The Birth of the Swatch

Topics: Omega SA, Lighter, Clock Pages: 8 (2453 words) Published: June 18, 2008
1. What changes in the production and marketing of watches led to Swatch?

Before 1950s - “home-made” effect
Starting from 1950s watches were considered as very precious goods that only few people could afford. The production of watches was a craft that required accurate skills and mastery of jewels making techniques. Watches were considered as a luxury good as well as a “financial investment”. People spent a lot on them, had great care of them and used to hand them down from generation to generation.

In this period the watch industry was dominated by Swiss producer, watch craftsmanship was developed especially in Switzerland; the country had a great “home-made” effect on consumers: people looked at Swiss watches as the best on the market and trusted the quality and value of such products. Although after the World War II many Swiss watch firms were forced to close because of the recession, almost the 80% of the world’s total production was Swiss: Switzerland was watch’s home country.

From 1950s to 1970s - low-price and new technology
After 1950s the overall industry landscape changed, after-war time companies evolved into the development of low-cost watches. Such watches still used mechanical movements but were made by metals in place of jewels, so they were less expensive but still very precise. In this period Timex was introduced; it is a U.S. company that produces simply designed watches with cheap exterior, but durable and precise. Later, other Japanese companies entered this arena, selling low-price watches with good quality and they started to compete directly with Swiss manufacturers.

Swiss watch producers started to fear competition coming from low-cost producers, and they felt this competition becoming stronger when Quartz technology was introduced. This new technologies created space in the market for Japanese and Hong Kong firms; such firms provided modern, precise and multifunctional watches that appeal customers of all over the world. Switzerland begun to be uncompetitive in the market, Swiss manufacturers refused to embraced the quarts technology because they believed that their own watches were more sophisticated, more luxurious and more valuable than the Japanese ones; they believed that customers would have perceived the more value provided by their watch and felt like they were competing in an upper segment than other producers. But this was not the story; customers liked the new watches, they did not care anymore whether the watch was Swiss or Japanese, they wanted a nice- precise watch that could be provided by other than Swiss manufacturers. The new watches could also include jewels or fake jewels and this really appeal customers.

From 1970s to 1983 – the newly born Swatch
Looking at this situation Swiss watch manufacturers understood that something had to be done. First of all the two biggest companies of the industry- ASUAG and SSIH- merged and fought together against this new environment. It was perceived that a change was needed, not only a change in the product but also a change in strategy, in structure and in management. The new company’s objective was to have a wide presence all over the market, not only in the upper segment.

At this point Swatch was born: to be present in the low end segment the company had to provide a new product that could be produced at low cost and that embraced the quartz technology, and Swatch was the right answer to all this needs. Basically three changes were carried on through Swatch: firstly the production was vertically integrated. In order to drive production costs down, the company had to rely a little on labor force and try to make the most of things automatic. Secondly, the material used was a cheap one: plastic; thirdly this new product had to have a new image, perceived as unique by all customers.

Understanding these needs, and working on such changes Swatch started its way through the success.

2. Why was the swatch so...
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