MOSH Jewelry

1 MOSH

MOSH by Mihaela Hozmache & Stefan Otzen

Edition June 2014 University of Southern Denmark Innovation and Business

Supervisor Marianne Stenger

MOSH by Mihaela Hozmache & Stefan Otzen

Edition June 2014 University of Southern Denmark Innovation and Business

Supervisor Marianne Stenger

PREFACE This bachelor thesis project is performed for the University of Southern Denmark and represents the completion of the Innovation and Business programme.

Comprising the knowledge gathered throughout the study, this project emphasizes our entrepreneurial competencies and ability of starting a business.

In regard to the development of the project, together with the hard work the group put into its creation, there are several persons who are entitled to gratitude for their contribution with ideas and solutions so as the final goal to be achieved.

We would like to express our gratitude to our supervisor Marianne Stenger for her time, valuable input and support throughout the project. Eva Lund and Michael Nordahl Andersen founders of Vera Vega Jewelry and Nordahl Andersen were particularly kind to answer all our queries. We are greatly thankful to all respondents of our questionnaire, as well as the participants to our focus group and interviewees for their suggestions, good ideas and productive conversations during the research process. For creating the layout and design of the project, Patricia Lima is entitled to our gratitude. We are particularly grateful for Bart Wozniak’s valuable advice and recommendations which added considerably to our final outcome.

Finally, we would like to thank our families for their unconditional encouragement and support throughout our study period.

Sønderborg, 28th of May 2014

Mihaela Hozmache

Stefan Otzen

EXECUTIVE SUMMARY Based on the groups’ interest in entrepreneurship and jewelry design, this project intends to assess the business opportunities of a new jewelry company in the Danish market. Realizing the challenges entailed by starting a company, the group decided to approach the problem from a business perspective and to determine its feasibility by combining theoretical models and research methods.

Secondary data research was performed in order to analyse the jewelry market potential. Several official databases and statistics were consulted in order to size the market and determine its growth. Since the market proved large and is expected to grow even more, the group proceeded to determine the market segments it should address. Adding to the secondary data, primary data obtained from a questionnaire provided an overview over jewelry consumer behaviour and shaped the market segment. Based on the market segment characteristics, statistics regarding its size have been consulted. The number of consumers proved large enough to support the business. On the other hand, the market segment of jewelry retailers, which is the consumers preferred choice of distribution, has doubled its size in the past years, according to the statistics. Following the research, different models such as Porter’s five forces, PESTLE and SWOT were used to determine the market attractiveness, the macro environment and the strengths of the new company in the described context.

Once the market demonstrated to be attractive, the right product/market fit had to be determined. The primary data collected form the questionnaire was used to create the general product features, such as materials, design and quality. For discovering the unfulfilled needs of jewelry consumers, a focus group was gathered.

Apart from a future workshop, participants rated several pieces of jewelry and individual interviews were held in order to understand their design preferences. To match the product with the suitable market, customer profiles were created based on the consumer behaviour theory and a marketing strategy was created.

Since the main purpose of this thesis was to describe the process and to determine whether starting a new company is reasonable in the Danish jewelry market context, the sustainability of MOSH’s business model was assessed. After calculating the costs and prices, the initial business model proved inefficient, since it was inconsistent with the company’s value offer. Following that, the group analysed alternative business models and proposed a suitable solution.

The final outcome of the project is a sustainable business model based on a partnership with a company that deals with outsourcing, value chain management and sales. Provided that MOSH creates designs that meet customers’ demands and creates this key partnership, there is a high chance of successfully entering the Danish jewelry market.

TABLE OF CONTENTS

Introduction 14

Project Formulation 15 Methodology 17

Market & Industry Attractiveness 24 Market Analysis 24 Porter’s Five Forces 35 PESTLE 45 SWOT 52 Sub Conclusion 56

Product/Market Fit 60 The Product 60 Customer Profiling 75 Marketing Strategy 80 Sub Conclusion 85

Business Model Sustainability 88 Pricing 88 Alternative Models 94 Sub Conclusion 102 Conclusion & Future Work 106

LIST OF FIGURES Figure 1 - MOSH jewelry ......................................................................................................16 Figure 2 - Research methods............................................................................................... 17 Figure 3 - Market and industry attractiveness.................................................................... 24 Figure 4- Jewelry, Watches and Accessories Sales values in Denmark 2007-2012......... 25 Figure 5- Jewelry, Watches and Accessories Sales values in Denmark 2012-2017...........26 Figure 6 - Other European market ......................................................................................27 Figure 7- Personal Accessories: Global value sales...........................................................28 Figure 8- Regularity of Men wearing Jewelry......................................................................29 Figure 9- Regularity of Women wearing jewelry..................................................................30 Figure 10- Danish women average jewelry spendings on a yearly basis...........................31 Figure 11- Consumer market size (Danmark Statistiks)....................................................32 Figure 12- Preferred Purchasing Locations........................................................................33 Figure 13- Porter’s Five Forces............................................................................................35 Figure 14- Threat of New entrants.......................................................................................36 Figure 15- Threat of Substitutes...........................................................................................38 Figure 16- The bargaining power of buyers.........................................................................39 Figure 17- Bargaining power of suppliers...........................................................................40 Figure 18- Competitive rivalry .............................................................................................42 Figure 19- The Value Net......................................................................................................44 Figure 20- PESTLE analysis.................................................................................................45 Figure 21 - Women Age Distribution in Denmark................................................................47 Figure 22- PESTLE - Technology..........................................................................................48 Figure 23– PESTLE - Dangerous chemicals in jewelry.......................................................49 Figure 25 - SWOT analysis....................................................................................................52 Figure 26- Product/Market Fit..............................................................................................60 Figure 27- Jewelry type preferences....................................................................................61 Figure 28- Female Purchasing Decision Criteria.................................................................62 Figure 29- Future workshop - Fantasy phase......................................................................64 Figure 30– Future workshop - Fantasy phase outcome......................................................65 Figure 31- Participants rating jewelry pieces.......................................................................67 Figure 32- Example of the rating system..................................................................................68 Figure 33– Jewelry rating outcome......................................................................................68 Figure 34- Use of Individual interviews................................................................................70 Figure 35- Squid shaped earrings........................................................................................71 Figure 36- Combination of materials example....................................................................71 Figure 37- Wood necklace.....................................................................................................72 Figure 38- Industrial Cuff......................................................................................................73 Figure 39- Horn Earrings......................................................................................................73 Figure 40- Primary data findings..........................................................................................74 Figure 41– Persona profile....................................................................................................76 Figure 42- List of retailers....................................................................................................79 Figure 43- Marketing mix......................................................................................................8 2

LIST OF TABLES Table 1 - Retailers in Denmark.............................................................................................34 Table 2- Jewelry production in Denmark.............................................................................43 Table 3 - Retailers market segment attractiveness.............................................................78 Table 4 - Predicted annual overheads .................................................................................90 Table 5 - Annual profitable making hours............................................................................92 Table 6 - The hourly rate.......................................................................................................92 Table 7 - Pricing a piece of jewelry.......................................................................................93 Table 8 - Predicted annual overheads recalculated............................................................95 Table 9 - Annual profitable making hours recalculated......................................................95 Table 10 - The hourly rate recalculated...............................................................................96 Table 11 - Pricing a single piece of jewelry recalculated....................................................96 Table 12 - Total expected profit.............................................................................................98

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INTRODUCTION History

of

jewelry

Project

Formulation

Methodology

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INTRODUCTION History of jewelry The oldest pieces of jewelry known to man are dated 75 000 to 100 000 years back.

They were made of shell beads and used as pendants or in necklaces. Jewelry reveals the first evidence of human self-expression and aesthetics. It is believed that humans initially started adorning themselves with elements from the nature such as leaves, berries, animal teeth, feathers and shells, as a reflection of their search for food. The ornaments signified a successful hunt or expedition. With the evolution of mankind, the rare materials and increasingly sophisticated forms, jewelry also evolved. While some pieces of jewelry were worn to convey status or membership of a social group, others were believed to grant supernatural powers or ward off evil and worn as amulets. After the discovery of precious materials, jewelry could be used to display social status, wealth and was also used as currency in trading. (Miller, 2012, pg 10)

Jewelry nowadays In the 21st century, innovative new materials and styles emerged. Designers with different backgrounds started creating jewelry and Computer Aided Design became a commonly used technique within jewelry design. The automatic mass production and the appliance of methods from other industries made innovation possible for the jewelry manufacturers. The renewed interest in vintage costume jewelry met the global trends of recycling and the recession. Designers combine traditional techniques with modern technology, vintage pieces with new materials to create exciting contemporary pieces. (Miller, 2012, pp 36)

Precious jewelry and non-precious jewelry Precious jewelry is made of precious metals and often combined with precious gems. Gold, silver and platinum are considered precious metals, while all others are non- precious. The difference between precious and non-precious materials is mainly one of rarity and value. Precious or fine jewelry is expensive and normally bought for its intrinsic value, apart from the aesthetic purpose.

In the early 20th century, the term costume jewelry came into common usage.

The term was used by fashion designers to describe non-precious jewelry created to coordinate with the outfits they designed, which were then called costumes,

hence costume jewelry. Made from materials with little intrinsic value, this kind of jewelry was regarded as a fashion accessory meant to be only worn with a specific outfit. This type of jewelry is also known as fashion jewelry. (Miller, 2012, pp 10)

Project formulation Project background The jewelry industry is globally growing and is expected to have a bright future.

The current annual sales of €148 billion are expected to grow by a 5-6 % every year and amount to €250 billion in 2020. (Dauriz et al, 2014) The demand for jewelry, which was reduced by the economic crisis in the past years, is now growing again.

The industry is not only rapidly expanding, but also very dynamic. The consumer behavior is expected to change and jewelry companies need to be responsive to the changes in global trends, in order to be competitive. (Dauriz et al, 2014) Denmark is a fashionable nation within the European Union. It offers good opportunities for producing and selling jewelry. Considering the last years’ trends within the fashion industry, a start-up fashion jewelry business has a number of opportunities in the Danish market. (CBI Ministry of Foreign Affairs of the Netherlands, 2011) For a company trying to enter the industry, the opportune price range would be medium to high, as there is an increasing demand in good quality pieces as opposed to: cheap, mass produced, fast changing fashion jewelry. When considering the design, the trends are set by the different fashion fairs, such as Copenhagen International Fashion Fair. Originality of design is highly appreciated.

The Danish customer is highly aware of ethics and proves a great interest in the country of origin and working conditions in which the pieces have been produced.

Furthermore, sustainability and eco friendliness are also issues that concern the Danish user and a new company should integrate in their processes. The market of “Do it Yourself” is growing and customers like customized pieces, where they can take part in the design of the piece, or adjust it to different outfits. Being an important fashion and trade hub in Scandinavia, Denmark offers a great opportunity of business expansion. Fashion accessories chains are well represented in Denmark and internet sales are increasing. (CBI Ministry of Foreign Affairs of the Netherlands, 2011)

Problem formulation This project aims at assessing the opportunities for a new fashion jewelry company entering the Danish market. MOSH is a concept company. The name is a combination of the initials of the founders: Mihaela Hozmache and Stefan Otzen.

Depending on the outcome of the analysis performed in this project, MOSH will be further developed into a start-up.

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Starting from the team’s business idea, the project entails thorough research aiming at proving or disproving the initial assumptions. As a start-up company, MOSH would like to position itself within the industry by setting the all production processes in Denmark to be able to control the production both in terms of quality and working conditions, as well as supporting the local industry. Furthermore, the jewelry would display an innovative design, while using combinations of alternative materials. Aiming at sustainability and environmental friendliness, the company would use recycled and waste materials as raw materials for the jewelry. The pricing range of the pieces will be between medium and high. The focus will be on non-precious materials. However, the medium to high prices will be justified by the flawless finish and the artistic value of the jewelry. By marketing its products as high end, MOSH will try to establish a brand, where its products are easy recognizable and represent the brand itself.

Figure 1 - MOSH jewelry

In the context of the growing industry and market opportunities in Denmark, this project aims at investigating the real potential of MOSH to successfully enter the market and become a profitable business. With the stated opportunities in mind, the purpose is to find a niche where the company can activate and to determine whether it is reasonable to start-up the company.

Research questions

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In order to make a systematic inquiry and examine the facts, the following research questions are raised:

• How attractive is the Danish jewelry market for new entrants?

• How to create the optimal product/market fit in the Danish jewelry market?

• What is the most sustainable business model for a new fashion jewelry company?

Methodology In order to answer the research questions, a series of research methods have been used. Secondary research techniques such as data bases and statistics were consulted in order to determine the jewelry market growth and prospectives, both in Denmark and other European countries. Built by using primary quantitative research techniques, the questionnaire provides specific, relevant to MOSH data that the desk research cannot provide. To prove the market need and to get a better insight on the customers’ dissatisfactions with jewelry, a focus group was gathered and individual interviews were held. Furthermore, interviews with a Danish jewelry company, as well as a wholesale company were held.

Figure 2 - Research methods

MOSH

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Primary data

The questionnaire The questionnaire included 13 questions and it was designed using Google Drive.

It was spread over social media in order to reach a wide spectrum of people, with different personalities and nationalities. The questionnaire was openly available from the 22nd of February to the 18th of March 2014. During this period a number of 105 answers were provided. The respondents were mostly students, but also teachers, doctors, housewives and librarians. Therefore, they displayed a broad range of wages.

The questions are built in such a way that they can provide quantifiable information about consumer behavior, requirements, opinions and perceptions in regard to jewelry. Throughout the report, references to the questionnaire are made in different chapters, where found relevant.

Before answering the questions, the participants were asked to fill in certain information in order to get an overview of their background. Some of the information was mandatory and other optional. The required information includes gender, age and nationality. The optional information contained name, e-mail, profession and monthly income.

When analyzing the questionnaire a few respondents were excluded due to their nationality. Participants who did not originate from nations within Europe were left out of the analysis. This was done due to the fact that MOSH will focus on the Danish market. Non-European people might have very different preferences in comparison to the Europeans. The European citizens outside Denmark, on the other hand, were taken into account for the analysis since 8.7% of all residence in Denmark are foreigners (statistikbanken.dk). The relevant respondents have 10 different nationalities.

