Case 2 AnalysisSwatch Watch U.S.A.
: Creative Market StrategyTABLE OF CONTENTSABSTRACT3BACKGROUND4SWATCH ANALYSIS5Marketing Strategies5CONCLUSIONS AND RECOMMENDATIONS7REFERENCES9ABSTRACTSwitzerland was an industry leader in the watch market up until the 1970s 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 1980s 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. BACKGROUNDFor 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 1950s 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 worlds population could not afford a Swiss watch. In the 1970s 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 ANALYSISIn the 1980s 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 StrategiesBy 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 often as every three months the Swatch became not only a fashion accessory, but an item to collect.Advertising the Swatch was a creative process designed to attract a certain segment of the population. By using activities that attract the target market, 12 to 24 year olds, Swatch further tightened its hold on the niche market. Advertising included big bold statements and colors and was put into popular magazines read by the younger generation. Swatch also sponsored activities like sporting events and used popular music themes in its commercials.
Once the Swatch became a well known brand the company decided to expand its product line. In much the same way as Swatch was marketed the new products were also assigned a theme and the theme is changed on a regular basis. Instead of placing the new products next to existing popular brands, SMN opened kiosks in major department stores so that they could control the environment their product was sold in. By doing this they simplified the adoption process consumers go through before making a purchase.
A consumer will often decide they need a certain product and then they have to decide which brand to purchase. If, for example, a consumer is looking for a new knapsack they will go to the department that carries them. Here they will be given a range of products and brands to choose from and often price and/or brand loyalty will play a big part in the decision making process. By selling Swatch products in a separate kiosk the consumers are not overwhelmed with choices, they only see the products SMN wants them to see. In addition they are offered a number of products, shirts, pants, beachwear and more, that are all part of the same theme.
This simplifies the process. The consumer does not need to shop around as everything needed is supplied in one spot. CONCLUSIONS AND RECOMMENDATIONSSMN was extremely successful in entering the new watch market. Their creative design was durable, attractive and priced competitively. They employed successful strategies and actually created a market within a market by advertising Swatch as a fashion accessory.
In expanding their product they employed the same strategies that had worked for Swatch, targeted the same market and were again creative in their marketing techniques. By limiting their products in both quantity and location they did not flood the market and were able to keep their customers interested in the products. In order to continue their success they will need to find new innovative ideas, changing their products as the market changes and in this way stay ahead of the competition. By researching different countries and learning the needs of different cultures they may need to develop country/culturally specific product lines in order to expand their market further. Another consideration is to research expanding their market in regards to their targeted age group.
As their customers mature, SMN could expand their product line to include fashions that while still trendy, are designed more for the professional setting. In addition they need to insure that their value to cost ratio is equal to or better than their competition.Developing alliances with global companies would enable SMN to enter new markets by using the other companys trademark. For example, Swatch could develop an alliance with a major shoe manufacturer like Nike or even a soft drink company such as Coke and joint advertising would benefit both companies and allow them greater access to world markets.
The main goal would be to develop alliances with companies that had the same overall feel. Swatch is fun and hip therefore an alliance with a company that produces fax machines would not be mutually beneficial. By implementing new strategies and continuing to produce quality merchandise at reasonable prices Swatch will continue to be a frontrunner in the fashion accessory and apparel industry.
REFERENCESKeegan, W. J. Global Marketing Management. Prentice Hall.
Seventh Edition, 2002, pages 219-227