Swatch

THE "CASE" SWATCH 1. INTRODUCTION Among the numerous grades of wrist-watch we thought necessary choosing the Swatch model, this being a very significant design object. It becomes popular not for the shape innovation but for the message it carries inside and for the high quality with a low cost. 2. WHAT IS SWATCH The Swatch comes out like a moulded plastic watch with a quartz movement and it is entirely produced in Switzerland. In 1986 the Swatch was launched in Italy, the last great European nation to have received it into its market; because of this reason at the moment of its launch the Swatch success was tremendous. The Swatch is manufactured in an enormous amount of models, at about 140 each year, the most part of which is designed in the Swatch planning laboratory in Milan; at about 20 people coming from different parts of the world are working here. One of the greatest contribution as a art director of the laboratory was given by Alessandro Mendini a famous italian designer. At the moment, the range of Swatch watches is made up of the classic first model and of products carrying out different functions such as the scuba (subaqueous watches), the chrono (quartz chronographs), of automatic models and, newly, of metal watchcase watches. 3. THE WATCH MARKET The Swatch comes out in Switzerland to contrast the crisis of the national watch industry blew up in the 70s because of the arrival of hundreds of quartz watches at a low price, coming from Japan and from Hong Kong, and for the decision to adopt not the quartz technology the Swedishes themselves had invented. There were, moreover, strategic, structural, and managerial problems too. The two biggest Swedish watch firms, the Ssih (Omega) and the Asuag (Rado, Longines, Ebauches) were going to a bad patch because of erroneous production and selling choices and, in 1983, this will bring them to merge into Smh (Swiss Corporation for Microelectronics and Watchmaking). At the moment of the merger of the two companies, the watch market had a selling volume of about 500 millions of annual units, divided into three

different segments. The lowest market segment included watches at a cost of about 75 $ at most and represented 450 of the 500 millions of units. The intermediate segment, with prices of about 400 $ at most, affected the market with 42 millions of units. The last segment, the highest, was made up of 8 millions of pieces with prices varying from 400 to several millions of dollars. The Swedish quota at the lowest segment, 450 millions of watches, was equal to zero; in the intermediate segment it was of about 3%, while in the highest was of 97%. The Swedish producers reacted to the quartz technology by withdrawing gradually themselves from the lowest segment, by exposing themselves, through time, to attaks of the oriental producers also in the other segments. It was at this moment that the Swatch operation came out, to have a wide presence in the market, so to control the quality and the costs also in the other segments. 4. COMMODITY OR UTILITY? To consider the watch not to be necessarily a commodity but a emotional product able to show a image to the others was the factor of success of the creation of the Swatch. This object became popular in a absolutely new market thanks to the discovery of a new language of visual communication that was visible in the images printed on it; it became than holder of a message to the people and no more a instrument to measure the time. We could state, in fact, that the Swatch is a watch simply because the conceiver produces watches, but it could have been any other product. 5. VISION AND MISSION OF SMH Smh sets itself the vision to bring the Swiss industry of the clocks back to a leader market position and the mission to bring the turnover in assets (for the sake of lucro). 6. STRATEGIES, TARGETS, VALUES The main strategies identified in order to support the business vision are based on the reorder of the organization, on the creation of a specific product for the lowest segment of market and on the repositioning of the already existing brands. As a target the company established of having a leader brand for every field relying on the potentialities of the Swiss industry (values)

