Steinway and Sons

Presenters
Team 02
MKTG 445-02
Ashley Sides
Derek Moss
Andrew Wyatt
Lindsey rooks
!ason ryant
Lindsey rooks
Ta"le o# $ontents
%&e'(ti)e S(mmary
*
+istory 4
,nd(stry Trends
5
,nd(stry $om-etition
.
Tar/et Market
0
Marketin/ Strate/ies
1
SW2T Analysis
30
$on'l(sion 33
2
Executive Summary
Problem:
As a res(lt o# the de'lination o# sales in the -iano ind(stry4 Steinway and
Sons needs to 5nd a way to (-hold its histori'al "rand re-(tation while /ainin/
market share world wide and (sin/ inno)ati)e te'hnolo/y6 -arti'(larly in the Asian
Market
Background:
,n late 37744 Steinway and Sons was yet a/ain a 'om-any on the market to
"e sold8 9or their own -ersonal reasonin/4 the irmin/ham "rothers de'ided to sell
the -iano man(#a't(rer8 2n A-ril 314 3775 Kyle Kirkland and Dana Messina4
already 'ontrollin/ m(lti-le 5rms4 de'ided to make the -(r'hase8 The in)estment
"ankers -(r'hased the :ew ;ork -iano man(#a't(rer #or an in'redi"le <300 million8
Discussion:
The -iano ind(stry has "een in ra-id de'line o)er the -ast 2 de'ades and in
-arti'(lar4 Steinway and Sons has taken a hard 5nan'ial hit8 Glo"al sales o# the
ind(stry ha)e dro--ed 40= o)er the -ast 24 years and with the introd('tion o#
ma>or ind(stry 'om-etitors4 Steinway and Sons ha)e 'ontin(ed to str(//le8 ,n
addition to the ne/ati)e im-a't o# these ind(stry trends4 Steinway and Sons
introd('ed a new -rod('t line to address '(stomer demand8 They -rod('ed a
more mid--ri'ed -rod('t line6 the oston Piano8 This ste-4 ?"reakin/ tradition4@
was taken with the intent to /ain market share in Asia while in'reasin/ -ro5ts8
Recommendations:
$ontin(e to -rod('e the mid--ri'ed oston line o# -ianos to /ain market
share
3
Make /ra)e attem-ts to take ad)anta/e o# the Asian Market "y attra'ti)ely
meetin/ demands6 i8e8 satis#yin/ demands #or ?#ree@ in hall t(nin/ and
deli)ery #or -ianists endorsements and esta"lishin/ '(stomer "ase with
'(stomer ser)i'e
They sho(ld (se A(ality and their re-(ta"le so-histi'ation to market more to
the instit(tional market whi'h makes (- only 30= o# )erti'al -iano sales and
20= o# /rand -iano sales
History
Steinway and Sons was esta"lished in :ew ;ork $ity in 315* "y +enry
%n/elhard Steinway4 an immi/rant #rom Germany8 The "(siness e&'elled "e'a(se
o# it te'hni'al "rillian'e and shortly4 a year later4 the 'om-any won a /old medal at
the Metro-olitan 9air in Washin/ton D8$8 The #ollowin/ year4 Steinway and Sons
introd('ed the 'ross-strin/in/ te'hniA(e in a -iano with a 'ast iron #rame4 an
inno)ation that is now (ni)ersal in all /rand -ianos8 D(e to the 'om-anyBs
inno)ati)e a"ility and te'hni'al s(-rema'y4 orders /rew ra-idly and a new lar/er
#a'tory was 'onstr('ted in 31.08 9or the ne&t 340 years4 Steinway and Sons wo(ld
"e re'o/niCed as the leader in the market #or hi/h A(ality -ianos DGo(r)illeE8
2)er the -ast 25 years4 Steinway and Sons ha)e "een somewhat
t(m(lt(o(s8 A#ter 320 years o# "ein/ a 'losely held #amily o-eration4 it was
de'ided Steinway and Sons 'o(ld no lon/er s(r)i)e in this manner8 The 'om-any
