Swatch Company Analysis - Case Study Example

Swatch Introduction From the early 1600s where watch making was considered to be one of the most wondrous art forms to present times where a watch is a utility accessory, a fashion statement or a status symbol, the watch industry has certainly come a long way over time. One of the players, Swatch, has created an image and a brand which is respected and appreciated as it plays in several different markets at the same time and is credited with bringing the watch industry back to Switzerland after it had almost been snatched away by Japan (Blaszczyk, 2004). The case analysis of Swatch has some interesting positions for the company and is useful for understanding the watch industry as it is in present times. Case Analysis Porter’s five forces framework shows us that there are different strategies adopted by the players in the global watch industry. It seems that the first barrier is the market entry mechanism is the cost which is incurred to make a name become accepted and appreciated in the watch world (FHS, 2007). For example, an established design house can certainly launch their own watch brand under the name of the designer (TATA, 2004). Clearly, Giorgio Armani and Versace would have no problems in getting their watches accepted as fashion accessories but to break into the market as a completely new company would be a significant undertaking in terms of marketing costs and in creating brand recognition (St. John, 2002). In fact, this is the only barrier which prevents the entry of new companies and allows the current players to dominate the market with the power of supply and innovation in the field. Clearly, as increasing sales show the trends, there is no real substitute for a watch and even though individuals may choose not to wear a watch and use a phone to tell time there will be those who consider a watch to be essential (Ramirez, 2006). Marketing certainly helps in selling watches especially when a watch needs to be given a particular image even if replicas can be made the quality and the manufacturing of the original can not be realized in the cheap copies which are in the market (FHS, 2007). Buyer power in the fashion sector of the market is quite significant since what is fashionable today may not be as fashionable tomorrow without innovation or staying power with new trends (St. John, 2002). However, brand loyalty can also be established with good quality products and products which have a perception of permanence in some terms. For example, a company like Rolex or any other high end brand would try to give a generational image where a watch may be passed as an heirloom from one generation to the next (Shearer, 2002). There are two main forces that drive in the industry and particularly the Swatch brands mentioned in the case. These are fashion and technology because fashion determines what the target market as per the age of the target group would by and technology allows companies like Swatch to produce watches which last longer, keep better time and be constructed from better materials than their competition. For instance, Timex was able to produce a watch in collaboration with Microsoft due to the technology being present which allowed it to make customers interest in the brand and TATA was able to create some strides into the Indian market with innovation (TATA, 2004). Strengths Current Brand Image Popularity with the youth Designs and current lines Swiss quality image Weaknesses Entry into diversification was a failure No lasting loyalty from customers No associations with other brands Market positioning Opportunities Cross branding and cross promotions with car or sports equipment manufacturers Product placement in connection with sports or fashion Acquisition of other watch brands Threats Competition has many brands to work with Profit margins are very low in this segment New watch making technology could come up in the future which allows the competition an advantage Table 1 SWOT Analysis for Swatch Similarly, Japanese manufacturers like Citizen and Seiko were also able to use technological advancements in quartz technology which allowed them to produce analogue watches that were at par in quality with the Swiss manufacturers (Blaszczyk, 2004). This certainly undercut the competition and changed the focus of production as well as sales from Swiss, European and American manufacturers to Japan. The internal competition and the ability of watch manufacturers to create alliances with clothing brands, designer labels and fashion houses is a strategic force that can hold Swatch from changing the rules of the industry (FHS, 2007). Additionally, although there are significant barriers to entry, a new technology and a new system for production of wrist watches could certainly change the picture entirely. For example, using electronic paper or a source of energy from the human body could be one technological statement for making watches and a company which holds on to a patent on such a tool could feasibly come to the market with a bang. Of course technology innovation is hardly the core competency for Swatch since they are not a technology firm, however, they should continue to research and develop those technologies