Swatch Watch Usa - Creative Market Strategy

Case 2 Analysis

Swatch Watch U.S.A.: Creative Market Strategy

TABLE OF CONTENTS

ABSTRACT 3

BACKGROUND 4

SWATCH® ANALYSIS 5

Marketing Strategies 5

CONCLUSIONS AND RECOMMENDATIONS 7

REFERENCES 9

ABSTRACT

Switzerland was an industry leader in the watch market up until the 1970's when the digital watch was introduces to consumers. The digital watch was inexpensive to manufacture and could be produced in mass. It created a whole new market by making watches inexpensive enough for all classes of people. The Swiss did not respond to this new competition and began to lose their market share. The Swiss watchmakers still produced high end watches for the wealthy, but did not compete for the lower end market.

In the 1980's the Swiss watchmakers began to realize they needed to change their business model to fit in to the new global market place. They needed to not only change their views of the market but the infrastructure of watch manufacturing. In order to compete on a global level they needed to improve their technology, design products that would appeal to new markets and be able to compete with other companies both in quality and cost.

The development of Swatch® allowed one company, the Swiss Corporation for Microelectronics and Watchmaking Industries (SMN), to do just that. SMN developed a product that was appealing to a younger target market. Their new design, distribution and production strategies created a niche market that became popular worldwide. The company developed an advertising campaign that was new to the watch industry and was strongly directed at a younger audience.

BACKGROUND

For years the Swiss watch industry had a competitive advantage on the watch market, in fact they had little or no competition and often had waiting lists for their watches. In fact, in the 1950's the Swiss held an estimated eighty percent of the free-market share (Keegan, p 219). Their product was of high quality and held great appeal to their target market. Despite their success they only had a small corner of the potential market as the majority of the world's population could not afford a Swiss watch. In the 1970's electronic watches were introduced to the market. Inexpensive and easy to mass produce the new digital watches made watches available to a much larger section of the population. Although the Swiss still held on to the high-end watch market they were no longer the dominant competitor in the market.

The Swiss ignored the new market. They continued to produce "luxury" watches that were only sold at exclusive stores. Their management attitude remained fixed. Rather than examining the infrastructure of their companies and looking for ways to improve their competitive advantage, the companies chose to continue to produce the same product they had always produced regardless of what the market was looking for.

Although their expertise and knowledge of the creation of top quality watches did not change, their refusal to conduct market research, change their technology and move into the newly created markets caused them to loose their advantage. There was now substantial competition and this new competition was very aware of what the market was looking for and strove to fulfill those needs.

SWATCH® ANALYSIS

In the 1980's the merger of two companies helped create a new market for Swiss watches. Asuag and SSIH merged to create Swiss Corporation for Microelectronics and Watchmaking Industries (SMN). This merger was extremely advantages to both companies as it brought together new technology with brand recognition. The new company broke into the watch market by using a number of creative strategies. The new CEO, Ernst Thomke, restructured the managerial section of the company by bringing in new, creative executives who were hired for their creativity and energy rather than their experience in the field.

The first step to gaining entry into the new market was the creation of a redesigned product. The Swatch® watch was the product that did that. It was easy to produce, had simpler components than typical watches and was able to be produced in mass quantities and is manufactured by robots rather than employees. Despite the simplicity of design it still offered benefits, such as being shock resistant and water-resistant, that more expensive watches offered.

Marketing Strategies

By introducing the Swatch® as a fashion accessory rather than just a timepiece, the company gained competitive advantage over other watch manufacturers. Swatch® had created a niche market that other companies were not able to immediately compete in.

Their unique design strategy set them apart from other companies. They simplified the process by limiting the overall style of the watch to four designs, but changed the face of the watches as often as every three months. They used the faces to reflect the season or a theme and named each new group of designs. In addition, the design made it possible to change the look of the watch without having to change the production process.

Another way SHM executives controlled the market was by limiting distribution. Many other manufacturers were selling their watches everywhere, including supermarkets and drug stores. The Swatch® was only available from certain locations and by limiting availability Swatch® has remained more exclusive than other watches in its price range. Another distribution strategy the executives at SMN employed was limiting the time each design was on the market. By issuing new designs as