[Solved] the birth of swatch case report

The Birth of the Swatch During the 1980s, Swatch experienced an outstanding success as a result of careful and well-executed marketing plan, while just a few years earlier there was observed a rapid decline of the Swiss watch industry. For many years Switzerland was world leader in the watch manufacturing industry. By 1945 they accounted 80% of the world total production. Starting from 1970, Japanese manufacturers actively began to produce and assemble quartz watches, which the Swiss mistakenly viewed as a passing fad.

In the result, by 1983 the Swiss share of world markets for watches had fallen dramatically to less than 15%. In 1983 Nicolas Hayek became a CEO of the newly-based company in the result of merging of SSIH and ASUAG. Even though that most people who analyzed the destruction of the Swiss watch industry in the 1970s emphasize price and technology, the base of the problem was an absence of well-developed structure, management and strategy. After analyzing consumer behavior and lifestyle, SMH adopted a strategy that completely changed the concept of a wrist watch.

Hayek right began executing a “shift” in the company’s strategy with the purpose in mind to create a “profitable, growing, global brand in every segment, including the low-end” (Yongme Moon, 2004 cited in Marketing Management 2013 Spring by Dr. Young-Ho Sorn) The “shift” started from structure, namely Swatch determined vertical integration – produce and assemble the low-priced quartz watch entirely in Switzerland. Thus, Swatch had to bring production costs down to Asian levels by redesigning production techniques that enabled to manufacture Swatch on a fully automated production line.

Continuing with management changed, Swatch made a goal to become a competitive brand in every price segment and start mass production. Hayek explained the necessity of quality and cost control in the low-end sector first, through the use of, for example, cheap plastic cases, in order to be a leader in all others. The turning point in swatch strategy, which distinguished it from all other watchs, was called a Unique Message, meaning that they were selling not just a commodity, but an emotional product, that bears a strong message and is part of the consumers’ image.

Swatches were considered not simply as a watch, but as a fashion accessory. Swatch utilized a distinguishing quartz watch analogue, formed fancy shapes in a combination with various colors and thereby created unique designs. A collection was replaced by a new one very quickly. As Swatches were sold as fashion accessories, consumers were buying more than one swatch for different appearances. Those changed concepts in the company’s marketing strategy and its step by step implementation resulted in revolution of the world watch industry.

The core of Swatch success was its focus on customer based brand equity model. The company focused on creating the brand awareness and the brand image while launching Swatch into the market. There four main factors lead Swatch to the success, known as 4 elements of Marketing Mix. Swatch watches (product) were just completely different from all other brands – they used bright colors and fancy designs, which had never applied before by anyone. And they have been producing a wide variety of models and creating plenty of new styles for different occasions.

As all Swatch collections were just not like any others and changed on an ongoing basis, consumers often were buying a couple of watches from different collections within several months period. The company hired best artists and industrial designers from all over the world. All models were designed under Swatch Design Lab. This led to creation of witty, sometimes outlandish designs that no watch brand had one that before. Whimsical innovation was at the heart of Swatch. People were rotated regularly inside the design lab to capture and develop new look and shape.

Employees travelled throughout the world from big fashion shows to exhibitions and the opera to capture ideas and then embed them into Swatch. Two results of fantastic innovation include first see-through watch and a scented watch. As the product itself, Swatch distribution strategy (place) conveys a message to the customers too. SMH tried to keep out of traditional distribution channels like specialty watch shops, jewelry stores and displays, and preferred shop-in-shop system and mini-boutiques that focused on the Swatch brand only in order to receive intensive attention.

One of the examples of unconventional retail approach is the Veggi Swatch Line, which was sold through vegetable or fruit store unlike usual competitive companies. In addition, Swatch opened several mono-brand Swatch stores in high-fashion districts. Swatch promotional strategy was quite aggressive, and opposite from original watch industry. They spend roughly 30% of the Swatch’s retail price on advertising, which was more than double the industry average.

In the result of high-profile advertising approach, like using TV commercials, Swatch was placed on 56th advertiser position on European television. They used every chance for unorthodox promotion from break-dancing sponsorships to celebrity support. For instance in Germany, SMH hung the giant Swatch outside the Commezbank skyscraper. Another example of special and unorthodox promotional strategy is Swatch Collectors Club created for their fans that allowed them to get a watch from an exclusive collection just for an annual fee of $90.

Moreover, members were subscribed to the Swatch Street Journal contained the latest information about Swatch and pop culture trends. Besides all above mentioned reasons for high demand, affordable and approachable price level of the Swatch is an important aspect too. For example in the United States the price was – $40, Switzerland – SFr50, Germany – DM60, and in Japan – Y7000. The basic idea of SMH price strategy is low price tag, which is a provocative in its nature indeed. That is consumers easily can purchase Swatch on impulse without thinking too much.