After the selection, there were 97 relevant answers left to analyze. The respondents were mainly German (40), Danish (31) and Romanian (10). The other sixteen persons were from a variety of countries, including Hungary (4), Slovakia (4), Iceland (3), Poland (2), Finland (1), Czech Republic (1) and Holland (1).

For analysis purposes the relevant data was divided into two segments, based on gender. The male segment consisted of 35 participants and the female one of 62.

The clear segmentation was made in order to make the analysis as relevant as possible, since men and women have different views on jewelry and also different buying habits.

While the questionnaire provides a large quantity of data, it has its limitations.

Since only a small number of people responded, compared to the whole market, the answers might not be truly representative for the entire jewelry market. The survey was also conducted in a limited span of time. The answers can be regarded as hypothetical, since it is often the case that respondents make statements in the questionnaire that do not reflect the real life behavior. Respondents chose not to answer some questions. Therefore, the questionnaire is limited in its abilities.

However, it provides an overview on the matter.

Focus group A focus group is a form of qualitative research aiming at gaining feedback on a product, service or concept. A group of people are asked about their opinions, beliefs and attitudes towards the subject in matter.

The focus group was mainly used because it is generally agreed that a group output is better than individual outputs. Focus groups provide better quality information than the sum of individual interviews. In groups, participants display more spontaneity and candor, less inhibitions and a sense of protection given by anonymity. Some scholars state that the ideal focus group should be formed of 8 to 12 members. (Fern, 1982) The focus group was formed of 11 people and the meeting took place at Alsion, in a classroom. Refreshments were provided and a cozy atmosphere was created, so that the participants feel comfortable. The activities involved a future workshop and jewelry rating.

The participants were aged 19 to 26 and comprised of 9 women and 2 men. They are from different backgrounds, varying from design students to engineering and business students. The participants have previously filled in the questionnaire and were provided with information about the workshop beforehand.

Out of the 20 people invited, only 11 attended the focus group. That is why there is a limitation in age range. Furthermore, all the participants reside in Sønderborg, which is not considered a large urban area. As with the questionnaire, the focus group is not entirely representative for the whole jewelry market, but merely gives an overview.

Individual interviews Following the jewelry assessment, individual interviews with the several participants were held. They consisted of open discussions on the pieces. Basically, the participant was asked to motivate the rating for each piece of jewelry. The aim was to understand which basic principle behind the design, combination of materials and style influenced the decision. By knowing that, the basic principles

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could be used for further different designs. The audio interviews can be found in the electronic Appendix 0.1.

MOSH

In order to get real life information from a new jewelry company, Vera Vega Jewelry was contacted. Vera Vega was founded in September 2012. The founder of the firm agreed to answer several questions regarding the challenges faced by a newly formed jewelry company. This was done over e-mail, using a word document. The document can be found in the electronic Appendix 0.2.

Nordahl Andersen was contacted in relation to MOSH’s outsourcing options. Being the partner of one of MOSH’s direct competitors, Nordahl Andersen was contacted so that information of a potential partnership with MOSH can be acquired. The conversation contained several e-mails and a phone interview. They can be found in the electronic Appendix 0.3

Secondary data The main tools that were used are the databases Passport, Orbis (Amadeus) and Danmarks Statistik. Working with the three databases required different approaches, since they have different focus areas. Passport is a database representing a gateway for global strategic intelligence. Orbis (Amadeus) is concerned with company information, while Danmarks Statistik is a Danish governmental organization, which is responsible for creating statistics on the Danish society. Apart from this, a research report for the Danish jewelry market was bought from an international consumer market research company – Canadean. Moreover, scholarly articles were used for different chapters.

Theory Apart from the research, theoretical methods for analyzing the business perspective were used. PESTLE analysis was used to describe the macro environment in which MOSH will develop and to analyze the factors that influence its development.

Porter’s five forces analysis was a useful tool of analyzing the industry as a whole, especially the attractiveness of the industry and the level of competition. Moving towards the core capabilities of MOSH, a SWOT analysis was performed and the internal and external factors that are favourable or unfavourable for the company were analyzed. In order to clearly state MOSH’s offer and manner of delivering it through marketing, the 7P’s analysis was used. Theory was also used as a guideline for creating the profiles of both the ideal consumer and customer.

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How is

attractive

the

Danish

jewelry for

market

new

entrants?

Market Porter'’s

Analysis Five

Forces

PESTLE SWOT Sub

Conclusion

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01

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Market and industry attractiveness Market analysis The first research question intends to determine whether it is reasonable for MOSH to enter the jewelry business. That is, to determine the market and industry attractiveness. For creating a market overview, a thorough market analysis was performed. Market values were analysed in order to determine the market growth and forecasts. Furthermore, market segmentation makes a distinction between consumers and customers and describes their respective markets. The macro environment describes the external factors that influence MOSH in the larger context. The PESTLE analysis was used as a tool for it. Porter’s five forces was used as a framework for describing the competitive environment and to determine the industry attractiveness. A SWOT analysis was performed to determine MOSH’s prospects within the described context.

Figure 3 - Market and industry attractiveness

Market data Data obtained from a market research report was used to determine the market values of the Danish jewelry market. Furthermore, relevant data obtained from official databases describe the jewelry market in other European markets and the global perspective over jewelry.

The Danish jewelry market Generally, jewelry is part of the large industry of Apparel, Accessories, Luggage and Leather Goods category (also known as Personal Accessories). Based on an extensive market research covering the Jewelry, Watches and Accessories Retailing category in Denmark, several historic and forecast sales details of the category can be described. The analysis is performed for the period 2007-2012 and also presents forecasts for the period up to 2017.

The Jewelry, Watches and Accessories market had sales of US $700 million in 2012, with a negative compound annual rate of -5.9% from 2011 and -0.75% from 2007. The Jewelry, Watches and Accessories achieved its strongest performance in 2008, with an increase of 9.3% compared to the previous year. (Canadean, Jewelry, Watches and Accessories Retailing in Denmark: Market Snapshot to 2017) The graphic representation of the market situation between 2007-2012 is located below. The sales decline is easy noticeable, especially when comparing the years 2008 and 2012. The growth rate is not steady over the years, but rather unstable and variable. However, even when there is a high growth rate e.g. 2011, the sales value is still relatively low. Furthermore, in 2012 both a major decrease in the growth rate and sales value is displayed. An explanation for the negative situation between 2007 and 2012, especially after 2008, could be the economic crisis that hit Europe and inherently affected Denmark as well.

Figure 4- Jewelry, Watches and Accessories Sales values in Denmark 2007-2012

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Looking ahead, the Jewelry, Watches and Accessories category is to grow at a compound annual rate of 0.93% between 2012 and 2017, reaching sales of US$700 million in 2017. This represents a total growth of 0.8% from 2007 and 4.7% from 2012. (Canadean, Jewelry, Watches and Accessories Retailing in Denmark: Market Snapshot to 2017) As opposed to the 2007-2012 situation, in the 2013-2017 period, the rate of growth and the value of the sales are to be more stable. Between 2013 and 2014 there is a noticeable decrease of 3.5% in annual growth. This practically translates into no growth at all in 2014, compared to 2013; but also into the fact that the sales value remained the same.

Figure 5- Jewelry, Watches and Accessories Sales values in Denmark 2012-2017

The market is forecasted to grow slightly in 2016, only to slightly decrease again in 2017. What is important to observe is that regardless of the variation of the growth rate, the sales values are to remain constant or increase, but not to decrease in the following years.

It is safe to state that the market has good prospects for MOSH, in the sense that the Danish jewelry market seems promising. However, this analysis is based on a forecasted prognosis and cannot entirely be related on. As with any market research, although efforts to provide accurate data are made, the facts cannot be guaranteed.

Other European markets Although in the starting year MOSH focuses solely on the Danish market, if the business proves successful, the plan is to extend to other European markets such as Germany and Scandinavia, but also the United Kingdom and Eastern Europe.

Although not directly relevant for the purposes of this report, a brief research has been made on these countries as well.

Figure 6 - Other European markets

Apart from the United Kingdom which displays a steady but small decline in market size, all the other countries display overall market growth in the following years. Although not extensive, this analysis provides an optimistic view on the European market and on MOSH’s prospective expansion.

Jewelry in the global perspective With constant value growth expected to remain relatively small, global personal accessories sales in 2012-2017 are to see a gradual recovery from the decrease in 2012. The constant compound annual growth rate is predicted to be 6%.

(Euromonitor, Personal accessories: global trends and prospects, pp 35)

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Figure 7- Personal Accessories: Global value sales

The constant value growth in 2012-2017 is expected to be higher than over 20072012, signaling a revival in consumer demand for mid-priced and premium brands.

Although costume jewelry is expected to be one of the fastest growing categories in personal accessories, it is expected to grow at a slower pace than precious jewelry. (Euromonitor, Personal accessories: global trends and prospects, pp 35) As stated before, jewelry is part of the Personal Accessories group and often analyzed as part of the group. Although the exact value of the percentages might vary from country to country, the relevance of the above graph is that it illustrates that jewelry is by far producing the most sales among all the other categories in its group. That is helpful for knowing that in the personal accessories group, jewelry has the largest share.

Market segmentation Since MOSH intends to sell both directly to consumers and indirectly through retailers, the market segmentation addresses both categories. Primary and secondary data is used to define and size the markets. Both the consumer and wholesalers market size are estimated.

Consumer market size Although the detailed consumer profile will be described in the next chapter, the results of the survey provide guidelines to how the consumer market should be divided. The questionnaire reveals the criteria on which the target market should be based. Following this, the respective market can be analysed through secondary data.

Regularity of jewelry wearing For the female segment, 35 of the 62 women stated that they wear jewelry on a daily basis and 9 only on special occasions, while 21 wear jewelry both daily and on special occasions. Only one woman responded that she does not wear jewelry.

For the male segment, 16 of the 35 participants answered they do not wear jewelry.

A number of 8 men answered that they wear jewelry on a daily basis, while 9 men answered that they wear jewelry only on special occasions. Two of the men answered they wear jewelry on both special occasions as well as on a daily basis.

Figure 8- Regularity of Men wearing Jewelry

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Figure 9- Regularity of Women wearing jewelry

By analyzing the answers to the question and comparing the results from the two segments, it can be stated that women, generally wear jewelry more often than man. Furthermore, almost half of the male respondents never wear jewelry.

Based on this information, MOSH can clearly decide which gender segment to focus more on. It is more legitimate for MOSH to focus on women jewelry. Although the strategy for the future is to expand to the men segment, for the first year, MOSH will only create women jewelry.

Income and spending habits The information gathered through the survey revealed that income increases with age. Although not all respondents disclosed their income, from the ones that did, it can be stated that older women earn more than younger ones. Furthermore, women with larger income tend to spend more on jewelry on a yearly basis. Younger women show more enthusiasm and tend to be more fashion focused. However, older women have more buying power. The peak spendings are reached at the age of 28, from where they slowly decrease. Although the number of answers is very limited and the survey does not reflect the whole Danish market situation, it can be used as a guideline. Taking this into account, the age range on which MOSH will focus is 20-35.

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Figure 10- Danish women average jewelry spendings on a yearly basis

Since the company will be based in Copenhagen and since the design generally addresses fashion oriented women, who give great importance to appearance and have direct access to the most recent trends, MOSH decided to mainly focus on women who live in large urban areas in Denmark.

In order to ensure MOSH’s growth and profitability, the customer base has to be large enough to sustain the business. Markets that are too small are not desirable as they do not contain enough customers. On the other hand, very large markets invite numerous well-financed competitors and require extremely expensive marketing campaigns. That is why, MOSH has to ensure that there is substantial number of women who fit the target market and support the business. (Abrams and Borrow, 2005) Sizing this niche market is a matter of observation more than an exact determination. However, demographic and geographic information can be found in local governmental agencies and official databases. Denmark statistics data was used to estimate the market size. The graph below represents women between 20 and 34 years old who live in urban areas and earn between 25 000 and 99 999 DKK on a monthly basis.

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Figure 11- Consumer market size (Danmarks Statistik)

The graphic reveals an estimated number of 70 000 women who fall into this category. This represents approximately 16% of the total number of 432 000 women (electronic Appendix 1.1) between 20 and 35 years old that live in Denmark, independently of region or income. This number is stated because, in the long term strategy, MOSH intends to expand its market to women who might not afford to be constant costumers, but might purchase a piece of jewelry at least once.

It is arguable to determine which locations are considered urban and whether the suburban areas should be included. The choice of the cities was based on a ranking of the largest cities in Denmark. The data is dated back in 2012 and changes might have occurred since then. As previously stated, this is a mere estimation of the market size. However, it provides an overall idea of the number of potential customers.

Jewelry retailers market size The 5th question in the questionnaire, “Where do you buy jewelry?,� reveals what are the consumers’ preferences in terms of purchasing location. For this question male respondents were also considered, taking into account that they also buy jewelry, either for themselves or as a gift for women.

Out of the total number of 62 women, 46 stated that jewelry stores are their preferred location, followed by 43 who shop online and 38 who buy from clothing stores. Gift shops and department stores are preferred by 8 women. Jewelry fairs, flea markets and other locations are preferred by less than 5 women each.

The question was multiple choice. Although with much smaller proportions, the preferences also coincide for men.

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Figure 12- Preferred Purchasing Locations

As far as wholesale customers are concerned, the answers reveal that jewelry stores should be the primary focus of MOSH. The company should make efforts in attracting and retaining such customers. Online shopping and clothing stores follow closely and MOSH should also consider these channels as lucrative ways of selling.

According to the Orbis database (electronic Appendix 1.2), there are currently 1115 active jewelry and watches retailers in Denmark. These data refers only to the brick and mortar shops. Adding the online and clothing retailers, this number would considerably increase. On an article dating back to 2002(Heebner, JCK Magazine,2002), it is stated that there were more than 600 jewelry retailers country wise. The number of jewelry retailers has, therefore, approximately doubled in the past 12 years. This is also proof of the market growth.

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Table 1 - Retailers in Denmark

Market analysis conclusion The market analysis provides a positive overview over the jewelry market. Not only is the market growing in Denmark, but also in Scandinavia and the rest of Europe. This provides an optimistic perspective for the growth and development of MOSH outside of Denmark in the future years.

