{"id":5126,"date":"2015-12-09T17:35:30","date_gmt":"2015-12-09T22:35:30","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/pandora-winning-strategy\/"},"modified":"2015-12-09T17:35:30","modified_gmt":"2015-12-09T22:35:30","slug":"pandora-winning-model","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/pandora-winning-model\/","title":{"rendered":"PANDORA WINNING MODEL"},"content":{"rendered":"

Pandora is one of the most successful stories of the past decade in jewelry[1] <\/sup>and this success can be explained by their strategy and operating model to grow up to this point. The company\u2019s vision is ambitious and, as highlighted by Deutsche Bank, needs attentions to keep delivering today\u2019s results. I would like to focus on the aspects that contributed to reach today\u2019s baseline.<\/p>\n

BUSINESS MODEL<\/strong><\/p>\n

\u201cTo become the world\u2019s most loved jewelry brand\u201d [2]\"pandora2\" <\/sup><\/em><\/p>\n

In 2014, PANDORA\u2019s total revenue was DKK 11.9 billion[2]<\/sup>. The company is headquartered in Denmark and started as a family business in 1982. Now it is publicly listed in NASDAQ Copenhagen stock exchange.<\/p>\n

Value Proposition:<\/strong> PANDORA designs, manufactures and markets hand-finished and contemporary jewelry made from high-quality materials at affordable prices[2]<\/sup>. Their product portfolio offers women around the\u00a0world the opportunity for personal expression by focusing in charms\/bracelet (core business), rings, earrings and necklace categories. Their main products are made of silver. Their DNA is defined by: affordable luxury, personal storytelling and contemporary design<\/em><\/strong>[3]<\/sup>. PANDORA business model up to now, was a top-line growth, designated to maximize return on capital employed[2]<\/sup>.<\/p>\n

 <\/p>\n

OPERATING MODEL<\/strong><\/p>\n

PANDORA\u2019s business model is vertically integrated. PANDORA control the entire value chain: design, production, distribution and sales. This model allows PANDORA to benefit from scalability and flexibility, maintain a clear and complete overview of operations, and develop products and activities to match changing market needs[3]<\/sup>.<\/p>\n

To deliver its DNA, PANDORA provide a high-quality consumer experience through materials and craftsmanship, stores environment and global audience. This is possible because of:<\/p>\n

Manufacturing facilities\/Labor and quality<\/strong><\/p>\n

Every piece produced by the company is hand-finished by experienced and skilled craftspeople[3]<\/sup>.\u00a0More than 70% of their employees are located in Thailand, their manufacturing site[2]<\/sup>. According to PANDORA, to produce 91 million jewelry in 2014, they combined a standardized and scalable modern production techniques with centuries old craftsmanship[3]<\/sup>. Because PANDORA craftsman pieces rely on a labor intensive production it is crucial that they be installed in a country with lower wages such as Thailand. Also, the country\u2019s tradition with silver also facilitated manufacturing know-how.<\/p>\n

Inventory\u00a0<\/strong><\/p>\n

Because PANDORA is in the affordable jewelry business and because of the\u00a0vertically integrated supply chain, volume purchases of commodities gives PANDORA a cost advantage and operational leverage.\u00a0PANDORA also receives returns that are melted down to produce faster-moving and more productive inventory. Deustche Bank estimates that \u201cre-melting fashion jewelry products could cost up to 5% of the product price, which is irrelevant when compared to the dilution that would derive from aggressive discounting and clearing of inventory\u201d.<\/p>\n

Distribution\"pandora3\"<\/strong><\/p>\n

PANDORA is sold in more than 90 countries through approximately 9,500 points of sale, including\u00a0more than 1,600 concept stores[1]<\/sup>. They became one of the largest distribution presences worldwide for a jewelry brand[1]<\/sup>. This was possible given their expanding structure of low capital intensity through wholesale. PANDORA operates through retail, franchisee model and also owned\u00a0and operated branded stores[3]<\/sup>. For the past few years, PANDORA focused in gradually improving the branded sales versus unbranded wholesale point of sales[1]<\/sup>. They also worked in re-balancing\u00a0their unbranded stores to a more healthy balance and design their concept store[1]<\/sup>.<\/p>\n

IT development<\/strong><\/p>\n

In 2012, PANDORA developed an in-house data system that enable them to monitor sales-out to end-customers on a daily basis at the SKU level. The system is working for PANDORA Concept stores and expanding to other stores. Because the company is vertically integrated, PANDORA can quickly use this system to be more consumer oriented and to be more efficient: product portfolio, inventory management, production and distribution can be adjusted to match consumer demand. This full integration is the key element of success of PANDORA[1]<\/sup>. Accordingly to PANDORA annual report, they \u201ccontinually gather and analyze data from different parts of the value chain to ensure our organization remains efficient\u201d.<\/p>\n

Innovation<\/strong><\/p>\n

The development of new products and new categories is also important to sustain sales momentum (top-line growth). PANDORA established a target of seven annual product launches to the stores. This allow stores to have new products assortments to cover events and drive traffic even in low peak periods. New products and categories helps the company to diversify the purchasing portfolio and attract more customers even when their sales became saturated.<\/p>\n

[1] 27 July 2015, Initiation of Coverage from Deutsche Bank Market Research in 2015<\/p>\n

[2] 6 December 2015, http:\/\/www.pandora.net\/<\/a><\/p>\n

[3] 2014, PANDORA Annual Report 2014, http:\/\/investor.en.pandora.net\/<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

To become the world\u2019s most loved jewelry brand…<\/p>\n","protected":false},"author":778,"featured_media":5158,"comment_status":"open","ping_status":"closed","template":"","categories":[218],"class_list":["post-5126","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-jewelry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nPANDORA WINNING MODEL - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/pandora-winning-model\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"PANDORA WINNING MODEL - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"To become the world\u2019s most loved jewelry brand...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/pandora-winning-model\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/pandora5.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"960\" \/>\n\t<meta property=\"og:image:height\" content=\"960\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/pandora-winning-model\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/pandora-winning-model\\\/\",\"name\":\"PANDORA WINNING MODEL - 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