The Birth of Swatch Case Report

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The Birth of the Swatch
During the 1980s, Swatch experienced an outstanding success as a result of careful and well-executed marketing plan, while just a few years earlier there was observed a rapid decline of the Swiss watch industry. For many years Switzerland was world leader in the watch manufacturing industry. By 1945 they accounted 80% of the world total production. Starting from 1970, Japanese manufacturers actively began to produce and assemble quartz watches, which the Swiss mistakenly viewed as a passing fad. In the result, by 1983 the Swiss share of world markets for watches had fallen dramatically to less than 15%. In 1983 Nicolas Hayek became a CEO of the newly-based company in the result of merging of SSIH and ASUAG. Even though that most people who analyzed the destruction of the Swiss watch industry in the 1970s emphasize price and technology, the base of the problem was an absence of well-developed structure, management and strategy. After analyzing consumer behavior and lifestyle, SMH adopted a strategy that completely changed the concept of a wrist watch. Hayek right began executing a “shift” in the company’s strategy with the purpose in mind to create a “profitable, growing, global brand in every segment, including the low-end” (Yongme Moon, 2004 cited in Marketing Management 2013 Spring by Dr.Young-Ho Sorn) The “shift” started from structure, namely Swatch determined vertical integration – produce and assemble the low-priced quartz watch entirely in Switzerland. Thus, Swatch had to bring production costs down to Asian levels by redesigning production techniques that enabled to manufacture Swatch on a fully automated production line. Continuing with management changed, Swatch made a goal to become a competitive brand in every price segment and start mass production. Hayek explained the necessity of quality and cost control in the low-end sector first, through the use of, for example, cheap plastic cases, in order to be a leader in all others. The turning point in swatch strategy, which distinguished it from all other watchs, was called a Unique Message, meaning that they were selling not just a commodity, but an emotional product, that bears a strong message and is part of the consumers’ image. Swatches were considered not simply as a watch, but as a fashion accessory. Swatch utilized a distinguishing quartz watch analogue, formed fancy shapes in a combination with various colors and thereby created unique designs. A collection was replaced by a new one very quickly. As Swatches were sold as fashion accessories, consumers were buying more than one swatch for different appearances. Those changed concepts in the company’s marketing strategy and its step by step implementation resulted in revolution of the world watch industry. The core of Swatch success was its focus on customer based brand equity model. The company focused on creating the brand awareness and the brand image while launching Swatch into the market. There four main factors lead Swatch to the success, known as 4 elements of Marketing Mix. Swatch watches (product) were just completely different from all other brands - they used bright colors and fancy designs, which had never applied before by anyone. And they have been producing a wide variety of models and creating plenty of new styles for different occasions. As all Swatch collections were just not like any others and changed on an ongoing basis, consumers often were buying a couple of watches from different collections within several months period. The company hired best artists and industrial designers from all over the world. All models were designed under Swatch Design Lab. This led to creation of witty, sometimes outlandish designs that no watch brand had one that before. Whimsical innovation was at the heart of Swatch. People were rotated regularly inside the design lab to capture and develop new look and shape. Employees travelled throughout the world from big fashion shows to...
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