Patek Philippe and the Outsourcing Challenge

Please imagine you are senior manager with the Swiss Haute Horlogerie brand Patek Philippe. Since its creation in 1851 in Geneva, the family-owned brand Patek Philippe has been perpetuating the tradition of Genevan watchmaking and jewelry. Together with brands like A. Lange & Söhne, Vacheron Constantin, and Piaget Patek Philippe builds the high-end segment of the worldwide watch market. Patek Philippe is known to design and manufacture the most complicated watches such as the perpetual calendar with moon phase. All watch components are produced in-house. Also, the Patek Philippe Seal guarantees the enduring quality of Patek Philipe's timepieces, i.e. Patek Philippe commits to lifelong servicing and restoration for all timepieces created by Patek Philippe since 1839 supporting its claim "You never actually own a Patek Philippe. You merely look after it for the next generation."

Please imagine that the management board at Patek Philippe asks you to elaborate on the following: Should Patek Philippe start outsourcing (contracting out internal to processes to third-party partners) parts of the production? Please base your recommendation on a sound analysis of opportunities and potential threats of outsourcing parts of the value chain.

In case you recommend to outsource parts of the production: Which parts of the production would you outsource? In which country should the third-party partner be located? What are the consequences for your marketing mix? Feel free to include additional aspects in your reasoning.

In case you recommend not to outsource parts of the production: What do you alternatively recommend in order to improve profit margin of Patek Philippe's product range? Feel free to include additional aspects in your reasoning