Background

In late 1994, Steinway and Sons was yet again a company on the market to be sold. For their own
personal reasoning, the Birmingham brothers decided to sell the piano manufacturer. On April 18,
1995 Kyle Kirkland and Dana Messina, already controlling multiple firms, decided to make the
purchase. The investment bankers purchased the New York piano manufacturer for an incredible
$100 million.

Company Brief
The main changes in the environment and the Steinway organization since 2002 still involve the
economy. Steinway doesnt operate like a typical organization. The culture of Steinways brand is
based on tradition and quality of craftsmanship. When many companies were discounting items to
entice consumers in a bad economy, Steinway stood by the price of their pianos and their name
Steinway never discounts, according to financial writer Nancy Miller, That's part of the pianos'
prestige. Steinway even laid off one third of their production staff in a New York City adjacent
factory. Miller also states, Inventory control is only part of Steinway's pricing power. Steinway still
has many hurdles to overcome before they are profitable to a point which makes stockholders
pleased. Other change that has occurred since the diagnosis in 2002 is sales.

The piano industry has been in rapid decline over the past 2 decades and in particular, Steinway and
Sons has taken a hard financial hit. Global sales of the industry have dropped 40% over the past 24
years and with the introduction of major industry competitors, Steinway and Sons have continued to
struggle. In addition to the negative impact of these industry trends, Steinway and Sons introduced a
new product line to address customer demand. They produced a more mid-priced product line; the
Boston Piano. This step, breaking tradition, was taken with the intent to gain market share in Asia
while increasing profits.

About pianos
Two segments of pianos
1) Grand pianos
2) Vertical pianos

Grand pianos were larger & more expansive

It generally possessed a louder & more resonant tone

The market for Grand was much smaller than for vertical

Problem
As a result of the declination of sales in the piano industry, Steinway and Sons needs to find a way to
uphold its historical brand reputation while gaining market share world wide and using innovative
technology; particularly in the Asian Market

Global Economy and Technological Changes

Over the years, piano sales have increasingly dropped from as high as 223,000 units in the 1980s to
nearly 100,000 in 1994. People have different arguments of why piano sales dropped so dramatically
over the past 20-30 years.

The first of these arguments includes the idea that the decrease in sales is simply a trend and that it is
predicted that in the future piano sales will once again rise significantly. In addition, computer home
entertainment and electronic devices such as keyboards were being sold more than traditional pianos.
A second observation is that the piano industry has become a consolidation of many of the top piano
manufacturers. Many of the industries in the United States and Europe have been going through
consolidation efforts. In the early 1900s there were several hundreds of piano makers whereas in
1992, there were only eight.

A third trend is that many Asian piano manufacturers arose. Four Asian companies including
Yamaha, Kawai, Young Chang and Samick accounted for 75% of global sales in the 1990s. Asian
imports achieved a 35% unit share of the vertical pianos market and an 80% unit share of the grand
piano market by 1994,

The fourth trend in the industry market was the change in market size. With countries such as South
Korea, Japan, and China representing a very large portion of the market, the United States and
Western Europe were no longer the industry leader in sales.

A fifth and final issue that faces the piano industry is that these high-priced, high end pianos may
limit piano sales. Owning a Steinway and Sons piano may be viewed by some musicians as a
symbolic representation of high status.
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Industry Competition
Steinway and Sons had only a few competitors that were considered threats to their market share.
After the industrys consolidation of manufacturers from hundreds of makers to a mere eight
companies that were considered major competition, their high volume manufacturing competitors
included Kawia, Yamaha, and Baldwin. Their competition in the low volume, high quality market
was Bsendorfer and Fazioli.

Yamaha Corporation, a 100 year old company, was the largest producer of pianos in the world.
Yamaha had $1 billion in sales in 1994 with 35% world market share and 50% Japanese market
share. In 1994 Yamaha produced 175,000 pianos using highly automated, assembly techniques .
Yamaha also produced high concert end grand pianos using traditional craft methods with the goal
of producing the best grand piano in the world. Yamaha would often seek new strategies to compete
with Steinway and Sons in the grand piano market. Yamaha claimed that the wood used in Yamaha
pianos was from the same wood mill as Steinway and Sons.
Kawai was a competitor from Japan which produced 90,000 vertical pianos and 10,000 small grand
pianos a year . Much like Yamaha, Kawia wanted to special in a high quality concert grand piano.
Kawai was not a major competitor of Steinway and Sons since their materials used in their pianos
were considered low quality by many critics.

