Contents
ABSTRACT 2
CHAPTER 1: INTRODUCTION 4
1.1. A Brief History 4
1.2. Existing Landscape of the Watch Market 5
SWATCH GROUP CASE STUDY2
1.3. Swiss vs. Japanese Watch Industries 6
1.4. Rationale 7
1.5. Research Questions 8
1.6. Research Objectives 8
CHAPTER 2: CASE BRIEF 10
2.1. The development of Swatch Group 10
2.2. The Creation of Swatch Group and Company Governance 11
2.3. Analysis of stock price growth 12
CHAPTER 3: PROBLEM STATEMENT 15
3.2. Research Methodology 15
3.3. Literature Review 16
3.4. Globalisation models 16
3.4.1. SWOT analysis 16
3.4.2. PESTLE 17
3.5. Strategic management 20
3.5.1. Environmental Sustainability 20
3.5.2. Concept of social responsibility (CSR) 21
3.6. Innovation 23
3.6.1. Open innovation 23
3.6.2. Knowledge-based view of the firm 23
3.7. Sources of Data 24
3.8. Ethical Considerations 25
CHAPTER 4: ANALYSIS DEVELOPMENT 26
4.1. SWOT Analysis 26
4.2. PESTEL analysis 27
4.3. Knowledge-based view of the firm 29
4.4. Environmental/social sustainability 30
4.5. Overall Findings 33
CHAPTER 5: RECOMMENDATIONS 38
5.2. RECOMMENDATION PLAN 40
CHAPTER 6: APPLICATION CASE SEIKO 43
SWATCH GROUP CASE STUDY3
6.1. COMPANY BACKGROUND 43
6.2. RELEVANT CONNECTIONS WITH SWATCH 46
6.3. PROPOSED INTERVENTION FOR SEIKO 47
Appendix (List of Figures) 56
ABSTRACT
SWATCH GROUP CASE STUDY4
This study, centres upon Swatch Group case study and concentrates on the different
strategies adopted by the company since 1983. It indicates that, instead of brand innovation
(Swatch), it was the streamlining and globalisation of alongside with new marketing strategies
(product differentiation, supply and retailing services, communication, amid others) which have
been critical sources of the success of Swatch business on the global market up to date. Swatch
Group fundamentally identifies its competitiveness on technological resourcefulness.
SWATCH GROUP CASE STUDY5
CHAPTER 1: INTRODUCTION
1.1. A Brief History
According to Jeanerette (2011) the watch business is considered the ancient industry of
Switzerland. It grew at the onset of the eighteenth century. Nevertheless, following some
profitable decades for Swiss watchmakers, the industrial revolution provided them with their
initial difficulty. The unveiling of new technologies that permitted for more calibration,
revolutionised the watch making customs that depended chiefly upon handiwork. As a result, the
watch business industry experienced some difficulty when adapting to these new technological
advancements. At the start of the 19th century nevertheless, the business had recovered and
dominated nearly 90 percent of the international watch market.
By 20th century that witnessed the beginning of mass manufacture of watched saw challenges
for the sector. The discovery of the quartz technology and the emergence of new Asian and
American rivals in 70s and 80s period challenged Switzerland’s dominant status in the watch
industry. Initially, a critical restructuring was implements so s to fragment the robust cartels that
characterised the market in that age. In attempt to repel the new market players, who were more
consolidated and thereby economically stronger, senior company executives tried to achieve a
higher magnitude of consolidation in the industry. Such restricting resulted in three further
outcomes of critical significance for the topography of the segment, as it is currently. A company
like Swatch Group started to form while targeting standardising the market ever more.
Additionally, the corporation envisioned to regulate every step of its distribution network,
stressing on vertical and horizontal incorporation, as regulating the wholesome value-chain was
essential so as to stay effective. Ultimately, for the company to be capable of lowering the
SWATCH GROUP CASE STUDY6
manufacturing expenses and to reach new stores overseas, the decolonisation started, with varied
processes of production being globally fragmented.
But the brand “Swiss manufactured” was developed at the same time in order to conserve the
premeditated benefit of Swiss superiority against competitors. As result, the market chiefly made
high-end and luxury sectors as their main targets. So as to accomplish that goal, a decision was
arrived at to market mechanical watches as an epithet of Swiss superiority, custom and a well-
recognisable history of watch manufacture, and to utilise these aspects as strategic marketing
instruments. Consequently, quartz technology chiefly remained with Asian and American rivals.
These core transformations, sparked by the industrial revolution and the quartz technology crisis,
changes the Swiss watch industry into what it is currently. In spite of the various crises the sector
has encountered across history, it appears that the business has succeeded in conserving its
image, embodying a practice and a robust mechanical culture (Zou and Cavusgil, 2012).
1.2. Existing Landscape of the Watch Market
Deshpande, Misztal & Beyersdorfer (2012) posit that as initially indicated, the Swiss
watch industry consists of more than 400 watch products of different sizes, majorly accumulated
in Western Switzerland. The market comprises a great range of companies with a diversified
operation portfolio. Contrariwise, the watchmakers manufacture the sum of their watches in a
vertically incorporated arrangement, without pleasing to subcontractors. In contrast, horizontal
incorporation occurs. Distributors and subcontractors like the parts producers, initially offer
assemblers with movements and other components of the chronometers. Next, the assemblers as
well assemble the distinct parts of the watch and are accountable for the commercialisation
SWATCH GROUP CASE STUDY7
activity. Since this last stage, assemblers and manufacturers, even if just symbolising a drop on
the ocean of the industry, are famous to the public.
Many watch products stay moderately small-sized firms, recruiting less than 100 individuals,
whereas couple of them consist of more than five-hundred workers. Apart from the small self-
regulating products and the larger independent players, for instance, Rolex, three registered
corporations dominate the industry: Swatch Group, Richemont and LVHM. Among the three
competitors, Swatch Group is presently the premier international watch manufacturer.
1.3. Swiss vs. Japanese Watch Industries
The Swiss timepiece business is regarded as practically unproductive at the onset of the 1980s, as
a result of being incapable of repelling the global growth of its Japanese competitor. Thanks to
the mass manufacture of exclusive motorised chronometers trailed by quartz timepieces, the
Japanese watch business commenced in the second half of the 60s a development plan designed
to end the Swiss control of the global market. The remarkable growth of Japanese watchmakers
in the 70s, whose production level increased from 350 million dollars in 1970 to USD2 in 1980,
made it possible for the nation to outdo Switzerland in 1981-1985. More so, Japanese watch
exports amounted to an average 1.7 million dollars during 1981-1985 i.e. a greater value than
Switzerland, a variation that implicitly shows how Swiss watch manufacturers had become
inefficiently competitive on the a global scale. Japanese competition sparked a critical crisis in
the Swiss nation, typified by a decline and unproductivity in exports and also a steep fall in
services.
SWATCH GROUP CASE STUDY8
But towards the culmination of the 80s, both nations shifted into completely distinct stages,
highlighted by a large growth in exports from Switzerland and conversely, a stagnation then
decline in Japanese exports (Donzé, 2011). In the 90s, both the watch manufacturers and the
academics gave a great preference to brand modernisation so as to overcome the crisis and gain a
competitive advantage once more with Switzerland watch business. The preoccupation with
brand improvements influenced companies to introduce new brands, but has had insignificant
influence with respect to growth. While Japanese have continued to advocate for technological
innovation, Swiss researchers seem to back societal concerns as well as marketing approach
when defining changes experienced in this industry as from the 90s. Two critical strategies might
be differentiated. The leading as well as major one is the justification centred upon the industrial
quarter hypothesis.
