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TIME TESTED VALUES [Oman Economic Review (OER)](Oman Economic Review (OER) Via Acquire Media NewsEdge) Rolex is perceived as one of the finest references among Swiss watchmakers. It is a legendary brand in the eyes of many watch enthusiasts and specialists, but one that discloses very little about itself. Especially about its internal workings. In an exclusive interview the chairman of the board of directors, Maître Bertrand Gros, reaffirms in what way the brand can claim to have a unique status. The 64-year old with intense blue eyes also explained the recent developments in the Geneva-based company, such as the recruitment of the future chief executive. The interview took place in the inner sanctum of the brand: the 11th floor of the vast Rolex headquarters building in Acacias, Geneva. The impressive and luxurious boardroom has a commanding view of the whole city. Similar in a way to the brand's domination of Swiss watchmaking, according to experts. For many observers, Rolex is a legendary company and, additionally, the world's leading watchmaking brand. How do you explain this status? For three fundamental reasons of a historical and chronological nature. First and foremost, the genius of our founder, Hans Wilsdorf. He was a truly exceptional man who notably invented the self-winding, waterproof wristwatch. And underlying all that he did was an obsession for excellence and performance, which he also associated with sporting achievements, such as climbing Mount Everest, the dive into the Mariana Trench or swimming across the English Channel. These values inspire us and form the basis of our marketing today. Wilsdorf wanted sports watches that were elegant and chic and which would resist all the rigours of the weather. The second reason? In the 1970s, virtually the entire watchmaking industry turned towards electronics - quartz watches. Our managing director at the time, André Heiniger, remained firmly opposed to the idea. He considered the mechanical watch to be the true embodiment of the expertise and craftsmanship of our watchmakers. The future proved him right. What was the concrete advantage of such a choice? It gave us a head start of many years over certain competitors. Later, most of them returned to mechanical watches. Market shares in this segment were consequently reduced, but our market shares were already established. And the third explanation? Patrick Heiniger, who had succeeded his father in the early 1990s, swiftly realised that Rolex needed to become an entirely vertically integrated company in terms of its production facilities, on four sites. Over the past 20 years, we have acquired our most strategic suppliers and integrated them into our own structures. We have also modernised and expanded our production sites. They are among the most efficient and productive, and probably the best, in the industry. This gives us unrivalled autonomy, independence and flexibility, essential for our expansion. I must admit, though, that the global reputation of Rolex, as shown in the convergent results of brand reputation surveys around the world, across all industries, has surprised even me. (Laughs.) So well known, yet so little external communication, why? In my view, Rolex communicates a great deal. But we concentrate essentially on the product and what surrounds it. Beyond traditional advertising, we communicate considerably on the events with which we are associated, whether in sports or culture, - as well as on our philanthropic programmes, such as the "Mentors and Protégés" and the "Rolex Awards for Enterprise". With regard to the company itself, 18 months ago we invited 60 journalists to the inauguration of our expanded movement production facility in Bienne. In our minds, it was a major step that needed to be shared. But why so much mystery, especially about your figures? Most other watch brands are in the hands of groups that are listed on the stock exchange. They are obliged to publish their results. As we belong to a single shareholder, the Hans Wilsdorf Foundation, we are not under the same constraints. We consider this to be an immense advantage. Rolex is answerable only to its single shareholder. Will this discretion continue? Yes. There is no reason for this to change. It is not necessary to do so, and we don't feel the need. How can we get a concrete idea of the company's health? Exceptionally, I will let you into a secret: in less than a week's time, the company's annual general meeting will be held, bringing together the shareholder's representatives, the Board of Directors and more than 200 employees. In the run up to this event, our CEO, Gian Riccardo Marini, is very much looking forward to announcing that 2013 was another record financial year for Rolex. Such a performance has never been recorded by our brand before. It is historic. Our chief executive will also be pleased to be able to speak about the outlook for 2014, which is extremely encouraging. Mainly because our new products were very favourably received at the last Baselworld fair. But there is no reason to go into such information in detail; that is reserved exclusively for our shareholder. And in any case, at Rolex we are not in the habit of shouting our triumphs from the rooftops. Will the arrival of Jean-Frédéric Dufour, current head of Zenith, as the new Rolex CEO lead to a cultural revolution in the company? First of all, a clarification is called for. Dufour's arrival at Rolex has nothing to do with the way the company's business is going. At Rolex today, "all is for the best in the best of all possible worlds", as said in Candide. What Marini has achieved, together with the entire management, is quite remarkable and it has put Rolex in a very healthy position, healthier than ever before, in fact. Dufour's recruitment follows as a natural and logical step. What do you mean? Looking to the long-term, the board of directors, with the backing of the general management, is gradually putting into place the next generation who will be running the company for the next 15 to 20 years. The arrival of a new person at Rolex, whatever their role or function, is obviously not something that is going to modify or radically change either our company culture or philosophy. No more than it will our commercial strategy. We cultivate essential, unchanging values in this company, values that we respect and which will endure. Jean-Frédéric Dufour is an intelligent man who immediately understood this reality. Nevertheless, it is clear that, taking into account his age, his experience and his talent, he is probably going - with his outsider's eye - to bring fresh ideas for perpetuating and strengthening Rolex's status as leader. We are looking forward to discussing this with him. When will the baton be passed? Dufour will be joining us in the early autumn and will officially take up his functions at a date that is yet to be determined, to give him time to become fully acquainted with the company and its specifics. Why an outside solution when there cannot be a shortage of in-house talent? It is true that we tend to favour internal promotions. But we also look for leaders elsewhere, either in watchmaking circles or other sectors. Recruiting someone from the outside is therefore certainly not an exceptional phenomenon at Rolex. After in-depth consideration, Jean-Frédéric