7. STRATEGIC AND PRODUCTIVE CHOICES OF SMH In order to have a competitive product in the price on the market and at the same time profitable for the company, it was necessary to rethink the productive systems and the strategies. Smh is a strongly integrated enterprise vertically, this for being able to conserve strategic independence and freedom of maneuver in the market. The single marks do not build more their clocks, because the production is totally cetralized with the use of parts the most standardized the possible and is moreover strongly automated. The choice of a wide vertical integration was due to the fact that the only producers of movements besides the Swiss were the Japanese of the Citizen and the Seiko. If the Swiss producers had decided to acquire the mechanics for their clocks from the companies of the Rising Sun they would surely be exposed to political obstruction. In fact, in case of particular success of a Swiss clock, the Japanese enterprises would have suspended the production or have raised the costs of their mechanisms. In order to avoid whichever interference from part of other companies, Smh chose to produce also the chip to 1.5 volt, necessary for the production of its clocks; this brought the company to massive investments from more parts thought excessive. The choice to produce these components revealed to be veryprofitable; currently, in fact, the chips are used in other equipments such as: hearing aid, pacemaker, cellular telephones and even the switch of monitoring for ABS systems. The receipts for the sales of the chips from 1.5 volts come for over the 50% from external fields to those of the clockwork, allowing to maintain high volumes and low costs. When Smh entered the market of the quartz movements it created a remarkable reduction of the prices of the same ones, and began to resupply the companies that assemble clocks to Hong Kong and in Japan also. The corporate structure, differently from the production, is the most possible decentralized. The Smh has 9 main marks on a world-wide scale: Blancpain, Omega, Longines, Rado, Tissot, Certina, Hamilton, Swatch and Flik Flak. Every brand has its own organization, its management, and even its own buildings. The marks have the complete control on the design, the marketing and the communication. But they have a role decidedly limited in the production and the assemblage. For this reason they must negotiate with the technological branch and that one of the production of Smh. A productive organization of crucial importance is Eta, which constructs all the quartz movements of Smh. Eta that has center to Grenchen, 20 minutes to the south of the home office of Smh to Biel, has the responsibility of all the research on the electronic movements and of all

their production and the assemblage. Eta is a productive empire. It allows to work to gigantic factories building movements for the greater part of the producers of Swiss clocks, and assemblage systems highly automated in all the country. Obviously only Eta is in a position to satisfy its main customers: Smh marks. Therefore are always in course negotiations on the style in relation to the quality, on the design in relation to the feasibility, the speed in relation to the cost. These rigid borders and these laborious negotiations let Smh to reduce the general costs at the bottom. 8. THE ORGANIZATION IN SMH The company has a very little number of bureaucratic control systems or referents of the headquarters. Instead, beside the apex of Smh there is a Enlarged Group Management Board constituted from 16 members. The executives that make part of this council work in all the parts of the world and are directed responsible of the different units of business of the company. A Restricted Group Management Board composed from 7 members chosen between those of the wider group, constitutes the highest organ of management of Smh. When these 16 executives gather, as they make once a month (the more narrow group gathers, instead, 2 times a month), they exchange the information related to the key markets of the respective nations, they make to emerge and they level eventual controversies between unit of business and zones in competition, and then they return to the respective organizations with the last "outline of game" of the enterprise. In other words there are minimum time discard between decision and action. Finally there is the general executive manager who becomes part directly and visibly in all Smh, in particular in the aspects that regard the strategy and the new products. This role has been covered since the beginning from Nicolas G. Hayek who has shown remarkable dowries of leadership. To him are linked the choices against current to produce the clock entirely in Switzerland (country with one of the work costs more elevate in the world) and a strongly integrated organization vertically. Even if these choices to the beginning were opposed from many, they were revealed extremely effective allowing the company remarkable returns. The enterprise has approximately 200 centers of profit for which are defined very strait budgets , are controlled closely the achieved results turned out with timely statements that concur to react very quickly to unexpected situations. The organization of the job is based on a planning team, a system that renders if the entire team is completely concentrated on the objective to catch up. The final result

is a solid company without being heavy: a determined contender and in fast evolution whose remarkable turnabout demonstrates the power of the not conventional principles of management of Smh. 9. TENDENCIES AND EVOLUTION It is just the evolution that characterizes the Swatch production: being born like a simple quartz clock in colored plastic, formed from 51 pieces, it has acquired in the time ulterior functions; they have been created chronograph models and with alarm clock, underwater and for wall, until arriving to models that little they have to see with the starting technologies, but they follow the traditions of the Swiss clockmaking, such as the Irony models with metal case and the Automatic with a automatic movement. Recently it is caught a glimpse in the Swatch a greater attention to the various cultures present in the world. The company in fact has contacted, for its last collection dedicated to the art, 6 artists coming from various zones of the world: Australia, Africa, China, United States, Europe and Russia. This has carried the Swatch to being permeated of messages coming from different and far between them cultures. Probably will be these 2 tendencies of market to make from guide to the evolution of the Swatch in the next few years; it is not difficult to imagine a automatic rifle model with case in metal and an always greater separation from the Swiss culture or at the farthest European, with an extension of the message to far or smaller cultures. 10. A STRONG MESSAGE The Swatch clock is born in 1982 for one field of market to low cost: that one constituted from plastic clocks coming from Japan and Hong Kong. The classic shape of the Swatch is due to 2 young graphical designers of Zurigo, which, before reaching the final definition , have experienced various shapes, between which also those square and rectangular ones. The precarried out launching to St' Antonius in Texas, in spite of the good quality of the product and its low cost, revealed a fiasco for the Swiss company. Its collection was ugly and boring, its colors pale and dark. Also the official launching happened in Switzerland in March 1983 was not thrilling; it was understood, then, that in a market as that one of the clocks at a low cost was not sufficient a product reliable, but it was necessary a clock that it had something completely

