Swatch and Global Watch

Industry
A Report on the Watch Industry From a Marketing Perspective

LIM YU-JIN, WEI RONG,

Swatch and Global Watch Industry

A Report on the Watch Industry From a Marketing Perspective

Swatch and Global Watch Industry | [Pick the date]

Executive Summary

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Swatch and Global Watch Industry | [Pick the date]

Table of Contents

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EXECUTIVE SUMMARY...........................................................................................................2
TABLE OF CONTENTS...........................................................................................................3
TABLE OF FIGURES.............................................................................................................. 5
INTRODUCTION .................................................................................................................. 6
2.0 HOW DID TIMEX SUCCEED THE SWISS AS WORLD VOLUME LEADER IN THE 1950S AND 1960S? .............6
2.1 TIMEX POSITIONING....................................................................................................6
2.2 ADVERTISEMENT AND PROMOTION....................................................................................7
2.3 PLACEMENT............................................................................................................. 7
2.4 PRICING................................................................................................................. 7
2.5 PRODUCT............................................................................................................... 8
2.6 INSERT COMPETITIVE ADVANTAGE ANALYSIS FROM TEAMMATES ...................................................8
2.7 COMPETITOR RESPONSE................................................................................................8
2.8 CONCLUSION............................................................................................................8
3.0 HOW DID SEIKO BECOME THE INDUSTRY LEADER IN THE MID-1970S? ............................................9
3.1 MARKET CHANGES.....................................................................................................9
3.2 COMPETITIVE ADVANTAGE ANALYSIS:.................................................................................9
3.3. MARKET POSITIONING ................................................................................................9
3.4 PRODUCT............................................................................................................. 10
3.5 PROMOTION...........................................................................................................10
3.6 PLACEMENT........................................................................................................... 11
3.7 PRICE................................................................................................................. 11
3.8 OTHER MARKETING STRATEGY: SUPPLY CHAIN ...................................................................11
3.9 RESPONSIVENESS OF MARKET LEADERS...........................................................................11
3.10 CONCLUSIONS:..................................................................................................... 11
4.0 HOW DID SWATCH MANAGE TO RESUSCITATE THE SWISS WATCH INDUSTRY? ....................................13
4.1 MARKET POSITIONING................................................................................................13
4.2 PRICE................................................................................................................. 14
4.3 PRODUCT............................................................................................................. 14
4.4. PROMOTION..........................................................................................................14
4.5 PLACEMENT........................................................................................................... 14
4.6 EXPANDING THE MARKET............................................................................................14
4.7 CONCLUSION..........................................................................................................14
5.0 WHAT SPECIFIC COURSE OF ACTION WOULD YOU RECOMMEND TO HAYEK? .......................................15
5.1 POTTERS FIVE FORCE ANALYSIS FOR THE WATCH INDUSTRY .....................................................15
5.2 INNOVATION...........................................................................................................16
5.3 PROTECTING THE MARKET SHARE ..................................................................................17
5.4 SUPPLY CHAIN MANAGEMENT.......................................................................................17
5.5 RECOMMENDATIONS..................................................................................................17
6.0 WHAT WOULD SWATCH HAVE TO DO TO SUCCEED IN YOUR COUNTRY? .......................................19

7.0 WHERE

DOES THE WATCH INDUSTRY GO FROM HERE?

ANALYSE THE INDUSTRY FROM A GLOBAL, REGIONAL AND

SPECIFICALLY, WHERE DOES SWATCH GO FROM HERE? .......................................20
7.1 1990S TO CURRENT................................................................................................20
7.2 CURRENT CHALLENGES..............................................................................................20
REFERENCES:.................................................................................................................. 21

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LOCAL PERSPECTIVE.

