Swatch.group2

Symbiosis Institute of International Business (S.I.I.B) Pune

SWATCH Case Analysis Strategic Marketing Management Submitted By Group 2 on 08-09-2011 Name Manish Bajpai Siddhesh Brid Amruta Mohite Madeep Chadha

PRN 10020241046 10020241111 10020241035 10020241014

Problem statement: 1. The company at the moment is not sure whether the product is Fashion Inducing or not. So to identify whether the products can make people follow what product intends to deliver is a perplexing question in front of the management. Swatch is known for giving quality at low price but in the same segment many new competitors, with lower price points are coming in. So the first problem is “delivering quality” at competitive prices. 2. Now the research shows the different features are rated differently in different countries. So another problem statement is whether company should go for global positioning or local positioning which is depicted in exhibit-6. 3. How to embed the objectives of above two problem statements in company’s objective of improving sales growth and developing a long term international strategy.

ASSUMPTIONS: 1. Findings of Exhibit 6 and exhibit 7 are representation the whole population in given countries. 2. Technology would allow reducing the manufacturing cost. 3. We would be talking in terms of the strategy in terms of 5 territories discussed in Exhibit 22. 4. Swatch is in a position to set up new manufacturing company. 5. There are distributors which cater to all the regions of a market.(e.g HCl in case of Nokia in India) SWOT Analysis     

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Strengths Swiss Quality Label Patents Products are continuously evolving Promotional Budget is 30 % of Sales Highest awareness in all the served markets Opportunities Growing market size Lowering down of manufacturing costs

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Weakness High labour cost as compared to Asian Manufacturers Low margins to wholesalers

Threats   

Emulators Low price players in Asian markets Digital watches

Segmentation, Targeting ,positioning: A closer look at exhibit 22 gives us an insight as to what people think of Swatch and what all values do they think Brand Swatch has. Following characteristics emerge 1. Switzerland: people think of swatch as a quality watch for sports enthusiast and which comes at a reasonable price. 2. United States: people in US think of brand Swatch as an attention catcher and trendy watch and it comes at a reasonable price. 3. United Kingdom: people in UK think of Swatch as a fashionable watch suited for all occasions and come at a reasonable price. 4. France: young people’s watch which keeps sync with fashion and appeals to sport enthusiasts. 5. West Germany: the outlook of the people is same as the people in France.

So, a look at the preferences of people in these territories gives us an overall view of what perceive of Swatch. It is summarised as follows: 1. Fashionable 2. Trendy, continuously evolving 3. Young and sports enthusiasts. So, the product line will cater to these people and not particular age segments. So, targeting will require emphasis on these attributes of the brand and the values that these attributes will bring for customers. So the basic targeting strategy can be devised by identifying the points of parity and points of differences of Swatch watches: Points of parity: 1. Quartz technology because it is precise 2. affordability 3. trendy Points of differentiation: 1. Swiss watch- quality watches. 2. Continuously evolving designing- a new design in every 6 month on an average. Now, positioning of watch should keep points of differentiation in mind. So it should be positioned as a fashion accessory that keeps the customer in sync with latest trends and comes at cheaper prices. Now, here company should identify the different stages of life cycle of the product. The company should be first to identify the fashion so that distinctiveness of the product can be

identified. So that company can be a first mover considering that fashion and maximum benefits can be reaped out otherwise emulators can mimic the product and it will soon become mass market thus it might lead to decline of margins. Earlier the company is able to identify the fashion, more would be the margins and more can be the advertising expenditure ( company invests the 30% of net revenue on advertising). Communication strategy: Swatch now has to design communication strategy. For an effective communication Strategy Company must 1. 2. 3. 4. 5.

Identify the target audience Determine the communication objectives Design the communication Select the channels Establish the total marketing communication budget

Modern marketing calls for more than developing a good product, pricing it attractively and making it accessible. Company must also communicate with present and potential stakeholders and general public. For most, the question is not whether to communicate but rather what to say, how and when to say it, to whom and how often. Identify the target audience Swatch should identify the potential buyers, current users, deciders or influencers, individual group etc. Above we have found out the basic perceptions about Swatch as a brand and the values that it brings to customers. The company should identify those groups which are trendy, fashion conscious and wants to have Swiss quality watches at affordable prices. Determine the communication objectives There can be various communication objectives like category needs, brand awareness, brand attitude and brand purchase intention. As can be seen in exhibit 20 Swatch enjoys good brand awareness among the five territories discussed above with almost same perception but the company has not been able to project the same values in past. Company has not been able to make brand attitude. Swatch has a chance of catering to need of people who are fashion conscious coming at affordable prices and thus can build a brand attitude of being a watch for young hearted sportsmen. Design the communication Company should come out with creative strategy of roping in both retired sportsmen and old Hollywood stars as well as young players like Evan Lendl young football players as in Europe Football and tennis is a frenzy. This communication will have transformational appeals, as it will cater to non product related benefit or image. The effort of the company has to create a sense of belonging with Swatch. Selecting communications channel

We have a choice between two kind of marketing channels a. Personal communication channels b. Non personal communication channels We will choose non personal communication channel like electronic media as the brand value propagators have to say how they associate themselves with Swatch. Through electronic media advertisements this can be effectively conveyed and it will be most effective in moulding the brand attitude, which at the moment is quiet weak for the brand. Also print media advertising will be effective in communication. Establishing total marketing communications budget Company, presently spends 30% of net revenue on the advertising. Rather company in this current scenario will have to decide on budget through objective and task method, which can be formulated as follows with the help of exhibit 20. 1. Establish the market share goals The company will have to estimate potential users and sets a target of attracting the a percentage of those potential users. 2. Determine the percentage of aware prospects that should be reached by advertising. 3. Determine the percentage of aware prospects that should be persuaded to try the brand. 4. Determine the number of advertising impressions per 1% trial. 5. Determine the number of gross rating points that would have to be purchased. 6. Determine the necessary advertising budget on the basis of average cost of buying a gross rating point.

The objective and task method has the advantage of requiring management to spell out its assumptions about the relationship among dollars spent, exposure levels, trial rates and regular usage. Distribution strategy The problem with the distribution of Swatch at the moment is 1. No exclusivity provided to distributors. 2. Low margins for distributors- It is lowest among all the competitors and stands at 11% for swatch, 16% for Japanese manufacturers, 18% for Hong Kong, 25% for Swiss watches. 3. Parallel importing and distribution through unauthorised channels leading to counterfeiting activities thus diluting the Brand image. Company has to deal with above said problems so first of all company can opt for a single local distribution company having wider reach in a particular market. Now to tackle the situation of low

margins for distributor, Swatch can set up companies where manufacturing costs can be lower. The lowest cost of manufacturing is in Japan(18%) and cost of manufacturing for Swatch is 20%. So company can set up manufacturing company in some Asian country where the cost of manufacturing can be lower than 18% and some benefits of lower manufacturing can be supplied to distributors. Also we have mentioned that company will have only one distributor and Swatch will provide the volume to that Distribution company with extra margins to distributor thus leading to economies of scale and it would be a win win situation for both Swatch as well as Distribution company.