was sold to the $S M(si'al ,nstr(ments Di)ision in 3702 #or <23 million worth o#
$S sto'k8 The -rimary reasonin/ #or the sale was asso'iated with 5nan'es whi'h
hadnBt 'han/ed in the #ollowin/ #ew years6 the 'om-anyBs ret(rn on 'a-ital was
only a"o(t 5= DGo(r)illeE8
4
,n the "e/innin/4 $S in)ested se)eral million dollars in the 5rst #ew years
a#ter -(r'hasin/ the 'om-any8 This may not seem like an e&'e-tionally lar/e
amo(nt6 howe)er the Steinway #amily had ne)er "e#ore in)ested more than
<3504000 -er year in 'a-ital im-ro)ements8 ,n addition4 to ease the transition and
to ens(re A(ality #o'(s4 $S em-loyed +enry Steinway as -resident o# Steinway
and Sons #or 5)e DGo(r)illeE8
Lookin/ #or a reasona"le ret(rn on in)estment4 $S wanted to in'rease
re)en(e and de'rease man(#a't(rin/ 'osts "y in'reasin/ -rod('tion8 Their 5rst
ste- was to in'rease dealers "y almost 40=8 While these 'han/es did in #a't
in'rease sales )ol(me and -ro5ts4 it dama/ed the re-(tation o# Steinway and
Sons8 $riti's and "(yers "e/an to 'hallen/e the A(ality o# Steinway and SonsB
-ianos8 2)er the ne&t 30 years4 +enry Steinway is re-la'ed "y se)eral $%2Bs4 only
to worsen the 'alls #rom 'riti's 'hallen/in/ the A(ality o# Steinway and SonsB
-ianos8 ,n :o)em"er o# 37144 $S anno(n'ed the sale o# Steinway and Sons #or
<50 million to !ohn and Fo"ert irmin/ham DGo(r)illeE8
Altho(/h the irmin/ham "rothers had no e&-erien'e in the m(si'al
"(siness4 they set o(t to re-esta"lish Steinway and Sons as the maker o# the
hi/hest A(ality -ianos in the world8 $%2 r('e Ste)ens set o(t to ass(re e)eryone4
'(stomers4 em-loyees4 and dealers4 that the new owners were hi/hly 'ommitted to
A(ality8 The 'om-any now "e'ame re#o'(sed and ret(rned to what had made
them so s(''ess#(l8 Aside #rom the new#o(nd #o'(s on A(ality4 the irmin/ham
"rothers e&-anded Steinway and SonsB -rod('t line8 ,t now in'l(ded the oston
Piano line introd('ed in 37724 the Steinway Limited %dition -ianos introd('ed
377*4 and the $rown !ewel $olle'tion o# Steinway -ianos introd('ed in 37748
Des-ite these -ositi)e 'han/es "y Ste)ens and his team4 the r(nnin/ o# Steinway
5
and Sons was on'e a/ain 'onstrained "y limited 5nan'ial reso(r'es8 The 'om-any
was a/ain sold on A-ril 314 3775 to Dana Messina and Kyle Kirkland #or <300
million DGo(r)illeE8
Messina and Kirkland had already a'A(ired the Selmer $om-any4 a meat
-ro'essin/ and a -a-er 'om-any4 and #elt as tho(/h Steinway and Sons was a well
r(n or/aniCation whi'h 'o(ld rea- the "ene5ts o# their 5nan'ial e&-ertise
DGo(r)illeE8
Industry Trends
2)er the years4 -iano sales ha)e in'reasin/ly dro--ed #rom as hi/h as
22*4000 (nits in the 3710s to nearly 3004000 in 3774 DGo(r)illeE8 Peo-le ha)e
diGerent ar/(ments o# why -iano sales dro--ed so dramati'ally o)er the -ast 20-
*0 years8 The 5rst o# these ar/(ments in'l(des the idea that the de'rease in sales
is sim-ly a trend and that it is -redi'ted that in the #(t(re -iano sales will on'e
a/ain rise si/ni5'antly8 ,n addition4 'om-(ter home entertainment and ele'troni'
de)i'es s('h as key"oards were "ein/ sold more than traditional -ianos8