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Table of Figures

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FIGURE
FIGURE
FIGURE
FIGURE

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1:TIMEX POSITIONING................................................................................................7
2:SEIKO PRODUCT POSITIONING...................................................................................10
3:SWATCH MARKET POSITION.....................................................................................13
4: MICHAEL E PORTER FIVE FORCE MODEL....................................................................16

Introduction
The global watch industry is a huge industry with a rich history of changes. This
report seeks to examine the causes of these changes from a marketing perspective,
and what the market leaders did to create value for their customers and overtake
the market leader. In particular, it will examine the emergence of Timex in the
1950s to 1960s, Seiko in the mid 1970s, and finally Swatch and how these
companies make good use of marketing to capture a significant market share.

2.0 How did Timex succeed the Swiss as world

volume leader in the 1950s and 1960s?
According to the case study, in 1945, the global watch industry comprise of a huge
market for Swiss watches in that by 1945 Swiss watch accounted for 80 per cent of
the worlds total watch production, and 99 per cent of all US watch imports (page
3). To understand how Timex succeed the Swiss as world volume leader in the
1950s and 1960s, we will examine how Timex positioned itself. Next, we will
examine how Timex use the marketing mix to capture a market share based on its
market segment. Also, we will look at the competitive advantage that Timex enjoys.
Finally, we will examine the market response to the threat from the industry
leaders.

Swiss watches are highly expensive with good quality (page 3). A lower price
alternative from US Turnip pocket watch is very cheap but of poor quality (page 3)
which was rejected by the mass (anyone who wanted a real watch bought Swiss).
Timex position its new product as inexpensive and good quality (Timex introduced
in 1951 a line of inexpensive, disposable, yet stylized and highly durable Timex
watches, page 4).

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2.1 Timex Positioning

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F IGURE 1:T IME X P OSITIONING

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From this, we can see the positioning of Timex is different from that of the Swiss
Watch.

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Timex then engaged the marketing mix to provide more value for its customers to
capture a bigger market share:

2.2 Advertisement and Promotion

To reinforce the image that the product is cheap but of high quality, Timex did a
worldwide advertising campaign on television Took a licking kept on ticking (page
4). Also they invited celebrity to be featured in commercials that emphasizing the
watchs low cost and incredible durability (page 4) to bring the point of their
product position.

2.3 Placement
Because traditional jewellers were reluctant to carry the brand (page 4), Timex
developed new distribution channels and sells its watch at drugstores, discount
houses, department stores, catalogue showrooms, military bases, and sporting
goods outlets (page 4). This allows it to reach the mass through other means than
a jewellery store.

2.4 Pricing

Timex offers its watch from US$6.95 to US$7.95 which is considered inexpensive
(but not as cheap as Turnip watches). This pricing is to make it affordable to the
mass. This low pricing is made possible by various cost cutting measures, such as
automating of production lines (page 4).

2.5 Product
Timex watch differentitate itself by having hard alloy bearings instead of traditional
and more expensive jewels. This allows it to have a cost advantage over its rivals,
and lowers its cost of production.

2.6 Insert competitive advantage analysis from Teammates

2.7 Competitor response

1. Expanding the total market: Usually, when the market is expanded, the
market leader stand to gain more, but in this case study, this does not
applies (a rising worldwide demand for watches did little to slow the steady
decline in the Swiss share of the world market).
2. Protect its market share through good defensive and offensive
actions: The market leader should try to prevent or fix weakness that allow
for opportunities for competitors. Surprisingly the response to Timex is
almost non-existant, allowing Timex to capture a bigger market share.
3. Increasing the market share: Swiss could try to increase their market
share of the watch industry by using new technology to come up a lower cost
product to fight with Timex. However, this was not done.

2.8 Conclusion
Based on the marketing positioning, excellent use of the marketing mix to achieve
its desire marketing position, a competitive advantage, and a lack of response to
Timexs entry, Timex was able to successfully capture a large market share in the
1950s to 1960s.

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There is little response to the US and Japanese Competitiors in that the Swiss
members companies do not really support the initiatives to try to response to
Timex. Accordingly to Kolter et al (2001), the market leader should work on 3 fonts
to ensure that it continues to the market leader:

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3.0 How did Seiko become the industry leader in the

mid-1970s?
In this section, we will examine how Seiko become the industry leader in the mid
1970s, and capture a huge slice of the market from Timex and Swiss Watch.

