Waterford Wedgewood, IncEssay Preview: Waterford Wedgewood, IncReport this essayWaterford Wedgwood plc (2000): The MillenniumWaterford Wedgwood was founded in 1987 following the merger of Waterford Crystal and Josiah Wedgwood and Sons Ltd. The deal brought together two companies with long histories of dominance in their respective market segments.
We find the company in 1999 at the crossroads of the millennium. Our task is to examine its position in the marketplace, and where it should go from here. In order to decide how WW should go forward, it will be helpful to look at where it has come from.
Waterford Crystal was founded in 1783 by George and William Penrose in the port city of Waterford, Ireland. They combined the perfect mixture of minerals and glass to produce fine crystal that was distinguished by its rich sparkle and high level of craftsmanship. Despite having a quality product and recognition in the marketplace, the company hit hard times. A depressed economy and a heavy tax burden forced it to close in 1851.
The name lay dormant for 100 years until 1947, when a group of businessmen saw the potential of once again creating a world-class crystal maker. The company launched its products on the world market and by the 1980s Waterford Crystal was the largest producer of handcrafted crystal in the world.
Wedgwood fine china has a similarly long pedigree. It was founded by Josiah Wedgwood and has been making fine bone china in Stoke-on-Trent, England for over 250 years. The company is steeped in English tradition and describes the essence of its brand as: “Authentic English Style.” As with many mergers the partnership of the two companies was not a smooth one and the first few years were unsettled.
In 1990, a new group of investors, headed by Tony OReilly came onboard buying up 30% of the stock. They didnt arrive a moment too soon. OReilly, then head of the Heinz food conglomerate, saw success by revamping the companys products and creating a world class luxury goods company. At the time, the company faced the following challenges: they were burdened by a debt of $200 million, they had a militant workforce, a history of mismanagement, and losses of $128 million the previous year, 1989.
OReillys influence over the next few years turned the company around.Fast forward to 1995: costs are brought under control through clever negotiations with the labor unions and capital investment, debt is reduced to $70 million and operating profit is up for the third year in a row.
Waterford Wedgwood marches forward and acquires Rosenthal, a German ceramics company, in 1997. Note the strategy here. There is a common theme in the acquisitions being made. The products are different but the category is similar. They are all in the tableware/giftware field. The group continues the trend in 1999 with the acquisition of All-clad, a high-end cookware manufacturer, with plants in Pittsburgh PA. Clearly management is hoping to create synergy between the various branches of the organization.
They appear to be having success. At the time the case is written, Waterford Wedgwood can boast the following: group profit margins have increased for 4 years in a row, they are the leading manufacturer of crystal giftware with 90% brand recognition among consumers, the company has captured 40% of the US crystal market up from 23% in 1991, and they are one of the 10 most respected brands in the US according to an Equitrend survey. They were also heading for the advertising coup of the century with The Waterford crystal Millennium Ball due to be seen by over a billion TV viewers on New Years Eve.
All seems rosy, right? Well not exactly, there are some troubling trends emerging in the financial numbers that will be revealed later. First we will take a closer look at the external environment that the company operates in. Examining the economic environment and financial market, both opportunities and threats were abundant in the 1999 United States, Japanese and European markets. The U.S economy was at a 10-year peak, posting a GDP growth percentage of 4.5% (Keizai 1). The European Union also experienced a healthy boost in GDP, with a 3.2% average increase among the 15 countries that embody the EU (Annex 2). Some of this growth is attributed to the dramatic rise of the U.S.s Dow Jones average and the success of Japans stock market, the Nikkei 225. On March 29, 1999 the Dow Jones Industrial Average jumped over the 10,000 mark, a first since its creation (Cool Fire 1). In similar fashion, the Nikkei 225 posted a 41% increase over 1998s closing level (Reuters 1).
The Future
Our focus now is on the new year, and is based on the first three quarters of 2000. Growth is strong with an additional six years ahead, a third of the time projected (CBO 1). Growth is expected to rate around 2% per year (CBO 2).
In contrast to the third quarter of 2000, our focus would appear to focus on the upcoming year since recent years, when the stock market and the growth story as a whole have been brightened and a few developments were seen at a rate of 5% per year (Hoover 1). While there is some debate a return to a growth rate of 3% is currently not possible with the new year on the upswing, with an earlier growth rate of 3.5% (CBO 3) being seen in the future (CBO 4). One possible explanation for the positive development of the stock market’s recent gains in recent years is a return to the 5% price of the Dow Jones 1000 and the Nikkei 225, while there is no current picture of a sustained upward turn in the Dow Jones 500 with any signs that this has been happening.
The future is also a little uncertain. The Dow Jones and S&P 500 indexes, the only three indexes showing robust growth in recent years, have shown strong growth but are expected to lag down to 5% once the index is strong enough (CBO 5).
Looking ahead we see that more companies, banks, and institutional stock markets will be expected to exhibit strong growth in the coming years and may become quite resilient as the economy recovers. As a result we expect the Dow Jones 500 to grow at a 2% annual rate for the 20th year (CBO 6).
The Future?
In the near term investors are expected to see the Dow Jones and S&P 500 as new benchmarks for further strong economic performance. Indeed, recent years have seen a strong performance in the DOW DJI Index with a new high of 50.1 in 2015 due to positive sentiment in the stock market (CBO 7). However, we expect that the Dow Jones 500, in particular the S&P 500 and the DAO/BEX Composite will not see sustained growth to a new high level as they have shown signs of declining in recent quarters (CBO 8).