various from how much was already present in that field. The clock was considered no more a functional product but an object that could be important for its own image. It was attempted to load the Swatch with a strong, exciting, particular, authentic message, that could reveal to the others who it is and because it makes what is made. There are many elements that construct the Swatch message: elevated quality, bottom cost, provocation, joy of living, but the more important element is the difficulty of imitation from part of others. At the moment the Swatch caught up these objectives, the success was clamorous all over the world. A new market in which the succeeding element was the message and not more the function came to create itself, in which Swatch was found again to being the only actor. This product was turned to people of whichever class, but genuine, shining and nonconformist. In agreement with how much the clock had to transmit, the presentation in the several countries has been carried out in a original way. In Germany and Japan, as an example, it has been hung on a skyscraper one giant Swatch , high more than 165 meters, heavy 13 tons and really working. 11. THE MARKETING - MIX The marketing mix developed from Smh is based on a product of low cost and high quality, bearer of a message, with a packaging formed from one simple box in a transparent plastic, distributed directly through own stores, and customary channels of sale (jewelrys shop, department stores) with a price of approximately 40 dollars. The promotion was carried out beyond that with the usual television advertising campaigns and on the printed publication paper, also with the creation of own events (festivity to Zermatt for the one hundred-milion produced clock) and with the presentation of particular models in places appointed for other uses (Triptycon model with a decoration regarding the feeding, introduced in the fruit and vegetable markets) beyond to the sponsorship of initiatives at a high technological and ecological content which the World Solar Challenge (competition for vehicles moving with solar energy that is carried out in Australia). The marketing mix developed initially from the Smh for the Swatch, based on the intensive development and a strategy of penetration in the market, evolved becoming one marketing mix centralized on the diversified development. The product is passed from an only typology and only a price (simple clock) to one series of models from the various prices, able to satisfy different requirements. It was passed from the 50000 Liras of the classic model to beyond 100000 Liras of the models more evolved. The Swatch comes therefore

oriented towards several segments, as an example it has been placed greater attention to the feminine public creating smaller models (series Lady Lady), or towards more tradizionalist clients inserting into market clocks and chronographes with case in metal (Irony series), diversifying the packaging in accordance with the models (box covered in feint skin for the Irony series). The purchase process differs remarkablly from that one of other products: thanks to its low cost and the plurality of messages of which it is bearer it seems more to approach itself to the purchases defined of impulse. In fact, the phases related to the collection of information and appraisal of the alternatives are completely jumped. From a point of view regarding the cycle of life of the product we could assert that it finds itself in a phase of maturity and it does not seem to have undertaken the phase of the decline. For Smh the Swatch represents an authentication cash cow, it guarantees a remarkable cash flow in a market with amodest development rate. 12. SWATCHMANIA As far as the Italian market, the launching of the Swatch has happened in atypical way. The clock was already famous because previously introduced in the other European states. This created in the Italian consumers a strongest desire of possession of the object. The wait for the official launching in Italy was skillfully fed with one series of events of high profile, like one of the first organized auctions of Swatch from Sotheby just in Milan. Moreover, was taken advantage of the fact that also famous personages had become purchasers of the "economic" Swiss clock. It has begun therefore a authentic collector phenomenon that carried the prices to double themselves or to triple themselves in the exchanges between private, beyond catching up millionaire quotations for the older models or products in limited series. Currently, Smh has created just a club that re-unites the clients collectors, whose initiatives are present on Internet in a site purposely dedicated to the Swatch. As far as the Italian market, beyond the 25% of the purchasers is composed from young people between the 18 and the 35 years, pertaining to medium classes and medium-high of culture and yield, with a equal interest between men and women. Even if now the smania for the Swatch it is descent, the sales remain on the highest levels, it seems therefore that it has become a "eternal" brand like Coke Cola and Levi' s are.