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Brathwait: A Transparent Watchmaker

Brathwait is a new entrant into the minimalist watch segment, but it has a significant competitive advantage the low price of its watches. Brathwaits mission is to bring transparency into the field of watchmaking by informing their customers about the total breakdown of the production costs and the amount of profit they make per item. According to Henrik Torp, the founder and CEO, Brathwait minimizes the watches costs to give the customer an excellent watch at a much lower price in comparison to traditional brands, which charge exceptionally high prices. Industry insiders believe that Brathwait is poised to make a big splash in the minimalist segment of the global wristwatch market, and its all down to their transparent marketing strategy.

The watch industry is going through the second phase of disruptive innovation due to the arrival of smartwatches. The more recent disruptions in the industry have not stopped Brathwaits entry into a market dominated by Swiss manufacturers.

Manufacturing watches only costs a fraction of the total cost; a substantial proportion of it is spent on exclusive promotions and advertising. A Swiss quartz movement with extra-long battery life can cost as little as $10, and Chinese-made quartz movements are even cheaper at $3. However, due to celebrity endorsements and other branding activities, the final price of an average Swiss watch can be fifty times the original cost or even higher.

Brathwait keeps costs low by manufacturing its watches in China, excluding intermediaries (like retailers and stockists) and using advertisement strategy that focuses on social media. The costs breakdown available on its Website, shows a total cost of $92.35 for the Classic Swiss model.

Brathwaits story is an intriguing for its dual proposition of breaking the secrecy of watchmaking and offering watch-lovers high quality timepieces at an affordable price.

Answer the following questions:

Discuss the drawbacks of Brathwaits cost leadership strategy. (25 marks)

Describe the sources of cost advantages that Brathwait may have over its competitors. (25 marks)