The utilisation of various core aspects of Marshall’s district facilitated the interpretation of the
renaissance of the Swiss watch business as emanating from a technical culture located in a
particular region, which made is possible for relocation of the industry. This lead to the
production of high quality brands utilising traditional technology. Nevertheless, this type of
strategies cause problem, since they suggest a framework that is centred upon on disputable
explanation of industrial quarter and on the assessment that does not depend sufficiently on
documentary resources, and on the contrary since they fail to introduce the Swiss watch business
through an international perspective.
1.4. Rationale
Conducting research of the subject of creating a sustainable competitive advantage is very
crucial not just to understand the complex environmental dynamics experienced by
SWATCH GROUP CASE STUDY9
organisations, but to count with theoretical explanations to develop a recommendation strategy to
assist firms to articulate this problem.
The research will centre upon three disciplines: Strategic Management, International business
models and Innovation models.
1.5. Research Questions
This study is designated to answer the following questions:
- What are current the political, environmental, social/cultural and technological factors of
Swatch Group? - What are current the strengths, weaknesses, opportunities and threats of Swatch Group?
- What are the strategies managed by Swatch Group at international level, as well as from
strategic and innovative perspective? - What are most germane theoretic methodologies appropriate to structure the problems and
issues entrenched in each discipline?
1.6. Research Objectives
- To have a look at the contemporaneous position of Swatch Group evaluating the external and
internal atmospherics of the conglomerate. - To revise the present strategies of the firm from the perspective of globalisation, strategic
management and innovation.
SWATCH GROUP CASE STUDY10
- To distinguish the core challenges and matters drawn from these disciplines that endangers the
competitive niche of Swatch Group. - To determine the germane models of business theories that might find solutions to those
problems offering premeditated guidance to sustain a competitive position.
SWATCH GROUP CASE STUDY11
CHAPTER 2: CASE BRIEF
2.1. The development of Swatch Group
Donzé (2011) suggests that at the start of the 80s, the chief strategy implemented to
overcome the recession consisted of incorporating two largest Swiss watch manufactures i.e.
USUAG AND SSIH (1983). Having gross transactions averaging 1.3 billion Swiss francs and
815 million Swiss francs in 1979, the two groups outperformed other watch manufacturers, with
second place being usually taken up by the Société des Garde-Temps SA and Rolex, whose gross
transactions at this period were estimated at CHF 170 million. Besides, in 1979 USUAG and
SSIH recruited approximately half of the labour force in Swiss watch market. Nevertheless, this
dominance should be viewed in context, as it was chiefly as a result of the watershed that
affected other corporations. Really USUAG and SSIH experienced large industrial and fiscal
challenges, and their existence was indebted to the endorsement offered by major banks.
ASUAG faced challenges as result of the rapid-expansion and diversification of former years.
While this firm had previously been established in early 1930s as a trust regulating manufacture
of motorised parts and components for almost the entire market and gained from the
endorsement of centralised Republic, the liberalisation of the 60s called this mainstream function
into interrogation. SSIH was as well caught in the crunch after 1974. This finished watch brands
comprising particularly Omega and Tissot, differentiated broadly during the 60s as well as
during the onset of the 70s, particularly into inexpensive motorised timepieces were not effective
on the global market. Between 1974 and 1982, the corporation became bankrupt. The bulk of
transactions fell from 12.5-1.7 million, whereas gross sales plummeted from CHF 720-535
million.
SWATCH GROUP CASE STUDY12
2.2. The Creation of Swatch Group and Company Governance
To succeed in restricting, financial institutions referred to the expert Nicolas G. Hayek.
Born in 1998 in Beirut but was educated at the University of Lyon (France), he managed to set
up a consulting company in Zurich, known as Hayek Engineering that provided numerous
consulting services to some European Manufacturing firms. According to the reports he drafted
for financial institutions in 1982, Hayek recommended as the chief strategy merging USUAG
and SSIH into one holding corporation. This was carried out in 1983, culminating in the birth of
world biggest watch group that adjusted its label to Swatch Group in 1998. The entire
organisation of Swatch Group was certainly very unmanageable since USUAG and SSIH
appeared structured as holding firms with numerous groups of stores. In 1983, some corporations
were integrated into three sub-assets with respect to their kind of operations, and previously
branded by rationalisation. As for the Executive committee, it was still controlled by financiers,
who wished to supervise the achievement of the changeover. In the short run, the major outcome
of streamlining the corporation was to facilitate Swatch Group to become lucrative for a second
time (Wegelin and Mister, 2010). The Swiss mutual memory, the narrative articulated by Swatch
Group and theoretical texts normally depict the important function of a brand invention in
defining the productivity of Swatch Group and the rebirth of the watchmaking industry in
Switzerland on the global marketplace: the Swatch. Designed as a fashion brand, this plastic-
designed quartz watch made in the Swiss was introduced in 1983 and faced increasing success
across the globe towards the culmination of the 80s. This popularity evidently facilitated the
company to invest in dominating and reorganising other products and therefore reintroducing the
whole industry (Wegelin and Mister, 2010).As a result of unavailability of information
concerning some Swatch Group products, it is impossible to evaluate the actual effect of the
SWATCH GROUP CASE STUDY13
product on the company’s administration or establish which brands were more accountable for
its reinstated competitive edge. Nevertheless, the Switzerland’s overseas business statistics and
the yearly reports of the centralised Swiss watch business offered certain important cues. These
statistics certainly discuss the cost and bulk of sales of non-metal chronometers. Although these
watches are not just Swatches, this product obviously symbolise an essential position within this
classification, with the cost of its supply indicating great increase after the introduction of the
Swatch. These statistics fail to completely show the company’s gross transactions. Contrariwise,
not every watch products contained in these statistics, but the products continued to sell on the
Swiss market. Since this is only available information, it becomes interesting to compare and
contrast the value of these overseas transactions to Swatch Group’s gross sales. Although this
certainly offers an essential profit source i.e. a major supply of finances for restricting, the
company failed to play the profound function that it normally envisioned. In reality, Swatch
Group retained competitive edge is founded upon two other core aspects: the rationalisation of
manufacturing tools and a novel marketing strategy (Donze, 2011).
2.3. Analysis of stock price growth
The major shock that the luxury watch manufacturing sector experienced in the past few
years was the worldwide financial crisis in 2007/08. Through evaluating the growth of the
corresponding stock prices, this part infers a conclusion how Swatch Group and Richemont were
impacted by and deal with the crunch was an economic and fiscal point of view. The illustration
below shows the stock price growth of Richemont and Swatch Group measured by percentile
from August 2007 to December 2010. Quantifying stock prices by percentile has the benefit that
the whole performance can be recognised on a ratio basis, beginning at 100 percent during the
SWATCH GROUP CASE STUDY14
start of the observation. This diagram is particularly important when equating two or more
absolute share prices. For instance, the stocks’ initial price by now may have been varied and
hence a comparison of absolute figures might provide no further value scholastically.
