Analysis of Swatch Company - Case Study Example

 Swatch Report: The Time According to Swatch Introduction Watch making and developing means of telling and measuring time have been an industry which has formed the basis of our civilisation as it has gone from the mechanical age to the digital age. Historically speaking, in the seventeenth century, watch making was seen to be one of the most amazing art forms while in present times; a watch is an essential part of the environment. Everything from mobile phones to mp3 players to expensive watches with jewelled movements tell us the time and keep us abreast of our day. A watch can be a multifunction utility device, a fashion statement or a symbol of wealth and in similar terms, the industry itself has been segmented into various zones which produce watches based on their niche or mainstream markets. One of the sellers, Swatch, has developed a new image and a revitalised brand which is respected by analysts and appreciated by the users as it operates in several different markets. Most importantly, it is given the credit of bringing the watch industry once again to Switzerland after it had been taken away by Japanese manufacturers (Blaszczyk, 2004). A large part of this success owes itself to the marketing function, the product design and to the operations of the company which all combine to show how Swatch has an advantage over the rest of the watch making industry. A deeper analysis of these elements is very important for all who are interested in Swatch in particular and the watch industry. Marketing Function If we examine the marketing side of the watch industry, we can see that there are different strategies adopted by the players in the global watch industry when it comes to marketing and creating an image for their products. Sellers such as Rolex may choose to highlight the celebrity or success association which comes from having professional sports personalities sponsor their products while companies such as Seiko or Citizen might be more focused on technology rather than celebrity appeal alone. In this regard, Swatch takes a fresh approach since it connects the product it is selling with fashion by making the watch a fashion accessory rather than a status symbol alone. In the fashion world, an established design house may certainly launch a branded watch under the name of the design house (TATA, 2004). Labels such as Giorgio Armani or Versace would have no issues in getting watches sold by them to be accepted as fashion accessories but to come into the market as an entirely new company or to create a new image altogether would be a significant undertaking when the total marketing costs are added to the expenses laid out for creating the brand recognition (St. John, 2002). Swatch can push the marketing side from two selling points which are seen as the drivers of the industry. These are fashion and technology since fashion lets the people know what the target market and the target group would buy and the development of new technology allows companies such as Swatch to produce more accurate and durable watches with a variety of fashionable and comfortable materials. For example, Timex produces a watch under a collaborative agreement with Microsoft to get an advantage over the competition in terms of the technology which the watch contained. This move allowed Timex to make customers take new interest in the brand. Similarly, TATA was able to create strides into the lucrative Indian market through innovative use of technology in the watch manufacturing process (TATA, 2004). Swatch markets itself to the sports and fashion conscious crowd and offers them an excellently priced alternative to more expensive watches which have perhaps the same level of functionality as the watches produced by Swatch. Since the demands of the fashion conscious crowds are quite fickle, Swatch has to continually adjust both its approach to marketing with event sponsorships as well as sports sponsorship in order to remain in touch with the young and the restless. However, till now this marketing approach has been quite successful for Swatch mainly due to the design of its products which have captured the hearts and minds of many individuals of all ages particularly those who wish to be in touch with the latest fashions. Product Design In the past, Japanese watch manufacturers such as Citizen and Seiko were able to use technological innovations in quartz technology that allowed them to make analogue watches that were equal to the ones made by high street Swiss manufacturers (Blaszczyk, 2004). This allowed them to undercut the competition and change the focus of manufacturing as well as sales from European or American watch makers to the industry in Japan. Swatch innovated with its own product design in order to heat up the competition in the market and through the use of alliances with clothing brands, designers as well as fashion houses the product design made by Swatch is now a strategic force which allows Swatch to change the rules of the industry (FHS, 2007). Of course, despite its innovations in watch design with new shapes and new brand alliances, the company does not have any real method of altering the overall dynamics of the industry since quarts based battery powered watches are a mature product which can be compared to automobiles in terms of the product life cycle maturity. Significant changes would be difficult to bring about since staples such as circular dials, numbers on the face, and hands to tell time are more or less standard as much as wheels and windscreens are standard on cars. However, Swatch does produce a much larger variety of models than any car manufacturer and this allows them to be innovative with product design. The products designed by Swatch seem to be quite successful in attracting the young, fashionable, urbanites to their brand and they reaped the benefits of their product design. For the future, by aligning more strongly with successful fashion brands and producing high quality watches for established brands to sell them under their own label, they could both boost both their image and improve their sales. Products could also be designed by keeping a certain theme in mind from a certain designer in order to present a complete package. As a designer sells a tie and shirt package, it could also sell as tie, shirt, trousers, belt and watch package where the colours of the belt match the colours of the watch. However, such