Jewelry has the largest share of the personal accessories category. That is promising, not only because the whole category shows signs of growth in the near future, but also because it is the most preferred accessory. This means that customers tend to buy jewelry over other personal accessories.

Looking at the consumer market segment, the number of 70 000 women who fit in the narrow target market is large enough to sustain the business. Furthermore, the number of women in the specific age and income range is even larger, when disregarding the urban areas focus. That means that MOSH has the opportunity to expand its market share to even a larger extent.

The number of jewelry and watches retailers has doubled since 2002. Not only does this support the data stating the market is growing, but it also supports the primary data in which respondents state that jewelry stores are their most preferred purchasing locations.

Porter’s five forces Porter’s five forces is an industry analysis used to determine the positions of competitors and suppliers and how the whole market is constructed. It was developed as a way for assessing the attractiveness of different industries.

Figure 13- Porter’s Five Forces

The first part is dealing with the threats of new entrants and it analyses the degree of difficulty of bringing a new company and a related product to the market. The second part is concerned with the threat of substitutes. The third force is focusing on how much power the buyers have on the company. The fourth component deals with the supplier power exercised on MOSH. The fifth part is called competitive rivalry and is concerned with how much pressure the competitors can apply on MOSH. (Johnson et al., 2008, pp.60) This analysis is performed within the Danish jewelry industry. The industry is constructed of many jewelry companies that largely differ from each other. The companies are differentiating themselves through size, age and also which niche they are serving. However, since the niches are interlinking strongly, the whole industry will be analyzed.

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Threat of new entrants The threat of new entrants describes how easy it is for a company to enter the market and to sell their products. This is relevant since the easier it is to enter, the fiercer will the competition be. The threat of new entrants depends on the extent and the height of the entry barriers. (Johnson et al., 2008, pp.61)

Figure 14- Threat of New entrants

The threat of companies entering the market is relatively high. This is the case due to the fact that the industry already has a large number of companies competing.

One of the strongest reasons for new companies entering the market is that high investments are not required. Since large production facilities and large stocks are not a requirement for jewelry production, there are no high expenses for premises.

Furthermore, the company does not require high-tech equipment for the production. Since there are many companies competing, the economy of scale does not have such a big influence on the new entrants as it would have on other industries. Mostly the large incumbents of the market are benefiting from the economy of scale. They are able to produce on a cheaper basis, since they produce larger quantities. Otherwise it is more common in the fashion jewelry industry that the incumbents are benefitting from an economy of scope, which means that the companies are reducing their costs by producing different types of pieces.

Another reason why the barrier of entering the market is low is the experience curve, even though it is not the most relevant factor for the industry. Formal academic training in the field of jewelry design and crafting is not required and therefore, people who do not have designer background are still able to enter the market and compete with the existing companies.

The entry barrier is also lowered since it is easy for companies to gain and establish channels for supply and distribution. The suppliers can easily be found and reached. For reaching distributors, there are distribution channels which are designed for new entrants and it is also relatively easy to get their products into the demonstration rooms of independent jewelry distributors. The independent jewelry distributors can decide freely whose products they take into stock.

However, if they are also selling pieces for renowned companies, they might be forced by the large companies not to display and sell the pieces from the new company.

This would happen in the case of larger players’ retaliation. The possible retaliations that a new company can face from a larger competitor might scare away possible new entrants. Possible retaliations include marketing blitzes and price wars, which can push the incumbent out of the market. This could increase the entry barrier.

Another reason why the entry barrier is low is that there is a moderate to low differentiation between the different companies. This is because once a trend arises, most companies tend to follow it. Through this, the designs of the different companies could be similar. Furthermore, the materials most companies are working with are similar to the others’. However, a way to differentiate is to provide an interpretation of the trend and to create a distinctive design. It is also possible for the companies to differentiate themselves through the brand.

A reason that lowers the chance of new entrants is that the existing companies have relatively strong brand names this makes it hard for the new companies to compete with them. What helps the companies to enter is that the regulations are limited but still important enough that some companies might be scared away.

Threat of substitutes Threat of substitutes describes how high is the risk for a company to have their product or service replaced by another company’s product or service that offers a similar benefit through a different process (Johnson et al., 2008, pp.62).

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38 MOSH

Figure 15- Threat of Substitutes

The threat of being substituted can be described as moderate. This is because there are several fashion items that can substitute jewelry. However, they are not directly competing for the same market. Possible substitutes could, in general, be other types of accessories such as hairpins, handbags, hats, belts, scarves, and glasses.

Another substitute would be just no jewelry at all, or “do it yourself� jewelry. These are substitutes for the jewelry industry but they are still direct competitors in the fashion industry. The reason why customers might decide to go for a substitute product could be because of the price/ performance ratio.

The price/ performance ratio refers to the ability of a product to provide performance for its price. When comparing with substitute products, if the performance of the substitute is similar and the price is lower, then the customers are more likely to purchase the substitute product.

Most of the accessories that have been stated before have a practical purpose. For instance, handbags are used to store items and glasses are used to increase the sight. Classic pieces of jewelry are mostly used for aesthetic purposes. But since jewelry is a piece of aesthetics and self-expression, they are not really threatened by the substitute products, although the substitution option exists. This is why they are rated as moderate.

The power of buyers In this part of the analysis, the power of the buyers is evaluated in order to determine whether the buyer has the power to force the company to lower prices - e.g. if the company is relying on only a few customers, then these customers have a lot of power. If the company has many different customers, they do not have the force to push the prices down. (Johnson et al., 2008, pp.62)

Figure 16- The bargaining power of buyers

The power of the buyers can be described as moderate. This is the case since within the industry there is not the case of concentrated buyers. This means that the company does not rely on a limited number of buyers, since it is possible to sell the jewelry directly to the customer through the internet and also to the different distributors. Currently, in Denmark there are over 1150 jewelry retailers (Orbis, 2014). That is why MOSH is not only depending on one or a few customers.

A reason that increases the power of the buyers is that the switching cost is low.

If buyers are not satisfied with the product or they do not like the design it is very easy to switch to a competitor. And this allows the buyers to be independent, since there are many other companies within the industry.

There is a buyer competition threat within the industry. This is the case since “DoIt-Yourself� projects have become more common after the financial crisis. Since then, people have been trying to save money (Arrington, 2013) through making things themselves. This also applies for jewelry.

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40 MOSH

Another reason for the competition buyer threat is that some of the retailers are also producing jewelry under their own brand. If their brand develops to a great extent, they might desire to sell exclusively their products and leave out other jewelry producers, like MOSH. Being able to buy large quantities of jewelry, the large retailers can acquire more power on the company. Furthermore, they have the power of influencing the other retailers as well. In the industry the sensitivity towards the price is not very strong.

People are willing to pay for good quality and design. But the price quality ratio must be acceptable.

Another case of what could happen is that they see that one specific design is high on sales and they decide on producing a similar looking product under their own name. To avoid that, certain steps can be waged to protect the design. By registering at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) it is possible to get, even though just to a limited extent, a copyright for the designs (Boothroyd, 2011).

The power of suppliers The supplier power is the part of the analysis determining the influence of the different suppliers over the company. Suppliers are those who provide the company with all the necessary materials, parts and equipment (Johnson et al., 2008, pp.62).

Figure 17- Bargaining power of suppliers

The power of the suppliers can be described as low. All the materials used for creating MOSH jewelry have to fit the EU regulations. That regards especially the percentage of released nickel that comes in contact to the skin. It is also important for the materials that they are created through ethical processes, like recycling. This limits the number of possible suppliers but not far enough to say that MOSH will be facing the problem of concentrated suppliers. A concentration of suppliers means few producers who dominate the production of a certain product or material. They can apply more pressure on the companies and force them to comply with potentially high prices. (Johnson et al., 2008, pp.63) Since this is not the case in the jewelry business, MOSH can select and switch between suppliers, according to its needs.

The switching costs can increase the power of suppliers. If the switching cost from one supplier to another is high, then it would give the supplier the power to dictate the price. Since MOSH only requires small amounts of material in the first year, the switching cost is not very high. For the most part, the materials are ordered and shipped through postal services and this does not imply any large cost associated with the shift in transportation.

Receiving materials on an ordering basis only, should involve no switching cost. This is the plan for MOSH, at least in the first year. However, in order to reduce prices, companies could sign a contract with the suppliers to have delivered supplies on a regular basis. Since a contract is normally binding, terminating it before the time stipulated can result in penalty. This will also increase the switching cost.

The last point that could increase the supplier power is the supplier competition threat. This happens when the suppliers eliminate the intermediates and decide to produce jewelry themselves. Forward vertical integration is another term used for describing it. In the jewelry industry, this situation is highly unlikely to occur.

The silver and stainless steel providers might consider it. However, it would not be their area of expertise. The same applies for the other material suppliers.

The competitive rivalry The competitive rivalry is the fifth part of the Porter’s five forces. This part analyzes the fierce competition within the market between the companies who aim to capture a larger piece of the market share. Competitive rivals are organizations with similar products and services aimed at the same customer group (Johnson et al., 2008, pp.64). The main competitors for MOSH are Pilgrim, Kranz & Ziegler, SCENCE Copenhagen, Maria Black and Von Lotzbeck this part of the analysis will be focused on them.

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42 MOSH

Figure 18- Competitive rivalry For the competitive rivalry there is a moderate chance of having a strong rivalry within the industry. This is dues to the fact that it is a very large industry, in which a lot of firms and designers are competing for market share. Within the industry there are several hundred different companies of different sizes.

One of the reasons which reduces the competitive rivalry is that the industry is divided in such a way that there are a few large firms, like Pilgrim, that dominate the industry and many smaller firms, like Von Lotzbeck, that coexist within the market. The smaller firms, in general, do not challenge the large ones directly since they focus more on niches and try not to directly intrude into the market segment of the large companies. The direct competitors for MOSH are mostly small, but Pilgrim is larger than all the others. Therefore, Pilgrim has more power than MOSH does.

The exit barrier is also a reason that can increase the competitive rivalry. The high exit barrier is when a company has high investments in non-transferable fixed assets; this is the case for machinery. Under the high exit barriers also fall the high redundancy costs. This is the case when a company has many employees with high salaries this can result that the company has to pay the employees their redundancy payments, there is also the case of other closure costs like for contract contingencies with suppliers and buyers. Large companies have, therefore, high exit barriers. The smaller companies do not have such a high exit barrier. Through having a high exit barrier companies will try to survive longer in the market and increase their market position to ensure that they will not fail.

The industry growth rate also influences how intense the competitive rivalry is.

The jewelry industry is expanding since 2008. In 2008 the production of jewelry and related articles for Denmark had a value of 996.4 million DKK. In 2013 it was noted for 1882.4 million DKK. This is an increase of 88.9% and therefore, can be described as a steady growing market as it can be seen in the table below.

Figure 19- The Value Net

But since at times it is only growing slowly there is the danger of the different competitors fighting for the market share to ensure their growth. Another reason for the competitive rivalry being medium is the lack of diversity in the market.

Since there are so many companies, there are often similarities in the products and designs.

Through these factors there is a low to medium competitive rivalry since the companies will fight for their market share. But since the market is expanding there is enough space for the companies to coexist. For smaller companies it is possible to exist as well since they are able to focus on niches. But there is still a chance that the larger companies will user their power to push out smaller competitors to ensure that they have an increase of their market share and therefore a stable and secure position in the market.

Porter’s five forces conclusion For MOSH it is important to be aware that there is a medium chance of having to face a strong competitive rivalry once they enter the market. This is since the competitors are fighting for the same niche.

The suppliers do not have high power over MOSH. Their strength is depending on which material they are supplying. The buyers have different degrees of influence depending on who they are. The consumers do not have a high power.

The wholesalers, on the other hand, have more power, since they can buy larger quantities and have more leverage over the company.

Although there is a large variety of personal accessories that can decrease the sales of MOSH, the threat of substitutes is moderate. That is mainly because

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jewelry is bought for its aesthetic features and generally, represents the largest share of personal accessories.

MOSH

The threat of new companies entering the market is high since there are many opportunities for new companies. While this is an advantage for MOSH, it is also a disadvantage, because the market invites other companies to enter and compete for the market share.

Value Net The value net is an illustration of organizations in a business environment demonstrating opportunities for value creating cooperation as well as competition.

The illustration shows how the different segments, customers, competitors, complementors and suppliers work together with and on MOSH. The customers are jewelry stores and private persons, which buy the items directly from MOSH. The main competitors for MOSH are Pilgrim, Kranz & Ziegler, SCENCE Copenhagen, Maria Black and Von Lotzback. These companies are similar in terms of design and pricing. The complementors are mostly online and fashion stores. The Suppliers for MOSH are CRED Sources, Capella Manufacturing. These companies supply MOSH with recycled metal, especially silver. Other suppliers are slaughterhouses and lumber productions, or wood working firms. The slaughterhouses can supply MOSH with horn. The lumber productions and the wood working firms can supply MOSH with the required wood pieces for the jewelry pieces. The value net can be split up into four triangles (Johnson et al., 2010, pp.62).

Figure 19- The Value Net

PESTLE

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The PESTLE analysis is a tool that provides a framework for investigating and analyzing the external macro-environment for an organization. The frame work identifies seven key areas that should be considered when attempting to identify the sources of change. The acronym PESTLE stands for Political, Economic, Social, Technology, Legal, and Environment. The PESTLE analysis is an adapted form of the PEST analysis. (Cadle et al., 2010 pp.3)

Figure 20- PESTLE analysis

Political This section describes how the politics could influence the industry. This can be results from a change in the government which results in changes in existing policies and priorities, as well as introduction of new government initiatives.

(Cadle et al., 2010, pp. 4) The politics can influence the industry in various ways. If major changes occur, for instance, if a new party has the majority and it decides to regulate the trade with other countries differently, this will entail changes in the supply chain, if the materials or production are procured from abroad. This is highly unlikely to occur, not only due to the general EU regulations, but also because it will negatively affect all industries.

MOSH

46 MOSH

It is actually more likely that connections with the EU and Scandinavia will be improved through politics. This would give countries within the EU the possibility to trade more feely and will establish a better price competition.

The tax policy can also change through the politics. The changes in the taxes will also have influences on the industry and they can be positive or negative depending on whether the taxes are increased or reduced. Furthermore, the politics also influence laws and regulations. Major changes in relevant laws will also have an impact on the company.