Figure 1: Stock prices of Richemont (CFR) and Swatch Group (UHR) (2007-2010)
The red line (UHR) denotes the stock price growth of Swath Growth whereas the blue
line (CFR) denotes Richemont’s stock price index. The graph underscores the fact that both
groups responded analogically to the overall path of the financial crisis. What is more, both firms
stock price faces a robust hold up to the start of 2009 and a sluggish recouping from the start up
to the end of 2010. This year highlights the stage of recovery as Richemont’s stock price
overtakes the initially beginning point of 100 percent beforehand. On the other hand, Swatch
Group’s stock price growth follows with a slim interruption of about 2-4 months. Nevertheless,
especially surprising and of heightened significance for this research’s evaluation is the
comparison between the two firms stock growth toward one another. As underlined in the figure,
both circles underscore both comparative stock price growth similarities in terms of the slim
variations up and also downward. Because the declarations in the corresponding shareholders’
segments failed to go public about this development, particularly with regard to similarity, it can
be projected that this stock price growth indicated a generally standardised market. This
SWATCH GROUP CASE STUDY15
hypothesis is underscored by comparing this observation with the stock price growth of LVMH,
the succeeding largest Switzerland’s watch manufacturing corporation (Credit Suisse, 2013).
SWATCH GROUP CASE STUDY16
CHAPTER 3: PROBLEM STATEMENT
This paper will be focusing on four problem areas, which are base on the Swatch Group case
study.
Firstly, this research will be focusing on Swatch’s strategic management by using two models:
concept of social responsibility and environmental sustainability.
Secondly, the author will also focus on globalization by using both SWOT and PESTEL analysis
Thirdly, the author will also touch on innovation models by using open innovation and
knowledge-based theory as tools.
3.2. Research Methodology
The corporate world of watchmaking on which this research is based exists externally and is not
connected to the writer; thereby they would be measures via objective techniques as opposed to
being concluded subjectively through reproduction, sensation or intuition (Smith, 2012). This
paper would thereby adopt a positivist approach as reliable data could just be resulting from
quantitative analysis of phenomena detected (Saunders et al. 2010).
Research approach
As a result of the positivist nature of research, this paper will adopt a deductive approach. This
method denotes the most common perception of the association between theory and research and
outcomes obtained from this technique are established through rational thinking (Bryman and
Bell, 2009). The statistics findings will be equated against available literature to determine if
they agree with what has already been available.
SWATCH GROUP CASE STUDY17
Research strategy
This study will adopt a case study in answering the research questions. Robson (2012) affirms
that the case study is important if the objective of the study is to obtain as concrete understanding
the research standpoint and the procedure of being recommended.
Validity and Reliability
The primary data exploration and the procedure information on Swatch Group upon the ground
of the case study and other germane analysis are categorically valid for further study and
enhancement of Swatch.
As for the findings and assumptions are absolutely founded on limited companies, these findings
may not be generalized to some other firms in the equivalent industry.
3.3. Literature Review
3.4. Globalisation models
3.4.1. SWOT analysis
SWOT analysis is the evaluation of a company’s internal strengthens and weakness, its
opportunities for development and enhancement, and the threats the external atmospherics
presents to its existence.
The primary objective of strategic planning is to bring a firm into equation with the external
environment and to sustain that stability over time. Companies accomplish this stability by
SWATCH GROUP CASE STUDY18
analysing new strategies and services with the intention of exploiting structural performance
(Cadle et al. 2010).
i. Strengths
Mainstream SWOT analysis views strengths as present facets that have stimulated exceptional
organisational performance (Aguillar, 2007). An example may include highly competent staff, a
clear understanding amid personnel of the company’s goals, and the determination on quality
development.
ii. Weaknesses
Weaknesses are a company’s facets that will raise operation costs. Weaknesses can be
fragmented further to categorise reasons (Cadle et al. 2010).
iii. Opportunities
Conventional SWOT analysis sees opportunities as important new business initiatives accessible
to a company.
iv. Threats
Threats are aspects that might be negatively impact a company’s operations. Some examples
include: political or economic instability, etc. (Aguillar, 2007).
3.4.2. PESTLE
SWATCH GROUP CASE STUDY19
Cadle et al. (2010) all firms are expected to establish external factors in their environment that
have the potential of impacting their activities. Most of these will be issues that the firm has no
control over, but the implications of which want detailed understanding.
An important tool for establishing these external factors is the PESTEL Analysis that can be used
to assist the company to take into account: Political, Economic, Social, Technological, Legal
and Environmental matters.
i. Political factors
It is always worthwhile to keep in touch in government priorities that can lead to new initiatives
being ushered in and also transformations to trade protocols or fiscal policy (Aguillar, 2007)
ii. Economic factors
These issues consist of the examining potential transformations to the economy inflation rate,
taxes, interest rates, trading policies and excise duties (Aguillar, 2007). In terms of the
company’s performance productivity it is necessary to take into account such facets as
unemployment’s, competence levels, availability of expertise, payment patterns, working
practices, amid others. When attempting to identify the economic feasibility of the market the
company should examine such issues as the present cost of living for the target market and also
the accessibility of credit or funds.
iii. Social factors
The company must put into account attitudes toward thing such as health, profession and
environmental issues. Social facets and cross-cultural communication play an important function
in the global markets, and the success of the firm will rely on the depth of their research in this
SWATCH GROUP CASE STUDY20
field. Overlooking this factors will be costly to the company and might not be exposed until
substantial investment has been undertaken the company (Cadle et al. 2010)
iv. Technological factors
This aspect has become a core facet for companies in evaluating and determining things that
might have a considerable effect on its performance and that might be essential to it long-term
future (Aguillar. 2007). It is by utilising such methods as PESTLE that firms will be capable of
brainstorming even the most bizarre recommendations, since what today appears unlikely may
become ordinary in matter of just a few years.
Technological facets can extensively be broken down into two fields: manufacture and
infrastructure. By taking advantage of opportunities to update of change their production a
company can obtain market share, therefore achieving a robust competitive advantage.
v. Legal factors
The set of legal facets that must be put into consideration includes present and imminent
legislation that might impact the industry in disciplines like employment, competition, and health
and safety. Projected transformations in legislation in the key trading affiliate regions must as
well be investigated.
Current years have witnesses a considerable increase in the number of regulatory entities that
have been established to manage corporation’s observance of legislation associated with will
fields of performances, including consumer protection, personnel wellbeing, waste disposal, and
how their proceeds and investments will be taxed (Aguillar, 2007).
vi. Environmental factors
SWATCH GROUP CASE STUDY21
These issues encompassing environmental protection have become progressively significant in
present years as the outcomes of under-controlled economic action are witnesses today. This has
turned into more important with globalisation as the effect of a firm’s activities might be
experienced outside of its inherent region and might suffer immeasurable monetary penalties
(Cadle et al. 2010)
3.5. Strategic management
3.5.1. Environmental Sustainability
The strategies of bot firms and nations are progressively inspected and examined from a natural
environment angle. Corporations like Swatch Group now supervise not only the price its vendors
provide for brands, but also how those brands are made with regard to environmental practices.
An increasing number of business institutions provide separate courses and even a focus in
environmental management (Basu et al., 2008)
Enterprises should not exploit and decimate the natural ecology. Workers, consumers,
administrations, and society are in particular resentful of companies that harm as opposed to
conserve the natural ecology. On the other hand, individuals today are in particular obliged of
companies that carry out actions in a manner that mends, protects, and preserve the natural
ecology (Berrone et al., 2009). Consumer interest in corporations conserving nature’s
environmental balance and nurturing a clean, healthy ecology is high.
No company desires a reputation as being a polluter. A bad sustainability record will harm the
business, endanger its status in the society, and invite inspection by watchdogs, stockholders and
environmentalists. Administrations increasingly expect companies to act accountably and need,
for instance, that the firms openly report the pollutants and wastes facilities generate.
