Steinway & Sons (A)
A Steinway is a Steinway. . . . There is no such thing as a “better” Steinway. Each and every Steinway is the best Steinway. Theodore Steinway
The 1990s was a period of change for the music industry. Foreign competition in the mid-price upright piano market was intense. In addition to well-entrenched players from Japan (Yamaha and Kawai), two South Korean firms (Young Chang and Samick), were emerging as competitors. Moreover, Yamaha and Young Chang had already established a presence in China. Forecasts indicated that the future growth market for pianos will be concentrated in Asia. This case discusses Steinway & Sons’ history, the evolution of its value system, and the current market conditions facing the firm. It highlights the issues faced by Steinway & Sons as its top management formulates its strategy toward the growing Chinese piano market. COMPANY BACKGROUND The Steinway Family Years — 1853 to 1971 Steinway & Sons was founded in 1853 by Henry E. Steinway, Sr. and his sons, Henry Jr., Charles, and William. In 1854 the firm entered and won its first competition. A year later it won first prize at the American Institute Fair in New York. By 1860 Steinway & Sons built a manufacturing facility at 52nd Street and Fourth (now Park) Avenue, on the site now occupied by the the Seagrams Building. Here 350 men produced 30 square pianos and five grands per week. In 1864 the firm opened a showroom on 14th Street. In 1865 sales topped $1,000,000. From the beginning, piano building at Steinway & Sons was a family affair. Each of the Steinway sons concentrated on gaining expertise in a different aspect of piano manufacturing: William was a "bellyman" who installed the piano soundboards, Henry, Jr. focused on piano "finishing," and Charles concentrated on “voicing” the piano. By 1854 the Steinways were employers, and the family members had become managers. Henry Sr. was in charge overall, while Henry Jr. focused on research and development, Charles managed the plant, and William took care of marketing. This case was prepared by Professors Suresh Kotha (School of Business Administration, University of Washington) and Roger Dunbar (Stern School of Business, NYU) with assistance from Joseph H. Alhadeff (Stern MBA, 1995); Gerald Tennenbaum (Stern MBA, 1995) and Professor Xavier Martin (Stern) as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1996 Kotha and Dunbar. All rights reserved.
Steinway & Sons (A) Music historians consider the competition at the 1867 Paris Exhibition as the turning point in the piano industry because it was there that the "American" system of cast-iron frames, heavier strings, solid construction, and more powerful tone took the competitive honors from European pianos. The jury report gave the Steinway piano a slight edge over the other major US manufacturer, Chickering & Sons, due to its expression, delicate shading, and a variety of accentuations. With this recognition, Steinway’s domestic piano sales and exports grew rapidly, requiring greater production capacity. In 1870, under William’s leadership, the firm purchased 400 acres of remote farm land in Astoria, Queens with the idea of moving the factory from Manhattan. By 1873 the new factory was operating, and Steinway-sponsored employee housing, transport, and other facilities were built. Two years later, the firm opened a showroom in London. Ten years later, to build a global presence, the firm built a factory in Hamburg, Germany. Pianos manufactured there were marketed in Europe and exported to the rest of the world. Today, these two factories remain the firm’s only manufacturing centers. In the 1870s, low-price piano producers were a significant competitive threat. Conflict emerged between William and Theodore concerning the best way to respond. (C. F. Theodore was the fourth son of the founder and had joined...