Economic The economic part of the analysis describes the economic factors that influence the industry within the target country. However, since the globalization is taking place it is important to not only look at the economy of the target country but also at the global economy. (Cadle et al., 2010, pp.4) During the financial crisis, the market for jewelry decreased. The population practiced a more responsible way of dealing with their finances. The focus was on buying the necessities and buying luxury items was avoided. After the crisis the market has recovered and since then has continually been growing.

The economy indirectly influences the industry. It directly affects the consumers.

If the economy is strong then the consumers are willing to spend more money on personal use and luxury goods. On the other hand, if the economy is weak, they limit their expenditures.

Social The social part of the analysis covers information related to cultural aspects.

There are several factors that influence the jewelry market from a social view point.

The demographic change is a problem that influences the jewelry industry. Since the population in Denmark is aging, the main target group is changing with it. In the recent past there has been a decrease in birthrates, which affects the age distribution over time and creates a higher average age.

Another factor of the social area is the fact that there is a high degree of awareness regarding health within Denmark and the EU, in general. People are mostly willing to buy safe products that will not affect their health. That is why the materials used within the jewelry industry must be safe for use and handling. This will also be covered in the legal part of the analysis.

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Figure 21 - Women Age Distribution in Denmark

During the financial crisis there was a shift in consumer behavior. Before the critical period, consumers spent more money for personal use and non-essential products. During the crisis, they developed reluctance towards these kinds of expenditures and did not spend as much, especially for luxury goods. In the recovery phase, were security was regained, the luxury purchasing habits was reinforced. (Passport, 2013) For Danes it is also common that they are willing to spend more money on a product of good quality. Therefore, the quality-price ratio is important for their buying decisions. It also has become more common in the Danish society to search for and buy ethically produced items. They display great interest in the conditions under which a product has been made.

As revealed by the Future workshop and the individual interviews, the consumers tend to expect a broader image of the product, in the sense that the story behind the product is important and can heavily influence their preferences.

The popular trend of researching on the internet before buying a product is particularly present for luxury items. Even when purchasing from a brick and mortar shop, customers consult the internet beforehand, either for studying the trends or comparing prices.

Technological The technological sector has been described by Cadle et al. (2010 pp. 4) in the following way “This area covers factors arising from the development of technology.

There are two types of technological change: there can be developments in IT and there can be developments in technology specific to an industry or market ...�

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The first technological change that affects the jewelry industry is the internet, in general. The internet changed the shopping patterns of the consumer through providing an easy way to compare different brands, products and prices. It provides an accessible way of finding background information of companies and their activities. It also raises the awareness for the products. Furthermore, the internet allows many customers to buy online.

Another technological factor that has influenced the industry is the possibility of using the computer for designing 3D models of jewelry. This also provides the option of producing the jewelry through industrial processes where the production of the jewelry is automated. 3D modeling allows 3D printing, which has become more and more accessible and cheaper. Its use is no longer limited to industries only, but it is now available for private use. Since there are more and more private persons using 3D printers, it is also very likely that the trend of self-designing and 3D printing jewelry will grow.

Figure 22- PESTLE - Technology Another technological influence that the industry is facing is interactive jewelry and accessories. For instance, smart watches are very common. There is a high chance that there will also be a trend of other interactive and smart jewelry pieces.

The production process is also influenced by technology. In the case of mass production, automized processes allow a faster production speed. Therefore, the production is cheaper and larger quantities can be produced in less time. Since the machines exist for a long time, they have become cheaper. This means that it is also possible for smaller companies to have production facilities that are automated and industrialized.

By technological means, it is less complex to artificially produce stones and gems.

This means not only that the prices of such stones decreased, but also that they are more accessible.

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Legal This part of the analysis is concerned with laws and regulations that can influence the industry. They can be either on a national or international level.

In order to regulate the amounts of dangerous materials that can be harmful to the health, on an international level, there are several laws regarding the amounts of other trace materials in the jewelry.

The REACH program, which stands for Regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals, is checking if the chemicals that are used for the processes and the production follow the EU norms (CBI Ministry of Foreign Affairs of the Netherlands, 2013a). There are several laws that are part of the REACH program.

There is the law that regulates the amounts of lead contained by jewelry pieces which sets the limit within the European Union at 500 mg/kg for each part of the piece of jewelry. (CBI Ministry of Foreign Affairs of the Netherlands, 2012a).

Another law is concerned with the levels of cadmium within products. It is limited for jewelry to 100 mg/kg. The machinery for the production is also not allowed to have pieces made from cadmium (CBI Ministry of Foreign Affairs of the Netherlands, 2012b).

Figure 23– PESTLE - Dangerous chemicals in jewelry

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Another aspect to be considered is the law that regulates the amounts of nickel in jewelry. The law differentiates between different pieces of jewelry. Jewelry that is inserted into pierced ears or other body parts are allowed to have a migration limit of 0,2 (microgram/(cm^2 ) )/week of nickel. For jewelry pieces that are intended to come into prolonged contact with the skin such as necklaces, bracelets, rings and similar items it is allowed to have a migration limits of 0,5 (microgram/(cm^2 ))/ week of nickel (CBI Ministry of Foreign Affairs of the Netherlands, 2013b).

There is another law that limits the use of azo dyes in textiles and leather. This law is directly relevant for the MOSH, since a lot of jewelry pieces are also made from or with leather and textile. This law prevents the usage of any azo dyes that release certain aromatic amines (CBI Ministry of Foreign Affairs of the Netherlands, 2012c). The use of Mercury is also limited.

There are also laws regarding the packaging of products. The packaging has to describe the materials which have been used, so that they can be recycled (CBI Ministry of Foreign Affairs of the Netherlands, 2012d). The size of the packaging is also regulated. The size has to be large enough for safety and hygiene. (European Parliament and Council Directive, 2009).

Additionally, there are laws that prevent the use of certain materials that originate from endangered species. The law that protects these is called CITES, which stands for Convention on International Trade in Endangered Species of Wild Fauna and Flora (CBI Ministry of Foreign Affairs of the Netherlands, 2013c).

Another law that applicable in this industry is the law concerned with the liability for damage caused by defective products. This law can be followed by complying with European safety standards (CBI Ministry of Foreign Affairs of the Netherlands, 2012e). It is also possible for the companies to register their intellectual property, such as the designs of their pieces. This can be done through the Office for Harmonization in the Internal Market (Trade Marks and Designs). Through this it is not possible for other companies to copy the design.

These laws and regulations are always susceptible to change with time and therefore, they have to be continuously reviewed. There is also the possibility for new laws to be enforced, which can influence the activities of MOSH. It is also possible for different countries to have different limits for the used chemicals and trace elements.

Environmental / Ecological The Environmental / Ecological sector of the analysis is dealing with arising concerns about the natural environment. (Cadle et al., 2010, pp.5) Since the problem with climate change has become more prevalent, consumers are becoming more and more likely to focus on environmental friendly solutions.

Precious materials are often used in the jewelry industry. The problem with such materials is the process of extraction. Mining is required to gain new access to raw materials for producing precious jewelry, even though most precious jewelry is created with recycled materials. Mining is highly unfriendly to the environment, since it impacts the water quality of the surrounding areas and has a high carbon output which contributes to the climate change. Furthermore, it involves erosion, fauna and flora disturbance and many other factors that negatively influence the environment.

To avoid being dependent on the mines it is important to recycle. The advantages of recycling are important because the recycling process emits a lower carbon footprint.

However, chemicals are used in the process. Furthermore, the process still requires a lot of energy, which makes it not the optimal solution for a complete “green� solution. But it is still a right step into an environmental friendly direction.

Through recycling, a cradle to cradle system can be implemented and materials can be reused several times. This is not only an option for the jewelry pieces themselves but also for the packaging.

In general, companies tend to have a high impact on the environment and that is why it is important that they constantly reduce their footprint. For gaining a relatively green footprint there are several things that have to be considered.

For instance, the waste in production has to be reduced, the supply chain must be sustainable and the parts should be from a local area or nearby locations, to reduce the carbon dioxide output resulted from transport and the materials used in production should be recyclable.

PESTLE conclusion The PESTLE analysis allows MOSH to determine the external forces that influence their competitive advantage the most. The economical factor has the highest potential of affecting the company, either in a positive or negative fashion, depending on whether the economy is strong or weak.

Another important factor to monitor closely is the legal area, since there are strong regulations regarding the production of jewelry in terms of dangerous chemicals.

It is also recommended for MOSH to adjust to the Danish social environment, with an emphasis on creating high quality and ethical jewelry.

Furthermore, ecofriendliness is another important aspect of high importance for the Danish society in general and that is why MOSH has to ensure a low carbon footprint. The internet changed the consumers’ purchasing habits. Therefore, MOSH has to grasp the opportunity and use the online media to create consumer awareness and increase sales.

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SWOT The SWOT analysis is a useful method for understanding the company’s strengths and weaknesses, while identifying the opportunities and threats it faces, in the described context. Generally, strengths and weaknesses are internal to the company while threats and opportunities are influenced by external factors.

The analysis is useful in helping with the discovery of opportunities the company can exploit. By understanding the weaknesses, MOSH can manage and eliminate the threats that otherwise would catch the company unaware of. The firm can successfully compete in the market by recognizing the strengths and using the SWOT analysis as a framework for developing a strategy of distinguishing from the competitors.

Figure 25 - SWOT analysis

Strengths Although the term ‘innovative design’ is quite broad, what MOSH intends to create is jewelry with a personality. The designs will be in accordance to the fashion trends. However, they will have a character of their own, in the sense that they will

not be confused with mainstream jewelry. The intention is to use design for creating the company’s brand and create a story and a context in which customers can give a meaning to the jewelry and develop emotional attachment. The combination of rough and smooth, organic and industrial, old and new are some of the core design features that will be implemented to all pieces in different forms. The idea is to create a recognizable brand with a distinctive design and story.

The metals MOSH uses for the making of jewelry are stainless steel and silver.

The aim of the company is to have as small of an impact on the environment as possible. The company will only use recycled metals. By doing this, all the emissions and pollution created by the mining processes are avoided. As part of its social responsibility, MOSH will make it its mission to constantly reduce its contribution to pollution.

Apart for the metals, organic materials such as leather, horn and wood will also be used. To maintain the environmental friendliness, MOSH will procure these materials from sources where they would be considered waste. Apart from the environmental aspect, organic materials also play an important role in the design, since they will mostly give the distinctive design.

One of the important points of critique in the future workshop was quality.

Participants mentioned a mismatch between the good quality, price and design.

They stated that, for the most part, jewelry has good design but is very low quality and cheap. On the other hand, precious jewelry is normally very high quality, but often boring and very expensive. MOSH will create jewelry to fill in the gap between these two extremes.

Not only is it more efficient to produce in Denmark, but also value adding.

Producing in Denmark is definitely more expensive than having a production facility in the East. However, this creates the advantage of short distances and close connections. Furthermore, as a start-up, it is important to have full control over all the processes in the company.

And since the company is starting small, in the first year, there will be only one person in charge of designing and creating the jewelry and it will be done manually as opposed to fully automized mass production. On the other hand, customers have shown an increasing interest in the country of origin of fashion items, as well as the working conditions under which they were produced. MOSH will secure its position as an ethical jewelry company by producing locally.

Packaging makes a product appear more desirable and, if used effectively, can be a decisive factor in the purchasing decision. Good quality packaging is part of the branding and helps create the image of a valuable piece of jewelry. Especially for jewelry, which can often times be bought as a gift, creative packaging design can make an impression. Furthermore, most women keep the packaging and use it

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as a jewelry box. Therefore, the packaging will be durable, aesthetically beautiful and has to express the brand’s message.

Weaknesses MOSH is a start-up company with limited resources. Being founded by two students, the limitations of capital forces the company to start small. Loans or venture capital are to be avoided, mainly due to the fact that this will impair the natural growth of the company. Pressure from the investors might be applied and this might influence the designs and business strategy of the company, which is not advantageous. On the other hand, having no external funds translates into a very slow and small start, as confirmed in the interview with Vera Vega.

The lack of experience of the two students can make the process even slower.

Although they have been trained in Innovation and Business, which entails entrepreneurship concepts, they do not have practical experience outside the university. Professional advice is often very expensive and with the limitation in capital, might not be affordable. Therefore, most of the actions required to start and run the company have to be dealt with by the two students. They are prone to make mistakes and learn by doing.

The jewelry market is well established and quite large in Denmark. While this is great news in the sense that it is easier to enter an existing market than to create a new one, MOSH still lacks a customer base. The customer base along with the brand has to be created from scratch. This will be a slow process and therefore, profits will also be slow to arise.

There is a higher and higher demand for branded products. Therefore, it is important for MOSH to create its brand. Starting up as an unknown name is a weakness for the company. However, by consistently using and applying the brand, as well as flawlessly delivering the value proposition, the company has good chances of creating recognition.

Opportunities As previously stated, entering the jewelry business is easy. There are hardly any barriers and there is enough space for creating or addressing niches. MOSH has the opportunity to attract a share of this market. Although the competition is fierce and big brands hold the largest share of the Danish market, it has still potential. In a large market the customer preferences are varied which increases the chances of MOSH reaching its ideal customers.

Although most jewelry is still sold in stores, online selling has shown significantly increases in the recent years. MOSH’s strategy is to sell online and through

distributors. The company starts with limited resources and an online shop is the best solution for direct selling. And this is the right time for doing so, since it coincides with the trends (CBI Ministry of Foreign Affairs of the Netherlands, 2011) and with the consumers’ preferences. In the questionnaire, online shops were the second most preferred locations for purchasing jewelry.

Denmark is strategically placed between two great economic powers in Europe.

Not only is it part of Scandinavia, but also neighboring Germany. This provides great prospects in terms of market expansion and growth. After well establishing its brand and economic power in Denmark, MOSH can reach and expand towards the other countries in the north and in Germany. (CBI Ministry of Foreign Affairs of the Netherlands, 2011)

Threats MOSH mainly uses recycled metals for producing its collections. While this is a strength, it also represents a threat. The company will collaborate only with suppliers who provide recycled silver and stainless steel. The number of such suppliers is smaller than the overall raw metal suppliers. That could result in a high suppliers bargaining power, due to scarcity. In order to avoid shortage of materials, the company will have at least three open options for suppliers at all times.