In order to implement the low-price strategy in reality, Swatch simplified and automated the production process, and started to encase watches in cheap plastic. This made Swatch still keep the premium “Made in Switzerland”, and made a competitive price to Japanese and Hong-Hong corporations. In addition, as Franco Bosisio stated, in order to keep price low Swatch was selling at “clean price”, which also a simple price, meaning that Swatch didn’t allow for any price mark-ups for their dealers.

Swatch also kept the price unchanged for the first 10 years, although there was a very high demand for their watches. By not raising the price in the response to high demand was actually a right policy in the scope of long-run, which is usually a primary objective of any company. Of course, Swatch could refuse low-price policy, due to unmet demand and thereby maximize their short-term sales, but then an opportunity cost for such an instantaneous decision would be lost of its market share in low-priced sector, which they had accumulated in a hard way.

Another motive for Swatch to follow chosen strategy is competition among SMH brands. Initially, brand Swatch was created in order to enter low-priced sector, and if Swatch will increase the prices, which mean they are not anymore in a low-price group, they will compete with one of the other 8 SMH brands. Before the introduction of Swatch, the market was dominated by Timex, Hattori-Seiki, and Swiss manufacturers. Prior to 1950s the most popular Swiss watches were those consisted of a “meticulously crafted mechanical ovements, with more than 100 separate components” and jewels. (Yongme Moon, 2004 cited in Marketing Management 2013 Spring by Dr. Young-Ho Sorn) The main feature of the watch was quality, and they were considered as financial investments and heirlooms. The target customers were high-income group people. The watches were sold primary through jewelers and upscale department stores. The competition was primarily between the Swiss manufacturers, with no major foreign competitor. Later in 1951, a company called U. S.

Time (Timex) entered the global market, which changed the competition completely. It introduced low cost disposable watches to the market which was the major point of difference from Swiss ones and lead to their massive popularity among different category of consumers. Timex could keep price low due to the use of low cost mechanical movements and automated production. The design was strictly functional. They were available at low priced outlets such as drug stores, discount houses and were positioned in the market by a series of extensive television advertising campaigns.

By 1970 Timex was selling more watches than any other manufacturer in the world. Followed by Timex popularity, in 1970, the introduction of quartz technology changed the nature of competition technology one more time, and led to the emergence of two Japanese companies namely Hattori-Seiko and Citizen. These watches were cheap but gold-plated, add-in chip and sophisticated electronic circuit resulted in high accuracy and sophisticated functionality (watch also displayed date and day of week).

By 1979, Hattori-Seiko had become the world`s largest company in terms of revenues. Due to the different product attributes and value of each unique brand, those watches were popular among different customers’ income-groups. Timex were available for mass due to low price and functional appearance; quartz watches for middle income-group due to their gold or silver plating, but available at much cheaper price than original Swiss watches, like Rolex, whose target market were high-income people with a purpose to represent status and prestige. Coke

From the Swatch case we can conclude that there are two main components necessary for the success of any business, which are unique product and right marketing strategy. Coke is another worldwide known example of design innovation and marketing promotion. Besides its unique taste of the beverage, Coca Cola is famous for one of the most successful and recognized brands of all time. The very first Coca-Cola syrup was produced in 1886 by Dr. John Pemberton. Later in the 20th century, Asa Griggs Candler became the first who began promotion campaign under slogan “Drink Coca-Cola”, “Delicious and refreshing. Besides, he started to send coupons by mail to get free coca-cola, and different souvenirs with Coca-Cola logotype on it. He became the first, who used such marketing stunts. The trick with logotype brought an unbelievable success to the company and trademark recognition around the world. Coke’s marketing efforts have been some of the most famous and ideal efforts. Coca-cola’s advertising slogans and tag lines are easy to remember and fun, which makes Coca-cola different than others.

For example, everyone associates Christmas advertisements and commercials of Coke with Santa Claus. Here is a brief description of Coca-Cola marketing strategy: * Television advertising is one of the most used media by Coke to market its brands. Coca-cola spends a huge amount of money every year to advertise on television. Coke prefers the most watched television programs and events on TV Channels to place its advertisements. * Coke uses celebrity endorsements as a weapon in advertising. They hire the most famous and favorite celebrities for their brand endorsement. Hoardings are also a great media for Coke to promote its brands. Coke use hoardings mostly in rural area and semi urban area to attract people. Hoardings with eye catching graphics and thought provoking slogans make Coca-cola an out-standing advertiser. * Coke used print media also as a medium to publicize and promote its brands. Coke places its advertisements in highly popular magazines. * Partnering in some event and functions is also a great way of promotion of brands. Coke sponsors many contests to promote its brands, like FIFA world cup.

This sponsorship allows coke to place their advertisements during the event and promote its brands simultaneously with the event. * Coke also sponsors reality shows to gain more eye horizons of viewers. Some of the most famous of Coca-cola are launched during these reality shows and big sports events. Coke is also known for the most creative and innovative advertising. * Coke selects marketing campaign according to the culture of the country for which the advertisement is being prepared for. It takes care of characters, colors, music, location, celebrity while designing the advertisement.

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