A se'ond o"ser)ation is that the -iano ind(stry has "e'ome a 'onsolidation
o# many o# the to- -iano man(#a't(rers8 Many o# the ind(stries in the Hnited
States and %(ro-e ha)e "een /oin/ thro(/h 'onsolidation eGorts8 ,n the early
3700s there were se)eral h(ndreds o# -iano makers whereas in 37724 there were
only ei/ht DGo(r)illeE8
A third trend is that many Asian -iano man(#a't(rers arose8 9o(r Asian
'om-anies in'l(din/ ;amaha4 Kawai4 ;o(n/ $han/ and Sami'k a''o(nted #or 05=
o# /lo"al sales in the 3770s8 ?Asian im-orts a'hie)ed a *5= (nit share o# the
)erti'al -ianos market and an 10= (nit share o# the /rand -iano market "y 37744@
DGo(r)illeE
6
The #o(rth trend in the ind(stry market was the 'han/e in market siCe8 With
'o(ntries s('h as So(th Korea4 !a-an4 and $hina re-resentin/ a )ery lar/e -ortion
o# the market4 the Hnited States and Western %(ro-e were no lon/er the ind(stry
leader in sales DGo(r)illeE8
A 5#th and 5nal iss(e that #a'es the -iano ind(stry is that these hi/h--ri'ed4
hi/h end -ianos may limit -iano sales8 2wnin/ a Steinway and Sons -iano may "e
)iewed "y some m(si'ians as a sym"oli' re-resentation o# hi/h stat(s8 2nly a
small -er'enta/e o# -eo-le who are lookin/ to -(r'hase a -iano 'an aGord a
-rod('t o# Steinway and Sons8 ,n 37754 Steinway and Sons /rand -ianos were
-ri'ed #rom <2.4000 to o)er <0040004 )erti'als were -ri'ed #rom <334700 to o)er
<3040004 and oston -ianos were -ri'ed #rom <.4*75 to o)er <*04000 DGo(r)illeE8
The oston models are aro(nd hal# as e&-ensi)e4 howe)er they 'ontin(e to "e o(t
o# the -ri'e ran/e o# the a)era/e '(stomer8 The ma>ority o# the -("li' is >(st not
willin/ to -ay that kind o# money on a dis'retionary item s('h as a -iano8 The
re'ession o# the early 3770Bs 'an also "e linked to the de'rease in -iano sales in
re'ent history DGo(r)illeE8
Industry om!etition
Steinway and Sons had only a #ew 'om-etitors that were 'onsidered threats
to their market share8 A#ter the ind(stryBs 'onsolidation o# man(#a't(rers #rom
h(ndreds o# makers to a mere ei/ht 'om-anies that were 'onsidered ma>or
'om-etition4 their hi/h )ol(me man(#a't(rin/ 'om-etitors in'l(ded Kawia4
;amaha4 and aldwin8 Their 'om-etition in the low )ol(me4 hi/h A(ality market
was Isendor#er and 9aCioli8
aldwin Piano and 2re/on $om-any was the only remainin/ 'om-etiti)e
lar/e s'ale -rod('er o# /rand and )erti'al -ianos in the HS in 3775 aside #rom
7
Steinway and Sons8 aldwin sold many )arieties o# -ianos ran/in/ #rom #a'tory
man(#a't(red )erti'al and "a"y /rand -ianos4 to e&-ensi)e hand made /rand
-ianos8 aldwin was seen as a ma>or 'om-etitor in 3774 sellin/ 204000 -ianos
worldwide and /eneratin/ <322 million in sales DGo(r)illeE8
;amaha $or-oration4 a 300 year old 'om-any4 was the lar/est -rod('er o#
-ianos in the world8 ;amaha had <3 "illion in sales in 3774 with *5= world market
share and 50= !a-anese market share8 ,n 3774 ;amaha -rod('ed 3054000 -ianos
(sin/ hi/hly a(tomated4 assem"ly te'hniA(es DGo(r)illeE8 ;amaha also -rod('ed
