Swatch Report

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Swatch
case study

"This watch is the product which will reintroduce Switzerland to the low and middle price market. It is the first step of our campaign to regain dominance of the world watch industry," said Dr. Ernst Thomke, President of ETA SA, a subsidiary of ASUAG and Switzerland's largest watch company. Ernst Thomke had made this confident declaration about SWATCH to Franz Sprecher, Project Marketing Consultant, in late spring 1981. Sprecher had accepted a consulting assignment to help ETA launch the watch, which was, at that time, still in the handmade prototype phase and as yet unnamed. This new watch would corne in a variety of colored plastic cases and bracelets with an analog face. ETA had designed an entire production process exclusively for SWATCH. This new process was completely automated and built the quartz movement directly into the watch case. Sprecher's key concern was how to determine a viable proposal for moving this remarkable new product from the factory in Grenchen, Switzerland into the hands of consumers aIl over the world. COMPANY BACKGROUND : ETA, EBAUCHES AND ASUAG

SWATCH was only one brand within a large consortium of holding companies and manufacturing units controlled by Allgemeine Schweizer Uhrenindustrie (Asuag, or General Company of Swiss Watchmaking). SWATCH was to be produœd by ETA, a movement manufacturer, which was part of Ebauches SA, the subsidiary company overseeing watch movement production within the Asuag organization.

Asuag was founded in 1931, when the Swiss government orchestrated the consolidation of a wide variety of small watchmakers. The major purpose of this consolidation was to begin rationalization of a highly fragmented, but vital, industry suffering the effects of one world war global depression. By 1981 Asuag had become the largest Swisss producer of watches and watch components. Asuag was the third largest watchmaker in the world behind two Japanese firms, Seiko and Citizen. Asuag had a total of 14,499 employees, 83 percent of whom worked within Switzerland. Asuag accounted for about one third watch exports, which were estimated at billion in 1980. Major activities were manufacture and watch assembly. Cases, dials and crystals were sourced from pendent suppliers. Ebauches SA, a wholly owned subsidiary of Asuag, controlled the various movement facturers. The Swiss government played an important role in encouraging and funding Ebauches' formation in 1932. An "ébauche” was the base upon which the movement was built and Ebauches companies produced almost all of the movements used in watches produced by Asuag group companies. Sixty-five percent of Ebauches production was used by Asuag group companies, and the rest was sold to other Swiss watch manufacturers. Ebauches SA recorded sales of Sfr 675.0 million in 1980, a 3.1 percent increase over the previous year. Ebauches companies employed a total of 6,860 people, 90 percent of them in Switzerland.

ETA SA, the manufacturer of SWATCH, produced a full range of watch movements and was known as the creator of the ultra-thin movements used in expensive watches. The quality of ETA movements Swatch case study — page 1

was so renowned that some watches were marked with "ETA Swiss Quartz" as well as the name brand. ETA movements were distributed on a virtual quota basis to a select group of watch manufacturers. The demand for its movements had always equalled or exceeded its production capacity. ln 1980 ETA employed over 2,000 people and produced more than 14 million watch movements for revenues of approximately SFr 362 million and profits of about SFr 20 million. Dr. Ernst Thomke had joined ETA as president in 1978. Early in his career, he had worked as an apprentice in production at ETA. He left the watch industry to pursue university degrees in chemistry and cancer research eaming both a Ph.D. and a medical degree. He then moved on to a career in research at British-owned Beecham Pharmaceutical. Thomke did not stay in the...
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