The threat of plagiarism is present in all fashion sectors. When a design becomes successful, inherently, counterfeit items copying the design will appear. This is an issue that all fashion firms face. Although there is little the company can do to protect its designs, this is not a great problem, as the fake jewelry pieces are generally cheap and poorly executed. On the other hand, competitive companies who have the resources of creating a good quality identical design have no interest in doing so, since they are also focusing in building their own image and brand.

The downside of entering the large market of jewelry is the fact that having so many options, it is very easy for the customer to substitute one piece for another.

Having a price range of moderate to high, the substitutes for our products would be precious and branded jewelry. It is only a matter of personal preference and the only power MOSH has is to create special designs that are preferred over the competitors’.

SWOT conclusion This analysis provides an overview on the advantages the company has, yet it reveals its downsides. In the large context of the jewelry industry, a special emphasis should be put on the threats and weaknesses, because MOSH has to make it its business to transform them into strengths and opportunities. This

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SWOT analysis represents a base from which the company has to constantly improve. The analysis should be performed periodically, in order to keep track of the changes and to acknowledge the progress.

MOSH bases its strength on creating quality jewelry at a reasonable price, while caring about the environment and has social responsibility. The company must be aware of the fact any other start-up jewelry business in Denmark can rely on those strengths. While these are important traits, what is really unique about MOSH is the design of the jewelry, the message it transmits and the fact that the jewelry is tailored to fit customers’ needs.

Therefore, in order to stay competitive, the company has to ensure that value is created and delivered to the customer through quality and exclusive design. The biggest weakness for the company is entering in a well-established market with no brand or customer base. The challenge is to gain customers’ trust and to make MOSH jewelry the ideals’ customer first choice, especially because there is a large variety of substitute jewelry customers can buy instead of MOSH. On the other hand, variety in offer also means variety in demand. Out of the large mass of jewelry consumers, MOSH has to find the ideal ones to fit with the company’s style and vision. Provided the company finds its suitable niche, there is a high chance to succeed, taking into account the many opportunities that the growing jewelry market offers.

Sub conclusion To conclude, the Danish jewelry market is fairly attractive for new entrants. The market already displays high volume sales of over $700 million and is predicted to grow even more.

The market growth invites new companies to enter and compete for market share.

As Porter’s five forces analysis reveals, there are low barriers for entering the market. While this is favourable to MOSH, it is also a challenge, since it is easy for other new companies to enter and establish within the market. Once MOSH enters the market it will be fighting within the same niche as its direct competitors. The degree of rivalry is moderate and so is the power of buyers.

Since the main channel of distribution is represented by jewelry retailers and there are over 1115 such retailers in Denmark, there is a high chance for MOSH to succeed in this area. Even if some retailers could be reluctant in collaborating with a new company, there are still plenty of options. Furthermore, there are over 70 000 women in the target group, which is a large enough number to support the business. From the personal accessories group, jewelry has the largest share.

This means that customers are willing to spend more money on jewelry than on any other type of accessory.

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As the PESTLE analysis has proven, there are several external macro environment factors that a new company has to consider. The company has to run according to the economic situation and the laws regarding dangerous chemical along with the environmental and social factors that influence the Danish customer.

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MOSH will face challenges such us entering the market with no established brand and no solid customer base. This makes the company weaker than its direct competitors. Furthermore, the limited capital and no direct experience in the market are also weaknesses that MOSH has to overcome. On the other hand, the size of the market and jewelry that are tailored to customers’ needs are the company’s strong points and they translate into growth opportunities.

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Product/Market Fit Introduction The second research question intends to match the right product to the Danish jewelry market. Based on the questionnaire, focus group and interviews, the features of the product are described. Since the product is tailored to fit potential customers’ needs, a thorough description of both the end users and retailers is provided. Furthermore, the marketing strategy describes the different techniques to be used in order to connect the product to its target market.

Figure 26- Product/Market Fit

The product In order to create the product that best fits the target market, data collected from the questionnaire, focus group and interviews were analyzed. MOSH started with a vision of what this product could be and used the research methods to prove or disprove this vision. By combining the founders’ vision with the feedback from the potential customers, the company can create a frame for the ideal product.

Material preferences Mosh initially intended to only produce non-precious jewelry. In order to get feedback on this intention the following question was asked: “What kind of material do you prefer your jewelry to be made out of?”

Represented by 41.9%, almost half of the women stated that they only prefer jewelry made of precious metals. On the other hand, 12.9% of the female respondents prefer only non-precious metals, while 46.8% prefer both precious and non-precious jewelry. By adding up the numbers, 87.1% of women wear precious jewelry, while 59.7% wear non-precious.

Therefore, MOSH’s intention was disproved. After gathering these informations and performing a further desk research, the team decided that the company will also consider precious metals into the material list. This way MOSH uses the opportunity to reach a larger group of customers and to address their needs.

However, at least in the starting phase, only silver will be used, due to price reasons.

Jewelry type preferences For determining whether fashion jewelry represents or not a big share of the general jewelry portion, the question “What kind of jewelry do you usually buy?“ was used.

In the female segment, 71%, said that they buy trend Jewelry, 35.5% branded jewelry and 29% customized jewelry. Three women did not answer.

Figure 27- Jewelry type preferences

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This question aimed at providing an overview of the purchasing patterns of potential buyers in terms of jewelry types. MOSH initially intended to create fashion or trend jewelry, which is confirmed by the survey. In creating the collections, MOSH will follow the fashion trends but with its own interpretation and design style. However, as also revealed by the desktop research, customers are increasingly interested in branded products. This supports MOSH’s intention of creating a strong brand.

Purchasing decision criteria In order to create jewelry that meets customers’ requirements, criteria on which they base their buying choice were needed. “On what do you base your purchasing decision?” intended to gather this data.

The most important attribute that influences the purchasing decision is design.

90.3% of the female respondents agreed to it. Price follows closely, with a percentage of 77.4%, while material and quality are the third and fourth criteria with 59.7% and 56.5%, respectively. Only 30.6% stated that brand is important, while texture and innovativeness accumulate 9.7% and 3.2% respectively. A single respondent voted other reasons, without specifically stating them.

Figure 28- Female Purchasing Decision Criteria

As it can be seen in the graphical representation of the answers, design, price and material are the most important factors that women considerate when deciding whether or not to buy jewelry. Surprisingly enough, quality only comes forth in the queue. As we discover in the future workshop, that is probably because quality is associated with very high prices.

The ranking of the criteria supports MOSH’s intention of differentiating from the competitors, among others, through design. Furthermore, the company will combine good quality with affordable prices, trying to meet both needs. The fact that the material used is quite high in importance for the customers, supports MOSH’s decision of using both precious and non-precious metals, so that a larger target group can be reached.

Creating the future jewelry The Future workshop enables a group to find and develop solutions for problems.

It was developed by Robert Jungk to allow stakeholders to become involved in the process of creation of a preferred future as opposed to only reacting to it.

The workshop is action orientated and aims at designing the desired future and planning it. (Jungk & Müllert, 1987 ) The future workshop was adapted to the type of feedback needed for jewelry pieces and was divided in different phases.

Negative experience with jewelry This phase is called the Critique phase and was designed to draw out specific issues, problems and generally negative experiences with jewelry. Participants were asked to think of any dissatisfaction they have regarding jewelry, whether it is aesthetics, quality, fashion or comfortability. This was done by following the steps: 1. Collection of critique points. This consisted of a brainstorm with the topic of “Negative aspects and user experience of jewelry”. All ideas were written on the board, without judging or assessing. This phase is especially important because it emphases the dissatisfaction customers face with their jewelry. This is a way of finding out the needs that are not currently fulfilled by competitors. The full list of critique points can be found in electronic Appendix 2.1. Some of the most relevant critique points from the brainstorming are:

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2. Clustering on the board. Ideas were clustered into two groups, based on their areas of applicability. Discussions on how to title the two groups were held and finally the choice was made: Design/Quality and Practicality. Design/Quality referred to the characteristics of the piece itself, while practicality referred more to the user experience. The board cluster can be found in electronic Appendix 2.2.

The most relevant aspects of the cluster can be seen in the table below:

The ideal piece of jewelry In this phase, participants were asked to draw an exaggerated picture of the future, a utopia, fairytale or fantasy story by turning critique points into ideal solutions for jewelry. By using this method, participants were stimulated to find solutions to the critique points without reflecting on restrictions of feasibility, tradition or other barriers. Although some of the solutions are impractical or unrealistic, they might be implementable in the future, or at least they can give a starting point from which a practical solution can be found. (Jungk & M端llert, 1987)

Figure 29- Future workshop - Fantasy phase

All participants were divided into two groups, each with their respective topic.

The participants became creative and used sketches and text to describe their solutions to the specific problems regarding Design/Quality and Practicality.

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Figure 30– Future workshop - Fantasy phase outcome

Some of the most important solutions to the critique points are:

The needs The future workshop was a useful method of discovering people’s current dissatisfactions regarding jewelry. Through analyzing them, the needs can be clearly stated and measure can be taken to fulfill the needs and wants. While some evident points of critique were already considered by the team, others offered a fresh perspective to the matter.

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There is a lack of middle point in the jewelry industry. The participants stated that either jewelry is too expensive or too low quality. According to their perception there is a lack of a middle line of good quality at an affordable price. This reinforces MOSH’s intention of creating good quality jewelry while keeping a moderate price range.

According to the participants, the jewelry advertising is dull, in the sense that all commercial are similar and they mostly include beautiful models wearing jewelry.

MOSH intends on being creative with the advertising and present the jewelry in a fresh, innovative perspective. Furthermore, as one team also illustrated in the fantasy phase, the packaging itself has to promote the jewelry. Therefore the company will particularly focus on package design and use it as an advertising technique.

Most men are not very fond of jewelry. That is also because of the constant and continuous focus on women jewelry. The participants suggested that the men’s jewelry market is underdeveloped. Even though most men do not wear jewelry, the ones who do, have few options to choose from. This is a point of reflection for MOSH. Even though the first collections will focus on women, men should be considered for future collections.

There is an increasing interest in ethical jewelry. That was also confirmed by the participants who admitted to taking interest in the country of productions of the jewelry, as well as the working conditions of the employees there. This reinforces MOSH’s intention of producing in Denmark.

Jewelry selection Since the purpose of this thesis is to reflect on the most important aspects of the process of setting up a jewelry business, the jewelry making process is not described in detail. This is mainly because it is such a complex topic in itself that its analysis would exceed the time and resources allocated for this project. In short, the process involves designing, followed by prototyping and creating the final pieces. Throughout the process, users should be involved, in order to ensure fulfilling their needs and wants to the best abilities. There are different methods, such as workshops and seminars, of involving users in the product development in the design and prototyping phases.

MOSH intends to directly involve users in the jewelry creation and assessment.

For the purpose of this project, participants were asked to provide feedback on already made jewelry prototypes. Their feedback would help with the selection of pieces that will enter the first MOSH collection.

Jewelry assessment In this part of the workshop, a series of 23 pieces of jewelry were presented to the participants. Most of the jewelry was hand crafted by Mihaela Hozmache. As a connection to the questionnaire, the jewelry was made of the same materials as the ones mentioned there. Although there were men attending the workshop, their ratings were not considered, when analyzing the data, since the purpose is to determine women preferences.

Figure 31- Participants rating jewelry pieces

The rating was made based on three criteria: design, combination of materials and style. In order not to get confused, participants were explained the criteria and the rating system beforehand. The design refers to the overall look of the piece and should not be confused with style, which is the personal fashion style of each participant. For instance, one might consider a piece beautiful; however, it does not represent one’s personality and style and thus would never wear it.

When rating the combination of materials, participants needed to watch, feel and assess the pieces, based on how well the materials they were made of go together.

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The participants were given a catalogue with all the pieces. For each piece, there were two columns for positive and negative feedback and they had to rate the piece, based on whether they would wear it or not and on the three criteria. The participants took all the time they needed. All the ratings can be found in electronic Appendix 2.3. The averages can also be found in electronic Appendix 2.4.

Figure 32- Example of the rating system

The aim was to observe how the participants react to pieces of jewelry made of the particular materials listed in the questionnaire, as well as to understand their design choices. By analyzing their ratings a broad outline of how the first MOSH collection should look like would be given. The jewelry that obtained the highest ranking is the following. They are placed in the order of preferences.

Figure 33– Jewelry rating outcome

Linked to the quantitative inquiry, the jewelry assessment provides an insight on how important context is, when seeking users’ feedback. In the questionnaire, plastic was one of the least preferred materials to be used in jewelry. That is most probably because plastic is associated with cheap, mass produced pieces and is not considered suitable for jewelry making.

Surprisingly enough, the forth piece in the above figure is a plastic necklace and has obtained a fairly high score. Put in the right context and with a good design, plastic becomes desirable. MOSH will not, however, work with plastic because it goes against its intention to be an environmentally friendly company.

However, this is an illustrative example of the fact that participants’ answers from the questionnaire are not entirely reliable. It is often the case that customers answer one thing when they are asked, but act differently when they are making a real purchase decision. The factors influencing this decision cannot be controlled.

It is difficult if not impossible to determine which pieces the users would actually buy. Not only is the choice very subjective, but also depending on other external factors such us state of mind and mood. While performing personal interviews with some of the participants, some were surprised with their own rating. Not only were they not able to justify their ratings, but some also changed their mind and wanted to change their ratings. In terms of design, the input received from users cannot be used as the only reference.

Apart from the subjective form of the rating as such, the focus group was also limited in size, age and geography, which makes the results even more relative.

However, the outcome was still valuable, in the sense that it provided a guideline.

Generally, a good design stands out in spite of the limitations. For instance, the third ring from the figure above won a contest on a crowd source jewelry manufacture website. The ring gathered more than 70 votes for the contest. The fact that it was also among the preferred pieces in this focus group confirms the good design.

The general conclusion in terms of design is that the cleaner, simpler designs were preferred. There were various types of pieces they had to choose from.

Complicated pieces with a variety of shapes, colors and materials were presented along with simple, well defined, generally based on geometry ones. From the rating above a tendency towards simplicity and structure is noticed. This tendency can be conceptualized and used in the first collection.