hi/h 'on'ert end /rand -ianos (sin/ traditional 'ra#t methods with the /oal o#
-rod('in/ the "est /rand -iano in the world8 ;amaha wo(ld o#ten seek new
strate/ies to 'om-ete with Steinway and Sons in the /rand -iano market8 ;amaha
'laimed that the wood (sed in ;amaha -ianos was #rom the same wood mill as
Steinway and SonsB8 ;amaha also wo(ld -(r'hase Steinway and SonsB -ianos4
disassem"le them4 and try to re'reate a "etter -iano that Steinway and SonsB
model8 ;amaha marketed their -ianos to ma>or (ni)ersities4 in order to /ain on
Steinway and Sons8 They wo(ld o#ten ?loan@ -ianos to (ni)ersities #or st(dents to
(se and to "e 'onsidered #or -(r'hase later8
Kawai was a 'om-etitor #rom !a-an whi'h -rod('ed 704000 )erti'al -ianos
and 304000 small /rand -ianos a year DGo(r)illeE8 M('h like ;amaha4 Kawia
wanted to s-e'ial in a hi/h A(ality 'on'ert /rand -iano8 Kawai was not a ma>or
'om-etitor o# Steinway and Sons sin'e their materials (sed in their -ianos were
'onsidered low A(ality "y many 'riti's8
Isendor#er and 9aCioli were two 'om-anies that 'om-eted with Steinway
and Sons in the to--A(ality /rand -iano market8 Isendor#er #rom A(stria -rod('ed
400 /rand -ianos in 3774 to 9aCioliBs 40 DGo(r)illeE8 These two 'om-anies (sed
8
the same hand'ra#ted te'hniA(es as Steinway and Sons and were 'onsidered to-
not'h amon/ '(stomers #or "ein/ made in low )ol(mes8
9
Target "arket
Steinway and SonsB two ma>or markets to sell their -ianos in were the home
or -ri)ate market and the instit(tional market8 These two markets were /ro(nds
#or sellin/ Steinway and SonsB )erti'al and /rand -ianos8 Jerti'al -ianos ha)e their
strin/s mo(nted )erti'ally while /rand -ianos ha)e their strin/ mo(nted
horiContally8
The home market4 o#ten 'alled the -ri)ate market made (- most o# Steinway
and SonsB sales "(yin/ 70= o# its )erti'al -ianos and 10= o# its /rand -ianos8 The
home market /enerally was 45 years old and had o)er <3004000 in'omes a year8
To 5nd their market4 Steinway and Sons had to 5/(re o(t who the m(si' lo)ers
were and who had eno(/h money to -(r'hase their -ianos DGo(r)illeE8
The instit(tional market a''o(nted #or 30= )erti'al -iano sales and 20=
/rand -iano sales8 This market in'l(ded (ni)ersities4 m(si' instit(tes4 hotels and
-er#orman'e halls DGo(r)illeE8 Steinway and Sons wanted to /et their -ianos in
these instit(tions so that it wo(ld lead to more sales in the home market8
"arketing Strategies
Steinway and Sons ha)e shown a de'line in re'ent years on the sale o#
Grand Pianos8 Some o# the reasons that #or the de'line is -ri'e4 new te'hnolo/y4
new markets4 and the #a't that -eo-le that ha)e -ianos ha)e had them #or a while
and will not need to re#(r"ish a -iano that o#ten8 The 5rst A(estion that needs to
"e asked does Steinway want to 'ontin(e is strate/y as the world -remier /rand
-iano or does it want to take more a//ressi)e marketin/ strate/y and /i)e (- that
title #or a "etter -ro5t mar/ins and market share8 Steinway needs to take
ad)anta/e o# the diGerent marketin/ strate/ies and (se the Asian market to their
10
