Swatch-Brand-Strategy.docx

CASESTUDY：SWATCH1.INTRODUCTIONAmong the numerous grades of wrist-watch wethought necessary choosing the Swatch model, this being a very significant design object. It becomes popular not for the shape innovation but for the message it carries inside and for the high quality with a low cost.2. WHAT IS SWATCHThe Swatch comes out like a moulded plastic watch with a quartz movement and it is entirely produced in Switzerland. In 1986 the Swatch was launched in Italy, the last great European nation to have received it into its market;because of this reason at the moment of its launch the Swatch success was tremendous. The Swatch is manufactured in an enormous amount of models, at about 140 each year, the most part of which is designed in the Swatch planning laboratory in Milan; at about 20 people coming from different parts of the world are working here. One of the greatest contribution as a art director of the laboratory was given by Alessandro Mendini a famous italian designer. At the moment, the range of Swatch watches is made up of the classic first model and of products carrying out different functions such as the scuba (subaqueous watches), the chrono (quartz chronographs), of automatic models and, newly, of metal watchcase watches.3. THE WATCH MARKETThe Swatch comes out in Switzerland to contrast the crisis of the national watch industry blew up in the 70s because of the arrival of hundreds of quartz watches at a low price, coming from Japan and from Hong Kong, and for the decision to adopt not the quartz technology the Swedishes themselves had invented. There were, moreover, strategic, structural, and managerial problems too. The two biggest Swedish watch firms, the Ssih (Omega) and the Asuag (Rado, Longines, Ebauches) were going to a bad patchbecause of erroneous production and selling choices and, in 1983, this will bring them to merge intoSmh (Swiss Corporation for Microelectronics and Watchmaking). At the moment of the merger of the two companies, the watch market had a selling volume of about 500 millions of annual units, divided into three different segments. The lowest market segment included watches at a cost of about 75 $ at most and represented 450 of the 500 millions of units. The intermediate segment, with prices of about 400 $ at most, affected the market with 42 millions of units. The last segment, the highest, was made up of 8 millions of pieces with prices varying from 400 to several millions of dollars. The Swedish quota at the lowest segment, 450 millions of watches, was equal to zero; in the intermediate segment it was of about 3%, while in the highest was of 97%. The Swedish producers reacted to the quartz technology bywithdrawing gradually themselves from the lowest segment, by exposing themselves, through time, to attaks of the oriental producers also in the other segments. It was at this moment that the Swatch operation came out, to have a wide presence in the market, so to control the quality and the costs also in the other segments.4. COMMODITY OR UTILITY?To consider the watch not to be necessarily a commodity but a emotional product able to show a image to the others was the factor of success of the creation of the Swatch. This object became popular in a absolutely new market thanks to the discovery of a new language of visual communicationthat was visible in the images printed on it; it became than holder of a message to the people and no more a instrument to measure the time. We could state, in fact, that the Swatch is a watch simply because the conceiver produces watches, but it could have been any other product.5. VISION AND MISSION OF SMHSmh sets itself the vision to bring the Swiss industry of the clocks back to a leader market position and the mission to bring the turnover in assets (for the sake of lucro).6. STRATEGIES, TARGETS, VALUESThe main strategiesidentifiedin order to support the businessvision are based onthereorder of the organization,on the creation of a specific productfor the lowest segment of market and on the repositioning of thealready existingbrands. As a target the company established of having a leader brand for every field relying on the potentialities of the Swiss industry (values)7.STRATEGIC AND PRODUCTIVE CHOICES OF SMHIn order to have a competitive product in the price on the market and at the same time profitable for the company,it was necessary to rethink the productive systems and the strategies.Smh is a strongly integrated enterprise vertically, this for being able to conserve strategic independence and freedom of maneuver in the market.The single marksdo notbuildmore their clocks, because the production is totally cetralized withtheuseof partsthe most standardizedthepossible and is moreover strongly automated. The choice of a wide vertical integration was due to the fact that the only producers of movementsbesidesthe Swiss were the Japanese of the Citizen and the Seiko.If the Swiss producershad decided to acquire the mechanics for their clocks from the companies