Case study: The swatch

The Swatch watch was originally intended to re-capture the entry level market share lost by Swiss Manufacturers during the aggressive growth of Japanese watch companies such as Seiko in the 1960s and 1970s, and to re-popularize analog watches at the time when digital watches had achieved wide popularity. The launch of the new Swatch brand in 1983 was marked by bold new styling and design. The quartz watch was redesigned for manufacturing efficiency and fewer parts. This combination of marketing and manufacturing expertise restored Switzerland as a major player in the world wristwatch market. It was important for swatch to recapture the lower end of the market as it was dominated by Asian brands. In this case analysis, we are going to talk about how swatch managed to recapture the lower end of the market.

I-Macro-environment: Technological:
The Swiss watch industry suffered heavy losses due to the use of old and outdated production processes whereas competitors incorporated latest technologies in their products. However, the CEO of ETA, Ernste Thomke, managed to turn things around by having the idea of bonding watch parts to the case which resulted in creating the world's thinnest watch. This innovation helped swatch to regain technological edge over its competitors.

Threats: - Other manufacturers incorporated advanced technologies in their products whereas swiss watch manufacturers continued to use out-dated tech. - Introduction of the electronic watch by other manufacturers.

Strengths: - Long history of high quality watches. - Delirium project provided innovations that leaded to swatch's development. - Reduction of production costs due to using molded cases. - Management team composed of talented and innovative members - Innovative design and low-cost production Weakness: - Poorly suited structure for absorbing new electronic technologies.

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Economic: The Swiss watch industry suffered from harsh competition due to the arrival of asians o the market. II. . Weakness: .Massive loss of market shares to other watch manufacturers.Industry environment Threat of new entrants: High threat of asian manufacturers entering the market due to rapid market growth and increasing demand. they are mainly composed of retailers and consumers. .Increase in sales of electronic watches. Social: Due to the intense competition. job losses led to regional unemployment rates unknown in Switzerland since 1930. however that is not the case for asian companies since they have the required technology to enter the market. Threats: . therefore they are important to suppliers. the Swiss watch industry faced its misfortune which resulted in large scale layoffs and bankruptcies.Declining financial reserves and risk of debt. Bargaining power of buyers: Buyers have moderate bargaining power since there are a lot of brands to choose from.Adverse dollar exchange rates caused Swiss watches to be more expensive in the United States. technological barriers might stop new companies from entering the market.Large-scale layoffs and bankruptcies caused by the industry's misfortune. Bargaining power of suppliers: Suppliers have medium bargaining power because the customers (watch manufactures) have high negotiation power. as a result. Extension of sales outside of the European market. Opportunities: Domination of segments based on older technologies. . Third world countries and newly industrialized nations offer unexplored markets. Threats: . 2 . also. the Swiss watch industry had to undergo several changes in order to survive.Arrival of Asian manufacturers.

the difficult economic situation resulted in the reduction of the number of the industry: the number of companies decreased from 1600 to 600. reliable and affordable watches. Swatch products were also associated with a certain lifestyle which created a unique brand identity that distinguished it from other products on the market. To achieve low production costs. this strategy allows for spontaneous purchases. because the market is rapidly growing demand is rapidly increasing and there isn't much brand differentiation either. Pressure of substitute products The pressure of substitute products is moderate because it's relatively easy and cheap to switch from brand to brand. since they have low production costs. However. Also companies set attractive prices to their products while still keeping generous profit margins. 3 .Rivalry among existing firms Rivalry among firms is high in the watch industry. The watch industry attracts many new companies especially asians. III Mission and goals Mission: Swatch's mission is to offer high quality. IV-Business unit strategies The company's strategy is to offer high quality products at competitive prices while maintaining a high profit margin. The company' main target are people aged between 18 and 30 that favour high fashion accessories. Also. Bureaucracy was reduced to a minimum and communications across hierarchical levels was improved. swatch products are sold through specialized shops and chic boutiques to convince the consumers that swatch product are high fashion accessories. and several craftsmen supplied different parts of the watch to an “etablisseur” who put the entire watch together. production facilities are established in low cost countries such as china and india.Strategy implementation The Swiss watch industry was characterized by a strong fragmentation. after the success of the delirium project. V. Goals: The company's main goal is to become a leading company in product innovation and to establish a strong brand image. However. fashionable. the entire organizational structure was reworked in order to improve creativity and to encourage employees to express their ideas. up to thirty independent companies were involved in the production of a single watch.

Strategic Control In 1984. the net revenue increased greatly even with the increase of operating costs. this is due to an increase amount of sales over the years. There is also a drastic increase in operating costs in 1989. SMH had gross sales of 1. this number increased to 2.663 million in 1988 to 1.665 million SFR.146 million in 1989. these went from 1.VI. and this is due to recruiting more personnel in 1989 and buying more materials than usual. however. 4 . and that is due to better manufacturing procedures that reduced production costs and improved product quality. As for debts. All of these numbers translate into one thing: The Company is doing better over the years.865. The number of assets owned by the company also increased in order to face increasing demand. short term debts decreased from 500 million SFR to 367 million while long term debts decreased from 898 million to 295 million.

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