ad)anta/e8 They also need to look at -ri'e and te'hnolo/y to enhan'e their -ro5ts
in the -iano ind(stry8
Steinway de'ided to reli)e the #a't that -eo-le are not s-endin/ the money
on 004000 dollar /rand -ianos they de'ided to introd('e a new more aGorda"le
-iano 'alled the oston Piano8 The oston -iano whi'h is -rod('ed "y Kawai in
!a-an ena"les Steinway to sell a mid -ri'ed -iano with thro(/h the Steinway name8
Sin'e the introd('tion o# the oston -iano in 3772 the sales in'reased #rom 280
million in 3772 to 3.80 million in 3774 DGo(r)illeE8 This -iano /ains some o# the
market share that has not "een ta--ed "y Steinway "e#ore "e'a(se o# the 'ost o#
their -ianos8 Steinway also introd('ed a Limited %dition -iano whi'h sold o(t to
dealers within ho(rs o# "ein/ made a)aila"le8 Steinway needs to 'ontin(e to look
at diGerent ways and new marketin/ strate/ies to 'o(nter the -ri'e iss(e it has
with the Steinway /rand "ein/ hi/hly e&-ensi)e8
Another marketin/ as-e't that Steinway needs to #o'(s on is how to ta- into
the Asian market whi'h is the #astest /rowin/ market8 Steinway 'an 'a-t(re this
market "y introd('in/ the oston -iano to ri)al that o# the ;amaha and Kawai that
are -rod('ed in !a-an8 The more aGorda"le oston Piano will ena"le Asian -eo-le
to -(r'hase a Steinway witho(t /oin/ "roke8 y e&-andin/ o)erseas Steinway
wo(ld make (- #or some o# the lost re)en(e in the Hnited States market8
Steinway and Sons is known #or their im-e''a"le "rand ima/e and traditional
A(ality and d(ra"ility8 D(e to their imma'(late -rod('ts4 the 'on'e-t o# re-eat
"(yers is )irt(ally non-e&istent8 As a res(lt4 the (sed -iano ind(stry has Ko(rished8
9or e)ery new Steinway and Sons -iano that is sold4 a"o(t 5)e (sed Steinway and
SonsB -ianos are also traded8 These (sed -rod('ts hold their )al(e e&tremely well
and most are sold #or a"o(t 05= o# their -(r'hased -ri'e8
11
Steinway needs to #o'(s on de)elo-in/ new te'hnolo/ies and mi/ht want to
e&-and into ele'troni' key"oards whi'h are now "e'omin/ -o-(lar with the
yo(n/er /enerations8 y 'reatin/ a key"oard with the Steinway name that 'o(ld
/ain market shares in the /rowin/ m(si' ind(stry o# ele'troni's8 They 'o(ld also
rea'h yo(n/er -eo-le earlier and "e/in to make them aware o# the Steinway
name8
Steinway and SonsB $on'ert and Artist -ro/ram has "e'ome an e)er
s(''ess#(l marketin/ strate/y8 The -ro/ram allows #or a ?"ank@ o# o)er **0 -ianos
in whi'h /i#ted artists may 'hoose #rom #or their -er#orman'es8 The -er#ormers
ha)e their -re#eren'es re/ardin/ tones and so(nds whi'h are satis5ed "y master
te'hni'ians8 ,n e&'han/e #or their -er#orman'e4 Steinway and Sons is /ranted
e&'l(si)e (se o# the artistsB names #or their own -("li'ity -(r-oses8 With the (se
o# artistsB names4 Steinway and Sons is a"le to "etter a--eal to the ind(stry8
,n addition to the new -rod('t lines4 the (tiliCation o# artists4 new and (sed
-ianos4 te'hnolo/y and inno)ation4 and the Asian market share4 Steinway and
SonsB also takes ad)anta/e o# the (se o# inde-endent dealers8 A--ro&imately
3000 inde-endent dealers are res-onsi"le #or sellin/ o)er 75= o# new -ianos8 The
