Steinway & Sons: Buying a Legend(a)

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Steinway & Sons: Buying a Legend(A)

¢ñ. Statement of Problems and Issues

For 140 years, Steinway & Sons has set the standard for the quality manufacture of pianos. Why is Steinway legend? What made it so a great master? After first step into piano industry ¡°Steinway¡± and the word piano are almost synonymous. Working a long-term ¨C and still going- technical and market strategy that emphasized quality is to say, since the first Steinway family members arrived in New York from Germany in the middle of the 19th century, the company has pursued a strategy of making high-end quality product, selling them through its own sumptuous outlets and through a network of dealers, and gaining exposure by encouraging premier performing artists to use the pianos.

In the early 1970s, Steinway encountered competition from low-cost producers based on in Japan. While Steinway¡¯s fine image and reputation was unquestioned, the business wasn¡¯t particularly profitable. In addition to it, due to some stockholders who were unwilling to invest but mainly interested in income, Steinway¡¯s financial conditions became worse, so the family company came to an end, was sold to CBS. CBS recognized that the business didn¡¯t fit its corporate strategy. In 1985, CBS sold the company to John and Robert Birmingham, Boston-based investors. Under Birmingham, Steinway returned to its former stature, stressing quality and focusing on the high-end market. But ten years later, Steinway is also sold two investors, Kyle Kirkland and Dana Messina because of financial problems.

Problems and Issues
Now, the two young entrepreneurs have some questions and need to decide something important. Whether Steinway would continue its high-end quality piano or alternatively, pursue some bolder, more aggressive plan? Also they should decide what to do with the recently introduced line of Boston pianos. Did it make sense for Steinway to sell mid-priced pianos and how can they leverage the Steinway brand name to further enhance revenues? Finally, what role should they play in the running of Steinway?

We will mainly focus our analysis on the market share, financial problem and brand strategy. Now we start our analysis to choose the right creative to solve dilemmas which Kyle Kirkland and Dana Messina are facing.

¢ò. Analysis of Current Situation
1.External analysis: Market & competitor, Consumer behavior
MarketIndustry Trends1.Sustaining downturn in the piano industry (global sales dropping by 40% since 1980)2.Consolidation of the piano manufacturing industries in US & EU3.Emergence of several Asian manufacturersThe Used Piano Market1.The impact by an active market for used pianos is considerable2.Because of the extremely long life, ¡°duration¡± of piano¨¨threat to the piano industry seriouslyThe proportion of Steinway¡¯s marketUnited States (58%), Germany (8.6%), Japan (7.3%), England (6.1%),Switzerland (2.9%)Decreasing unit sale of Steinway grand piano from 1990 to 1994The unit sale of grand piano was decreased by 24.5% CompetitionYamaha1.The largest producer of pianos in the world2.Using highly automated, assembly-line techniques3.Traditional craft methods also used for making grand piano4.Strategies for improvement and promotion its grand piano-used noticeably higher quality raw materials-effort to duplicate the techniques of Steinway-employee¡¯s high degreed skills and limit of worker discretion-launching an ¡°Artist Program¡±Baldwin1.High-quality grand piano manufacturer2.Respected by trained musicians, choice by big artists and ¡°official¡± piano of organizationsKawai1.Manufactured on highly automated assembly lines2.Produced good quality verticals and small grand piano3.Manufactured Boston piano on behalf of Steinway Consumer behaviorBrand choice is driven by product quality, prompt delivery and competitive pricing As shown in the table above, the unit sale of Steinway grand piano was decreased by 24.5%, while...
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