This presentation was delivered on Swiss Watch industry. It doesn't have analysis of changes in porter's 5 forces.

1. The Watch Industries
In Switzerland
Japan and
The USA
1970s
By
Anindita, Abhishek, Ashish Sinha, Rajul, Suket & Anshuman

2. We’ll Discuss..
Overview of watch industry during 1970
How did Swiss watch industry evolve
How did Japan compete?
How did USA compete?
What were the disruptive events?
A comprehensive analysis
2

3. By Anindita
The Watch Industry in 1970
Overview
3

4. Pin vs. Jewelled Lever Watch
Pin lever watch has two major parts
Movement block (Ebauche) like the chassis and engine
Framework, gear train, winding & setting machine
Regulating components like the transmission
Escapement, Balance wheel and hairspring
Simple in design
Jewelled lever
Complex in design
Not much correlation found with cost or performance
Sold like jewellery
4

5. A Quick Look at Pin Lever
5

6. 1970 Watch Industry Looked Like..
80
70 Switz exports its 97% production. 42% of world production
60 Japan exports its 58% production. Rest consumed locally
Value in Million USD
50
17% global production from USSR, China & East Germany
40
30 USA consumes its 99.8% production. Rest imports.
20
10
Production
Exports
0
Switz. Japan USSR USA France West UK Italy
Ger.
Countries
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7. Swiss Were Key Exporter in 1970
Produced 42% of world output
– 3% of Swiss GNP
– Employed 8% Swiss labour
97% of production exported
– 610 M USD value
– 12% of total Swiss exports
Created the brand image for all Swiss products
BUT in 1940
– Produced 80% of world share! Share declined.
7

8. By Abhishek
Swiss Watch Industry
Struggles in 1970
8

9. Swiss Exported Mainly Finished Watches
Switch Watch Exports - In Value
90%
80% % in Value
70%
60%
50%
40%
30%
20%
10%
0%
Finished Watch Mis. Watch
Watches Movements Components
9

10. Swiss Exported Mainly Finished Watches
Swith Watch Exports - By Watch Type
500
400
300
200 Units (Millions)
Value (M USD)
100
0
Jewelled Pin Lever Electric -
lever Electronic
10

11. % Export To USA Declined
Exports in Unit & Value % to Major Markets - 1970
30.00%
% of total units
25.00%
% of total value
20.00%
Components
15.00%
%
10.00%
5.00%
0.00%
USA Hong UK Arabia West Italy Spain Japan
Kong Germany
11

12. % Export To USA Declined
Jewelled Lever Exports in Unit % - 1960-70
35
In Percentage Of Total Exports
30
25 Components
20
15 Jewelled Lever 1960
Jewelled Lever 1970
10
5
0
Europe Africa Asia USA - Latin
Canada America
12

13. % Export To USA Declined
Pin Lever Exports in Unit % : 1960-70
50
45 Components
In % of Total PinLever Exports
40
35
30
25
1960
20
1970
15
10
5
0
Europe Africa Middle Asia USA - Latin
East Canada America
13

14. How Swiss Watch Ind. Developed
More like cottage industry
– Watch making a craft
– Depended upon skills acquired over years
Two tier due to Renaissance (1800)
– Component manufacturing AND Assembling
Govt intervention due to 1920-30 recession
– Cartel: FH (assembler), Ebauches SA & UBAH (comp)
Govt invested in ASUAC. Imposed restrictions on
– selling & buying components
– fixing selling price, production, operational changes
– expansion, acquisition, technology transfer abroad
Cartel ends in 1966
– FH resisted due to poor quality supplied by protected EBA / UBAH
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15. Development after 1966
Consolidation
– 20% export shared by SSIH
– General Watch Holding Company formed
– Ebauche SA partnered with Holdings L SA
– 75% of exports controlled by 8 companies
But many problems persisted
– Duplicate product lines
– Disjoint production facilities
– Management out of sync
15

16. Swiss Also Took Aggressive Steps
Investment and acquisition in USA
– Waltham Watch Company, Elgin, Gruen
– Hamilton, first marketer of digital watch in USA
– Benefitted in USA from the USA based brands
Promotional practices
– World wide trainings on sales service and management
Research and Development
– Centre Electronique Horliger (CEH) to develop tuning fork
mechanism to counter Bulova of USA
– FASEC with Brown Baveri & Landis (Swiss) and Phillips
(Dutch)
16

17. But Gaps Were Plenty
Fragmentation continued
– At low level. Lack of integration.
– Leading to poor strategy development
Research and Development not enough
– .8% of industry sales
Threat of disruptive technology
– Plans inadequate for quartz watches
Diversification nonexistent
– Resulting in high risk
17

18. By Suket
Japan Watch Industry
Picking up in 1970
18

19. Concentrated Industry in Japan
9% 3%
28%
60%
K. Hattori & Co. Citizen Watch
Orient Watch Ricoh Watch
4 major firms
24 million units
14% of the world market 19