dealers 'arry Steinway4 or ;amaha4 as their -rimary "rand alon/ with entry le)el
"rands with lower retail mar/ins8 These inde-endent dealers are eGe'ti)e and
eL'ient #or the sale o# Steinway and SonsB -ianos8
Steinway m(st #o'(s on many diGerent marketin/ strate/ies and need to
"e/in to in'rease the sales o# their -ianos witho(t losin/ the hi/h A(ality that the
Steinway and sons -iano "rin/s8 9o'(ses need to "e shi#t i# they want to 'ontin(e
their /reat m(si' tradition8
S#$T %nalysis
12
Strengt&s
Steinway and Sons ha)e an esta"lished "rand re-(tation o# A(ality and
d(ra"ility
There are min(te diGeren'es "etween the so(nd o# ea'h 'ra#ted -iano whi'h
allows #or diGerentiation and '(stomiCation o# the -rod('t
The Steinway $on'ert and Artist -ro/ram has aro(nd 150 artists whom
'hoose the Steinway and Sons -iano
#eaknesses
The d(ra"ility and A(ality o# their -rod('ts limits the 'on'e-t o# re-eat
"(yers and "rand loyalty
The a)era/e '(stomer is o)er 45 years old and earns in e&'ess o#
<3004000Myear
With the introd('tion o# the oston -iano line4 Steinway and SonsB ima/e
took a ste- away #rom tradition
Growin/ te'hnolo/y and inno)ation has taken toll on traditional -ianos6 they
ha)e "een re-la'ed "y key"oards and other 'om-(ter te'hnolo/y
$!!ortunities
%sta"lish a lar/er '(stomer "ase in Asia to in'rease market share
Steinway and Sons 'o(ld in'rease their ind(strial market "y oGerin/
dis'o(nts to (ni)ersities or 'on'ert halls andMor "ein/ more '(stomer ser)i'e
oriented
Hsin/ inno)ati)e te'hnolo/y4 Steinway and Sons 'o(ld -otentially in'rease
markets "y a--ealin/ to lower and middle 'lass -(r'hasers with low to mid-
-ri'ed -rod('ts
13
T&reats
With the e&-ansion o# Asian man(#a't(rers4 /lo"al market share is no lon/er
"ein/ 'ontrolled "y Ameri'an man(#a't(rers
There are le)els o# ine&-erien'e o# the '(rrent yo(n/er ownersM$%2s
onclusion
As a res(lt o# their de'line in sales d(e to the ra-id 'han/e o# the -iano
ind(stry4 te'hnolo/y4 e&-ansion o# new markets and #orei/n 'om-etitors4 Steinway
and Sons will need to make some drasti' 'han/es to (tiliCe these ind(stry trends8
,n order to e&-and market share and /ain -ro5ts4 Steinway and Sons need to take
ste-s towards (sin/ te'hnolo/y to enhan'e their -rod('ts while maintainin/ their
traditional "rand re-(tation8 While 'ontin(in/ with their hi/h-end -rod('ts as well
as introd('in/ a mid--ri'ed line4 Steinway and Sons will "e a"le to rea'h more o#
the markets demand8 $on'entrations sho(ld also "e made towards rea'hin/ new
'(stomers all o)er the world8 Their -rod('ts remain o# hi/h A(ality and d(ra"ility
whi'h allows #or less 'om-any loyalty8 %sta"lishin/ a '(stomer "ase is )ital #or
their s(''ess8 ,n order to restore their histori'al s(''ess while im-lementin/
'han/es and -re-arin/ #or /rowth4 Steinway and Sons will ha)e to (se this
de'lination o# the -iano ind(stry to their ad)anta/e8
14
Fe#eren'es
Go(r)ille and Lassiter8 ?Steinway N SonsO (yin/ a
Le/end DAE8@ Marketin/ Mana/ementO $ase Analysis "y
TeamsO -/ 340-3..8
15