Steinway Paper

1. At this point, Messina and Kirkland need to decide what do to with the Boston and Steinway lines of vertical pianos. The Japanese made Boston vertical pianos are roughly 35-45% less expensive than the Steinway vertical pianos of comparable size based on 1995 pricing. In addition, the worldwide market in 1994 for vertical pianos was estimated at 540,000 units where 58% of this demand was in Asia. Steinway has a strong growth potential for vertical pianos domestically and especially in the Asian markets. Steinway only sold 600 Steinway verticals and 2,300 Boston pianos in 1994 resulting in a global market share of less than 0.6% for vertical pianos. Since recent industry trends indicate that more Asian manufacturers are emerging to provide a lower cost (less quality) piano, Steinway should focus on promoting the Boston line as the mid-market line to untapped and rapidly growing Asian markets. Industry trends show that Asia is a new market with huge opportunities for the world’s piano makers. These new Asian manufactures are focusing on providing a low cost piano by automating the manufacturing process and reducing the overall quality. Steinway should invest in automating their manufacturing process for their low cost Boston piano line to be to competitive. This automation process should allow Steinway to be competitive in Asia by further reducing their cost. Steinway should continue to make both lines of pianos, but revamp these lines to meet the target customers. The Steinway vertical pianos can be promoted for the US market segment and the Boston pianos can target the Asian market segment. In the Asian markets, Steinway can bring customer value by providing the highest quality piano for the mid-priced market and leverage their brand name (reputation) for quality. This market opportunity in Asia will help generate more cash flow and profits to this highly leveraged company. Investing in this automated machinery for the manufacturing of their low end pianos will allow Steinway to increase their units produced, increase product turnover and reduce the sales cycle allowing them to collect payment faster. Past owners of Steinway have struggled financially since a majority of sales have been from the high-end pianos that had a production cycle of over a year. Finally, by targeting their low cost Boston piano line (as a different name) in Asia, Steinway is less likely to tarnish their brand name domestically in the US.

2. As mentioned above, Steinway should target the high-end piano market domestically in the US and focus their international efforts on the mid-market segment. The market trends strongly indicate that there is a greater demand in the US for the high-end market. In 1994, Steinway only sold 1,720 grand pianos which accounted for less than 6% of the market and they only sold 2,698 grand pianos globally (1.6% of the market). The US accounts for half of the world’s market for high-end pianos in 1994