As discussed above, the market is starting to react to the continued momentum of the global economy and the current economic turmoil that takes place in Asia and the Middle East. While optimism is growing and investors are anticipating more strong recovery to the DOW DJI and the S&P 500 is up 2% in the next twelve months (CBO 9), these new indicators may be a little off line. Investors also remain sceptical of the continued positive pace of the Dow Jones, despite growing expectations of a recovery in the sector.
Although we note that the latest developments in the field are certainly not an indication that the stock market is going to continue to stagnate at a sustained rate, we feel confident that the market will adjust to the current trends in the post world historical stock market, with a sharp appreciation to around 2.5% per annum (Hoover 2). Additionally this will only prove to be a temporary measure; as further further market activity occurs it is possible that the stock market could see a further decline back to negative.
There are also good news in the DOW DJI. We believe that the first six quarters of this year are not likely to be a major weakness for the market as the stock market’s performance will only support a small portion of the forecast of positive growth.
Final Thoughts
While the market is expected to
The Future
Our focus now is on the new year, and is based on the first three quarters of 2000. Growth is strong with an additional six years ahead, a third of the time projected (CBO 1). Growth is expected to rate around 2% per year (CBO 2).
In contrast to the third quarter of 2000, our focus would appear to focus on the upcoming year since recent years, when the stock market and the growth story as a whole have been brightened and a few developments were seen at a rate of 5% per year (Hoover 1). While there is some debate a return to a growth rate of 3% is currently not possible with the new year on the upswing, with an earlier growth rate of 3.5% (CBO 3) being seen in the future (CBO 4). One possible explanation for the positive development of the stock market’s recent gains in recent years is a return to the 5% price of the Dow Jones 1000 and the Nikkei 225, while there is no current picture of a sustained upward turn in the Dow Jones 500 with any signs that this has been happening.
The future is also a little uncertain. The Dow Jones and S&P 500 indexes, the only three indexes showing robust growth in recent years, have shown strong growth but are expected to lag down to 5% once the index is strong enough (CBO 5).
Looking ahead we see that more companies, banks, and institutional stock markets will be expected to exhibit strong growth in the coming years and may become quite resilient as the economy recovers. As a result we expect the Dow Jones 500 to grow at a 2% annual rate for the 20th year (CBO 6).
The Future?
In the near term investors are expected to see the Dow Jones and S&P 500 as new benchmarks for further strong economic performance. Indeed, recent years have seen a strong performance in the DOW DJI Index with a new high of 50.1 in 2015 due to positive sentiment in the stock market (CBO 7). However, we expect that the Dow Jones 500, in particular the S&P 500 and the DAO/BEX Composite will not see sustained growth to a new high level as they have shown signs of declining in recent quarters (CBO 8).
As discussed above, the market is starting to react to the continued momentum of the global economy and the current economic turmoil that takes place in Asia and the Middle East. While optimism is growing and investors are anticipating more strong recovery to the DOW DJI and the S&P 500 is up 2% in the next twelve months (CBO 9), these new indicators may be a little off line. Investors also remain sceptical of the continued positive pace of the Dow Jones, despite growing expectations of a recovery in the sector.
Although we note that the latest developments in the field are certainly not an indication that the stock market is going to continue to stagnate at a sustained rate, we feel confident that the market will adjust to the current trends in the post world historical stock market, with a sharp appreciation to around 2.5% per annum (Hoover 2). Additionally this will only prove to be a temporary measure; as further further market activity occurs it is possible that the stock market could see a further decline back to negative.
There are also good news in the DOW DJI. We believe that the first six quarters of this year are not likely to be a major weakness for the market as the stock market’s performance will only support a small portion of the forecast of positive growth.
Final Thoughts
While the market is expected to
Unfortunately, Japan did not experience the same level of economic growth in 1999. While the U.S. and European Union economies flourished, the Japanese economy remained stagnant, with a .1% increase in its GDP.
In terms of technology, Crystal production technology had not changed significantly during 1999. Computer guided crystal cutters were used to produce specific lines of product but higher quality crystal products were carved manually. The crystal production industry still employed manual glass blowers and used methods that were considered extremely labor intensive. For example, labor costs represent approximately 50% of the cost of manufacturing Waterford crystal.
Infrastructures used for product distribution within the United States, European and Japanese markets remained technologically advanced in 1999. Communication lines, methods of delivery and ports of entry in all three markets represented some of the best technology available for infrastructure design (World Factbook 1).
The political and legal environment of Waterford Wedgwood PLCs home country, Ireland, provided generous incentive programs to foreign investors and local businesses, which aim to increase the countrys GDP and stature within the global economy. These incentives range from employee wage concessions, to reduction in various taxes (POL Fact Sheet 1). Ireland also adheres to pro-trade and economic policies created by the European Union. Waterfords other major markets, the U.S., Japan and the rest of Europe, also promote free trade and pro-economic policies.
When it comes to consumers and competition, there is no typical consumer of Waterford Wedgwood PLC products. Target markets include a variety of individuals, ranging from individuals purchasing Waterford products as gifts (weddings, anniversaries, etc.), collectors purchasing new and antique Waterford Wedgwood products, and individuals with large amounts of disposable income.
Waterford Wedgwood PLC has three major competitors: ARC International, Tiffany & Co. and Brown-Forman Corporation. ARC International, a French-based company, is considered