Dufour proved to be the man for the job. In light of the change, it has also been said that the brand was going through a bad patch, that turnover has plummeted in China... As I said earlier, Rolex has just had a record year. With regard to China, I was there two days ago. The government's new policy [editor's Each brand has its own identity. And identity implies differences. So, for example, some brands are geared to quantity, others, such as Rolex, put the emphasis on quality, on excellence note: a crackdown on ostentatious gifts] is undoubtedly affecting the luxury and high-end watch industries. That being said, our strategy concerning our presence in China has always been very prudent. We believe the country certainly offers magnificent potential but we must tread carefully. This radical policy change, which happened in the space of only a few days, is proof of this. And in other countries? The traditional markets are doing well. In the United States, [our] results are even showing strong growth. In emerging countries, there are still some concerns. Quite clearly, you do not wish to give any indication about Rolex sales levels. Could you at least give us an idea? Vontobel bank, for instance, mentions sales of CHF 4.6 billion (5.03bn)? Some estimates from banking institutions, based notably on the number of movements we have certified by COSC, the Swiss Official Chronometer Testing Institute, [editor's note: 798,935 calibres in 2012, latest figure published] are actually quite precise. However, they only take into consideration Swiss exports to Rolex affiliates. They do not, therefore, include turnover achieved by the affiliates. And what about profitability? Your operating margin is estimated to be around 30 per cent? The level of profitability depends mainly on the choice the customers make, whether they prefer to buy a gold, Rolesor or steel watch. The margin is therefore variable. At the end of the day, our profitability is, nevertheless, relatively comparable to that of the luxury industry. So, the figure you put forward is quite plausible. Competition among the various players in the watchmaking sector has become very fierce... Each brand has its own identity. And identity implies differences. So, for example, some brands are geared to quantity, others, such as Rolex, put the emphasis on quality, on excellence. We tend to think that Rolex should concentrate on itself, continually call itself into question, set new objectives itself and achieve them. Competition is nonetheless vital as well as beneficial. It invigorates the industry and allows it to reinforce its reputation on an international level. Do you deliberately limit production to approximately 800,000 watches per year? As our founder taught us, we cultivate a sense of exclusivity and a certain form of rarity. This means that the company is definitely not going to increase its production in such a way as to flood the markets. However, if demand is too great, we adapt to the situation. Our production facilities now have the capacity to react almost immediately. So, Rolex will never deliver two million watches a year... That is not the objective or in the spirit of the brand either. But who can say...? You have invested heavily these last few years both in the canton of Geneva as well as in Bienne, where you produce your movements. Is that the end of major construction work or do you still have other projects? Our production facilities give us considerable scope, and volumes can be increased substantially should the need arise. Currently, the large investments made over the last few decades are fully satisfactory. But we also know that our constant pursuit of quality means we must always be on the move. What about your staffing levels? Rolex currently employs more than 10,000 people worldwide and staff levels are adjusted according to our needs. And your commercial network? Unlike other brands or watchmaking groups, you have not built up a network of directly owned stores. Why is this? Our founder had a universal vision: to be present on most markets. That being said, it is not possible to have boutiques all over the world. We would need hundreds, if not thousands of them. So this is why our approach favours multi-brand stores, with the idea of offering consumers a choice. Our job is to convince them. In a boutique, if they choose a Rolex, it's a victory. Nonetheless, we have also been developing the concept of single-brand Rolex boutiques for a few years now. They belong to, and are managed exclusively by, our clients. Consequently, we do not have to carry the costs of these boutiques, nor do we compete directly with them. Some voices believe Rolex does not innovate enough. How do you respond? At the risk of repeating myself, there was exceptional feedback on our new models launched at Baselworld, especially our Cellini line, whose success exceeded our expectations. We still have many surprises tucked away for the years to come. With the design, research and production tools we have at our disposal, there is no limit to our ability to innovate and continue to perfect our watches. What are the challenges that lie ahead for Rolex? They do not really depend on us, as they are monetary, economic and political and are the same challenges facing the industry as a whole. Many watchmaking chiefs have already decried the high value of the Swiss franc and the strength of the euro. In the event of a major economic crisis, there is no reason at all that the luxury goods industry should not also be affected. Politically, and as demonstrated by the current situation in China, we can only hope for stabilisation and improvement. What about the watches? The lower, middle and high-end ranges in Swiss watchmaking will continue, I hope, to seek and to perfect quality in the spirit of "Swiss Made", which is a veritable, internationally renowned and extremely powerful label for our industry. Should it be reinforced? From the outset, Rolex participated along with other brands in reinforcing it. We are, nevertheless, aware that it presents certain problems and that it can create difficulties for some companies. I personally would prefer to see the label reinforced. It would be beneficial in the long run for the entire watchmaking industry. Can Rolex still grow? Over the years we have consistently set ourselves objectives that were considered very ambitious, but we have always exceeded them. Although, "no tree grows to the sky", there is nothing to prevent us from imagining that the brand will continue in this vein. I see no reason why, in the long-term, Rolex cannot continue its expansion. The brand's reputation as a "status symbol", our innovative spirit, our corporate culture should all continue to spark the imagination of new generations around the world. Rolex is unique and I am convinced it will stay that way! Our production facilities give us considerable scope, and volumes can be increased substantially should the need arise. Currently, the large investments made over the last few decades are fully satisfactory It is true that we tend to favour internal promotions. But we also look for leaders elsewhere, either in watchmaking circles or other sectors. Recruiting someone from the outside is therefore certainly not an exceptional phenomenon at Rolex (c) 2014 United Press & Publishing LLC Provided by SyndiGate Media Inc. (Syndigate.info). |