Case study of Swatch (Case Study Sample)

Case study of Swatch
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Introduction
The watch industry has undergone tremendous changes over the years. Traditionally, the value of a watch was determined by the number of precious stones it contained. Furthermore, it was highly mechanical. Today, however, watches have been digitalized and the importance that was attributed to precious stones has declined considerably. The cost of these watches consequently went down as a result of reduced emphasis on the incorporation of precious stones. It is worthwhile noting that the invention and distribution of watches was initially monopolized by Swiss industries. While this has changed over the years, the Swiss industry has been working towards regaining its long lost glory.
The Swatch (A combination of “Swiss” and “Watch”) was a low cost watch introduced by Nicolas Hayek. This was after the merger of two leading Swiss watching making companies ASUAG and SSIH. ASUAG was a holding company which had over one hundred separate companies within it while SSIH was a watch making company started in the 1980s. The merger of the two was as a result of the low performance of their watches, an issue which was attributed to the emergence of low cost digital watches by its American and Japanese competitors. This low performance led to insolvency and thus the need to do away with some of its priced brands. Hayek however intervened and suggested that the two companies merge instead. He was made the CEO of the merged entities.
In order to fight competition and remain relevant in the market, Hayek was tasked with coming up with a low cost brand. The Swatch was thus invented. This brand faced numerous challenges such as the use of plastic casing which was highly controversial. Swiss watches were known to be encased in the most expensive metals and therefore the use of plastic suggested that the long standing reputation for Swiss watch making industry would be compromised. Secondly, Hayek was keen on embracing vertical integration where building and assembly of the watches was to be done in Switzerland. The effect that this would have would be the reduction of production costs associated with Swiss watches. This would prove to be a challenging task considering the high quality of materials that was used during building and assembly of the watches together with the cost of the manpower involved. Nevertheless, Hayek was able to overcome all these challenges and in its first year of sales, while anticipating at least 50,000 sales, the company made over 200,000 sales in the United Kingdom alone.
Strengths and Weaknesses
Swatch faces quite a number of strengths and weaknesses, all of which have defined its growth and development over the years. Notably, its strengths have overweighed its weaknesses and that is why it is one of the leading watch brands in the world. To begin with, the swatch has a cost advantage over its competitors and also over its differentiated brands. Being a low cost product, it has been able to maintain a grip in the watch industry while targeting middle class individuals. Furthermore, it has been able to consolidate the attention of the upper-middle class youth who make up the majority of its consumers. Its cost advantage has been further enhanced by its brand. Swiss firms have been known all over the world to be the best watch producers. Being based in Switzerland and all aspects of its production also based in Switzerland, it has been able to take advantage of this market aspect. Some of its competitors come from Japan and America which are not essentially known for watch making as compared to Switzerland.
Innovation is also one of its strengths. Before low cost watches were invented, it is important to note that it was in Switzerland that the Quartz, which was later adopted by Japanese firms, was invented. The Swatch is based on the Quartz framework which suggested advancement in technology. As mentioned earlier, Swiss watches were mainly mechanical. The quartz however makes use of integrated circuits whose functionality could be advanced. This advancement could be in form of incorporation of stop watches, calculators, ability to show dates and days of the week among others. Also, the fact that the swatch could be worn on a wrist marked a new beginning in watch technology. This kind of innovation made the swatch stand out and gain competitive advantage over its competitors. Other innovations attributed the swatch include scented watches and see-through watches. Apart from the above mentioned strengths, others include its leadership in market shares, customer loyalty and its strong financial position.
In regard to its weaknesses however, the swatch faces risks of imitation. Being a market leader, the swatch has become a target for imitation by cheap prototypes. This has been fairly witnessed in China where cheap and low-quality swatch imitations have been developed. The risk of imitation, especially when the imitated products are of low quality is that the original brand risks losing customer loyalty as it becomes increasingly difficult to differentiate original from imitated products. This has further slandered its name. Secondly, some of its branding and advertising initiatives have not been successful. This is in regard to the evolving world where advertising is taking a more empirical approach. In connection to this, the ever developing technology is also posing a great risk to swatch. For instance, with the introduction of mobile phones, people are less attracted to watches. Mobile phones come equipped with features for time and thus the need to own a watch is no longer necessary.
External Environment
Some of the opportunities for the growth and development of the swatch include its ability to diversify. Since it has incorporated technology in its development, it can further exploit this channel to provide differentiated products with advanced features for specific purposes. For instance, with mobile telephony being the next definitive step in technology, the brand could consider incorporating mobile telephony features. Secondly, there are emerging markets in Asia and Africa. Being a low cost brand, it could pursue the growing markets in Asian countries such as India. Africa has also been established as not only a source for raw materials but also a market for products. Therefore, it could consider venturing into such areas.
Competitors such as Timex are posing significant threats to the development of the brand. This is because Timex also has a low cost product targeting the youth. The youth are known to be trendy and therefore any competitor who would come up with a stylish feel and trendy product, he could easily win over the youth. This threat could mean that swatch has to ensure that it is abreast with the latest technological as well as fashion trends, an initiative which could be costly. Lastly, economic factors such as recession could see it lose its market to its competitors providing even cheaper products. Furthermore, recession could lead to minimal returns while increasing cost of production and thus run it into losses. These are some of the main threats facing the brand.
With the above strengths, weaknesses, opportunities and threats faced by swatch, it would be worthwhile noting that it still has an edge over the rest. The fact that the swatch has been digitalized, its features can therefore be expanded and thus keep abreast with changing technology. Also, having years of an established brand name, it could easily retain its market share provided that it arrests its challenges of imitation. Imitation erodes its brand name and if it could find a way of overcoming this, then it would not only secure its image but it would also regain its lost revenue through imitations. In this regard therefore, the swatch is a young and promising brand which could be diversified and thus portent success in the future.
Swatch Strategy
Swatch is a firm responsible for the development and sale of watches. It is in the lifestyle and retail category tasked with selling youthful and trendy watch designs. The company slogan is “Time is what you make of it; Fashion that ticks”. This serves to emphasi...