In 1978, when Dr. Ernst Thomke became managing director of ETA, the position of this Swiss flagship industry had changed dramatically. Especially with the presence of a strong competency (Japan and U.S).
Macro-environment: (PESTEL Analysis)
Threat: The market share had fallen from 56% to a mere 20%.
Opportunity: The production had grown from 61 million to 320 million pieces and movements annually.
Opportunity: the decline of the dollar was not quite as evident.
Threat: Market share loss was more pronounced in finished watches (Japan was producing 50.4 million Electronic watch compared to Switzerland and had 21% of market share on finished watches)
Threat: The situation was aggravated by adverse exchange rate movements relative to the U.S Dollar. Swiss watches was more expensive
Threat: U.S, Japan and Hong Kong had started to gain share especially since the introduction of the electronic watch.
Threat: Swatch’s technological lead has eroded due to other manufacturers incorporating advanced technology in their designs.
Weakness: The unemployment’s rate had increased dramatically (from 65127 employees to 30122).
The company had a great problem due to the high technologies of competitors, also their watches was more expensive so their market share had decreased.
5 Forces of M. Porter:
Threat of entry: * New entrants in the market of watches: Japan, Hong Kong. * Prices dropped dramatically from 1000/2000 $ in 1970 to merely 20/40 $ by the end of 70’s * In the 80’s, several competitors switched to the more sophisticated analogue models and thus created competition for the Swatch.
Intensity of rivalry among existing competitors: * Japan held the technological edge and created the new electronic watch to compete with Swatch. * Most of the early American digital watch producers had started to withdraw from the watch business