The outcome of the jewelry assessment gives a general outline about how jewelry is perceived and understood by the audience. However, the choice of the pieces for the first collection will be based on a combination of factors. Current fashion trends, general data about Danish jewelry demand and requirements, as well as the feedback from the workshop will all play a role in the creation of the first collection. It is worth mentioning that regarding the fashion trends is an important factor, especially when it comes to penetrating the market and getting retailers to sell MOSH jewelry.

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Figure 34- Use of Individual interviews

By means of the individual interviews the team gathered a better insight on the choices. The explanations are useful to drawing some outlines regarding what makes a piece attractive or not. Although it was decided not to completely rely on the design choices made by the participants in the focus group, the principles behind those choices can express a general perception of jewelry and be used in further development of designs. There were four individual interviews comprised of three females and one male. Although the men ratings were not included in the analysis, the open discussion with the male interviewee provided useful feedback on general jewelry design as well as a slightly different perspective than the female one.

Basic principles of design In order to get a potential customer interested, a piece of jewelry should be eye catching. Although it cannot be clearly stated whether the design itself or the materials create the impact, interviewees agreed that the piece should be interesting and attract. While some people are attracted by the designs which match the current trends, others believe that jewelry should have character and that each piece should represent an idea or tell a story. Either by unusual shapes or innovative combinations, the piece should stand out. For instance, one of the

interviewees related with this pair of earrings which has a shape similar to a squid.

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Figure 35- Squid shaped earrings

Good quality and flawless finishing is a requirement. Interviewees were told before the rating that some of the pieces are prototypes and were asked to disregard this fact and rate the pieces as if they were finished pieces. However, most prototype pieces were underrated mostly due to the unfinished look. The conclusion to withdraw from that is that, the finish has to be without imperfections.

The combination of materials can make or break a design. This results from two almost identical designs of rings. For one model leather, wood and metal was used and for the other rubber, a glass bead and metal. The first was greatly appreciated for its design and combination of materials, while the second was mostly disliked because of the combination of different textures and colors. Interviewees stated that the second ring looked cheap, kitschy and toy-like. Therefore, a good design is not enough. In order for a piece to be successful, it has to have the right balance between design and combination of materials.

Figure 36- Combination of materials example

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Although innovative combinations of materials that are not commonly associated are generally appealing, there is a fine line between a great piece and a kitsch.

It is not advisable to use different colors when different textures have already been used in a piece, for instance. The materials should fit together not only in terms of textures and shapes, but also colors and materials. The wood necklace, which combined a variety of textures, colors and materials, was criticized by most participants.

Figure 37- Wood necklace

People tend to consider on which occasion they would wear a piece of jewelry, as well as if it fits to the clothing article they possess, before making the purchasing decision. That is one of the reasons why it is important to be in accordance to the fashion trends. On the other hand, a unique, smart design that is unconventional is also much appreciated. The key is not to follow the trends to the letter, but to use them as guidelines and make the designs fit to the general styles, while still having their distinctive character. Otherwise, if the piece is too mainstream, it loses its value.

Jewelry should be comfortable. Especially when dealing with innovative combinations and distinctive designs, pieces tend to become uncomfortable.

Whether a cuff is too rough, a pair of earrings is too heavy or a ring is too big and encumbers the wearer, these are design mistakes that have to be avoided.

To illustrate, this cuff’s design was appreciated. However, it was described as uncomfortable to wear by most participants.

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Figure 38- Industrial Cuff

Generally, the combination of leather and metal, wood and metal and textile and metal were the most appreciated, in that order. Moreover, the combination between rough and smooth is quite successful e.g. pearls combined with metal nuts. It is important to state that all interviewees agreed that when organic materials are used, their proportion in the jewelry piece should be smaller than the one of metal, otherwise the combination becomes unbalanced and therefore undesirable. For instance, this pair of earrings, made mainly of horn had a low rating, mostly because of the big proportion in which horn has been used in the design.

Figure 39- Horn Earrings

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In contrast to the questionnaire, which is mainly focused on consumer behavior, the individual interviews focuses on the aesthetics and design quality of jewelry and aims at providing guideline to how should the ideal piece of jewelry be designed so that it becomes attractive and easy preferable by potential customers.

While perfection does not exist, MOSH will still make efforts to combine the above mentioned principles in order to create desirable pieces of jewelry.

Product conclusion The jewelry MOSH will create represent the outcome of the data received through the questionnaire, focus group and interviews. The final products will follow, at their core, the guideline provided by the costumers. The figure illustrates the most important features that jewelry should have from the customers’

Figure 40- Primary data findings

Apart from the general features of the product, such as materials, quality, design and price, MOSH has to consider the features that create the most value for the customer and differentiate the company from the competitors. While the initial value proposition in itself creates high standards in jewelry and the design is distinctive compared to what is currently available in the market, it does not create a clear barrier for competitors. They could reach a better quality and find ways to lower their prices, as well as creating different designs.

The reason why MOSH jewelry is different than the competitors is the fact that the jewelry is created to fit the customers’ needs. As uncovered by the focus group,

customers need to have jewelry more tailored to their desires. The advantage that MOSH has over other small startups in the jewelry business is the approach to the market. Vera Vega stated in the interview that they do not have any knowledge about what the customers need, but they would try to fulfill those needs if they did. Before entering the market, MOSH did the research and discovered the needs of its target customers.

While lacking formal education in the jewelry design field might be considered a disadvantage, formal education in innovation and business creates advantages.

Jewelry designers focus more on the jewelry creation, but often they do not have the knowledge required for starting a business. The design and quality of jewelry is definitely important, but enough to determine a customer to buy. The ultimate purpose of a company is to create profit and that can only be achieved by creating value for the customer.

Of the female respondents, 95% stated in the questionnaire that they develop emotional attachment to their jewelry. People do not buy products for their features, but for how they can use those features and the benefits and value it creates for them. They buy products which reflect their personality and desires.

And since MOSH understands that and involves the customer in the creation process, customers are prone to prefer MOSH jewelry over competitors.

Customer profiling Consumer profiling Consumer behavior is the study of processes involved when individuals or groups select, purchase, use or dispose of products, services, ideas or experiences to satisfy needs and desires. Understanding consumer behavior translates into a successful business. MOSH can only exist to satisfy the target market needs. The company can only satisfy those needs to the extent it understands the people who will use the jewelry it tries to sell. Data about consumers help MOSH to define the market and identify threats and opportunities for the brand. In a jewelry market of an almost infinite number of choices, it is important to identify distinct market segments and develop specialized messages and jewelry tailored for those groups. (Solomon,2011) There are different dimensions that can be used for defining such a large market as the jewelry one. Demographics are statistics that measure observable aspects of population, such as age distribution, income and lifestyle. The demographic variables make consumers the same or different from each other. These data are used to predict the size of the jewelry market. More subtle characteristics such as personality and tastes cannot be objectively measured, but might be extremely important in influencing product choices. (Solomon,2011)

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Demographic dimensions The demographic description refers to the most basic, objective aspects of the potential customer base. These aspects have to be observable and to directly relate to the interest, need and ability of purchase of the customer. The analysis of the demographic factors helps defining the target market.

Persona For the purpose of representing the consumer market segment, a persona was created. That is, a fictional character that is representative for the targeted demographics. The persona was names Sofia, a modern, yet common Danish name for women. Understanding the lifestyle of Sofia can lead to determine her purchasing reasoning. The persona’s attitude towards different aspects of life reflects into the buying behaviour. Furthermore, defining the persona’s demographic details helps in sizing the potential market. The aim of creating such a persona is to estimate the amount of Danish women who fall into this description.

Figure 41– Persona profile

Gender distinctions are important for the marketing strategy because men and women prefer different types of marketing. MOSH focuses on the women segment to begin with. According to Solomon, although people who belong to the same age group differ in many ways, they tend to share a set of values and common cultural experiences. Consumers of different age groups have very different needs and wants. That is why the ideal customer represents the average age in MOSH’s target market. Sofia is 28 years old. She has finished her Bachelor degree in Business Administration three years ago. She is now working as a junior manager at a trading company.

Family structure and marital status have a great effect on consumers’ spending priorities.(Solomon, 2011) Since jewelry belongs to the personal accessories group which requires expenses that are not absolutely necessary for existence, it is important that the ideal customer can both afford buying jewelry and has personal care as a priority. For instance, Sofia is not married and does not have any children and therefore, she spends the most of the extra money she earns on herself.

MOSH tailored its offerings to appeal to consumers who live in an urban area.

An influencing factor is the economic situation of a particular geographical area.

Another factor is the ability to follow the latest fashion trends and the interest in fashion in general. MOSH chose to address the urban areas in Denmark, due to the fact that it is more likely that women living in those areas are interested in and can afford the latest fashion trends. Sofia lives in a rented apartment in the center of Århus.

People who belong to the same social group have generally equal incomes and social standing in the community. Their work environments are roughly similar and they tend to have similar tastes in music, clothing, leisure activities and art.

They are part of similar social circles, socialize to one another and share many ideas and values regarding their lifestyle. Sofia earns 480 000DKK per year. She enjoys spending weekends with her friends, going out, shopping, dancing or just sitting at home and relaxing. More than television, she enjoys relaxing in the evenings with a cup of tea, while reading self-development books or women magazines. Sofia is also very active on social media. She uses Facebook to keep in touch with friends, Pinterest to illustrate her style and organise her preferences, Twitter to briefly express her opinions and LinkedIn to connect to her business partners.

Even when sharing demographic characteristics like gender or age, consumers have very different lifestyles. The factors that influence the purchasing decisions strongly relate to the consumers’ values, emotional state and ways of spending spare time. Relationship marketing is a philosophy that entails interacting with customers on a regular basis and building relationships between the brand and consumers. (Solomon, 2011) Sofia has always been interested by fashion. She dresses up every morning and makes sure she matches her outfit with the accessories. She likes putting make up and her favourite perfume on. She likes brands and she often buys from them, when they are affordable. But she feels very comfortable with combining branded items and no name pieces, as long as they fit her style. She makes most of her purchases in store, by visiting the shops in the shopping street in the centre of the city. Sofia also shops online, especially for the brands she cannot find downtown. She finds those brands in women’s magazines, where she normally searches for fashion inspiration.

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Jewelry retailers profiling As with the consumer markets, describing business to business markets is based on variables. The background, attitude and behaviour of retailers are important when deciding on collaborations. Business market segmentation is generally less developed than consumer market segmentation. It is more common to establish direct relationships between the companies. (Hooley et al., 2004, pp 288) The size is significant mostly because, depending on it, retailers have different buying preferences. In order to meet the average ordering sizes and volume requirement, MOSH has to approach small to medium retailers. The size of a retailer is mainly based on the number of employees, sales turnover and volume sold.

As for consumers, geography is also important for retailers. In order to reach the end users, the retailers have to be placed in the same geographical area.

Moreover, the shops have to be located in the main shopping centres, so that they are easy accessible for the consumers.

Purchasing policies are also relevant for the choice of retailers. For instance, depending on the retailers capabilities, they can require MOSH to provide a certain amount of jewelry on a monthly or quarterly basis. This type of fixed purchasing habits entails high commitment and MOSH has to ensure that it is capable to provide. On the other hand, more flexible and negotiable collaborations would fit more to MOSH’s capabilities, at least in the first year. From the purchasing policies view, the market segment attractiveness can be divided in four categories, based on the compatibility between the retailers’ requirements and MOSH’s resources.

Table 3 - Retailers market segment attractiveness

A list of retailers that fit MOSH’s criteria is provided below.

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Figure 42- List of retailers

There are essentially two approaches to wholesale buyers. MOSH can directly contact them, or they can contact MOSH. The strategy is to combine these two approaches for the best results.

Exhibitions and trade fairs represent an opportunity for MOSH to expose the business to retailers. Usually, wholesale buyers attend these fairs and place orders directly from there. The website is another way of inviting retailers to buy from MOSH. An exhaustive gallery of pictures will be provided on the website, as well as a contact page specific for retailer, where they can contact the company with questions and order placing.

Apart from providing the context for easy approach for retailers, MOSH also has the option of directly contacting retailers. This requires research and preparation.

Firstly, the company has to have at least one jewelry collection, professionally bound in a portfolio together with the wholesale price list. Along with the portfolio and brand statement, MOSH has to be ready to negotiate the terms and conditions for doing business which might include minimum order requirement, payment methods and terms as well as shipping charges and delivery time.

Apart from the brick and mortar jewelry shops, there are also other channels of jewelry distribution such as online retailers, gift shops, clothing stores and department stores. MOSH has to consider all types in order to get as many sales and exposure as possible. However, a good strategy would be to determine one target group that the company should focus on, while the others represent alternatives. Since the questionnaire revealed that jewelry shops are the preferred choice of consumers, MOSH will focus on this distribution channel.

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The ideal retailer is one which is generally associated with renowned Danish brands and good quality products. In order for the company to be consistent to the brand it wants to build, the locations MOSH jewelry can be bought from have to be in accordance to MOSH values. On the other hand, MOSH has to meet the retailer’s expectations in terms of quality and integrity. Furthermore, MOSH has to ensure of its capability of delivering the requested amount of jewelry on time.

Marketing strategy The marketing strategy is designed to increase customer awareness and deliver MOSH’s message. It involves activities such as advertising and public relations.

Through these activities the firm intends to make the customers aware of jewelry sold. It is important to clearly define the message MOSH is trying to convey to the customers. This is mainly achieved by strong branding. The message has also to be delivered to the customers through different advertising channels. The final aim of the marketing strategy is to secure sales. (Abrams and Barrow, 2005)

Branding Branding is the equivalent of a personality in business, the way the public perceives the company. Branding is the message MOSH wants to send to the public and it needs constant and continuous exposure. Communications, actions and decisions have to be aligned to the branding. It is about making it clear what the jewelry is made for, by stating the values of the company. Consistency is key when branding a company not only to create recognition, but also trust. (Boothroyd, 2011) The main purposes of branding revolve around enhancing the company’s value. A strong brand positively affects the customers’ perceptions and preferences and act as a barrier for the competition. Furthermore, it is a form of quality certification which influences the consumer’s decision making process, eventually leading to high profits and high market share.

Customers, especially retailers, have to be reassured that MOSH is a serious business that they can rely on in the long run. By pursuing a coherent and professional business conduct, the company will be perceived as worth making business with and trusted by costumers.