3.1 Market changes

From the case study, it should that in 1970s to 1990s, there is a new technology for
watches called quartz technology (page 5). Quartz watches used an integrate circuit
and are extremely accurate, more sophisticated, and were far less expensive to
manufacture. As a result of technology advances, there were new opportunities for
Seiko to penetrate the worldwide watch market.

3.2 Competitive advantage analysis:

[Insert from Teammates here]

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3.3. Market positioning

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The market position adopted by Seiko seems to be of slightly lower quality (quartz
watches were build on LED technology that has many flaws (page 5), but is still
good quality (they were accurate to less than one second per day). Seiko pricing is
slightly higher than Timex referred from The timex model was priced at US$125,
which was 60 percent below Seikos cheapest model at that time (page 7).
Having established the market position, we will look at how Seiko use its marketing
mix to support its position and differentiate itself from its competitors.

3.4 Product
Seiko watch use Quartz Technology that allows it to differentiate its product from
its competitors by providing LED display, and a wide range of functions that
traditional watchmakers does not have.

3.5 Promotion
Seiko increased its advertising budget (page 6), but it is unclear from the case if
this advertising align it with its position. However, from the results that by 1979,
Seiko has became the worlds largest watch company in terms of revenues with
sales approaching US $1.29 billion (page 6) indicates that advertising is successful.

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F IGURE 2:S EIKO P RODUCT P OSITIONING

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3.6 Placement
Seiko works with distributors worldwide to get its products to the customer (page 6,
in that relationships with distributors were enforced). Each distributor usually
resells the products to the retailers, who in turn sell it to the customers.

3.7 Price
Seiko seems to be mid-priced and priced more expensively than Timex from The
timex model was priced at US$125, which was 60 percent below Seikos cheapest
model at that time (page 7).

3.8 Other marketing strategy: Supply Chain

What is most interesting in the case of Seikos strategy for grow is not on
marketing, but rather on improving its supply chain management in that
Manufacturing / assembly facilities were set up all around the world, and that it
made large investments in the plants and equipments for fully automated highvolume production of integrated circuits, batteries and LCD panels (page 6), and
that it focus on relationships with distributors relationships with distributors were
enforced (page 6). By focusing on the supply chain operations, Seiko is creating
value for the customers by ensuring availability of the watches on demand.

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3.9 Responsiveness of Market Leaders

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Seikos ability to capture a major market share is because Timex facilities does not
allowed them to easily produce quartz crystals or integrated circuits (page 7) and
that Timex technology was rapidly becoming obsolete in light of the new technology
(page 7). However, to fight with Seiko and to defend its market share, Timex did
enter the Quartz watch market in the mid 1970s (page 7). Unfortunately, the low
barrier to entry results in many semiconductor firms seeking to enter the market
(page 7). To compete, they engaged in price wars (page 7), that led to decreasing
profitability. Strategic alliance to relive Timex market share with Texas Instruments
fell short (page 8) as Timex does not wish to cooperate.
As a result of these problems, Seiko overtook Timex in terms of units and total
sales.

3.10 Conclusions:
Based on these, we can see that Seiko was able to capture a huge market share as
a result of innovation in coming up with a new and better product. This new
product gains it significant competitive advantage by lowering costs. In addition,
Seiko improved its rapid expansion plans by building on good supply chain network.
The slow response from Timex as well as price wars in US market have hurted

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Timex profitability, and without forming strategic partnerships to combat the new
threat, Timex was unable to prevent Seiko capturing a bigger market share.

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4.0 How did Swatch manage to resuscitate the Swiss

watch industry?
Swatch resuscitated the Swiss watch industry in the 1980s. This section seek to
examine their market positioning, and how they capture a major slice of the watch
industry during this period.

4.1 Market positioning

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Swiss watchs tends to be positioned in the higher price market segment. Swatch
was conceived as an inexpensive, yet good quality watch with quartz accuracy,
water and shock resistance as well as a one year guarantee.