SWATCH GROUP CASE STUDY22
The environmental challenge embattling all firms needs managers to formulate strategies that
protect and conserve natural resources and regulate pollution. Important natural ecology includes
ozone depletion, global warming, and depletion of rain forests, amid many others.
3.5.2. Concept of social responsibility (CSR)
Because Swiss watch products have their HQ in Switzerland, it can be argued that the legal
context and cultural framework of the nation will shape the manner in which these products view
and practice CSR. However, it is hard to explicitly measure Switzerland’s official strategy with
respect with CSR since various federal agencies are accountable for different elements of
responsible business. As a result of this fragmentation, it is a sophisticated duty to create a lucid
impression of the management and operation of CSR practices in the Swiss. CSR chiefly deals
with a willing foundation in Switzerland, as a result, no particular item of legislation are linked
to CSR can be identified, as the subject is not yet a preference on the administration agenda.
However there are a couple of legal requirements for the Swiss firms to support CSR plans, with
mandatory reporting on CSR and sustainability for registered corporation being the only
available legal limitations. It is suggested that restrictive regulations on the issues would just lead
to extraterritorial discrepancies (Economieissue, 2010). Nevertheless, while vehemently
endorsing voluntary CSR actions of any type, the economic link issues the “Swiss ethics for best
practice for trade control”, concentrating its suggestions on the commercial governance field.
From a cultural perspective, Switzerland appears thereby to assume the recently increasing
phenomenon of obvious CSR in Europe prioritising trade voluntary standards in stead of codified
and obligatory expectations for companies. There is however limited information about the
SWATCH GROUP CASE STUDY23
manner in which Swiss organisations overall carry out CSR plans, as academic text on CSR
practices in Switzerland is insufficient.
Even if most of the trademarks are associated with philanthropic work and each of them appears
to further focus in other sectors of CSR. Operation processes, conservational sustainability,
natural resource accreditations are some of the areas in which they are largely engaged in.
inconsistencies are as well identified in the communication policy. Initially, the Federation of the
Swiss Watch Industry does not have particular provisions for concept of social responsibility nor
do the various available journals and magazines committed to the watch industry. CSR concerns
appear, thereby, to be disadvantaged by the absence of reporting by the expert media in the
market.
Additionally, not all products communicate about their CSR practices as regularly as expected.
Whereas various corporations commit an entire segment of their online platforms to CSR-linked
issues, others have absolute ignored it.
As before indicated, the portfolio of CSR practices that can be seem in the market are wide-
ranging. It is assumed that these CSR practices are chiefly split into three major groupings:
social, environmental and economic. With respect to social CSR, endorsing philanthropic
activities and foundations appears to be a CSR network that that firms regularly utilise.
Similarly, endorsing celebrities who are prominent for their charitable operations as well
comprise a far-ranging plan.
3.6. Innovation
3.6.1. Open innovation
SWATCH GROUP CASE STUDY24
Open innovation is founded on a backdrop of rich knowledge that should be utilised voluntarily
if it is to offer value for the firm that developed it. Nonetheless, a corporation must not limit the
knowledge that it unearths in its research to its in-house marketplace conduits, nor must those in-
house conduits essentially be restricted to bringing only the firm’s in-house knowledge to
marketplace (Mata, 2005).
In any R&D activity, researchers and their supervisors should separate the bad suggestions from
the good ones in order to weed out the previously whilst chasing and commercialising the latter.
Both closed and open innovation concepts are adroit at removing false positives (ventures that
previously appear to lack potential but become remarkably valuable). A firm that is focused too
internally, i.e. a company with a closed innovation approach is susceptible to miss a couple of
those opportunities since most will fall outside the firm’s present dealings or will require to be
integrated with outside technologies to reveal their ability (Allen, 2007). This can be particularly
hurting for corporations that have made considerable long-run investments in research.
Entirely incorporated innovators, for example, have become a jeopardised species in most
industries. As concepts splash out of the central R&D laboratories of huge firms, the other
techniques of innovation are in a locus to yield from them (Allen, 2007).
3.6.2. Knowledge-based view of the firm
It is hugely acknowledged that the knowledge-based view (KBV) of the company is a current
extension of the resource-based view (RBV) of the company (Bologun 2010). The present
addition of the RBV, the KBV is recognised to be sufficient to the recent economic perspective.
SWATCH GROUP CASE STUDY25
In this framework, intangible assets are exceedingly valued. The explanation of knowledge as a
resource sets up the hypothetical association between RBV and KBV of the company, and the
potential made that extension probable (Orsenigo, 2010). The competition premised on the
abilities and the idea of growing proceeded was initially proposed Edith Penrose (1959).
The KBV of the company is an extension of the RBV of the company since it affirms that
corporations are mixt entities with sufficient knowledge. Conner (2010) posit that clearly there is
a body of text that regarding KBV of the company as being the principle of the RBV of the
company. According to this author there is a developing strategic management literature on the
RBV that suggest knowledge as the root for competition.
Most organisations take into account that to operate with efficiency in the current economy, it is
important for them to grown into a knowledge-based firm. Ever more we discover knowledge
employees at the centre of the corporation operations (McGrath, 2011).
Strategic management literature presently is reviewing the competitive edge in manner that it
links company operation variant to intangible facets (Rouse & Daellenbach, 2009). Other than
natural resources trusts, the intangible resources embody a robust probability to generate
competitive position, as they are overall uncommon, socially sophisticated.
3.7. Sources of Data
Sources of information are categorised into Primary and Secondary, and each of these has their
own methods to collect data. Yin (2004) posits that selecting the appropriate technique for data
collection will rely on four core elements: a) the nature, scope and study goal of the research, b)
the availability of finances, c) the time factor, and d) the accuracy needed.
SWATCH GROUP CASE STUDY26
For that explanation, this writer chose to use secondary data, as a result of the strong
methodologies and perspectives that this offers. They include: journal articles, books and so on.
3.8. Ethical Considerations
As a researcher, it is very significant to comprehend the significance of the research ethics,
which talk about maintaining the confidentiality and integrity of data and the research work.
Therefor the information and findings of this research will as well be utilised just for academic
purposes (Bryman and Bell, 2013).
CHAPTER 4: ANALYSIS DEVELOPMENT
In carrying this analysis is indispensible to understand that all the theories are connected to the
goal of accomplishing and gaining a competitive advantage in the market. In terms of what has
been described in the previous chapter, using the concepts explicated will seek to examine the
SWATCH GROUP CASE STUDY27
competitive locus of Swatch, and establish the suitable decisions that the company must take into
consideration.
4.1. SWOT Analysis
Strengths
Swatch enjoys client allegiance. This was further improved with the introduction of Swatch
Membership Club. It is a collectable that has demonstrated to be an important asset and has
increased high costs at auctions.
The company enjoys esteemed brand position in the global market since it is one of the most
successful brands in the world.
Weakness
Swatch is becoming so fragmented which make the endorsement of brands to be hard. Swatch
has currently encountered a decline in turnover of its asses in contrast to its closet arch rival,
Rolex. The productivity per worker is weak therefore impacting the fiscal proceeds. The
effectiveness of Swatch is 0.2 million dollars compared to 0.3 of its rival Seiko (Donze, 2011).
Opportunities
Advanced economic environment in developing nations like China and Brazil is expanding
individual’s disposable earnings
SWATCH GROUP CASE STUDY28
As growing nations become somewhat westernised: Swatch Group might obtain a competitive
advantage in these advancing regions with an integration of its design architecture and artistic
techniques (Wsjournal, 2013).
