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The Birth of Swatch
I. Executive Summary……………………………………………………………………………………page 3 II. Evolution of Watch Page 1
Executive Summary Anmol Virk Page 2 .April.. ………………………………………. Threat from untraditional sources………………. Examples of resurgent brands……………………………………………………………………page 7 I. Pricing Strategy of Swatch………………………………………………………………………….page 6 IV.…. 22 The Birth of Swatch Industry………………………………………………………………………page 4-5 III..page 6 V.
and they felt this competition becoming stronger when Quartz technology was introduced. Swatch reversed the fortune of SMH as well as the whole Swiss watch industry. 22 The Birth of Swatch Over the last 5 decades. Swatch became a huge success story of the watch industry. Hayek did not relent and persisted with the idea of Swatch. Swiss watchmakers refused to embrace quartz based on the perception that quartz watches were a passing fad. Question 1 Anmol Virk Page 3 . Starting from 1950s watches were considered as very precious goods that only few people could afford. I recommend that Swatch should continue with its strategy of low pricing of Swatch as its pricing strategy differentiates it from the other players in the segment. so they were less expensive but still very precise. I have tried to showcase that over a period of 5 decades the key attributes valued by customers have undergone through series of changes.April. The recent product launches such as Scuba line and Chorno line are steps in right direction. after-war time companies evolved into the development of low-cost watches. for further growth of the brand I recommend that Swatch should continue expanding its product line across different categories. Using perceptual maps. After 1950s the overall industry landscape changed. Swiss watch producers started to fear competition coming from low-cost producers. Swiss Watch majors SSIH and ASUAG faced insolvency and eventually merged to become one entity. Switzerland found itself unable to compete with Japanese watchmakers. The latter part of the paper is focused on the challenges Swatch faces in terms of its pricing strategy and in terms of the competition from outside the industry. In this paper. In 1983. I recommend that SHM should continue to promote Swatch as a style statement rather than time checking instrument. Swiss watchmakers now control 18% of total world volume and command 55% of total value. Japanese watchmakers saturated the global market with quartz watches at rock bottom prices. In terms of threat of competition from unconventional sources such as laptops and mobiles. Watches were considered as a luxury good as well as a “financial investment. I have covered the evolution of watch industry. Pricing strategy of Swatch acts as a mirror for communicating its other attributes. With its innovative designs and aggressive promotion. The rise of quartz technology hastened the decline of the Swiss watch industry. Hayek’s most critical effort was to launch a 1 st low end Swiss watch – Swatch. Hayek came under severe criticism for ‘toying’ with the brand image of the Swiss watches. Watch industry has undergone radical chages. Swatch restored the credibility of Swiss watches. Nicolas Hayek became CEO of the merged entity (SMH) and undertook series of steps to revive the Swiss watch industry. Such watches still used mechanical movements but were made by metals in place of jewels. So.
In this period the watch industry was dominated by Swiss producer. 22 The Birth of Swatch Watch industry has undergone a complete revamp since 1950.April. Many a times. had great care of them and used to hand them down from generation to generation. watch craftsmanship was developed especially in Switzerland. Although after the World War II many Swiss watch firms were forced to close because of the recession.“home-made” effect Home made (Switzerland) Longiness mega Piaget Embellishing Unembellished Alien or foreign Starting from 1950s watches were considered as very precious goods that only few people could afford. the changing trends and changing consumer preferences. The evolution of watch industry can be broadly classified in to 3 time periods Before 1950s . In this period Timex was Anmol Virk Page 4 . Watches were considered as a luxury good as well as a “financial investment”. so they were less expensive but still very precise. From 1950s to 1970s .low-price and new technology Durable Omega Longiness Timex Quartz Citizen Hattori Seiko Luxury Thriftiness Luxury Timex Thriftiness Longiness Piaget Ephemeral Mechanic After 1950s the overall industry landscape changed. after-war time companies evolved into the development of low-cost watches. The production of watches was a craft that required accurate skills and mastery of jewels making techniques. reversed the fortunes of the existent players in the market. Such watches still used mechanical movements but were made by metals in place of jewels. the country had a great “home-made” effect on consumers: people looked at Swiss watches as the best on the market and trusted the quality and value of such products. almost the 80% of the world’s total production was Swiss: Switzerland was watch’s home country. People spent a lot on them. over 5 decade period (1945-1995).