Bsendorfer and Fazioli were two companies that competed with Steinway and Sons in the topquality grand piano market. Bsendorfer from Austria produced 400 grand pianos in 1994 to
Faziolis 40 . These two companies used the same handcrafted techniques as Steinway and Sons and
were considered top notch among customers for being made in low volumes.

Target Market
Steinway and Sons two major markets to sell their pianos in were the home or private market and
the institutional market. These two markets were grounds for selling Steinway and Sons vertical and
grand pianos. Vertical pianos have their strings mounted vertically while grand pianos have their
string mounted horizontally.

The home market, often called the private market made up most of Steinway and Sons sales buying
90% of its vertical pianos and 80% of its grand pianos. The home market generally was 45 years old
and had over $100,000 incomes a year. To find their market, Steinway and Sons had to figure out
who the music lovers were and who had enough money to purchase their pianos .

The institutional market accounted for 10% vertical piano sales and 20% grand piano sales. This
market included universities, music institutes, hotels and performance halls . Steinway and Sons
wanted to get their pianos in these institutions so that it would lead to more sales in the home market.

The External and Internal Environment

Steinway and Sons have shown a decline in recent years on the sale of Grand Pianos. Some of the
reasons that for the decline is price, new technology, new markets, and the fact that people that have
pianos have had them for a while and will not need to refurbish a piano that often. The first question
that needs to be asked does Steinway want to continue is strategy as the world premier grand piano
or does it want to take more aggressive marketing strategy and give up that title for a better profit
margins and market share. Steinway needs to take advantage of the different marketing strategies
and use the Asian market to their advantage.

Steinway decided to relive the fact that people are not spending the money on 70,000 dollar grand
pianos they decided to introduce a new more affordable piano called the Boston Piano. The Boston
piano which is produced by Kawai in Japan enables Steinway to sell a mid priced piano with through
the Steinway name. Steinway needs to continue to look at different ways and new marketing
strategies to counter the price issue it has with the Steinway grand being highly expensive.

Steinway and Sons is known for their impeccable brand image and traditional quality and durability.
Due to their immaculate products, the concept of repeat buyers is virtually non-existent. As a result,
the used piano industry has flourished. For every new Steinway and Sons piano that is sold, about
five used Steinway and Sons pianos are also traded. These used products hold their value extremely
well and most are sold for about 75% of their purchased price.

Steinway needs to focus on developing new technologies and might want to expand into electronic
keyboards which are now becoming popular with the younger generations. By creating a keyboard
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with the Steinway name that could gain market shares in the growing music industry of electronics.
They could also reach younger people earlier and begin to make them aware of the Steinway name.
Steinway and Sons Concert and Artist program has become an ever successful marketing strategy.
The program allows for a bank of over 330 pianos in which gifted artists may choose from for
their performances. The performers have their preferences regarding tones and sounds which are
satisfied by master technicians. In exchange for their performance, Steinway and Sons is granted
exclusive use of the artists names for their own publicity purposes. With the use of artists names,
Steinway and Sons is able to better appeal to the industry.

SWOT Analysis
Strengths

Steinway and Sons have an established brand reputation of quality and durability

differences between the sound of each crafted piano which allows for differentiation and
customization of the product

Concert and Artist program has around 850 artists whom choose the Steinway and Sons
piano

Weaknesses

durability and quality of their products limits the concept of repeat buyers and brand loyalty

average customer is over 45 years old and earns in excess of $100,000/year

introduction of the Boston piano line, Steinway and Sons image took a step away from
tradition

Growing technology and innovation has taken toll on traditional pianos

Opportunities

Establish a larger customer base in Asia to increase market share

increase their industrial market by offering discounts to universities or concert halls and/or
being more customer service oriented

innovative technology, Steinway and Sons could potentially increase markets by appealing to
lower and middle class purchasers with low to mid-priced products
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Threats

expansion of Asian manufacturers, global market share is no longer being controlled by

American manufacturers

levels of inexperience of the current younger owners/CEOs

Future Prospect

Continue to produce the mid-priced Boston line of pianos to gain market share

They should use quality and their reputable sophistication to market more to the institutional
market which makes up only 10% of vertical piano sales and 20% of grand piano sales

Make grave attempts to take advantage of the Asian Market by attractively meeting demands;
i.e. satisfying demands for free in hall tuning and delivery for pianists endorsements and
establishing customer base with customer service