4.2. PESTEL analysis
PESTEL analysis is implemented by managers to comprehend the macro-environment impacting
the industry. These analyses are strategic apparatus to for comprehending market expansion,
market share, and recent trend, amid others.
Political factors: These stands for the germane government regulations that impact the business
environment of Swatch such as tax policy, labour law, minimum wages law, excise duty etc.
Economic factors: These stand for the macro-economic facets that may impact the enterprise of
Swatch which are inflation, GDP, GNP, reverse repo rate et cetera.
Socio/cultural factors: These comprise of the numerous social and cultural aspects prevalent in
the corporate setting of Swatch such as greater awareness of the individuals toward environment,
transformations in preferences of the consumers, standard age of customers et cetera.
Technological factors: These refer to the technological facets like R&D process, automation
and other innovations that have transformed the manner in which to engage in business.
Environmental factors: These comprise of the environmental and ecological dynamics that
impact the trade of Swatch such as climate change, global warming and fast depletion of natural
raw materials.
SWATCH GROUP CASE STUDY29
Legal factors: These include the legal setting in which the business is carried out like trade
barrier, consumer law,commercial acts, amid others.
Additionally, watch trademarks are as well dynamic in the cultural, entertainment, scholastic and
artistic disciplines, by promoting varied faculties, awards or concerts (Weber, 2011). Target
commercial charity appears thereby to be a leading sequence in the different products.
Furthermore, the industry overall gains from a good reputation in terms of social involvement, as
it overall provides superior domestic working standards and is accountable for mass
employment. More some numerous activities have as well been carried out by organisations to
enhance the public transport, and thereby the movement of the society they operate in. What is
more, sustainability as well constitutes as component of the watch industry’s CRS plan:
timepieces comprise sustainable products because they are sturdy pieces that consumers do not
dispose of within a short timeframe, avoiding ecological contamination. Other firms additionally
devote to lowering their CO2 emissions, to recycle or construct new premises made of
biodegradable components (Wood, 2011).
With respect to the economic dimension, some positive elements regarding the value chain
administration can as well be witnessed. Some trademarks have begun to join some official CSR-
linked initiatives. For example, numerous brands became members of councils or global
endorsement so as to verify the geneses of raw materials.
Findings: There are only two-thirds of Swiss firms consider implementing active and positive
communication about their CSR practices. Only various Swiss watch brands as associated with
three largest groups, namely Swatch Group, Richemont and LVMH). Nevertheless, firms gain
from robust autonomous in the context of the responsible practices they desire to undertake and
SWATCH GROUP CASE STUDY30
promote. The three conglomerates do monitor their subsidiaries CSR actions and offer them with
guidelines and advice; however products can mostly take on their own policy (Richemont, 2012
and Swatch Group, 2013). Consequently, practices can differ largely from one product to
another.
It is significant to acknowledge that individual watch trademarks fail to include certain online
segments dedicated to CSR, all three trademarks (Swatch Group, Richemont and LVMH) at least
own one. More so, the groups issues annually CSR-linked reports. It is feasible to assume that
the absence of confederation of the industry might be as result of numerous aspects. First off, it
can be credited to the different sizes of corporations in the watch market, some of which are
leaders in the industry
4.3. Knowledge-based view of the firm
Orsenigo (2010) posits that the evolving knowledge-base view of the firm provides new
understanding into the causes and management of interfirm associations. Nonetheless, the
development of a productive knowledge-based model of alliance formation has been inhibited by
a simplistic view of association as catalyst for structural learning by which strategic alliances
have recognised to be inspired by companies.
Knowledge requires to be connected to unrestrained, astonishing and until now indefinite
creativity, as explained by knowledge-based view of the firm concept. If rival firms had the
desire to innovate on a long-run basis, most would be cagey since innovation always signifies
threat. This threat is not just fiscal but also rather theoretical since it needs acceptance of
SWATCH GROUP CASE STUDY31
indecision, the likelihood that are the outcome does not correspond to what is previously
strategic, and the prospect for the whole failure (Mata, 2005).
In essence, the dawn of the Swatch flagship innovation is apparently unheard of. Hitherto, there
is little is known about the pre-launch era, the period that lapsed between the innovative
conception of the Swatch and its previous success on the market (Bologun, 2010).
Findings: Swatch cases shows that without knowledge, it is impossible to design: however, with
knowledge, we can just replicate. Innovation needs knowledge and creativity. The Swatch
design procedure complied with the knowledge-based view of the firm theory. There was
arduous and constant interaction between individuals involved with conceptual matters and
creative individuals participating in engineering matters (Mata, 2005).
4.4. Environmental/social sustainability
For a company that manufactures high-end chronometers utilising limited resources and jewels,
as of the largely essential disciplines with relevance to ecological sustainability, is the ethical and
justifiable locating of these precious gemstones. A corporation such as Richemont is engaged,
for instance Responsible Jewellery Council (RJC).
The agency was founded in May 2005. Cartier, Richemont’s dominating brands, is an instituting
participant of the RJC. The agency is a voluntary program, whose members are devoted to the
endorsement of responsible business operations throughout the diamond and gold locating
distribution network.
In particular, all members carry out processes that guarantee that these gemstones entering the
distribution channels have been located without harming the ecology or the community in which
SWATCH GROUP CASE STUDY32
the location has occurred. On the other hand, Kimberly Process Certificate Scheme expects every
unprocessed diamond exports and imports of member states to be reported, distinctively certified
and sanctioned through a government agency so as to endorse war-free diamonds. CITES is
associated with the purchase, import, utilisation and export of leather and other resources issued
from endangered variety.
However, Swatch Group is devoted just to the Kimberly Process Certification Schemes, and of
the company’s diamonds imports adhere to the Kimberly procedure protocols. During 2010,
Swatch Group initially reported its program concerning distributors and the sourcing of
resources. But its annual report fails to show when the corporation started adhering to the
Kimberly procedure protocols (Mäler, 2010).
Findings: To guarantee an appropriate comprehension and so as to offer detailed outline, the
information collected is presented with respect to social sustainability practices associated with
transparency. Swatch Group annual report (2010) indicates that the corporation operated globally
and has stores in over 37 regions. Nevertheless, more comprehensive data about the locations of
manufacturing were not issued.
Also, Swatch Group reports data regarding the water use over the whole period under evaluation,
except for 2008. But, rather than providing certain statistics, the corporation presented just the
corresponding annual reduction or upsurge. For instance, in 2010, indicated that the utilisation
rate of water declined by 1.8 percent respectively and that non-drinking water level rose by just
1.5 percent (The Swatch Group, 2010). Even if the company reported the total volume of waste
in 2010, Swatch Group withdrew gathering of data with regard to the volume of waste by variety
and also by disposal technique in 2011. This publication included data about the amount of
SWATCH GROUP CASE STUDY33
distinctive waste, the portion of reused distinctive waste, and the reuse share of other
manufacturing waste.
Nevertheless, rather than presenting particular information, the firm displayed simply the
quotient escalation/reduction of the annual volume of waste. Swatch Group has been gauging its
carbon footprints since 2009.
Within two years, the company become carbon free via engagements like sourcing energy from
an eco-friendly distributor and through procuring carbon counterbalances corresponding to the
early year’s emissions. Nevertheless the reportage indicates a persistent increase in volume,
caused by a growth in overall trade. Swatch Group thus far reports just one publicly indorsed
program that endorses worker training and growth, namely the six Hayek watch manufacturing
institutions started by Swatch Group.