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F IGURE 3:S WATCH M ARKET P OSITION

From the diagram above, it seems that Swatch is positioned in the same segment
as Timex, and competes with Timex for the cheap but good quality segment. We
will look at how Swatch use the marketing mix to achieve this market positioning.

4.2 Price
Swatch was priced at around USD$40/= (page 9), which is considered affordable.

4.3 Product
Swatch watch does not contain any new technology such as quartz etc. However, it
differentiates itself by offering new features in its products such as water and shock
resistance, and a one year guarantee (page 9). The product was positioned as a
fashion accessory and swatch watches feature several different colors and designs
(page 10 with their trendy and colorful designs, models were created for every
occasions). These features allow it to differentiate itself from its competitors.

4.4. Promotion
Swatch relied heavily on promotion as a vehicle for success (page 10). In
advertising, swatch is positioned as a lifestyle symbol and a fashion accessory
instead of a traditional timekeeping instrument. That the media appeared to be
mesmerized by Hayeks approach to marketing resulted in a lot of free media
coverage and publicity (page 10). Also, the company also spend on public events
and public relations activities, and used celebrity endorsements extensively (page
10) to promote its watches.

Swatch choice of placement is the same as Timex in discounts houses and

department stores.

4.6 Expanding the market

Swatch helps to expand the market for watches by positioning it as a fashion
accessory and not just a timepiece. This allow it to reach market

4.7 Conclusion
Swatch ability to complete with Timex, the giant for the affordable watch category,
is a result of its advertising and promotions as well as its ability to differentiate its
products from its competitors it offers swatch in various colors and designs as
well as offers features such as shock resistance and water resistances and its
guarantee helps Swatch to compete with Timex and successfully capture large
market shares in the 1980s.

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4.5 Placement

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5.0 What specific course of action would you

recommend to Hayek?
Looking at the success factors for each of the market leaders in each era, we can
see that each of the market leaders capture a significant market share through
innovation that provides a competitive advantage. Also, they managed to capture
market share as a result the lack of defense from the current leader. To this, we
will examine the competitiveness of the watch industry, innovation, and protecting
the market share strategies. Also, we will examine briefly the supply chain
operations on marketing.

5.1 Potters five force analysis for the watch industry

QuickMBA notes that Potters five force analysis allows for looking at the
environment in which an industry operates. In it, Potter proposed that the industry
is characterized by five forces:

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1. Bargaining Power of Customers: This refers the power of the customers

have in choosing to purchase products. The customers power is strong if
they have the ability to put the firm under pressure. Considering the amount
of competitors product that customers can choose from at the same price
range (e.g. Timex) and that customers tend to be well informed, Swatchs
customers do have some bargaining power.

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2. Bargaining Power of Suppliers: This refers to the power of the suppliers

to influence the firms profitability. Suppliers have high power if the materials
used is only available from them. Considering the high number of
organizations providing the quartz (e.g. Texas Instruments etc), we are
inclined to believe that the bargaining power of suppliers were small.
3. Threat of New entrants: This refers to how easy is it for new firms to enter
the market. As more and more competitors compete, there will less profits
for each firm. Based on the case study, we believe that there is a high threat
of new entrants as there is low barrier to entry (e.g. Seiko, Timex, Swatch all
successfully entered the market).
4. Threat of Substitute products: This refers to other products that can
substitute as a watch. In todays world, most PDAs, handphones, laptop,
computers, clock etc. all have a date and time function that can be used as a
substitute for watch (as a timepiece). Therefore this industry has several
substitute products.
5. Competitive Rivalry within the industry: This refers to the fierceness of
competition within the industry. We are inclined to think that the watch
industry is highly competitive due to the high number of competitors.

Base on the analysis above, it seems that the watch industry are characterized by
high bargaining power of customers, threat of new entrants / substitute products,
and have high competitive rivalry within the industry. While it is not possible for
Swatch to control substitute products or bargaining power of customers, it is
possible for Swatch to control the threat of new entrance and competitive rivalry
within the industry by having patents on new watch designs, or coming up with a
new technology that is better than quartz watch and then patenting the design.
With patents protection, Swatch group can reduce the threat of new entrances by
not allowing them to use the patent design, and force rivals to pay Swatch licensing
fees for using the patented design or technology. This is only possible through the
use of innovation.

