The Birth of Swatch - Harvard Business Review Case Study - Analysis of Swatch adopted strategy vs other key players. 9-504-096, IE Business School.

1. IE EMBA – S2 – Raffy Karamanian– Oct 2015
The Birth of the Swatch
Sales & Marketing Management – IE S2
IE EMBA – S2 – Raffy Karamanian – Oct 2015

2. IE EMBA – S2 – Raffy Karamanian– Oct 2015
Success & Differentiation
Why was Swatch so successful? In what way was the Swatch different then any watch the industry had ever seen?
Product Quality
ProductPrice
Luxury Product
• Swatch delivered a innovative product
• Delivered a new perception to watches
• High quality product with low / fixed pricing
• Large collection – became fashion item
• Large network of distribution
• Leveraging on Swiss skills
Mass Product
• 2,500 Swiss Watchmakers (Luxury)
• Considered luxury & financial investment
• 1945 – held 90% of world market share
• Sold through jewellers & up-scale stores
Nicolas Hayek “I decided, we could retreat no longer….. We needed at least one
profitable, growing, global brand in every segment – including the low end.”
• Low priced watches (mass market)
• Considered almost disposable
• 1983 – Held 85% market share (units)
• Sold through low priced outlets, etc..
* The information on the slide has been obtained from HBS ‘The Birth of Swatch Case’. The visual representation of the companies in term of
price vs quality is not accurate and has been placed for presentation purpose only and to reflect Swatch’s adopted strategy.
RolexBeume &
Mercier
Omega
Longines
Piaget Movado
The Traditional Swiss Watch makers
Times
Hattori-
Seiko
Citizen
Casio
Seiko
The American, Japanese, Hong Kong, etc..
Efficient Strategy
Swatch
Competitive
pricing & Larger
target segment
Leveraging on the
quality of the Swiss
Unique Message &
Genuine Emotion
Swatch – (Swiss + Watch)
Price Focused
Non Strategic Direction
(low quality vs high price)
The following quadrant reflects
product offering based on Price vs
Quality. This representation
visualizes the strategic direction
adopted by Swatch, their key
success factors and reflects its
differentiation points from other
watch manufacturer worldwide.
Q1

3. IE EMBA – S2 – Raffy Karamanian– Oct 2015
The Marketing Mix
What elements of the original Swatch marketing plan were most critical to the brand´s success? Do you agree with the original product strategy? The channel strategy? The promotional strategy? What about the
pricing strategy - what does Franco Bosisio mean when he says that the Swatch is sold at a “clean price”? Given the huge demand for Swatches (particularly for certain models), did the company make a mistake in not
raising the price for some of its styles?
• The information on the slide has been obtained from HBS ‘The Birth of Swatch Case’.
• Swatch picture has been obtained from google images.
Product Strategy
• High quality. Low price
• Fashionable Items
• Large collection of choices
Channel Strategy
• Shop in Shop
• Mini boutiques
• Non traditional POS (limited)
• Free standing mono-brand location (flagships )
Promotion Strategy
• 30% - double the industry average on advertising
• Unique style / fashion / trendy / etc…
• Unconventional methods (ex. Germany)
• Joy of life
Pricing Strategy
• Very competitive in market
• Fixed and ‘Clean’.
• Rounded figures and no fluctuation based on demand
• Low priced in comparison to product coming for Swiss
The ‘Swatch’ strategy is certainly positioned as innovative plan.
(1) Leveraged on Swiss standards. (2) It holds a unique message and genuine emotion. (3) Its delivery of unconventional promotional campaigns backed by a
strong distribution strategy (available in almost every country in the world). (4) Crafting a pricing strategy against the basic fundamentals of economics (supply
vs demand) can be considered a
‘Clean’ Pricing Strategy Masterpiece
Q2

4. IE EMBA – S2 – Raffy Karamanian– Oct 2015
Differentiation & Purchasing Behavior
Prior to the introduction of the Swatch, what kinds of watches were popular among consumers? In what way was a Rolex different from a Timex, or from a gold-plated Seiko? How did
consumers make buying decisions?
• The information on the slide has been obtained from HBS ‘The Birth of Swatch Case’.
Luxury Product
Mass Product
• High end Swiss made watch holding
(legacy, history, and craftsmanship)
• Limited quantity handmade piece of
jewellery; built with care and precision
• A luxury product and statement
• Distributed through luxurious channels
/ department stores – jewellery stores.
• Passed on from generation to
generation.
RolexBeume &
Mercier
Omega
Longines
Piaget Movado
Luxury Products (e.g. Rolex)
Times
Hattori-
Seiko
Citizen
Casio
Seiko
• A functional watch / seasonal watch –
no cultural / historical legacy
• Mass produced, affordable, and
targets everyone.
• Daily usage – non-luxury
• Distributed through variety of outlets
and stores. (No high end jewellers).
• Disposable
Mass Products (e.g. Timex, Seiko Gold)
VS.
Buying Decision
• Price of jewellery
• Luxury product / statement
• Belongingness to the prestige segment
• Financial Investment
• Timekeeping instrument
• Affordable and functional
• Disposable items
• Trendy and fashionable
Until the 1945, with 2,500 firms, the Swiss dominated 80% of the world’s watch production.
Following 1951, affordable mass produced watches penetrated the market mainly from the
US, Japan and Hong Kong. In 1983, the Swiss re-joined the market through Swatch.
Q3
Product Quality
ProductPrice
Efficient Strategy
Swatch
Price Focused
Non Strategic Direction
(low quality vs high price)

5. IE EMBA – S2 – Raffy Karamanian– Oct 2015
Changing Thoughts – Other Products
In many ways, the Swatch forced people to think about watches in a way they had never thought before. Can you think of other products in other product categories that have done the same thing?
• Pictures obtained from google images
Ford – Model T The I phone IKEA Apple Watch
I resemble it to Ford due to its
affordable pricing strategy,
unique message, and genuine
emotion
I resemble it the I-Phone by
introducing innovation, quality,
and design, to the mobile
industry.
I resemble it to IKEA by
delivering minimalistic concept,
high quality vs low price from a
relatively expensive country
(Sweden)
I resemble it, because I feel
history is trying to repeat itself.
It feels like its gonna be the next
Swatch. Wide product variety.
#Price #Message
#Emotion
#Design #Quality
#Innovation #Fashion
#Price #Quality
#Swedish
#Variety #Fashion
#Design
Q4
I have not identified a single product holding Swatch’s revolutionary strategy (as a complete package); However, I have listed 4
products from different industries that share similarities in their approach to consumers similar to Swatch’s disruptive direction.

6. IE EMBA – S2 – Raffy Karamanian– Oct 2015
What will be your next Model?
Thank You – EMBA – S2 – Raffy Karamanian