On the consumer level, when a person makes a purchase from MOSH, they identify with the company’s values and make a statement about themselves, their styles, their own values. Clearly aligning the company’s values to those of the ideal consumers will encourage them to buy from MOSH. MOSH jewelry targets strong, modern women who are independent and continuously growing and developing, both on the personal and professional level.

By wearing MOSH jewelry, women will make a statement of their fashion style, but more than that, they will send a message regarding their status. MOSH creates impact jewelry that can be adjusted to both day and night outfits. The pieces can either be worn on a daily basis, at work or for evening events and occasions.

From data gathered in the questionnaire and also from the individual interviews it can be stated that, generally, women attach emotional value to their jewelry and create a meaning when wearing them. Although MOSH cannot entirely create this meaning for the customers, the company can make efforts in suggesting it. Through all the advertising material, starting with the website, advertising campaigns and media releases, MOSH will be consistent and always send the same message: women do not wear jewelry for the sake of it, but for the way it makes them feel. Therefore, MOSH desires to create feelings of empowerment of women and to encourage them to always strive for more. Although the jewelry is not cheap, MOSH does not necessarily encourage the display of financial status, but more the personal development, supporting women in becoming happier and prouder of their achievements.

As stated by Petra Ahde-Deal in her study “Women and Jewelry – A social approach to wearing and possessing jewelry”, pieces of jewelry as such do not carry meanings. They are just products made of some materials and designed to be worn. The social setting around the jewelry and the possessor of it may, and often does create personal meanings for the jewelry. These meanings would then be in the possessor’s mind. Still in this perspective, the meanings are not in the products themselves, but rather in the thoughts of the possessors. What MOSH intends with its branding is to create the context in which the customers can create and attach their own meanings to the jewelry.

It is crucial for MOSH to identify and reinforce the company’s values. Not only is this necessary for differentiation from its competitors, but also in the context of an increasing success of branded products in Denmark( CBI Ministry of Foreign Affairs of the Netherlands, 2011).

What will make a difference is also the design approach. The jewelry combines the industrial look with stylish design, bringing together the rough and the soft.

Inspired by the engineering workshops the jewelry aims at creating modern pieces with masculine tendencies, while still preserving the feminine look.

In order for the branding to achieve its goals, it has to be consistent. MOSH’s message will be therefore communicated through all channels. The price points and good quality reflect the respect for its customers, suggesting that women should respect themselves. Furthermore, the website is a good opportunity for the company to use words, photography, animations and sounds in delivering its message. The choice of retailers is also a way of creating reputation. Making sure that MOSH jewelry is sold in the appropriate places will reinforce the brand.

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Public Relations Branding and public relations are closely linked. While branding deals with creating an image and raising awareness, public relations is about managing the reputation and nurturing the public perception of MOSH. The goal is to keep the company in the public’s minds for the right reasons. (Boothroyd, 2011) Writing press releases for magazines or relevant websites is an important PR strategy. Generally, a press release entails a one page document with an eyecatching photo. MOSH should start by creating a list of relevant publications and finding the relevant contact persons. They could either be jewelry, fashion or shop editors.

Collaborative opportunities usually result in extra publicity. Creating a partnership with a fashion designer and creating jewelry pieces for their collections would normally result in public exposure. Furthermore, organising special exhibitions with different artists, participating in charity fundraisers or competitions will help promoting the company and enlarge the audience.

Marketing mix - The 7 P’s Product, price, place, promotion, packaging, positioning and people are the seven elements that create the marketing mix. In order to effectively market the jewelry, these elements have to be structured and combined in order to help creating the target market and to guide development of the strategic marketing plan.

Figure 43- Marketing mix

Product The product sold by MOSH is jewelry. MOSH designs and creates the jewelry it sells. The pieces will revolve around an industrial design that will be crafted out of recycled and sustainable materials such as stainless steel, silver, leather, wood and horn. The jewelry is aimed at women between 20-35 years old, living in urban areas that have a medium to high income. What make MOSH jewelry different from the competitors are the distinctive design and the user experience it tries to create.

Price The pricing strategy at MOSH relies on affordable, but not very low prices. Since one of the core values in MOSH is good quality, the price should range accordingly.

Furthermore, customers associate high prices with value. That is why the average price of a MOSH jewelry will be between 400-700DKK. Considering the competitors pricing and also the buying power of the target market, this price is suitable for the position MOSH will take in the market.

Place The ideal place to market MOSH jewelry should be convenient and accessible for the target customer. The jewelry will aim at the Danish market and since the target market is urban areas in the country, it is recommended that the jewelry are sold in local retailers as well as directly on MOSH’s website, with day to day free delivery within Denmark. The aim is to reach reliable retailers that are positioned in the shopping streets or concentrated shopping areas of the largest cities in Denmark.

Promotion In order for the jewelry to be successful, promotion is needed for raising awareness and encouraging customers to purchase. In the first year of activity, MOSH will not be able to afford heavy promotion campaigns and therefore has to use alternative forms of advertising. Primarily, the website and press releases to the relevant media will be used as ways to communicate to the public, along with online campaigns on the social media platforms.

Packaging Packaging is one of the factors that influence MOSH’s credibility in customers’ eyes.

Furthermore, considering that the company’s intention is to create a recognizable brand, packaging should reinforce this by providing good quality, innovative and stylish design as well as practicality.

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84 MOSH

Since jewelry is often offered as a gift and since most women keep the jewelry in their initial package for a longer time, it is essential that MOSH creates a desirable and reliable package.

Moreover, as discovered in the future workshop, package can be used as a way of sending the company’s message, literally. That is, in the packaging, a certificate of quality guarantee as well as a short description of the company and its values should be included. On the exterior MOSH logo should be printed and packages should be tailored to fit the particular pieces of jewelry.

Positioning In the fierce competition environment in Denmark, positioning can be a challenge.

Apart from the design itself, which is a relative aspect, differentiation from the competitors can be acquired through the message and image MOSH tries to create in its customers’ minds.

Starting with the positive impact MOSH intends to make on its customers life by creating impactful jewelry to which meaning can be easily attached, the company also intends to gain customers’ respect. The company wants to be regarded as socially responsible and customer friendly. MOSH will provide warranty for the jewelry, as well as allow pieces to be returned. Moreover, through the marketing campaigns, MOSH also intends to position itself as a modern and stylish jewelry company.

People Although MOSH intends to start small, people are always the most valuable asset to a firm. To start with, the founders should strive with improving their skills and capabilities both in terms of design and business administration. External consultancy should be sought in case needed.

When the company starts growing, MOSH has to pay close attention to the recruitment process in order to ensure that the right person is making the key decisions. For instance, marketing is one of the most important activities for MOSH. That is why, if the company proves successful and starts growing, a competent marketing assistant will be hired.

Furthermore, if the company decides to keep producing internally even if it expands, then the team of jewellers that will produce the jewelry have to have a strong crafting background and portfolio, especially since the jewelry has to have the same quality, regardless of the person making it.

Sub conclusion After analysing the Danish jewelry market, it is essential for MOSH to create the product that best fits the customers’ needs.

MOSH will create fashion jewelry, made of both silver and stainless steel. The company provides an industrial design, by combining metal and organic materials such as leather, wood and horn. The jewelry will have a flawless finishing and the best quality at a suitable price. The strength that MOSH has over competitors is that the product is directly tailored to customers’ preferences. Each piece will have a background story and will be packaged in a creative way, so that the MOSH message reaches its customers. All the above mentioned features, that represent the core of MOSH jewelry are derived from the research. Although these features are susceptible to change and they do not reflect the whole market’s preferences, they still provide an overview on what type of jewelry customers prefer.

Following the product description, the ideal customer was described. By creating a persona, the ideal Danish consumer’s behaviour was illustrated: a 28 years old Danish woman, earning 480 000DKK per year, living in a large urban area and with a high interest in fashion. The persona creating was not only helpful in sizing the number of women who fall into the category, but also to better understand and relate the lifestyle with the jewelry purchasing habits.

Since jewelry retailers represent the largest share of the jewelry distribution channel, MOSH focused on studying them and determining the ideal customer: a small to medium sized retailer, placed in the shopping centre of urban areas that sells jewelry from renowned Danish brands. A list of such jewelry stores was provided.

In order to match the product with its target customers, the marketing strategy provides different techniques on how to approach the market. The brand, message, background story of the pieces and social responsibility address the consumers directly, as well as the public relations which include advertising and collaborations. For the jewelry retailers, MOSH has to focus on building credibility, by being a trust-worthy partner and proving integrity. The marketing mix briefly describes the brand offer.

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What

is

the

most

sustainable

business for

a

model

new

fashion

jewelry

company?

Pricing Alternative Sub

Models

Conclusion

04

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Business model sustainability Introduction This research question intends to determine whether it is feasible for MOSH, from a financial point of view, to start the company. The initial business model relies on small scale jewelry production, in MOSH’s workshop. In this context, the price of producing a single piece of jewelry is calculated, in order to determine whether it is reasonable to pursue this model. Furthermore, alternative business models were analysed to ensure that MOSH makes the best decision.

Pricing Setting the right price for a piece of jewelry is crucial not only for the positioning in the market, but also for the reputation and potential of the company. A too high price will result in no or few sales, while a too low price means losing potential profit or even making a loss. Furthermore, a very low price is often associated with worthless products, which harms the perception of MOSH in the customers view.

Annual overheads The first step in calculating the price of a piece of jewelry is to determine the hourly rate of the labor. In order to do that the annual overheads have to be estimated.

That is, to estimate the annual costs of running the business, independently of production or sales. These costs do not include materials, which are variable.

Although the costs are not 100% accurate, they provide guidance towards what the company should expect. For caution’s sake, the expenses are overestimated.

A workshop space will be rented for the production of jewelry. Apart from the cost of the rent, heat and electricity as well as internet are expenses incurred by the workshop. Tools and machines are also needed for production.

Like any valuable personal goods, the jewelry stock has to be insured. There are specialist insurers for the jewelry businesses. Furthermore, in order for the jewelry to be exhibited at fairs, a public liability insurance is needed.

When trying to sell to retailers, motor expenses will result. Often, negotiations and sales with the distributors involve long distance trips and sometimes more than one trip for a single deal. These include petrol consumption and vehicle wear.

Business cards and any promotional material that needs printing will incur costs.

Web shops offer customized business cards can be designed and printed at a low price.

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Professional photographs of the jewelry are essential to the business, especially since part of it is web based. Professionally-quality photographs are not only needed for the web presence, but also for fair application and business cards.

A professional camera will be acquired by the company and photographs will be taken internally, as opposed to hiring a professional photograph for each collection.

Marketing does not involve a fix cost. MOSH has to decide on its own budget allocated for marketing in the first year. Taking into account that the overall budget is limited when starting the business, advertising will not be a priority for high investment.

Table 4 - Predicted annual overheads

The website will also serve as a web shop. It requires a professional web designer to develop the whole concept. Apart from this, a domain name must be bought and a server is needed for hosting the website.

Creative packaging is a way of advertising as well as a way to transmit the company’s message and to outline the brand. Although it is more expensive than traditional jewelry packaging, the investment will return more profits.

The postage expenses will be included in the final price. When ordering online, the customer is not required to pay additional shipping costs. That means than an estimated cost of postage per piece will be determined and included in the overheads.

Hiring a professional accountant is necessary for the business. Apart from it, salaries for the two founders along with a part time accountant should also be considered as part of the business expenses.

Annual profitable making hours Apart from money, time is another valuable commodity that needs to be evaluated.

The making hours refer to the time spent actually making the jewelry – cutting, filing, setting, soldering and so on. There are other administrative tasks that will also require a lot of time, but it is not included in this estimation, as the admin hours will be paid as a salary and not included in the customer bill.

It is estimated that around 40 hours a week will be spent on the business, both for making and administration. The plan is to work around 45 weeks in a year, setting aside 4 weeks for holiday and 3 weeks for unforeseen events or sick leave.

As a percentage, it is safe to state that more hours will be spent on administrative tasks than on actually making jewelry. The making hours will approximately take 40% of the total working hours.

When trying to estimate the percentage of the stock that will actually be sold, it is important to realize that most likely, not every piece of jewelry will be sold.

The profitable making hours represent only the hours that have resulted in sales.

It is difficult to accurately state a percentage, but 70% could be a reasonable estimation.

The annual profitable making hours is calculated by multiplying the total annual making hours by the estimated percentage of the stock that will be sold during the year.

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Table 5 - Annual profitable making hours

The hourly rate Making the best guess on determining the annual overheads is a starting point for determining how much money is needed for keeping the business running.

The annual profitable making hours need to bring in enough capital to cover the overheads and ideally, create profit. In order to balance this equation, the hourly rate has to be determined. This represents the minimum amount of money charged for each making hour. The hourly rate is calculated by dividing the overheads to the number of profitable making hours.

Table 6 - The hourly rate

Pricing a piece of jewelry The price of a single piece of jewelry will be determined by using a worksheet, after calculating the profitable making hours and the hourly rate. Put simply, the price should reflect the costs of making added to the profit expected.

The first aspect of costs to consider is the labour, the number of hours spent making the piece. These costs are calculated by multiplying the number of hours with the hourly rate. Materials are also listed under costs.

Profit is the amount added to the cost so that the business makes money, ideally not only the bare minimum required to keep it running. Deciding on the mark-up is more of a trial and error process that depends largely on the type of jewelry and the market. For the first year, the profit should range from 40% to 15%. It cannot go down to 0, even if the purpose is to only keep the business running. At least 15% profits should be added for unforeseen occurrences such as cost fluctuation and mistakes. For the first year, MOSH will try and add a profit of 30%.

There is a distinction between wholesale price and retail price. The wholesale price is simply the costs plus the estimated profit of 30% and will be used for selling to shops and other resellers. The retail price is the one used by retailers after adding their mark-up and also the price that consumers are charged for when buying directly from MOSH. Usually, the mark-up price is calculated by multiplying the wholesale price by an index that can vary between 1.5 and 3, depending on geography. MOSH will use an index of 2 to determine the retail price.