The company trains learners to become expert watchmakers. However the company does not
provide any information regarding expenses pertaining to staff training and development. Lastly,
Swatch Group does not present data about it being involved with any foundation endorsement or
community engagement.
4.5. Overall Findings
The centralisation strategy had inconsequential effects upon the marketing policies of
varied brands. It concentrated fundamentally on statistics. In the mid 1980s, there existed no
brand strategy at the group strata, even if senior executives chose to ignore some low-end
products that were not showing signs of growth like Record Watch and Baume. More so, just
SWATCH GROUP CASE STUDY34
two products were unveiled in this year, the kids’ timepieces Flik Flak and the fashion
chronometers Pierre Balmain failed to emanate as of any marketing branch then instead from the
conglomerate’s motorised parts manufacturer, ETA. For some products, the appearance diversity
amongst products did not appear as much marked.
Omega and Longines still were traditional competitors they had become ever since the
culmination of the nineteenth century, with numerous brands under their belt that signified very
analogous ethics (accuracy, athletic, fashion, and sophistication). There were as well vacillation
in the middle variety (Certina, Mido and Tissot), where differentiation was somewhat
complicated, although Tissot was selected for introducing new brands, like chronometers with a
stone cases or wooden cases. The remaining two products to differentiate themselves were Rodo
that was characterised by contemporary design, and Hamilton that appropriated its Western
geneses (Deshpande, Misztal& Beyersdorfer, 2012). Evidently, the overall absence of distinction
can be defined by the desire to start by restructuring the intramural marketing plan of every
product.
The goal was rationalisation via a far-reaching minimisation of the quantity of prototypes. For
instance, at Omega, the amount of distinct replicas resulted in some 1600 units at the onset of the
1980s, was reduced to 850 by 1985. This reform of distribution placed Omega back in the
darkness in 1985 as never seen in history of the company. By 1990, the group’s CEO Hayek
reorganised the management board to carry out product management on a group scope, typified
by product differentiating and market segmentation i.e. a policy needing robust synchronisation
between the numerous product supervisors. Hence the management board which had been
mandated with the role of managing the ASUAG-SSIH merger accompanied by rationalisation
of the corporation during the 80s experienced restructuring. Swatch Group products should
SWATCH GROUP CASE STUDY35
compete with one another, but instead target distinct consumers. As much as the application of
this recent strategy was taken into account, the buyout of Blancpain proved essential. During the
second half of the 1990s, Swatch Group in a strategy of diversification and restructuring of its
core products in the luxury sector, so as to increase the company’s supplementary in order to
assist the corporation gain a competitive edge. This was essentially the situation in the available
luxury sector, between the primary traditional products of the company, namely: Omega,
Longines and Rado. The goal remained to underpin their own reputation and to portray the
brands as distinct as well as supplementary brands, designated for varied consumers. Omega
became the top notch end user product that the objective of repelling the influence Rolex already
had throughout global market.
Omega rapidly turned into the group’s chief product. In all respects, Longines and Rado had to
redesign to stop competing with Omega (Donzé, 2011). Longines was redesigned in a low-end
sector and became to be associated with sophistication and elitism and was not capable of
competing with other products within similar price variety, Rado. For instance, during the 1990s
Longines transferred its endorsements practices fit for a reputation of orthodox sophistication,
renouncing previous areas like Formula One racing. More so, Omega managed to underpin the
group’s reputation of a traditional inventor in watch manufacturing with the release of two
tomes, one narrating the company’s history, while the second one being the excision of
prominent record of American watch corporations authored by Jacques David.
The marketing policy assumed during the start of the 1990s was pursued and improved in
the subsequent years. The major supplements of this strategy were the restructuring towards
high-end goods: the underpinning of differentiation between the products and large financing in
supply chains. Hence, whereas the corporation’s expansion depended upon streamlining during
SWATCH GROUP CASE STUDY36
the 1980s, it later came to rely heavily on marketing. The generation program was even
restructured from this context witch major refocusing of movement production to finished
watched vendor. Swatch Group’s strategy merged with the overall framework of the critical
transformation in the luxury industry that occurred during the late 1980s. While this segment has
initially been marked by classicism, discretion and handiwork, it encounter during this time a
trend toward egalitarianism founded upon product internationalisation and the expansion of
consumers alongside a refocus of luxury businesses in the lucrative industrial sector. Though,
this egalitarianism of luxury resulted in robust division between elite luxury and reachable
luxury. Elite luxury defines high-superiority and disproportionately lavish goods, produced for a
select few.
As for reachable luxury, it designates brand commodities sold like luxury products but
economically accessible to a huge consumer base. This brand differentiation aims varied targets
and makes its likely to purse at the same time tactics founded on elitism and egalitarianism of
luxury. The watch sector is appropriately suited to this framework, with, for instance, the arrival
of Richemont (1988) and LVMH (1999) into the watch industry. Swatch Group espoused a
restructuring plan centred on both the corporation’s procurement and rebranding of commodities.
The initial goal was to increase its portfolio of high-end luxury products, as it just possessed
Blancpain in this industry, by procuring for more brands. The policy was similar in all four
instances. Swatch Group seized high-status products whole core shortcomings were entrenched
in their marketing policies: constricted supply strategy, and the absence of a characteristic design
(Deshpande, Misztal & Beyersdorfer, 2012).
The inclusion in high-end luxury targeted fundamentally at marketing accessible luxury
goods, especially Omega. Obviously, some elite luxury products boast sufficient turnover
SWATCH GROUP CASE STUDY37
margins, projected at roughly 24 percent for Breguet and at 19 Percent Blancpain in 2006.
Nevertheless, they result in just a miniature stake of gross transactions. The major advantage of
these products is instead indirect: they improve the image of other Swatch Group products and
make it possible for restructuring. The products that produce the biggest profits are certainly
affordable luxury brands, chiefly Omega that was responsible for one-third of timepiece
purchases in 2006. The impact of these products marks the concern of democratising
extravagance in the watch sector.
As for the standard-variety, other than Tissot, the group’s third product with respect to the
purchases of 2006, it denotes just a fraction of gross transactions. Put together, Balmain, Certina,
Hamilton and Mido was responsible for just 4 percent. However, Swatch Group has not parted
with this sector. Since there is still a worldwide market for such brands, it pursues its
engagement, for instance by unveiling inexpensive timepieces for the U.S. based fashion firm
Calvin Klein. On the other hand, the vertical incorporation of supply has hitherto been an
instrumental concern in the luxury watch sector during the culmination of the 1990s. The goal
was not just to enhance regulation distribution and sales of commodities, but also to adopt
earnings from this operation. Accordingly, in order to underpin the élite reputation of luxury
brands, distribution turned into a main concern. Consequently, the verticalisation of supply
impacted predominantly the group’s high-end products, via the production of flagship stores. The
priority offered to the supply and sale of finished goods lead to the formation of dozens of new
distribution networks (Swatch Group, 2010).
While Swatch Group concentrated on mainstream stores up to the end of the 90s, particularly
Western Europe, it focused to new markets after 2000. Swatch Group as well bought shares in
retail corporations, particularly in Thailand and in the UAE. In this perspective, China holds a
SWATCH GROUP CASE STUDY38
unique position, as it comprised of ten supply and sale firms in 2009 in contrast to the two in
- Conversely, the development of retail firms should be underscores, since it became a
central influence of marketing strategy. This was especially the case for luxury products, with
Les Boutiques corporations opened in most nations (Germany, China, France, UK, and United
Sates, amid others).
