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THE BIRTH OF THE SWATCH

1. Prior to the introduction of Swatch, what kinds of watches were popular among consumers? In what ways was a Rolex different from a Timex, or from a gold-plated Seiko? How did consumers make buying decisions?
A: The period before introduction of Swatch can be divided broadly into 3 eras having its own style and characteristics: Pre 1950s

Watchmaking in this generation was considered to be an art requiring the skills of a master jeweler combined with those of a mechanical engineer capable of assembling 100 components with utmost care and precision. Watches contained jewels, rubies, sapphires, etc. and it was considered to be a financial investment often passed down through generations. They used to be enclosed in precious casings made of gold or other costly metals and was sold primarily thorough jewelers. Because of the high cost, rebuy was seldom heard of; as a result watch repair was also a huge source of revenue generation for the watch manufacturers. The market was dominated by the Swiss watches and watches made in Switzerland were considered to be of better quality than the rest. Some of the well-known brands on this generation were Beaume & Mercier, Longines, Omega, Piaget, Movado, Rolex etc. 1950 - 1970

This period was marked with the emergence of disposable watches. Timex was the flag bearer in this respect. The watches were designed very simply, used cheap exterior which gave the device a strictly functional appearance. Since the watches could not be opened, the question of repair didnt exist. The price was also pretty low because of the lower quality; as a result jewelers refused to sell them, it got sold through low priced outlets like drugstores and discount houses. At the same time several Asian companies like Hattori-Seiko and Citizen had taken over their respective markets specially Japan. Post 1970s

This period was marked with the emergence of quartz technology. Being based on electronics rather than mechanical movements, they had more sophisticated functionality than their mechanical counterparts. But their accuracy level was that high only. Theses watches could be priced significantly lower because their manufacture demanded more

automation than labor which was more costly than automation. Digital watches also came into existence, but analog still ruled the market which used gold or silver plating to mimic the appearance of the traditional more expensive watches.

ROLEX Mechanical Very Expensive Sold through jewelers

Repairable Labor intensive production system Investment oriented buy Beautiful casings Exterior made of cheap made of costly metals materials

TIMEX Mechanical Very Cheap Sold through discount stores and drugstores Disposable Automated/Semiautomated system Functional

SEIKO Quartz Cheap Sold through multiple channels Repairable Highly automated system Multi-functional Gold or silver plated to mimic a Rolex

The decisions involved in buying a watch changed drastically from the pre 1950s to the post 1970s. In the pre 1950s, decision of buying a watch was based on the concept of making a long term investment for the family. Gradually, with the introduction of cheaper watches factors like fashion and looks became equally important. The number of watches possessed by one person also grew as time progressed. Also customers started giving a lot of importance to multi functionality than just sophistication.

2. How did Swatch change industry dynamics? What according to you were the critical success factors for Swatch (list down only 3 factors in the sequence of importance and also give reasons for the same).
A: When Nicholas Hayek took over SMH after merging SSIH and ASUAG together, the Swiss watch industry was in tatters. It was obvious that he had to bring about a breakthrough change in the industry to make it survive in the face of stiff competition arising out of competitors especially those from Asia. His methods were totally opposite to the kind of methods that were adopted so far in the Swiss watch industry. Of course it led to a lot of resistance, but that did not deter Hayek from implementing those changes and needless to say it succeeded. Some of the major factors that contributed to this success of SWATCH are: Cost leadership through automation: Hayek brought down the cost of making watches by cutting down on labor and focusing more on automation by introducing the quartz technology. He engineered a

process by virtue of which only 10% of the total cost was contributed by the labor cost. He concentrated on vertical integration and managed to get the number of components down from 91 to 51. Also he changed the materials used to much cheaper alternatives like plastic casing and all. Mass production of watches by implementing these changes brought down the cost of watches to such a level that it gave the cheaper Asian watches a run for their money. Uniqueness in design: Swatch was the first Swiss watch to concentrate on designs and selling it as a fashion accessory. Hayek felt that every watch should contain a message. Their outlandish designs coupled with the use of brash, intense colors immediately created a niche for itself. Dozens of models were available for each collection. For some customers it became a hobby to collect as many watches as possible. Top designers were hired to design watches for Swatch. The entire positioning followed by Swiss watches till that time was given the boot and the watches rather than just being a medium of time keeping became an item of fashion. They ended up capturing the market and customers who never used to buy watches started buying in huge numbers. The whacky designs coupled with the low price really set the market for Swatch. Connection with the customers through various initiatives: Swatch spent 30% of its revenue in advertising. Swiss watches lived in a niche of its own. They never really advertised for the mass market. The high profile advertising campaigns really caught the whims and fancy of the customers. They spent close to $15m in 1990 and $28m in 1992 in advertising alone and got enlisted as one of the top 100 advertisers in European television. The creation of a giant 500 feet, 13 ton model of a Swatch to launch the brand in Germany was one of a kind promotion in the watch industry. People really received it well and the numbers of watches started being sold like hot cakes. They also created the Swatch Collectors Club for its ardent fans where they used to give one collectors model of Swatch for free every year. Hayek wanted every Swatch watch to tell a story of its own and all these initiatives did manage to achieve that. Swatch customers were intensely loyal and they were always on the lookout for newer model. The customers really got involved with the brand.

