Swatch Case
PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS
INTERNATIONAL BUSINESS SCHOOL
CASE STUDY
SWATCH AND THE GLOBAL WATCH INDUSTRY
International Strategic Management
1st year master’s degree student:
Inarkaeva Lamara
Supervisor: Ekaterina Makhnovskaya
Moscow
10.12.2014
Key strategic issue
The Swatch Group is the world’s leading manufacturer of watches with 14 per cent share of the world market, which was the first Swiss company started to compete in a low price segment. In 1998 Swatch increased its net profit by 7.5 percent. However, after key figures left the organization, the Swatch Group started to face persistent difficulties in management and its position on the market. Moreover, company’s strategy started to be unclear for the shareholders, as they have a doubt that current strategy remains sustainable in rapidly changing competitive industry.
In view of the aforesaid, it is necessary for Swatch to change its current development strategy in order to keep up with their rivals and avoid a decrease in sales and market share.
Alternatives
There are several ways for Swatch to address the issue of changing its current development strategy.
First alternative for Swatch is to move the value-added chain activities to countries offering low production cost. Having manufacturing activities in Switzerland, which is the most expensive country in the world, does not let the company to successfully manage its expenses.
The benefit of this strategy is that Swatch will considerably reduce the price for materials, labor and operational costs. It will also let Swatch keep competing with low cost manufacturers on a watches market.
Also, moving manufacturing activities to other countries will give Swatch access to new markets, where demand for its products is high and the competition is minimal. Often developing countries provide incentives for the companies that move their manufacturing activities. It will lead to increased trade through exports and imports and
INTERNATIONAL BUSINESS SCHOOL
CASE STUDY
SWATCH AND THE GLOBAL WATCH INDUSTRY
International Strategic Management
1st year master’s degree student:
Inarkaeva Lamara
Supervisor: Ekaterina Makhnovskaya
Moscow
10.12.2014
Key strategic issue
The Swatch Group is the world’s leading manufacturer of watches with 14 per cent share of the world market, which was the first Swiss company started to compete in a low price segment. In 1998 Swatch increased its net profit by 7.5 percent. However, after key figures left the organization, the Swatch Group started to face persistent difficulties in management and its position on the market. Moreover, company’s strategy started to be unclear for the shareholders, as they have a doubt that current strategy remains sustainable in rapidly changing competitive industry.
In view of the aforesaid, it is necessary for Swatch to change its current development strategy in order to keep up with their rivals and avoid a decrease in sales and market share.
Alternatives
There are several ways for Swatch to address the issue of changing its current development strategy.
First alternative for Swatch is to move the value-added chain activities to countries offering low production cost. Having manufacturing activities in Switzerland, which is the most expensive country in the world, does not let the company to successfully manage its expenses.
The benefit of this strategy is that Swatch will considerably reduce the price for materials, labor and operational costs. It will also let Swatch keep competing with low cost manufacturers on a watches market.
Also, moving manufacturing activities to other countries will give Swatch access to new markets, where demand for its products is high and the competition is minimal. Often developing countries provide incentives for the companies that move their manufacturing activities. It will lead to increased trade through exports and imports and