The Swatch Group

The Swatch Group: Competing In An Increasingly Global Market For Watches

Nicholas Hayek and Ernst Thomke formed the Swatch Group (the Group) in 1983 by merging two bankrupt watch-making groups. The merger gave the Group ownership of many of the Switzerland’s dominant watch brands. Swatch, their first product initiative, was so successful that it helped pull the squandering Swiss watch industry out of a slump. In June 1999, with its 14 brands, the Group was the world’s largest watch manufacturer (in value terms). However, the global industry had changed and would continue to change dramatically in the new millennium. The Swatch Group was at a strategic crossroad and had to analyze the industry’s past and future in order to determine its next move. What proceeds is an in-depth analysis of the Swatch Group’s competitive position the global watch industry. We will identify a problem and offer several alternative actions to address this problem. Finally, we will discuss how to implement and evaluate these suggestions.

Industry Snapshot: 1999

Historically, the watch industry had been fragmented and protected by the national governments of many countries. In the 1980s and 1990s, however, the competitive environment began to change. First and foremost, newly formed companies began to mass-produce low-cost, technologically advanced watches. The emergence of these products dramatically changed the way people bought and sold watches. Another dominant factor for change was consolidation. As companies merged, they improved their competitive positions through improved distribution, R&D, marketing, and economies of scale. These conglomerates slowly became major global players against which many watch manufactures could not compete.

Initially, Swiss watch manufactures chose not to respond to many of these changes. They valued the inherent art of watch making and as such refused to succumb to the competitive pressures of large multinationals such as Seiko and Citizen. As a result, the industry took a dive in the late 1970s and early 1980s. Many companies and groups went bankrupt. Included were the two major groups that Hayek, together with a group of investors, bought back from Swiss creditors. In just a few years, they lifted the merged company (the Swatch Group) out of financial turmoil. Through strategic initiatives, they streamlined and rejuvenated many of t...

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... entice consumers and improve brand image. Both strategies would help increase market share in a high-margin/low-volume segment. Let us now discuss how to best implement these suggestions.

Implementation

The key to successful implementation would be proper planning. The Group may have to restructure the way it’s units are organized so as to better determine which brands would be most viable in each geographic area. Under this plan, the Group would open new retail shops in which it would sell its own brands and any complimentary items that consumers would associate with watches. First and foremost, the Group should establish high tech, JIT-ready distribution centers in the geographic areas in which it plans on opening new retail shops. This would ensure that the shops stay replenished, but not cluttered with too much merchandise.

The Swatch group would also need to expand its research and development staff. It would need to hire younger, creative people who know what is going on the world of technology, sports, and the arts. As such, they would be in touch with the needs of these markets. Only then could the Group determine what innovative products to develop and market.