Swatch Case: Increasing Business...Is That a Risk?

Swatch Case: Increasing Business...Is that a Risk?

Thinking of starting a new venture? If yes, than what is that first thing that you would like to have from the business? Let me guess and if I'm correct it should be high returns on the investment, in simple terms high profits.

Normally, the profits are linked to sales and cost of goods, more the sales more the profits...and more smiles on the faces of internal & external customers and stakeholders.

But sometimes with higher sales meaning increase in the demand of your product can be threat to your own company. As the company might not have adequate production capacity, logistics support, skilled staff, finances, warehousing capacity etc., these can effect the company's existing position too.

This situation can be better explained with an example of a very well company "Swatch Group AG" - world largest watch manufacturer with global presence.

The Swatch Company has grown consistently right from the day of their establishment with few ups and downs in-between and today it is in very strong position with high demands from all over the world.

But the company is facing some potential threats with the continuous increasing demand, some of these are: First, Supply Gap, where-in the demand of the Swatch Watches are high and the existing production capacity is not sufficient to meet the market demand, because of which the company has been losing on the business and profits. Second, shortage of skilled labour because of which too the company is not able to help themselves in their efforts to increase the output, directly affecting the output of the finished products. Third, with difficulty in increasing the production on one side the company faces tough competition from the peer group, who buys the raw material from "Swatch" and stand against them itself, therefore to ensure increase in sales and Swatch will have to plug this gap.

Adding to the above threats the Swatch may cause a dent in the confidence level of the existing stakeholders (internal & external) with the announcement by the company Chairwoman Ms. Nayla Hayek, that her Son Mr. Marc Hayek will become the next CEO, replacing Mr. Nick Hayek, this may pave negative sentiments and possibly affecting the confidence level of the people attached with the company. This can be considered a potential threat as loss of stakeholders confidence will have a cascading effect and was not called for at this juncture.

Board of the Swatch should be more concerned about meeting the market demand and making the strategy for the same instead of looking for the new face to represent the company.

So, after having a look on the situation of the Swatch we can assume that increase in the sales is not always a positive sign for company's better growth...and can lead to a big