The solution lies within the definition of Swiss Made, ‘Watches and clocks containing at least 50 percent Swiss-manufactured components by value.’ Therefore, to remain price competitive, cost effective and without tarnishing the Swatch Group’s Swiss Made image, up to 50 percent of the production process can be outsourced globally. Key design and styling and the overall value added chain will remain mainly in Switzerland, but less important and less specialized jobs will be outsourced to a low wage country such as Thailand, Malaysia and/or China. As for a firm in India called Titan looking for a partner, it will have to look somewhere else. Titan cannot seduce customers into buying $120 to $700 Indian-made wristwatches given the country’s poor reputation for quality of its exports. If the Swatch Group partnered with Titan, maybe it would lead to lower production costs, but the loss of quality assurance in the customers’ eyes would cause the Swatch Group to lose their competitive advantage resulting in a loss of market share.
Driving forces such as technological advancements are giving the Swatch Group an opportunity to become very successful. Continuing trends in networking, increasing mobile communications use and the decreasing costs of technology will allow the firm to make a profitable decision. By incorporating the latest technology in to certain timepieces, the Swatch Group can cater to customer’s new preferences. The new advanced timepieces, Access, Swatch Talk and Swatch Beat must be aggressively marketed in order to develop product recognition and build brand loyalty. As the first company out with these new technologies and in these market niches, consumers will have greater brand loyalty to the Swatch Group, as it will be the company behind an innovative revolution of watches. To further enhance this strategy, the Swatch Group should acquire licenses from ongoing trends such as movies, events and sports teams to promote the more affordable and collectable Swatch and Flik Flak brand watches. Ultimately, people will buy more Swatch Group watches, increasing market share and placing the company back in the number one market position.
In order to deal with the main problem, the joint venture problem must be addressed. The joint venture between the Swatch Group and DaimlerChrysler was developed in order to strengthen or protect the existing businesses and grow by investing in “markets of the future” and increasing consumers in new markets through the Swatchmobile concept car. While diversification seemed like a good idea in a saturated watch market, the Swatch Group was unsuccessful in their endeavor. However, if a more focused differentiation strategy, serving only one segment of the overall market and trying to be the most differentiated organization serving that segment were chosen, that would limit the Swatch Group’s ability to expand in to new markets and gain new profits. In order to diversify, the company should continue in the watch market, but also expand with the development of high-tech and specialized quality components supplied to different sectors such as telecommunications, medical applications, computers, automotive industry and electronics. Supplying engineering products involving electronic and mechanical modules to DaimlerChrysler instead of trying to joint venture will entail less risk with similar rewards as a joint venture.
This approach will allow the Swatch Group to deal with the problems of a saturated watch market, increasing competition, decreasing market share, increasing production costs, and diversification. It is important that this recommendation be implemented in the near future in order to be most effective. As technology and luxury products grow in demand with increasing gross national income per capita around the world, the future for the Swatch Group looks promising. Ultimately, this new corporate-level plan will give the Swatch Group the ability to move forward and regain market dominance as it once enjoyed in the prewar era.
Swatch and the Global Watch Industry
Submitted by Lukasz Ciesielski 2945102
Submitted to Professor Scott C. Ensign
In Partial Fulfillment of the Requirements of ADM 3318A
Monday, October 18, 2004
