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Swatch Case Essay

2744 words - 11 pages

Problems and IssuesIn the 1980's, Swiss watchmakers began to realize they needed to change their business model to fit into a new global market place. They needed to not only change their views of the market but the infrastructure of watch manufacturing. In order to compete on a global level they needed to improve their technology, design products that would appeal to new markets and be able to compete with other companies on quality and cost. During this time, a merger of two companies helped create a new market for Swiss watches. Asuag and SSIH merged to create Societe Micromecanique et Horlogere (SMH). They developed a line of watches called "Swatch" that appealed to a younger target ...view middle of the document...

It didn't help either that competition was increasing for Swiss watches in existing markets and in new markets.Fashion, lifestyle changes, and changes in consumer tastes were areas that needed to be addressed by the Swatch Group in determining the best markets. In addition, most watch companies had shifted manufacturing to Southeast Asia since it offered lower cost production solutions. They remained the only watch group to continue to produce watches in one of the most expensive countries in the world. At this point in time, the Swatch Group needed to consider turning to India, which had a huge domestic demand and low-cost.Potential solutions to the issues / how these solutions will resolve the problemsAs they did in the early 1980's, the Swatch Group must adopt new global strategies to be successful again. This includes increasing sales by better penetrating current markets and establishing new markets, improving margins by cutting production costs, using company-wide best practices to achieve the highest level of efficiency, and defending existing markets by creating local manufacturing plants.Potential Solutions1. Creating niche products -The Swatch Group's focus on producing fourteen (14) different brands had taken their focus off consumer behavior and lifestyle changes. Swatch Group should focus on the top four products (Omega, Swatch, Tissot, and Rado), as these four brands produce over 82% of the company's sales and 88% of the operating profit. Globally, the Swatch Group had a 14% share of the luxury watch segment with brands like Omega and Rado.1 They should focus on these luxury brands which would prove successful in the Japanese market. Japanese consumers are known for their knowledge about name brands and have a strong desire to buy luxury products. Swiss watches have long been the favorite of Japanese consumers and will continue long into the 21st century.Focusing on high sales and high profit brands will reflect on Swatch Group's designing, manufacturing, advertising, marketing and distribution efficiency; in which will impact margins positively, and increase profits. Eliminating poor or low performing brands will insure high quality, which was increasingly demanded by consumers in the global market, in addition to reducing both finished and unfinished goods inventories. These inventory reductions will enhance return on investments (ROI), allow for better cash flow and fast turnover of supplies, in addition to eliminating low margins products, which reflects on the financial capabilities of the company.Lastly, focusing on the four successful brands will make distribution easier, more efficient, and more attractive for retailers to handle and maintain. It will eventually increase the number of retailers who carry the Swatch brand. Focused brands will give advertising money more bang for the buck, and advertising budgets don't have to be split amongst so many different brands.2. Target the Indian Market -The Swatch Group should...

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