20. Japanese Watch Industry Evolves
Started in 1880’s
Focused on home market
Focused on jeweled-lever watches
Quality of time pieces inferior to quality of that in
the west
5 million units/year in 1930
20

21. Produces 7% world output in 1960
Produced 7 million units/year in 1960
Faced saturation in domestic market
Explored
South East Asia
Western European
United States
66% of exports destined for US or Hong Kong
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22. Had Focused Marketing Strategy
Focused on
Jeweled-lever watches
Medium price category through cost differentiation
Avoided luxury Segment
Existing firms well entrenched and positioned as
prestigious watch-makers
Investment needed to build up a prestigious image
Limited sales in unit terms
Contrary to mass production strategy
22

23. Japan Achieved Low Cost
Disciplined workers at low wages
Expanded to Hong Kong
Advanced production techniques
Assembly line
Backward Integration
23

24. Japan Also Gained From...
Large home market
Well protected from imports
Government encouraged concentrated
structure
Growth of Japanese Economy
Enlarged & upgraded production facilities
Non-watch production
New technology exposure
24

25. By Ashish
USA – The Biggest Consumer
in 1970
25

26. US: Largest Watch Market in 1970
0
Manufactured at
40 Home
Import / Virgin
60 Island
Export
World’s largest watch market
– Size – 1 billion $
– Volume – 45 million
Bulova and Timex dominant players
– 66% to 75% market share total
26

27. How Bulova and Timex Differed
Bulova
– Segmentation:
• Low(<30$) & Medium(30$-100$) Segment – “Caravells”
• Top Segment(100+) – “Accutron” : Patented Tuning Fork Technology.
– Cost Advantage – Got cheap jeweled watch from Citizen, Japan
Timex
– Focused on inexpensive Pin-Lever technology
– Believed in Mass Production
How They Achieved Success
– Directly selling to customer. No jewelers/repairmen.
– Exploited all niches (800 different watch models)
– Spread across the world, best of whole world
– Aggressive advertisement & distribution
– Benefited from Govt sponsored R&D projects.
27

28. How US Watch Industry Evolved
After 2nd World War, mostly domestic manufactured
– Jeweled lever watches dominated
– No labor intensive and specialized skills
Price Competition by Timex in low /mid price during 1950-60
– Small swiss firms also came with cheap watches
– Japanese started coming in 50s
– Mass merchandizing (new distribution channels) revolution
Only 2 USA companies remain in 1970, What about rest?
– Acquired manufacturing capacity in Switzerland,
– Procured from Japanese/Swiss firms
– Manufactured/Assembled in the Virgin Islands
Most companies became “Marketing” companies
28

29. The Quartz Crystal Cometh
US @ the centre of Quartz technology
Seiko introduces first quartz watch in 1970
Piaget, Hamilton join the race
Price range $1,350 - $2900
Objective – to milk the cream off the market
In 1971, others join in. Price range $125 - $475
1972, more players. Prices fall further.

30. The Quartz Crystal Race Heats Up
Waltham introduces a quartz crystal, solid
state, liquid crystal display (LCD) watch
Microma Universal, supplier of IC and LCD,
enters the watch market
Chip fabricators - Texas Instruments, RCA,
Motorola to enter electronic watch making ??
All quartz watches worldwide contained IC by
US electronics manufacturers

31. Quartz Is Superior!
Low labour cost – as low as 10% compared to
70% for mechanical watches
No patent issues. Technology available outside
the watch-making field
Low cost without compromising quality
Higher economies of scale possible
Quartz crystal and LCD technologies being
perfected further

32. Quartz Will Impact The market
Tall claims of decline of mechanical watches
Prognosis of emergence of American watch
industry and submergence of others
High hopes due to long range price prospects
Estimated market share in 1980 only 1/3 of
total market of 300 million units
Swiss watchmakers claim preparedness for
mass production of quartz watches

33. By Anshuman
Is Swiss Watch Industry Prepared?
34

34. Why did the Swiss dominate?
Strong dimensions of the Swiss competitive strategy
– Specialization: developed as a tradition and a cottage industry
– Brand identification: “Made in Switzerland”
– Product quality : excellent
– Technological leadership: leader in mechanical watches
The Swiss business scope
– Catering to world market
– Catering to almost all the market segments
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35. World market, all
The Competitive Positions (Approx.)
Bulova
segments
Timex
Omega,
Rolex
small
Competitive scope
Swiss Seiko,
Citizen
Restricted market
Price Differentiation
Competitive strategy
36

36. Why did/should dominant position erode?
2
Flank
1
Preemptive
Attacker Defender Contraction
Counter-offensive
Mobile
Frontal attack by the competitors
•Showed no signs of Dynamic Capability 3
•Showed signs of Core Rigidity
•Competitors adapted the Scale-driven value drivers
•Failed to recognize the Industry Disruption & Technical Substitution
Government policies
37

37. Our Recommendations To Swiss
Consolidate quickly
Invest more
– In R&D
– In Production
Select your market
Position your brand
– Advertise
Play like the leader
– Extend market, defend position, expand share
– Take lead in innovation, your original position
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38. That’s All From Group A
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