a decision or any decision to place the Swatch name in close proximity with another designer has to be taken after a careful market analysis has been made and it has been evaluated to the extent of future collaborations with other designers and brands. If the brand associated with Swatch ever falls out of fashion or is removed from the public eye, the effect on Swatch would not be very positive since the associated fallout would also adversely influence the sales of Swatch. Operations Over the past few years, Swatch has changed its operations quite significantly. The company entered into several different markets including the automobile manufacturing industry which certainly affected how the company was operated. However, more recently the company has exited other markets to focus on watch making and fashion accessories alone. As these are complimentary markets for Swatch it can be expected that the operations have therefore become more streamlined and efficient. By exiting the automobile and the other secondary segments of the market, Swatch has certainly taken a positive step towards returning their focus on their core competencies. At the same time, it appears that there is still a significant market for having time telling devices inside automobiles and Swatch could manufacture watches or even design the interiors of cars which positively compliment the stylish exteriors of cars. For instance, sports car makers and utility cars producers could be brought onboard if watches placed inside their cars are co-branded with the Swatch logo and if the watch inside the car reflectd the image of a particular car. Others players in the market have certainly capitalized on this as Aston Martin and Bentley have partnered with Brietling to produce high end luxury watches. Comparison with the Industry The only strong barrier which prevents the entry of new companies into the watch industry and which allows the current players to dominate the market is the cost of entry. As increasing sales show, there is no real substitute for a watch and even though individuals may choose not to wear a watch and use a phone to tell time there will be those who consider a watch to be essential (Ramirez, 2006). Marketing certainly helps in selling watches especially when a watch needs to be given a particular image even if replicas can be made the quality and the manufacturing of the original cannot be realized in the cheap copies which are in the market (FHS, 2007). Buyer power in the fashion sector of the market is quite significant since what is fashionable today may not be as fashionable tomorrow without innovation or staying power with new trends (St. John, 2002). However, brand loyalty can also be established with good quality products and products which have a perception of permanence in some terms. For example, a company like Rolex or any other high end brand would try to give a generational image where a watch may be passed as an heirloom from one generation to the next (Shearer, 2002). Additionally, although there are significant barriers to entry, a new technology and a new system for production of wrist watches could certainly change the picture entirely. For example, using electronic paper or a source of energy from the human body could be one technological statement for making watches and a company which holds on to a patent on such a tool could feasibly come to the market with a bang. Of course technology innovation is hardly the core competency for Swatch since they are not a technology firm, however, they should continue to research and develop those technologies which can help them in the manufacture of watches. Japanese manufacturers such as Citizen already have developed innovative ways to power their watches which have been highly appreciated by industry critics. However, as finding replacement products for wrist watches is rather a daunting task, unless creative brilliance in watch design and market penetration is possible, a focus on technology would be more important for a company like Swatch. At the same time, price competition is not recommended since Swatch has already found a good price point for a lot of its products and getting into the high end market would only be recommended with the acquisition of a high end brand that already has an accepted image. Other companies in the market have undertaken quite a few acquisitions and Swatch should continue to do the same especially if it wishes to survive in developing markets. Conclusions Swatch should continue to develop new fashionable and sporty watches while focusing on the technology that helps it lower costs or get into a better position in the global market. Sports sponsorships, product placement and other such marketing tools would also help Swatch in getting a better market share with sports and fashion enthusiasts. Integration with other devices such as phones or MP3 Players which are commonly carried into the fashion market could also help the manufacturer improve both its sales and its image with the youth market which the company is interested in (Ramirez, 2006). It seems that Swatch is well placed in the market at the moment but with effective marketing and correct investments in the technology that drives the watch industry will allow it to come to the top of the market in due time. A return to the focus on the core competencies of the company has certainly helped the company significantly but more needs to be done as other companies have already been in the business of co-branding while Swatch might be trying to do the same with the acquisition of other brands. The company has changed the structure of the industry in the past and there is no reason why it cannot do it again today. Word Count: 2,027 Works Cited Ramirez, J. 2006, ‘Time May Run Out’, Newsweek, vol. 148, no. 8, pp. 14-15. Blaszczyk, R. 2004, ‘Manufacturing Time: Global Competition in the Watch Industry, 1795--2000 (Book)’, Journal of the History of Science in Society, vol. 95, no. 2, pp. 320-321. St. John, W. 2002, ‘Telling Time Is Not Enough: Some Watches Stop Traffic’, New York Times, vol. 151, no. 52067, pp. 19. Shearer, W. 2002, ‘Timely Investments’, Yankee, vol. 66, no. 5, pp. 40-44. FHS (Federation of the Swiss Watch Industry), 2007, ‘The Swiss Watch Industry’, [Online] Available at: http://www.fhs.ch/en/faq.php TATA. 2004, ‘Titan re-defines innovation in the watch industry’, [Online] Available at: http://tata.com/titan/releases/20040722.htm Read More