The Birth of the Swatch

The Birth of the Swatch - 1 -

Case at a Glance

When it comes to electronics, we look for the label ‘Made in Japan'; for wine, ‘Made inFrance'; and for watch, ‘Made in Switzerland'. The country where the product was madegives the perception of quality and value for money for the respective product. For centuries, Switzerland has been known for its expertise in watchmaking that requires skillof master jewelry maker combined with artistic micromechanical engineer. Swiss watchis a global seal that portrays the wearer's quality, status, and prestige. By 1945, Swisswatch accounted for 80% of the world's total watch production and 99% of all U.S.imports. However, the first wave of turbulence was faced when an American companyU.S. Time introduced a line of disposable watches bearing the Timex brand name. Thiswas followed by the quartz technology, by which watch companies could reduce their manufacturing cost and sell at a much lower price. Japanese companies such as Hattori-Seiko, Citizen, and Casio emerged out of this technology, capturing a greater marketshare in Asia and Europe with these low-cost watches. Though the Swiss had pioneeredquartz technology, they paid no heed based on the belief that electronic watches wereunreliable, unsophisticated, and beneath Swiss standards. They were adamant that Swisswatch had to be made from precious stones, complex mechanical architecture, and veryhigh priced.With such skeptical views, the Japanese industries gained more market, while the Swiss'declined to just 42% in 1970. It was during this time when the two Swiss companiesASUAG and SSIH merged to form SMH and Nicholas Hayek took over as the CEO.SMH's new goal was to capture competitive brand in every price segment in the market.The strategy was based on vertical integration, decentralized marketing, and portfoliomanagement. The Swatch was born in 1983 with stylish design, plastic covering, quartztechnology and a very low price of $40. Hayek's motive was to assign Swatch as anemotional product with a message – a strong, exiting, distinctive, authentic message thattells people who they are and why they do what they do. The global success of Swatchand its brand association revived the sunken Swiss company, and its other products suchas Omega and Rado.

Problems in Swatch and SMH

Even though Hayek was successful to take SMH to greater heights and regain globalmarket share, Swatch and SMH still faced problems as of 1992, despite its sales of 26million and cumulative sales surpassing 100 million.



Swatch Fixed Selling Price of $40

: Hayek has considered that Swatch's 10 yearsconsistent price of $40 has shown the company's concern for customer's value for money. However, by doing so, SMH has to