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The Birth Of Swatch Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 1587 words Published: 1st Jan 2015

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Although the Swiss watch industry produced high quality watches containing jewels and hard stones, making it like any other well-crafted watch to be considered a financial investment. But because of this standard Swiss swatch makers had set in well-crafted watches at an expensive price, the Swiss could not adapt to their new competitors who were more cost efficient Also the Swiss were too stubborn to adjust to the introduction of new technology

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Situation Analysis

Internal Factors

One of SMH’s strength was that they had of years of experience in the craft of watch making, SMH produced watches that were unique in value, high in quality, reliable, precious, and sophisticated. Each watch was considered a craft that had roughly 100 separate components that was carefully assembled by a high skilled micromechanical engineer and a master jewellery maker. A weakness for the Swiss watch makers was its price range, especially during World War II. 97% of its market share was in products of $350 or higher, 3% in watches between $100 and $350, and 0% in watches below $100. An example is one of Swiss’s brands, Omega, that had 130 models of watches priced from $700 to $20,000. This kind of price is not affordable by many. In addition, because of its pricing Swiss watches were only sold primarily in jewellery stores and upscale departments stores. Most Swiss brands marketed their products by printing classy full page advertisements in magazines that targeted the narrow upscale demographic. Although having good advances in technology, and research and development, and also being the pioneers of the quartz technology; the Swiss however refused to take advantage of this due to the mentality that quartz watches were unreliable, unsophisticated and below Swiss standard and that the quartz technology was a fad.

External Factors

Competitors: Low-Cost competition started emerging in the 1950s which soon became a weakness for the SMH. During World War II, an American company known as Timex, developed a line of watches that were manufactured at low costs because of the use of hard alloy metals to produce the mechanical movements of the watch. These metals were much cheaper than the jewels used in a Swiss watch, needless to say that Timex watches went under intensive testing to prove that the watch was very durable. Timex was selling more units of their watches than any other manufacturer in the world by 1970. Other competitors were the Japanese manufacturers of Citizen and Hattori -Seiko who produced watches that were integrated with the new breakthrough of the quartz technology that revolutionized the watch industry. Casio also adopted the Quartz technology and specialized in low-cost, plastic-made, multifunctional digital watches. The vast use of Quartz technology declined the Swiss watch industry that caused Switzerland to be unable to compete with the low cost that the saturated Japanese watchmakers had. By 1983 and the unit share of Switzerland’s watch market dropped to less than 15%.

Alternatives

To address the issue of the narrow target market, Swiss has three key alternatives.

Develop a product that addresses the needs of consumers in all three price segments.

Pros – They will target more consumers (higher demographic market).

– A higher demand and increased consumers will ultimately result in higher profits

– They will satisfy the needs and wants of consumers they haven’t pleased in the past.

Cons – They could lose their reputation as to being a company that sold high end hand crafted watches

– Could lose some loyal customers who bought the brand because of its original purpose, since it would be less unique and more common.

-There was a possibility that if they broaden their market there is no guarantee it will pay off and they might just incur additional costs in changing things.

2) Collaborate with the Japanese and Chinese companies with making “disposable” watches and have the new quartz technology incorporated in their new brand, while still maintaining quality and the Swiss name.

Pros – This will help them enter the market that they currently had 0% of shares (watches below $100).

– Consumers are already buying from them so we know that consumers will buy our brand as well and perhaps enough more because of the Swiss name.

– Lower costs and increase profits.

Cons – If SMH collaborates with the Asian companies to make watches, they will lose their “ultimate watch maker” status because they had to get help from other companies.

– Since it won’t be made in Switzerland anymore, this might hurt Swiss image.

– SMH will have less authority over how the watches are made because they will have to take into consideration the opinions and suggestions of their Japanese/Chinese counterparts.

– They will have to invest money initially to change the way things are.

3) Leave things the way they were

Pros – The Company will still have its reputation of being one of the prestigious watch making companies.

– They will not need to invest their time and money into something that has a chance of not working out.

– SMH would remain as a distinct high class producer of watches.

Cons – They might go out of business due to losses.

– Will not have access to a very large population of consumers that are willing to buy new and affordable watches.

– They will be forced to sell company shares in order to keep their business going.

Recommendation

The best alternative would be to collaborate with Japanese and Chinese companies to make watches that incorporate the quartz technology while still maintaining their brand image. If SMH works with the Japanese and Chinese firms in producing there parts they will be able to drastically reduce costs, and ultimately create watches that target the two lower sections of the market. They need to make sure they continue to maintain their image, they can do this by approving the products before they are released into the market to ensure they meet the SMH quality standard. If they can do this, the problem of targeting the narrow high class market will be eliminated and SMH will have a leading product in each price range.

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Since the Japanese and Chinese have already made their mark with their low quality watch sales, the Swiss brand can benefit from simply merging with them for that particular market. The Swiss brands still need to produce high quality watches for their name to remain reputable, but also need to get in the market when it comes to low quality watch sales.

The first course of action for the Swiss brand to do is to come in contact with the leading manufacturing of the disposable watch companies. Once in contact, the Swiss brand can begin to learn the intensions of the Japanese and Chinese companies and vice versa. The Swiss have one thing that the Japanese and Chinese companies don’t which is reputation. When consumers hear about Swiss watches they think about quality and luxury and the Japanese and Chinese companies would want to use that tool in their marketing. Both companies should understand their benefits from working together on this type of project. The Swiss companies being involved in the disposable watch market and the Japanese and Chinese companies get the idea of borrowing the Swiss brand name to give consumers the idea of better quality watches.

The next stage would be to develop a contract between the two companies to declare what each company is entitled to as well as restricted to. This contract can either last for a certain period of time (ex. two years) or certain number of watches produced. This is the primary step for both companies to begin their business ideas.

SHC then needs to meet with the Japanese and Chinese companies to undergo the processes within the contract. The Swiss brand would want to examine the produces before they ship them out to the consumers. If SHC want to put their name on the product then they need to make sure the disposable watched wouldn’t cause the consumer problems (faulty parts). Even though these watches are considered disposal, the Swiss would still want a decent product to do out in public. After SHC evaluates that the watches are viable, they can go out to the consumers. The Japanese and Chinese companies can advertise that their watches are “Swiss Approved” which can give consumers the impression that they are getting Swiss disposable watches for cheap. SHC doesn’t necessarily need to ship any watches out themselves. The Japanese and Chinese can continue with their previous distribution strategy but now have a better marketing tool, the Swiss name behind their product.

The work that SHC need to do is quite minimize and the amount of change in production for the disposable watches by the Japanese and Chinese is also minimal. In the end, it all comes down to how the Japanese and Chinese want to market their product. The product itself wouldn’t undergo much change since the watches are currently selling in high numbers, but the advertising and marketing strategy will need to be revised to incorporate the Swiss brand name.

 

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