As from 2000, Swatch Group’s key brands had individual flagship boutiques that were designed
cater to needs of sales stores but as well as settings and platforms for activities graced by
international celebrities and emissaries. Ultimately, the reinforcement of connections with
domestic corporations which regulate extensive retail chains can as well be seen, at times
resulting in the development of joint ventures. On the whole, the generation strategy adopted by
the Swatch Group shows an evolution dictated by the restructuring toward luxury. Its major
aspects are the vertical incorporation of makers of external components; the end of the
distribution of movement parts to Swiss timepiece producers outside of Swatch Group. In
essence, the production mechanism reached stability during the close of the 1990s. The sweeping
restructuring of the assembly strategy during the 1980s and 1990s was done.
CHAPTER 5: RECOMMENDATIONS
In general terms the analysis conducted hitherto, indicate that Swatch Group still enjoys a very
robust competitive position in the marketplace. Useful knowledge has become widespread and
notions should be utilised with alacrity. Such aspects have created a new logic of open
innovation that supports external concepts and knowledge in conjunction with internal R&D.
This transformation provides novel ways to develop value.
SWATCH GROUP CASE STUDY39
Within the span of 15 years, from 1985 to 2000, Swatch Group encountered fundamental
transformations that made it move from a very incongruent corporation of tentatively
incorporated Swiss chronometers to a national, streamlined and globalized conglomerate. While
its Japanese competitor, i.e. Seiko, Citizen and Casio turned to technological innovation in the
1990s and 2000s in order to enter a new development stage, Swatch Group succeeding in
establishing itself as the world’s dominant watch corporation without boasting technological
novelty. This non-technological novelty is principally founded in two complementary strategies:
the rationalisation of manufacture structure, and the application of a recent marketing policy. The
initial stage of rationalisation of assembly structure lasted from the company’s foundation in
1983 till the culmination of the 90s. It cores aspects were the centralisation of motorised
component manufacture in the company’s subsidiary’s ETA, the vertical incorporation of
components and, in particular, the globalisation of manufacture structure with the introduction of
stores in Asia. The rationalisation improved efficiency and underpinned ETA’s traditional role of
a manufacturer and supplier of parts for the whole Swiss watch business. Alongside decision of
the manufacture rationalisation activity, a novel marketing policy was adopted in the first half of
the 90s, after the acquisition of Blancpain (1992). Categorised by an intense repositioning of
products, this plan was designed to make Swatch Group a manufacturer, and especially a dealer
of finished timepieces. Its core aspects were the takeover of numerous exclusive luxury products
and the decision of Omega as the main product to dominate the global market of available high-
end, customarily an exact lucrative sector and to repel Rolex’s leading role. This new marketing
policy had an essential impact on Swatch Group’s whole executive arrangement (Deshpande,
Misztal & Beyersdorfer, 2012).
SWATCH GROUP CASE STUDY40
According to Credit Suisse (2013) the 21st century is categorised by the growing
competitive atmosphere and effort for productiveness at any level of the industry atmosphere,
amid other factors. The resultant market sensitivity is impacted by probable as well as irregular
instabilities with growing frequency. As outline in this investigation, these instabilities have the
capacity to generate shocks that may reorganise whole industries and amount to departures and
market phase out by recognised organisations. Firms that have the potential to survive such
disturbances are regarded resilient. Contemporary transformation to the environment created
adjusted consumer needs towards any corporation. In particular, this paper has discovered that
consumers are progressively concerned with the firms’ capacity to balance trade operations with
unburdening and conserving the ecology simultaneously, i.e. being sustainable (Glasmeier,
2011).
Available research mostly relates sustainability to a firm’s level of operation. This paper applied
the hypothetical background to the fiscal crunch in 2007/08. The corresponding occurrence was
regarded as a suitable industry disturbance upon which an illustrative industry model is analysed
for performance. In particular, nevertheless, this research analyses whether any actions
connected with sustainability have contributed towards performance of the firm. The explicated
industry model included one of the largest firms of the Swiss luxury watch manufacturing
industry.
The research evaluation of quantitative data showed that numerous industries are met with
different and transforming consumer desires toward an augmented interest in sustainability. As a
consequence, corporations are compelled to come up with solutions that meet these desires so as
to gain competitive edge. This study found out that the investigated policies of sustainability,
SWATCH GROUP CASE STUDY41
namely ethical and sustainable location of scare resources are of great importance for the
corporations within the luxury watch manufacturing industry (Govindarajan and Kopalle, 2011).
5.2. RECOMMENDATION PLAN
Target the Indian Market
The Swatch must target the Indian market because there is a large local demand and availability
of low-labour. With a population hitting the one billion mark and is the fifth-biggest economy
around, India is alleged to have a fast growing consumer class comprising of the wealthy and
middle class as well. Omega and Rado brands should be targeted to these customers in the Indian
market. Swatch and Tissot, although less costly, still appeals to the fashion-oriented consumers
and might be an efficacious brand (Donze, 2011).
To repel the fierce competition with LVMH Watch & Jewellery, the Swatch Group must take
advantage of supply networks by basically launching extra separate, multi-branded outlets in
India as the conglomerate did fruitfully in other regions. In that sense, Swatch, Omega, Tissot
and Rado would be retailed. Tag Heuer has previously established six boutiques and wants to
raise the number before the year ends. It is suggested that Swatch Group must as well plan to
enter the metropolitan Indian marketplace via multi-brand stores that have synergy with the
product like sports stores, or bookstores, amid others (Hollensen, 2010).
The essence of the Indian strategy would be to develop a focus on the differentiators at all
echelons of the connexion, whereas targeting an extensive cross-section of fashion c mindful;
Indian customers. Through adopting this path, the Swatch Group will create a credible and
ambitious brand reputation and provide a global brand experience. Many of the global well-
SWATCH GROUP CASE STUDY42
known fashion timepieces have not ventured into the Indian market, and Swatch Group may
exploit this circumstance by setting up their fashion watch products in the fashion industry.
This researcher holds the view that for Swatch Group to be successful in the long-run, the
company needs to create value for its shareholders and for society all together. This is known as
Creating Share Value (CSV). As an important requirement for CSV, it is proposed that Swatch
Group must ensure that they comply with all pertinent legal prerequisites and Swatch Group
Corporate Business Principles also guarantee that the code of sustained development is
entrenched in their operations, brands and products.
This means conserving the future by making the appropriate decisions in a situation where water
is progressively threatened, natural raw materials are limited and biodiversity is decreasing. All
these factors are germane for catering to the needs of an expanding global population and for the
development of Swatch Group. More so, climate change might worsen our planet’s ecological
challenge (Banerjee, 2008).
5.3. SURVEY OF THE PROPOSAL
The success of Swatch Group occurred, in spite of other branded products equivalent distraction
for development and the value-mindful customer’ resistance to price inflation in a period of low
increase, and are picking high-quality customised label products in lieu of brands. Hence,
Swatch’s innovative development had basically expanded their consumer base ( Donze, 2012).
For Swatch, the rebirth and enhancement from their weakened market share as a result of their
costly timepieces and the presence of low-cost products can be accredited to the following
aspects (Deshpande, 2012). Firstly, the growth of their brand from the utilisation of stylish
SWATCH GROUP CASE STUDY43
components to plastic enclosed watches and the successive price decrease that they were
garnered made it possible to introduce low-price point watches.