of theRising Sun they wouldsurelybe exposed to politicalobstruction. In fact, in case of particular successof a Swissclock, the Japanese enterpriseswouldhave suspended the production or have raised the costs of their mechanisms.In orderto avoid whichever interference from part of other companies, Smhchoseto produce also the chip to 1.5 volt, necessary for the production of its clocks; thisbroughtthe company to massive investments from more partsthought excessive. The choice to producethesecomponentsrevealedto be very profitable; currently, in fact, the chipsare usedin other equipmentssuch as:hearing aid, pacemaker,cellular telephones and even the switch of monitoring for ABSsystems.Thereceiptsfor the sales of the chipsfrom 1.5 voltscome forover the50% from external fields to those of theclockwork,allowing tomaintain high volumes andlowcosts.When Smh entered the market of thequartzmovementsitcreated aremarkable reduction of the prices of the same ones, and began to resupply the companies that assemble clocks to Hong Kong and in Japanalso.The corporate structure,differentlyfromthe production, isthemost possible decentralized. The Smh has 9 mainmarks onaworld-widescale: Blancpain, Omega, Longines,Rado, Tissot, Certina, Hamilton, Swatch and Flik Flak. Every brand hasitsown organization,itsmanagement,andeven its own buildings.Themarks have the complete control on the design, the marketing and the communication. But they have a role decidedly limited in the production and the assemblage. For thisreason theymust negotiate withthetechnologicalbranchand that one oftheproduction of Smh.Aproductiveorganization of crucial importance is Eta,whichconstructs all the quartzmovements of Smh.Eta that has center to Grenchen, 20 minutestothesouth of thehome officeof Smh to Biel, has the responsibility of all theresearch on the electronic movements and of all their production and the assemblage. Eta is a productiveempire. Itallowsto worktogigantic factoriesbuildingmovementsfor the greater part of the producers of Swiss clocks, and assemblage systems highly automatedin all the country. Obviously only Eta is in a position to satisfy its maincustomers: Smhmarks.Thereforearealways in course negotiations on the stylein relation tothe quality, on the designin relation tothe feasibility, the speedin relation tothe cost. These rigid borders and these laborious negotiationsletSmh to reduce the generalcostsat the bottom.8. THEORGANIZATION IN SMHThe company hasa very little number ofbureaucraticcontrol systems or referentsof the headquarters. Instead, beside the apex of Smh there is a Enlarged Group Management Board constituted from 16 members. The executivesthat make part of this council work in all the parts of the world and are directed responsible of the different units of business of the company. A Restricted Group Management Board composed from 7 memberschosen between those of the widergroup, constitutes the highest organofmanagement of Smh. When these16 executivesgather, as they make onceamonth (the more narrowgroup gathers, instead, 2 timesamonth),theyexchange the information relatedto the keymarkets of the respective nations, they make to emerge and they level eventual controversies between unit of business and zones in competition, and then they return to the respective organizations withthelast outline of game of the enterprise. In other words there areminimum timediscardbetween decision and action.Finally there is the general executive manager who becomes part directly and visibly in all Smh, in particular in the aspects that regard the strategy and the new products. This role has been covered since the beginning from Nicolas G. Hayekwhohas shown remarkable dowries of leadership.To him are linked the choices against currenttoproduce the clock entirelyin Switzerland (country with one of theworkcosts more elevateinthe world) and a strongly integrated organization vertically.Even if these choices to the beginning were opposed from many,theywere revealed extremely effectiveallowingthe company remarkable returns. The enterprise has approximately 200 centers of profit for whicharedefinedverystraitbudgets,are controlledclosely the achieved resultsturnedout with timely statements that concur to react very quickly to unexpected situations. The organization of the job is based onaplanningteam, a system that renders if theentire team iscompletely concentrated on the objective to catch up. The final resultis a solid company without being heavy: a determined contender and in fast evolution whose remarkable turnabout demonstrates the power of the not conventional principles of management of Smh.9.TENDENCIES AND EVOLUTIONIt is just the evolution that characterizes the Swatch production: beingborn likeasimple quartzclock in colored plastic, formed from 51 pieces, it has acquired in the time ulterior functions; they have been created chronographmodels and with alarm clock, underwater and forwall, until arriving to models that little they have to see with thestartingtechnologies, butthey