The Birth of the

The Birth of the Swatch

Presented by: Jackie Rezk, James Person, Simon Kegler, Marc Chabane, Stacy Martinez, Jordan Martinez, Joe Cassissa

The Birth of the

Background
SMH controlled 9 global Swiss brands including Swatch. Prior to the 1950s, watch-making was a craft that required the skills of a master jewelry maker. The Swiss dominated the watch industry.

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Problem
The Emergence of Low Cost Competition
With the introduction of low cost competitors, the Swiss share of the global market declined from 80% in 1946 to just 42% in 1970.

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Arising Competition
In 1951, Timex introduced a low cost watch. One of every three watches sold was a Timex Quartz technology was introduced in 1970 and changed the industry once again.

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The 4 Ps - Product
Product 1.Quartz Made in Switzerland

2.Encased in cheap plastic

3.Unique design and message emotional product

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The 4 Ps Price
Price $40 SFr 50 DM 60 7000

Consistent global price parity

Low and simple prices encourage Impulse Buying

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The 4 Ps - Place
Place Designed in Italy, made in Switzerland

Launched in SUI, GB and US (1983)

Immediate global success Unit Sales (1993): EU: 37.4 Asia: 42.6, America: 6.1, Other: 0.9

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The 4 Ps - Promotion
Promotion - always deliver a message!

High-profile advertising approach Preserve uniqueness Sponsorships/Endorsements

30% of retail price spent on advertising #1 in watch industry

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SWOT Analysis
Strengths
Swiss Quality
Made in Switzerland label was a global seal of quality,

status, and prestige.

Vertical Integration
Assembled

all of the watches sold and built most of the components for the watches assembled.

Decentralized Marketing

Each of SMHs nine brands had total authority over product designs and marketing.

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SWOT Analysis
Weaknesses
Price
SMHs flagship high-end brand (Omega) sold for between

$700 and $2,000.

Efficiency
90% of Swiss watchmaking firms employed fewer than 50

people.
Retreating Attitude

The Swiss refused to compete with Japan and Hong Kong companies.

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SWOT Analysis
Opportunities
Mergers
SSIH and ASUAG merged to create Societe Suisse de

Microelectronique et dHorlogerie (SMH)

Market Trends
The opportunity to enter the low cost market segment.

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SWOT Analysis
Threats
Competition
U.S. Time introduced disposable watches. Several Japanese companies begin expanding.

Technology
In 1970, Quartz technology is introduced allowing

companies to create watches comparable to Swiss-made mechanical watches.

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Alternative Solutions
Problem: The emergence of low cost competition
Solution 1: Compete In Each Market Segment
Compete directly with Quartz competition & low cost

mechanical

watches (Timex)
Solution 2: Dominate High End Market
Solution 3: Create Alternative To Budget Watches

Make the Pie Bigger

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Alternative Solution Evaluation

Importance Growth Potential Profit Compete Directly Dominate High End Create New Alternative

5 4 4

3 4 3 43

1 2 5 33

5 5 3 57

Quality Perception
Sum

Solution: Create Fashionable Watch That Is Affordable

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Four Actions Framework

Eliminate Expensive raw materials High production costs Distribution strategy: High-end POS Reduce Production costs Production techniques Raise Affordability Fashion appeal

Create Vertical integration Efficient production techniques and manufacturing processes Unique mkt msg. Distribution strategy: Retail POS Design: New fashion appeal Low-price mkt segment

Value
Pr ice Ra w Ma ter ial s

Ma nu fa c tur tig e ing Inn ov tio n Va lue Su pp ly Ch ain

Pr es

Strategy Canvas

Factors
Ma rk eti ng Po rt fol io

The Birth of the

Swiss Swatch