5.2 Innovation
Based on the analysis of market trends and how market shares were captured, we
find that each of the previous leaders captured the market share by innovation:
Timex was able to capture the market share by innovating a new way of creating
watches that are cheaper than the industry standard at that time. Seiko was able to
capture a big market share by innovating the quartz technology. Swatch was able
to capture the market share by finding innovative uses of watches (as a fashion

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F IGURE 4: M ICHAEL E P ORTER F IVE F ORCE M ODEL

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accessory instead of a time piece). Therefore, Swatch would do well to innovate and
come up with new uses for watch, or having new designs, or come up with better
watches based on new technologies. After which, Swatch can patent its design and
technology to reduce the treat of new entrants, and reduce the competitive rivalry.
One other way in which Swatch can further grow is to protect its market share.

5.3 Protecting the market Share

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As a market leader, Swatch could do more on protecting its market share.

Accordingly to Kolter et al (2001), the market leader should work on 3 fonts to
ensure that it continues to the market leader:

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1. Expanding the total market: Usually, when the market is expanded, the
market leader stand to gain more. This is what Swatch did in 1980s when it
launches Swatch as a fashion accessory instead of just a timepiece. If Swatch
can expand the total market for watches, it can capture a bigger market
share.
2. Protect its market share through good defensive and offensive
actions: The market leader should try to prevent or fix weakness that allow
for opportunities for competitors. Swatch could engage in advertising, loyalty
rewards programs, provide free watch cleaning services etc to encourage
people to purchase from Swatch and to encourage brand loyalty.
3. Increasing the market share: Swatch could try to increase their market
share of the watch industry by introducing new products that appeal to
different market segments. From the case study, it seems that Swatch has
done just that, with Omega brand targeting higher end segment and swatch
watches targeting lower end segments. I am unsure if Swatch has a product
that target mid price segment etc.

5.4 Supply chain Management

Seiko rise in the watch industry is due largely to its innovation (in innovating the
quartz watch), but it is also partially also due to its excellent supply chain
management strategies. As cost increases in Switzerland and companies seek to
outsource watch making to cheaper countries, Swatch will find that it could not
produce watches that are as low cost as its competitors, and it may result in loss of
profits. To this end, it maybe possible for Swatch to outsource some parts of its
operations to reduce cost, and examine which operations could be outsourced to
countries with cheaper labour costs. This will ensure that Swatch group will not be
left out when other firms strive to achieve a competitive advantage by lowering the
cost of production.

5.5 Recommendations

Based on this, we will recommend that Swatch focus on innovation, and patenting
its designs as well as new technology breakthroughs in watch making technologies.
This will allow it to sustain a competitive advantage.
Also, Swatch will need to protect its market share or expand its market share.
Swatch can do so by:

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Finally, Swatch should consider its supply chain management operations and seek
to achieve a competitive advantage by lowering the cost of production.

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Swatch and Global Watch Industry | [Pick the date]

6.0 What would SWATCH have to do to succeed in

your country?

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7.0 Where does the watch industry go from here?

Analyse the industry from a global, regional and
local perspective. Specifically, where does
SWATCH go from here?
This section will look at the industry trends from a global perspective. Also, it will
look at trends in the regional (Asia market). Finally, it will examine from a local
(Indian) perspective.

7.1 1990s to current

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7.2 Current Challenges

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References:
Kolter, Brown, Adam, Armstrong (2001) Marketing 5th Edition, Prentice Hall,
Australia
QuickMBA.com Potters Five Force A model for Industry analysis, [Online],
[Available], Accessed on 28 Oct 2008
http://www.quickmba.com/strategy/porter.shtml

Swatch and Global Watch Industry | [Pick the date]

Richard Ivey School of Business (1999), Swatch and the Global Watch industry,
[Online], Restricted Access

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