shows like Jeopardy and Wheel of Fortune have been sponsored as well as actors in the series Ally McBeal and The Practice. The company’s national advertising is also placed in major industry publications as well as out-of-home advertising opportunities including billboards, buses and phone kiosks to support peak selling periods such as spring fashion, Mother’s Day, Father’s day, autumn fashion and Christmas. In 2006 Skagen Designs became an official sponsor of the professional cycling team CSC. Skagen Denmark’s Team CSC watch collection was comprised of six new styles of performance-inspired, Swiss-made watches featuring ultra lightweight and durable titanium cases and water-resistant leather straps. The Skagen sponsorship of the CSC team ended after the 2006 season. Competitors As a fashion company Skagen Designs is competing with all the major international companies designing watches – for example, Calvin Klein, Coach, Guess, Gucci, Swatch, Alfex and Jacob Jensen. Most of these companies possess a financial strength many times larger than Skagen Designs.
As an expert in international marketing Charlotte and Henrik have called you in to get valuable input in connection with the international expansion of Skagen Designs. Therefore, you need to answer the following questions. If necessary, make your own conditions and remember to state the reasons for your answers.
Q1. What screening criteria should Skagen Designs use in connection with its choice of new markets for its watch collection?
Q2. Make a specific choice of new markets for Skagen Designs. Table 1 and Table 2 can be used to support your argument.
Q3. Which ‘market entry mode’ should Skagen Designs use on the chosen markets?
Q4. Skagen Designs has launched other product lines (e.g. sunglasses, branded items for the home) with varying success. What should be the guidelines for including other product lines in the Skagen Designs collection?
Q5. Which criteria should Skagen Designs use for its selection of future sponsor partners?
Q6. Skagen Designs is considering online sale of its watches. What problems and possibilities do you see for the company in this area? On this basis what are your conclusions?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.