TAG Heuer: "you have less to lose." (expands internationally)(Little Big Corp: The Smaller Company Goes Global)(Adventure Capital)

In a global market, says Philippe Champion, executive vice president of Swiss watchmaker TAG Heuer, a smaller company has a powerful weapon: "Boldness. When you are small, you are naturally daring because you have less to lose."

Champion is part of a management team that took the reins at TAG Heuer in 1988. At the time, the Marin, Switzerland-based company had $36 million in revenues, and was focused on making precision stopwatches and other timepieces for the sports world. The new management team decided on a bold move: Combine the company's sports heritage with an image of luxury to create prestige sports watches.

"It was bold, because those two notions were almost opposite," says Champion. "Ten years ago, when you thought of sports, you thought of physical effort, sweat, and mass-consumption goods. When you thought of prestige, you thought Chanel or Cartier. Putting these two things together created something new."

The company also had bold plans for its bold concept - build TAG Heuer into a truly global brand. The company steadily expanded into new markets around the globe, and ran striking ad campaigns featuring high-profile tennis players, Formula One drivers, and downhill skiing stars. Today, TAG Heuer watches are carried in some 7,000 high-end retail outlets in 100 countries. The company's revenues - which now total some $325 million - come from Asia, Europe, and the Americas, with each region contributing about a third of the company's sales. The strength of the brand has grown as well, as evidenced by the fourfold increase in the average retail price of TAG Heuer products over the last decade.

To build its brand, TAG Heuer has worked hard to ensure quality and consistency across markets. "Our products are exactly the same in the 100 countries where they are distributed, and in the 55 countries where we advertise, you will see the same campaign," says CEO Christian Viros. "You need to have the local contacts to understand the local culture, and what makes the people there tick. You have to understand the mechanics of distributing or operating in the local country, and the differences of doing business there." But while operations may vary, the company's marketing approach is kept consistent. "It would be easy to get short-term gains by changing our marketing or product for different countries. But we believe that we should never forget our main thrust, and do what's proper for the company and the brand as a whole."

"There are two mistakes we learned to avoid," adds Philippe Champion. "One is not listening to the local countries at all. The other is listening too much, because almost always when you want to do something new, the countries tell you, 'What you suggest is wonderful; I am sure it will work everywhere - but not in my country because my country is different.' So the difficulty is to find the right balance."

As TAG Heuer's international efforts have unfolded, Viros and his colleagues have had to alter their distribution strategy in order to advance their brand. The company traditionally worked through independent agents in each market but found it difficult to manage merchandising and pricing. To move watches, local distributors might sell to down-market outlets, and retailers might cut prices and use inappropriate displays - all of which could damage TAG Heuer's carefully crafted brand. So, over the last few years, the company has been forming subsidiaries to handle distribution. Today, more than two-thirds of its sales are made directly to retailers, and the company has even opened shops of its own in Tokyo, Singapore, and Bangkok.

By taking over distribution, the company has increased its gross margins from 45 percent to 65 percent, which more than offsets the cost of running the local subsidiaries. Just as important, says Viros, the move has "given us control of our destiny. We have better control of the implementation of our marketing programs. A better understanding of local issues. Greater reactiveness to new developments. We live in a world that is much more volatile and difficult than it was four or five years ago, especially in Asia. So the closer we get to our retailers, the better."

Overall, growth and success have not come without problems, says Viros. For example, the company has found that doing business across three continents can put a strain on a smaller company's management resources. In particular, executives have spent a lot of time traveling to ensure that the company's values and approaches are understood by people in the field. "You have to be present locally to provide business advice and the proper marketing guidelines. You cannot just write your culture; we do not have a Ten Commandments or a guidebook of do's and don'ts. It's a question, especially at the beginning, of osmosis. By meeting with people, you create a common understanding." In the past year, the company has expanded its managerial team to help handle the growing workload.

In addition, Viros says, success attracts attention, and TAG Heuer has learned to watch for competitors that are more than willing to share in the markets the company pioneers. "When you are the leader, you should not underestimate the sleeping beauties you are awakening," he says. "We always tended to think of the proactive moves we wanted to make. There are times when you should have thought more clearly about defensive moves to prevent the competition from catching up with us in some places."

To stay ahead of those competitors, the company has also learned to keep cultivating that critical quality of boldness, and to keep thinking like a small company, says Philippe Champion. "Being less dating is a natural tendency that we fight against as we grow. We make a point to stop, to look at things from a distance, and to try to get away from the daily job that sometimes makes you lose perspective. We try to look at things as if we were outsiders, and be critical of ourselves and ask whether an idea is daring or not. If it's not, we say, 'Let's not do it.'"