It is important that the prices are relatively the same, independent of whether the consumer buy from a shop or from MOSH. If trying to cut the prices in an attempt of enticing people to buy directly from MOSH, on the long run, the company will lose orders from retailers. Furthermore, underselling not only devalues the jewelry, but also attracts the wrong customers and undervalues the whole industry.

Table 7 - Pricing a piece of jewelry

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Pricing conclusion The price of 7.423DKK is not reasonable for the type of jewelry MOSH produces. Not only does it not fit to the company’s value proposition, but it is also unreasonable as such, since the piece will be made of silver. It is not justified to charge such a price for a piece which is not made of gold or precious stones. Under these circumstances, MOSH has to determine alternative business models, since the current one is not sustainable.

Alternative models Cost reduction An option would be to reduce all the costs to the minimum. The founders could do most of the tasks themselves and seek to reduce the external or professional help to the minimum possible.

The salaries represent the largest expenditure. The founders can consider no salary for themselves. Having another job and working for the business on the side can lower the costs considerably. Since the business is small in size the number of hours an accountant is needed can be also small and therefore the task can be done without professional help.

Another way to reduce costs is to use mostly social media for marketing and cut the marketing budget. One of the founders can carry online marketing campaigns that usually are free or require little investment.

The cost of building the website was calculated by considering a web developer.

Although this would be more convenient, a compromise can be made. The team can use a standard platform and build their own website.

Since there will be no large stocks involved in the first year, the company can choose not to have the stock covered by insurance. In terms of photography, a specialized lens is desired. However, a professional camera can deliver high quality photographs by itself, without necessarily needing the lens.

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Table 8 - Predicted annual overheads recalculated

A change in the number of profitable making hours can also have an impact on the costs. Although most of the business working hours will be assigned to administrative work, the task can be carried by one of the founders. While one of the owners will exclusively deal with running the business, the other can solely focus on producing jewelry. The holiday weeks can also be reduced to the minimum. However, since the founders will have other fulltime jobs, the number of hours spent on the business will be reduced. Therefore, 30 full hours can be spent only for creating.

Table 9 - Annual profitable making hours recalculated

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Therefore, the recalculated hourly rate:

MOSH

Table 10 - The hourly rate recalculated

New price Having considered the cost reduction, the new price can be calculated.

Table 11 - Pricing a single piece of jewelry recalculated

Break-even point In order to determine how many pieces of jewelry have to be sold within the current configuration, the break-even point was calculated. This was done by dividing the annual overheads to the difference between price and variable costs. The variable costs refer to the materials used, that vary from piece to piece.

Since it was approximated that 70% of the pieces produced could result in actual sales, the minimum amount of pieces that MOSH has to produce in order to sell 117, is 199. Dividing the total profitable making hours to the average labour time that a single piece requires, MOSH’s capacity of jewelry production in the first year can be calculated.

The total number of jewelry pieces MOSH can produce in the first year is therefore 403. Assuming the average percentage of pieces sold is 70% of the whole production, MOSH can be expected to sell 282 pieces. That is, 165 more than just the break-even point.

Profit Assuming that all the 282 pieces will be sold at an average price of 700DKK, the total income represents 197.400DKK. By subtracting the total costs, a profit of 123.200DKK amounts. However, this is the ideal case, in which all the 282 pieces will sell and is very unlikely to occur. On the other hand, in order to keep the company running and experience no losses, only 117 pieces need to be sold. There is, therefore, a high chance that the company could reach at least the break-even point in the first year.

The total number of jewelry pieces MOSH can produce in the first year is therefore 403. Assuming the average percentage of pieces sold is 70% of the whole production, MOSH can be expected to sell 282 pieces. That is, 165 more than just the break-even point.

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Table 12 - Total expected profit

Cost reduction conclusion The cost reduction alternative seems feasible, since it does not only cover the break-even point, but it can actually result into profit. However, there are major drawbacks of this business model.

Cutting all the major costs might be a way of keeping the company running, but it entails great efforts from the founders. And since they do not get any salaries from MOSH and need to have other jobs to support themselves, it cannot be expected that they are 100% effective and efficient. In this scenario, MOSH is the second priority, which means working in the afternoons and weekends. While that is not impossible, it is not recommended either. Starting a new company requires a lot of time and concentration. There is a high chance that with this business model, the founders cannot allocate these resources properly.

Another drawback is the time spent on making the jewelry. Since the business model entails selling through retailers, MOSH has to ensure they can produce and deliver the required amount in a short time span. By producing everything manually, in the workshop, there is a high risk that MOSH cannot meet retailers expectations in that sense.

Apart from the speed, there is also the quantity issue. The maximum amount of jewelry pieces that MOSH can produce in the first year is 403. Although when replicating an item, the amount of time spent on making it decreases, it is still relatively high. This conflicts with MOSH’s intention of selling thorough retailers.

As previously stated, MOSH needs to rise to the standards of such retailers and be able to deliver their desired minimum quantity. In the case the collection proves successful and distributors order more than what MOSH can deliver, not only does the company lose money, but also its credibility and potentially its collaboration with those retailers.

Overall, this business model is feasible and could be successful, provided it is kept on a small scale. However, there are many variables and risks involved. Although is not a preferred option, MOSH could apply for a bank loan to get enough funds to support the salaries. Provided that the loan is accepted, the founders could work fulltime on the business. However, this option does not solve the limited produced quantity issue.

Outsourcing Another alternative to the current business model is outsourcing the production to a specialised company. This way, MOSH will only focus on designing the pieces and therefore reduce costs, increase production capacity and save time.

Nordahl Andersen is a leading provider of children jewelry and christening gifts.

With an experience of over 20 years in the industry, they have the resources produce jewelry not only for themselves, but also for other companies. The company does not sale to individual customers, but only to retailers. Nordahl Andersen was contacted by MOSH and information was gathered through e-mail correspondence and a phone interview (Appendix 0.3).

Since the company changed its focus from a mere wholesaler to a “house of brands”, Nordahl Andersen is interested in forming partnerships with jewelry companies that have great collections and international potential. This represents a good match with MOSH’s intention of expanding its market to other countries.

One of the strengths of Nordahl Andersen is that they have direct access to most Danish jewelry retailers and also to international stores. Furthermore, they have good marketing channels and deal directly with customer service and logistics.

Furthermore, the can take charge of outsourcing and financing of the stocks. They collaborate with Von Lotzbeck, one of the main competitors of MOSH. If Nordahl Andersen would agree to a partnership with MOSH, the latter would benefit greatly. Firstly, Nordahl Andersen would be in charge of outsourcing MOSH’s production. The company does not produce the jewelry themselves, but it has strong partners for that. The downside is the fact that the production facilities are not located in Denmark. As stated in the interview, hardly any jewelry company produces in Denmark, due to the high costs.

Apart from production, Nordahl Andersen takes control of the whole value chain.

Not only do they hold the stock, but also finance its production, if necessary. An important aspect revealed in the interview is that for the type of jewelry that MOSH produces, the price range is 200-600DKK, therefore lower than what MOSH could charge for creating the pieces manually. This supports outsourcing. Not only would the prices decrease when outsourcing, but also larger quantities would be produced in a shorter time span.

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100 MOSH

Since they deal with customer service, they also take full control of the stock in order to ensure on time delivery to the customers. Marketing is another of their strengths. Provided that the companies decide to collaborate, MOSH would be mainly focusing on designing the pieces, while Nordahl Andersen would focus on production, sales and customer service. With this business model, MOSH would receive royalties of 10 to 15% of the total turnover, depending on their efforts with marketing and the designs provided.

If a partnership is created, the companies need to negotiate the terms and conditions. Firstly, a strict non-disclosure agreement has to be signed by both parties. Not only does Nordahl produce jewelry for MOSH’s competitors, but they also have a jewelry line of their own. Therefore, sensitive information regarding designs has to be protected.

Furthermore, Nordahl Andersen has to define their capabilities and limitations regarding jewelry production. Taking into account that MOSH creates industrial designs by combining different types of materials, it needs to be ensured that they can be produced by Nordahl’s partners.

On the other hand, MOSH has to meet several criteria to be considered by Nordahl Andersen. First, MOSH has to create a large and diversified enough collection from which Nordahl can chose from. The design has to fit the current trends and market needs. Furthermore, the prices, percentage of royalties and margins have to be negotiated. Nordahl Andersen is open to new collaboration and states that there is no fixed formula to select the partners. Although being a new company provides no guarantees, Nordahl Andersen has the required experience to detect potential beyond the lack of experience.

Outsourcing conclusion Creating a partnership with Nordahl Andersen would mean not only outsourcing the production, but also the whole value chain and part of the marketing.

Such a partnership would increase MOSH’s chances of being accepted by the retailers. As stated in the interview, jewelry retailers are approached by a large number of jewelry designers and they find it difficult to buy from all of them.

Furthermore, a new company provides no guarantees. On the other hand, Nordahl Andersen has the retailer’s trust and it is more likely that jewelry retailers would buy from them than from MOSH directly. Furthermore, with its experience, Nordahl Andersen has an eye for what kind of jewelry suits which retailer.

The main issue with the previous business model was the fact that MOSH has very limited capabilities of production. This problem is solved by making a partnership with Nordahl Andersen. Not only will they manage the production, but also the

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stocks. One of their strong points is that they are prompt to react to customers’ needs. They manage the stock in such a way that they ensure they have the right quantities ready for next day delivery after an order has been placed by the retailers.

A downside to this partnership is the fact that the jewelry is not produced in Denmark. This was one of the selling points in the previous business model.

However, as described in “The myth of the ethical consumer” (Devinney et al.

2010), although consumers generally display ethical concern, more often than not, they are not willing to pay the high price associated with it. In this context, MOSH will still be designed in Denmark, but produced abroad. However, the company will make sure that the suppliers and producers follow the ethical code.

This model provides MOSH the opportunity to either deal with marketing itself or to share the task with Nordahl Andersen. The company will therefore chose to focus on clearly defining the brand, while still using Nordahl Andersen’s network to get public exposure.

Sub conclusion To conclude, the outsourcing business model is the most suitable from all the stated alternatives. Since the focus of the customer target group is on jewelry retailers, this partnership provides the best chance of entering the market.

Furthermore, the partnership would provide the complementary skills and experience that MOSH as a company lacks.

Therefore, MOSH can focus on creating jewelry collections that best fit the consumers, while not worrying about the value chain and sales. Although this partnership translates in MOSH only receiving approximately 10% of the total turnover, the business can still be profitable. The volume sold is expected to be much higher than the one MOSH can produce by themselves. Furthermore, no initial large costs are incurred by this model.

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CONCLUSION

05

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Conclusion This project described the most important aspects of the process of starting up a fashion jewelry business. Starting with a market analysis and segmentation, an industry and macro environment description, the project reveals the context in which MOSH would operate. The market analysis was followed by a product/ market fit in which the features of the product were set to meet the customers’ needs. In order to determine the right business model for approaching the market, cost and price calculations were made and alternative models were provided.

The Danish jewelry market, as well as the global one is generally growing. Despite the fluctuations created by the crisis, the prospects are generally positive. The jewelry, watches and accessories market registered sales of over $700 million in 2012. Of this category, jewelry has the largest share which translates into customers preferring jewelry over other accessories. It is forecasted that the market will continue growing in the next years. MOSH targets a market segment of over 70 000 women, which is a large enough number to support the business.

The attractiveness of the industry is mainly determined by the low entry barriers and moderate competitive rivalry. The industry is inviting for newcomers since it does not require heavy financial investments for starting a jewelry company.

On the other hand, a new company might face the challenge of being rejected by jewelry retailers, mainly because of the lack of experience and credibility. A possible solution to this issue is creating a partnership with a company that has direct access to the retailers and is trusted by them. There is a large number of various jewelry companies of different sizes and influence in Denmark. The competitive rivalry is moderate, since there is a slight threat of retaliation from the large players. In order to avoid this, MOSH has to create and address its own niche, by being well informed of the market demands and creating a product to match it.

The macro environment does not create any barriers for entering the industry.

Provided that MOSH complies with the economic trends, the Danish social environment and laws and regulations regarding jewelry production, the company should not have difficulties in operating in the industry. On the other hand, MOSH has to overcome the low capital and no practical experience which represent its biggest weaknesses. A way to address this issue is to seek external help.

Partnering with a company that has complementary skills and specializes in financing the production and managing the value chain, would allow MOSH to focus on designing and creating the brand.

The initial business idea involved a small scale business, dealing with designing, production and sales, along with marketing. After analysing the market

requirements in terms of distribution channels, MOSH concluded that jewelry retailers have to be the primary focus. This entails not only having access to the retailers, but also having large enough stocks to support their requirements. In addition to that, the price obtained by producing jewelry by hand is higher than the market would expect for this type of jewelry. Although it is not MOSH’s intention to sell cheap jewelry, the price range of 200-600DKK would be more suitable, as Michael Nordahl Andersen stated in the interview.

To conclude, there is a high potential for MOSH to enter the Danish jewelry market, provided that the company forms a partnership with a company that can complement the lack of experience and capital. Furthermore, a requirement of being successful on the market is to create customer tailored products and to establish a brand.

Future work Due to the limited time and resources allotted for this project, the primary research performed was also limited in scope. In order to better understand the jewelry consumers’ behaviour and purchasing patterns, as well as to directly involve them into the design process, a further, more insightful research study has to be elaborated.

Since the target consumer group is well defined, a new survey should be created with questions directly relevant to the target group. Furthermore, the questionnaire has to have a larger scope and include a larger number of respondents from different urban areas in Denmark. Moreover, interviews with women of different ages from the 20-35 range should be held. The interviews should not only refer to design of the pieces, but also to other decisional factors that influence them in their purchasing decisions.

For the direct involvement of customers in the design process, representatives of all ages and personality types from the specified range should be invited in a workshop where they have the freedom to design their own ideal piece of jewelry.

By providing them with the necessary materials and tools, they would be able to create jewelry and also present it to the group.

Based on the detailed primary research and a thorough investigation into the fashion trends, along with consultancy from a jewelry expert, the first collection has to be created. Even though MOSH will outsource the production, the designs have to firstly be created in the workshop. The collection has to be large and various enough to support further selection.

Further research has to be conducted in order to determine the best type of partnership MOSH should make in order to successfully enter the market.

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Databases Danmarks statistic MarketLine Orbis (Amadeus) Passport (Euromonitor)

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