The manufacturing activity having intended to be more productive than its rivals made it possible
for the production of low-price range goods. The growth of the process nevertheless due chiefly
to the transformation in the brand design: both rising the economies of Scale for the group
making it capable of increasing its target market and hence, furthering its marketplace share.
Adroitly premeditated, the Swatch timepiece adopted a distinct function; it had changed itself to
a portion of extravagance. The packaging offered to the new mien by the company had offset its
previous image and integrated the younger generation. Hence, the marketing strategy in line with
its new architecture had achieved marketability increased to overlook the social stratification.
CHAPTER 6: APPLICATION CASESEIKO
6.1. COMPANY BACKGROUND
SWATCH GROUP CASE STUDY44
Seiko was founded in 1881, but entered the global fame in 1969 by commercializing the world’s
original watch designed using quartz technology. A vertically incorporated watch producer,
Seiko possessed competitive edge over its competitors in the Swiss watch industry, which
included hundred of companies that specialized in several elements of motorized watchmaking.
Seiko invested heavily in R&D and towards the end of 1980s has introduced numerous
chronometers presenting technological novelty. Via in-house development, consolidation and
buyouts, Seiko spread into a new enterprise over time. But the timepiece industry, for which
Seiko was well-recognized, was being confronted by forces that were changing the worldwide
timepiece business (Farhoomand & Hout, 2010). The benefit gotten from Seiko’s mechanical
production potential at the time of quartz revolution had been eroded by cheap Chinese
watchmakers and a burgeoning Swiss watch industry, controlling the low-end and high-end of
the industry comparatively. In the meantime, opposition from Citizen, Casio and a plethora of
new-fangled fashion trends suggested that Seiko’s status in all marketplace sectors was being
confronted by an interminably growing number of rivals. In a sense, Seiko’s watch sales
plummeted during the 1990s, provoking the resolution to form Seiko Watch Corporation (SWC)
in 2001 as an independent subsidiary of Seiko Company.
The decision was designed to rationalise internal decision-making and provide for concentrated
product vision. By 2005, the luxury watch market had emerged as the most profitable, whilst
tightening margins overwhelmed the lower-priced sectors. Shinji Hattori, the CEO of SWC, felt
obstinately that the corporation must increase its perceived image outside of Japan, shift their
focus to upmarket and even confront the Swiss in the domain of automated watch production.
While Seiko had traditionally manufactured luxury timepieces for the local market, its high-end
lines enjoyed little prominence globally, with 95 percent of items distributed locally and the
SWATCH GROUP CASE STUDY45
remaining 5 percent in other Asian regions. In 2007, it became obvious that Seiko’s entry into
the upper ranks of global watch production profile would need restructuring of consumer
awareness, especially in Europe and the United States (Farhoomand & Hout, 2010).
SWC’s role was to develop and promote timepieces, tracking down from Seiko Instruments and
Seiko Epson. The two firms progressively expanded into large corporations in their own right.
Consequentially, the firm created production-oriented managing decisions instead of making
them from the point of running a proprietary watch enterprise.
A stronger separation of labour between the two industrialised facilities of Seiko Group was
institution to prevent overlying growth expenses. To stay cost competitive, much of SWC’s
industry-intensive watch production processes were relocated to China, since the region provides
cheap labour. The idea of innovation and refinement was to expand to the complete gamut of
Seiko’s operations: production growth, distribution and marketing advertisements.
Conventionally, SWC had concentrated upon creating products where sales opportunities were
present in a specific price ranges, allowing its international systems of 10 subsidiaries and some
thirty suppliers to carry out promotion and retailing policies appropriate to their areas. This
strategy complicated the challenge of differing consumer awareness in Seiko’s varied markets
worldwide. The corporation as well integrated annual international advertising promotions for
primary watch collections.
During the 1980s and 1990s, Seiko entered the watch industry with a market-share
leaning culture, exploiting opportunities to accomplish gross sales by launching timepieces at
varied price ranges, without caring the risk of changing its reputation. What is more, the
company managed a portfolio of sub-products: Pulsar falling in the mid-price points quartz
SWATCH GROUP CASE STUDY46
timepieces. Globally, the price of Seiko timepieces was characteristically viewed as falling in the
$150-600 point, with the product typically linked to consistency and value for money.
Nonetheless, in the local marketplace, Seiko was identified as a fully incorporated watch firm
and sold expensive timepieces for the high-end of the market. The United States is SWC’s
biggest market by value, then Japan, Asian and finally Europe.
Strengths
The corporation has collaborated with leading football clubs, which have
assisted Seiko brand presence in Europe
The company has an important presence in Asia and also in China
Seiko has also endorsed Olympic Games
The product has a robust after sales services channel that works for the
company
Weaknesses
The company is present in manifold brand sets apart from watches. Thus, the
positioning of the product as a watch is not robust in the consumer market.
Differentiation of its rivals is considerably robust as compared to Seiko
dominance in the low-end market.
Opportunities
Brand sets can be introduced to several sectors
The product can as well increase its global presence through marketing strategies
SWATCH GROUP CASE STUDY47
Threats
There is fierce competition in regard to cost in this industry. Because the price of
production has inflated considerably, the proceeds have suffered in the mid level
sector
Counterfeit brands that portray similar brand label an sell cheaply
6.2. RELEVANT CONNECTIONS WITH SWATCH
Seiko and Swatch share some elements that make likely the transference of the learning outcome
from one case to the other. These factors are defined below:
Competitive environment
Both conglomerated experience fierce competition. The watchmaking industry is greatly
competitive and fragmented, in particular among the three incumbents: Rolex, Swatch and
LVMH.
Core Values
The goal of Seiko is to produce a reliable and ambitious product image and offer its customers a
justly global brand experience, which the company believes is important for success in the
marketplace.
6.3. PROPOSED INTERVENTION FOR SEIKO
From what has been discussed above, both firms are related in the factor explicated previously,
thereby this author will recommend the same core learning outcome.
SWATCH GROUP CASE STUDY48
Aim to use the most efficient technologies
Seiko must aim to utilise the most productive technologies and apply best practises so as to
further optimise energy and water usage, reduce waste production, use sustainably managed
recyclable energy sources, recoup value from by-products and regulate and eliminate omissions,
for instance, greenhouse gases. At present, Seiko integrates environmental sustainability goals
when they create, build and restore amenities (John, 2011).
Reposition itself in the U.S. market
Because the U.S. holds the biggest population of high-earnings consumers globally, it is
suggested that Seiko must reposition its brands to appeal to these patrons. Brands like King
Seiko, Grand Seiko and Seiko Marinemaster provide greater margins and with consumer
confidence attaining impetus, these products can cater to the consumers’ expensive preference
(Banerjee, 2008). These products can as well pay off the Seiko brands success. Because most
young Seiko customers of the past now want more luxurious and trendy timepieces as their
earning expand, the Seiko Corporation can target this clients with more luxurious brands.
CONCLUSION
The global watch industry has become an extremely competitive market with most brands
covering all pricing points. Moreover globalisation of the primary enterprise of the Swatch
Group into foreign markets like India will assist to carry on with its leadership position in the
marketplace. Competition in the last couple decades did everything it could to obtain market
share and venture into new markets. Swatch Group rivals will persist to do everything within
their power enter new markets and to protect their existing markets.
SWATCH GROUP CASE STUDY49
REFERENCES
Aaker, D. A. (2010)Building strong brands. New York: Free Press.
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