follow thetraditions of the Swissclockmaking,such asthe Irony models with metalcase andtheAutomatic witha automaticmovement. Recentlyit iscaught a glimpse in the Swatchagreater attention to the various culturespresent in the world. The company in fact has contacted, for its last collection dedicated to the art, 6 artistscoming from various zones of the world: Australia, Africa, China, United States, Europe and Russia. This has carried the Swatch to being permeated of messagescoming from different and farbetweenthemcultures. Probably will be these2 tendencies of market to make from guidetothe evolution of the Swatch in the next few years; it is not difficult to imagine a automatic rifle model with case in metal and an always greater separation from the Swiss culture or at the farthestEuropean, with an extension of the message to far or smaller cultures.10.A STRONG MESSAGEThe Swatch clock is born in 1982 for one field of market to low cost: that one constituted from plasticclockscoming from Japan and Hong Kong. The classic shape of the Swatch is due to 2 young graphical designers of Zurigo, which, before reaching the finaldefinition , have experienced various shapes, between which also those square and rectangular ones.The pre-carried out launchingto St Antoniusin Texas, in spite of the good quality of the product and its low cost, revealed a fiasco for the Swiss company. Its collection was ugly and boring, its colorspaleanddark. Also theofficial launchinghappenedin Switzerland in March 1983 was not thrilling; it was understood, then, that in a market as that one of the clocks at a low cost was not sufficient a product reliable, but it was necessary a clock that it hadsomethingcompletely various from how much was already present in that field.The clockwasconsidered nomore afunctionalproduct but an object that could be important foritsown image. It was attempted to load the Swatch with astrong, exciting, particular, authenticmessage, that could reveal to the others whoitis and because it makes whatis made. There are many elements that construct the Swatch message: elevated quality, bottom cost, provocation, joy of living, but the more importantelement is the difficulty of imitation from part of others.Atthe moment the Swatchcaught up these objectives, thesuccesswasclamorous all over the world. A newmarket in which the succeeding element was the message and not more the functioncame to create itself, in which Swatch was found again to being theonlyactor. This product was turnedto peopleof whichever class, but genuine, shining and nonconformist. In agreement with how much the clock had to transmit, the presentation in theseveralcountries has been carried out ina original way. In Germany and Japan, as an example, it has been hung on a skyscraper one giantSwatch , high more than 165 meters, heavy 13 tons and really working.11. THE MARKETING - MIXThemarketing mixdevelopedfrom Smh is based on a product of low cost and high quality, bearer of a message, with a packaging formed from one simpleboxinatransparentplastic, distributed directly through own stores, and customary channels of sale (jewelrys shop, department stores)witha price of approximately 40 dollars. The promotionwas carried out beyond that with the usual television advertising campaigns and on the printed publication paper, also with the creation of own events (festivity to Zermatt for theone hundred-milionproduced clock) and with the presentation of particular models in placesappointed forother uses (Triptycon model withadecorationregardingthe feeding, introduced in thefruit and vegetablemarkets) beyond to the sponsorship of initiativesat ahightechnologicaland ecologicalcontent which the World Solar Challenge (competition for vehiclesmoving withsolar energy that is carried out in Australia).The marketing mix developed initially from the Smh for the Swatch, based on the intensivedevelopment and a strategy of penetration in the market,evolvedbecoming one marketing mix centralizedon the diversified development. The product is passed from an only typologyand only a price (simple clock) to one series of models from the variousprices, able to satisfy differentrequirements.It waspassedfrom the 50000 Liras of the classicmodel to beyond 100000 Liras of the models more evolved. The Swatch comes therefore oriented towards severalsegments, as an exampleithas been placed greater attention to the femininepublic creating smaller models (series Lady Lady), or towardsmoretradizionalist clients inserting intomarket clocks and chronographeswith case in metal (Irony series), diversifying the packagingin accordance withthe models (box covered in feint skin for the Irony series). The purchase process differs remarkablly from that one of other products: thanks to its low cost and the pluralityof messages of whichitis beareritseemsmoreto approachitself tothe purchases defined of impulse. In fact,the phasesrelatedto the collection of information and appraisal of the alternativesarecompletely jumped. From a point of viewregard