3. SMH was later renamed as The Swatch Group. What are your views on this renaming?
A: Under the leadership of Nicolas G. Hayek, the Swatch Group achieved worldwide renown as the crown jewel of the watchmaking industry. In 1998, SMH (Swiss Corporation for Microelectronics and Watchmaking Industries Ltd.), founded by Nicolas G. Hayek in 1983 through the merger Swiss watchmakers ASUAG and SSIH, was renamed The Swatch Group. At the time, both SSIH and ASUAG held a number of well-established Swiss watch brands. ASUAG had been founded in 1931, SSIH a year earlier through the amalgamation of Omega and Tissot. SSIHs principal objective was to

market quality Swiss watches. By taking over companies that produced high-quality movements and a number of lower-end watch brands, SSIH gradually managed to establish a strong position as a Swiss watch manufacturer. ASUAGs mandate was to maintain, improve and develop the Swiss watch industry. Neither ASUAG nor SSIH was doing well when Hayek took over. He changed the face of the company one he took control of its reins. He totally changed the way Swiss watch market operated. Swiss watches till then catered to only a niche high-end segment. Compared to its Asian counterparts, Swiss watches were perceived to be of higher quality but of much higher price. However when Swatch got introduced the entire perception got changed. Swatch meant Swiss watch. With breakthrough in technology and automation, Hayek managed to get the cost down and still maintained the quality of Swiss watches. The newer generation of consumers could associate themselves more with the kind of watches that Swatch manufactured and sold. SMH couldnt generate that perception in the minds of the customers. The Swiss name in the form of Swatch had to stay. Since it was Swatch specifically that brought about the change while maintaining the quality standards of Swiss watches, the name got changed to The Swatch Group to keep the association alive in the minds of the customers.

Question 4 Today the Swatch Group has more than double the number of brands in the portfolio compared to the 9 brands at the time of the case. How do they manage to minimize cannibalization between these brands?
Answer Sufficient differentiation has been achieved with respect to each brand on the basis of Unique Brand Message, Design and Origin. Every Watch has a separate TV spot and campaign that reduces possibility of cannibalization. Different brand ambassador for each particular brand because different segments of customers aspire to align their lifestyles to different celebrities. Each Watch owns a separate spot (untouched by any other watch) in the perceptual map. Brand awareness using various Mobile Apps Snap Dance

Swatch Art Swatch Collections Swatch club helps Swatch fans identify/understand the difference between various swatch brands. Advantages of being a member of that club are:

Access to limited Swatch watches Invitations to exclusive events and promotions Get up close with athletes, artists and Swatch designers Access insider news and previews of upcoming launches Receive the Swatch Lifestyle Magazine

1. Various collections Night Glows Collection Deep Shine Collection Big Automatic Collection Irony Chrono Collection New Gent Collection The Lady Collection Classic Collection Lady Plastic Collection Dia De Muertos Glance Collection The Chrono Collection Core Collection 2. Novelties

Chrono Plastic New Gent Lacquered Swatch Touch

3. Prestige and luxury range Breguet Symbolizes historical and cultural heritage Blancpain Interwoven tradition and innovation

Glashtte Original German values and quality, Passion and high precision Jaquet Droz extraordinary horological masterpieces of Jaquet Droz Lon Hatot express the sentiments and emotions of passionate, free women Omega Watch for a successful self-made person Tiffany

4. High range Longines Elegance: elegance is an attitude Rado - Trendy- some set trend some follow. Rado is the new direction Union Glashtte Philosophy pioneering spirit

5. Middle range Tissot Innovators by Tradition ck watch & jewelry Absolute, Contemporary Balmain A world of Elegance Certina Reliability, Precision and Innovation Mido A mark of true design Hamilton A passion for the sky and the movies

6. Basic range Swatch Revolution 51 Flik Flak Time is Fun

7. Private label division Endura

Question 5 In many ways, Swatch forced people to think about watches in a way they had never thought of before. Can

you think of brands in other product categories that have done the same thing? Bring at least one example to class.
AnswerLuxottica World Wide owns 12 Eyewear Brands i.e., Ray Ban, Oakley, Arnette, ESS, Mosley Tribes, Sferoflex, Persol,Oliver Peoples, Revo, Luxottica, Killer Loop, Vogue. Almost all of them are market leaders in their particular segments. The way they have managed to differentiate their brands is almost similar to Swatch. Below are some or their brands: Ray-Ban, the worlds best known sunglasses. Oakley, the worlds leading sports optical brand, Vogue styles stand out for their innovative design, for the wide variety of colours and frames and for the fashionable details on the temple of Vogue glasses. Killer Loop is a fresh, vital brand for a dynamic young public who are careful about their look. Arnette eyewear of choice, and lifestyle icon, of the 3S generation - surf, skateboard and snowboard Luxottica Titanium, a collection for people who prefer superlightweight frames of elegant design. Versace is a fashion and lifestyle brand for contemporary men and women who love glamorous luxury and distinctive personal style. Prada Made in Italy, Sophisticated, elegant and refined etc.