To: Mr. Messina & Mr. Kirkland
Steinway & Sons Acquisition by Selmer
Congratulations Mr. Messina & Mr. Kirkland on the recent purchase of Steinway & Sons, a pre-eminent maker of high quality vertical and grand pianos. There are several opportunities and paths available for the newly formed Steinway Musical Instruments, Inc. We have evaluated these opportunities in light of the industry, competition, and the assets of the company and believe that the future outlook for your operations looks good. Please read further for our analysis and recommendations.
The Piano industry is facing the following major trends:
1. Sustained downturn in the industry which is leading to lower sales 2. Consolidation of piano manufacturing industries
3. Opening of new and potentially large markets.
4. Emergence of Asian manufacturers
Let us examine each of these in turn. The sustained downturn in the piano industry can be attributed to various factors such as the rise of electronic pianos, computers as entertainment devices, and even the economic recession of recent years. However, this trend can be easily reversed if non users and other market segments are targeted.
The consolidation of piano manufacturing companies has been positive as it reduced the number of competitors in the industry. Now, we are able to focus more on the smaller number of existing competitors and are able to form our marketing strategies accordingly. Additionally, the opening of new markets in Asia represents huge opportunities for Steinway. This is a market where there is lots of room to grow, and it can help reverse the downturn in the piano industry.
Finally, the emergence of Asian manufacturers has changed the composition of the industry. The competition is fierce and the product is of comparable quality. This segment represents a great challenge, but they also represent a good target for us. We can focus our efforts on taking away market share from these competitors and increasing our sales.
While a few of these trends seem to suggest a decline, the industry is still in the maturity stage. There are a few competitors and growth has slowed, but there is a new market in Asia that is entirely new. There is lots of room to expand number of brand users by converting nonusers, entering new market segments, and winning competitors' consumers. To better format our strategy, let us take a look at the competition.
The key competitors for Steinway & Sons pianos are Yamaha, Baldwin, Kawai, Bosendorfer and Fazioli. Yamaha is a Japanese manufacturer that currently holds 35% of the market share worldwide and about 50% market share in Japan. This manufacturer is dedicated to quality through continuous improvements. This manufacturer poses a serious threat to Steinway with its similar quality and artist sponsorship program. Yamaha has been successful in getting several artists to endorse Yamaha's pianos. Kawai is another Japanese manufacturer who competes in the same space as Steinway. However, Kawai still has work to reach the same level of quality as Steinway. In contrast to Steinway, both Yamaha and Kawai mass-produced their pianos by using highly automated, assembly-line techniques with decent price and quality.
Baldwin is the only other American manufacturer and offers a full line of pianos. They compete with Steinway in the concert grand pianos space where they are widely recognized.
Lastly, we have Bosendorfer and Fazioli manufacturers who are of the same caliber as Steinway. However, the two are low volume producers and do not compete on the volume with Steinway. We would conclude from our analysis that Yamaha is most serious threat of these competitors. Yamaha has already established itself as a force to be recokened with and Steinway should not disregard Yamaha's potential.
Steinway & Sons
The success of Steinway & Sons for over 140 years and its place as the pre-eminent manufacturer...