which can help them in the manufacture of watches. The core competency for Swatch seems to be in attracting the young and the fashionable to their brand and they have done that strategically and quite successfully in the past. By aligning themselves with fashion brands and producing high quality fashion based watches for them they could certainly both boost their image and improve their own sales. Co-branding and Co-marketing would certainly help in this case and the Swatch brand on its own could be placed in fashion outlets for various labels. This would certainly be a radical change for the market since watches which are branded with both the Swatch logo and given the designer touch of a label would be a sign of both fashion and quality. For example, the case of the watch could say that it was designed by CK and manufactured in Switzerland by Swatch to add both to the perceived quality and the brand image. Of course, this could hurt the direct sales of the company from its own kiosks and shops around the world since people might prefer to buy the co-branded watch which has a lower level of profit for the company than the watch which is sold by their own outlet. Therefore this decision or any such decision to place the Swatch name in close proximity with another designer has to be taken after a careful market analysis has been made and it has been evaluated to the extent of future collaborations with other designers and brands. If the brand associated with Swatch ever falls out of fashion or is removed from the public eye, the effect on Swatch would not be very positive since the associated fallout would also adversely influence the sales of Swatch. By exiting the automobile and the other secondary segments of the market, Swatch has certainly taken a good step towards returning to focus on their core competency. However, it seems that there is still a significant market for having watches inside cars and Swatch could manufacture watches for the interiors of cars which match the stylish exteriors of cars today. For example, sports car models and utility cars manufacturers could be brought into the business fold if watches are co-branded with them for the interior of the car or produced by reflecting a particular car. The company does not have any realistic way of changing the dynamics of the entire watch industry since watches are as mature a product as cars or any other tools which have made the foundations of our civilization possible. A mature industry and a mature company would have to fight very hard in order to bring significant changes to the selling model, the strategic placement or even the core of the industry without first investing heavily in new technology or new products which can serve as effective and acceptable replacements. As finding replacement products for wrist watches is rather a daunting task, unless creative brilliance in watch design and market penetration is possible, a focus on technology would be more important for a company like Swatch. At the same time, price competition is not recommended since Swatch has already found a good price point for a lot of its products and getting into the high end market would only be recommended with the acquisition of a high end brand that already has an accepted image. I feel that Swatch should continue to develop new fashionable and sporty watches while focusing on the technology that helps it lower costs or get into a better position in the global market. Sports sponsorships, product placement and other such marketing tools would also help Swatch in getting a better market share with sports and fashion enthusiasts. Integration with other devices such as phones or MP3 Players which are commonly carried into the fashion market could also help the manufacturer improve both its sales and its image with the youth market which the company is interested in (Ramirez, 2006). Conclusion It seems that Swatch is well placed in the market at the moment but with effective marketing and correct investments in the technology that drives the watch industry will allow it to come to the top of the market in due time. A return to the focus on the core competencies of the company has certainly helped the company significantly but more needs to be done as other companies have already been in the business of co-branding while Swatch might be trying to do the same with the acquisition of other brands. The company has changed the structure of the industry in the past and there is no reason why it could not do the same again. Works Cited Ramirez, J. 2006, ‘Time May Run Out’, Newsweek, 148(8), p. 14-15. Blaszczyk, R. 2004, ‘Manufacturing Time: Global Competition in the Watch Industry, 1795--2000 (Book)’, Journal of the History of Science in Society, 95(2), p. 320-321. St. John, W. 2002, ‘Telling Time Is Not Enough: Some Watches Stop Traffic’, New York Times, 151(52067), p 19. Shearer, W. 2002, ‘Timely Investments’, Yankee, 66(5), p. 40-44. FHS (Federation of the Swiss Watch Industry), 2007, ‘The Swiss Watch Industry’, [Online] Available at: http://www.fhs.ch/en/faq.php TATA. 2004, ‘Titan re-defines innovation in the watch industry’, [Online] Available at: http://tata.com/titan/releases/20040722.htm Word Count: 1,647 Read More