Swiss watch producers started to fear competition coming from low-cost producers. company that produces simply designed watches with cheap exterior. and they felt this competition becoming stronger when Quartz technology was introduced. prompting consumers to buy multiple Swatches from its different collections. outlandish design with intense colors was unlike traditional time keeping instruments. they commanded 55% of total volume . This new technologies created space in the market for Japanese and Hong Kong firms. Swatch changed the rules of the game. Swiss watchmakers now controlled 18% of total world volume. precise and multifunctional watches that appeal customers of all over the world.S. once again completely revolutionized the watch industry. In terms of aggressive promotion Swatch spend 30% of retail price of Swatch on advertising. Swatch diversified within by providing watches for every occasion. such firms provided modern. The introduction of Swatch in March 1983. Swatch’s market share grew to 9%. it is a U. Swatch resurrected the fortunes of entire watch industry. 22 The Birth of Swatch introduced. but durable and precise. other Japanese companies entered this arena. By targeting low price sector. Swatch with its witty. From 1980’s to mid 90’s – Creative & trendy designs and innovative & aggressive promotion Trendy Rolex Cartier Omega Rado Swatch Benetton Fossil Luxury Citizen Seiko Affordable Traditional It won’t be an exaggeration to say that next change in the watch industry was single handedly brought down by SMH. for every whim. The company also print swatch street journal which featured latest news & info about Swatch and watch industry.April. In terms of value SMH ranked second with a 16% share. Using renowned artists and other key people in the industry SMH worked extensively on Swatch’s designs and color patterns. Within 9 years of launch. Anmol Virk Page 5 . Later. selling low-price watches with good quality and they started to compete directly with Swiss manufacturers. The company created as Swatch Collectors club for it highly loyal customers and fans whose membership entitled the members to receive an exclusive collectors’ swatch each year.
For overcoming the competition from electronic devices. For mid price segment motivation remains the same but the only difference is that they buy watches that look more expensive than they actually are. The recent product launches such as Scuba line and Chorno line are steps in right direction. Anmol Virk Page 6 . Due to its lower price. The consumers of Swatch see Swatch as an extension of themselves. As Swatch comes under this segment. Question 3 The watch industry can be broadly classified to 3 categories: 1) Upper price segment . With its introduction in 80’s.April. Swatch is cheap but carries a strong brand & a genuine emotion. Swatch made a sweeping change in the way how low priced segment watches were perceived by the customers. raising the prices of Swatch may generate more revenue in short run but the consequential effects on the brand image and positioning in the eyes of customers can be very negative and may lead to decreasing revenues and brand equity. vibrant colors and aggressive marketing helped swatch to create a niche in the low price segment. Raising the price of the Swatch will probably alienate the loyal customer of the company and limit the Swatch’s effort to penetrate the new markets. primarily because more often than not the consumers in this category buy watch for its intended use. SMH used price as a “mirror” for communicating other attributes of their product. Swatch should continue communicating the unique message of its brand & basically selling the emotional product rather than commodity. 22 The Birth of Swatch Question 2 I agree with the pricing strategy of the company. I think that if Swatch remains consistent with its communication in terms of product and marketing then the electronic devices can not have any significant impact on market share of Swatch.$350 and above 2) Mid price segment . The very strategy of Pricing has created a brand image of the Swatch as an affordable and approachable product. The designs. It’s the low price segment which is more threatened by the competition from non traditional category such as laptops or cell phones. low segment was attracted to Swatch.$100 to $ 350 3) Low price segment – Less than $100 Motivation for the customers in upper price segment is to maintain an air of exclusivity. The Swatch concept (“Swiss” + “Watch”) was quartz built to compete with the lower end of the market. Launching new products and targeting new segments of customers can also help Swatch in facing the competition. Swatch should leverage on the fact that it is radically different from the other brands in the same category. Price has been used as not only a medium to attract customers but also to differentiate from competition. In sum. The consumer image of Swatch is exactly the reason for my agreement. it is somewhat threatened by this newly evolved competition.
Apple has been healthy again and returned it to a place where it was contributing new and innovative technologies to the computer world and all other computer manufacturers are just trying to catch up with Apple. Last year. Discovery earned its highest ever primetime rating. pippin. In July 1997.30. The introduction of the G3 Power PC microprocessor made the Apple faster than those computers operating on Pentium processors. Apple managed to transform itself into the premier provider of MP3 players. In late 90’s. Apple also turned its energies toward producing an inexpensive desktop. The difficult phase saw number of CEOs coming in & going out. tam. a Swiss watchmaker. Discovery continues to produce outstanding documentaries and news features. After Steve Jobs returned that year. prime-time ad campaign. Monster Garage and Myth busters. Discovery recognized the critical need to evolve itself with the changing consumer preferences. the company stock was trading at an all time low of $3. And. The other brands that reinvented themselves with the changing consumer preferences have been Apple and Discovery channel. including the colorful iMacs. In 1997.April. Apple struggled to broaden the Mac’s appeal from a core user base of professional graphic designers. but most of them tanked. Discovery expanded its program content and developed a demographic strategy to include new audiences. complete with a splashy. Swatch’s breaking of tradition and penetration in this segment raised quite a few eyebrows. Discovery Channel Another brand that reinvented itself is Discovery channel. news specials and other programs were becoming repetitive. Anmol Virk Page 7 . which was another hit for the company. are bringing younger viewers to the cable network. Jobs also went to work improving the quality of the Apple computers. the iMac. such as American Chopper. Company also launched a string of new products such as newton. Then came the iPod. its documentaries. Discovery was fast loosing its viewership and had an all time low Television rating points (TRPs). in October 2001. ventured out to target the low end segment of customers. true to its mission. Apple started releasing a string of new products. Apple In mid 90’s the Apple was struggling to sustain market share of its flagship brand of Macintosh computer. 22 The Birth of Swatch Question 4 Swatch. but eventually Swatch redefined the watch industry forever. Steve Job returned to Apple and transformed Apple the way Nicolas Hayek transformed SMH. A primetime lineup of reality shows.
22 The Birth of Swatch Anmol Virk Page 8 .April.