Swatch watches case provides an excellent insight on how multiple image building

exercises could help position a image and convert it into a brand.

This Case can be looked from various angels:

Leadership – different traits of a leader who can be convincing, charismatic, dedicated,

visionary

Innovation in New Product Development – in line with the company’s existing

competencies. Will these new products provide us sustainable competitive advantage?.
First pager in a wrist watch

Brand Aspects – All above could be clubbed into this aspect to build a brand. How a
brand could be build?

The Swatch Group: On Internet Time (Knoop C.; Reavis C.; Wathieu
L.) New opportunities beyond the watch market have been explored
recently (e.g., telecom, cars), but they did not live up to expectations. In
October 1998, the Swatch Group launched Swatch Internet Time (SIT).
Many questioned Swatch's motive behind SIT and few saw it as a creative
advertising and publicity stunt

1. What are Swatch’s key resources?

2. Do these provide it with sources of sustainable competitive advantage?
3. Does Swatch Internet Time fit with the firm’s current brand appeal?

 Nicolas George Hayek, a Swiss-Lebanese entrepreneur born on 19 February 1928, died last
year on 28th June.

He was a business legend and a colourful character, He is being credited with reviving the
fortunes of the Swiss watch-making industry in general and the Swatch Group in particular, a
stable that is home to brands such as Swatch, Omega, Rado, Tissot, Calvin Klein and Longines.

To talk about history of Hayek. Having worked a consultant for few years, in 1963 he founded

Hayek Engineering AG and provided consultation to companies like Nestle, BMW, Siemens,
Swiss govt.
1970s – Japanese and Hong kong based manufacturers exploited their cheap labor, mass
product and quartz technology to penetrate rigorously in the world market lost cost watches. This
led to erosion of swiss made watches market share. Swiss exports fell from 91 mn watches in
1974 to 43 mn in 1983. Market share fell from 43% to less than 15%. This means market was
212mn in 1974 and 286 mn in 1983. Market grew but swiss made watches market share went
down.
SSIH and ASUAG – two of the swiss pretigious watch manufacturers were troubled at that time.
Nicolas Hayek, was asked to evaluate the situation. The Swiss banks were ready to write of their
losses selling off the assets of the company, however also wanted to preserve the rich Swiss
tradition of watchmaking and hoped a recovery strategy could be developed.
Hayek diagnosed the situation and came up with two proposals.
1. Merger of SSIH and ASUAG – to form SMH (swiss corporation of microelectronics and
watchmaking industries). SMH was renamed swatch group in 1998.
 Swatch group followed a flat organizational structure, hired resourceful people,
did not carry any debts, adopted simplicity in communication and believed that
people can change.
2. To develop low cost, high quality plastic watch brand. He analysed that 75-95% oe EU
consumer and 51-75 US consumer are willing to pay 7-10 % brand equity for a swiss
watch over Japanese watch.

He stated reason for adopting second proposal as well

- automation for high volumes improves productivity
- young people being price sensitive buyers are most likely to buy low priced watches
- mass market allows better brand communication by the consumer itself
- keep the competitors busy in lower end while we explore higher end

SWATCH GROUP brands:

In 1979, swiss engineers in the race with japan to develop worlds thinnest watch developed a
watch on .98 mm thickness and only 51 parts as compared to 151 parts in a traditional watch.

In 1982 – same group of engineers after 3 years of research developed waterproof, shock
resistant, accurate timepiece in synthetic material capable of being mass produced as low cost
and attractive range of colors. – It was called Swatch

In order to lauch swatch on 1st March 1983 – they needed inexpensive ways to attract consumers.
They made a surprising move. They designed a huge Swatch watch, 500 feet long, was
suspended from skyscraper in Frankfurt which displayed “Swatch, Swiss, 60 DM”.
Same strategy was adopted for Tokyo. In US they adopted traditional marketing style through
department stores and advertisements.

Swatch turned timekeeping into fashion. Different color watches.

 Hayek also introduced the world to the idea of having more than one watch – he and his
family often sported three or four watches on their wrists. Consumers, too, often wore two
Swatches at once and used a Swatch as a ponytail band.

POSITIONING

Target market – young people, athletes, music freaks.

Frame of reference - Watches for various occasions and personalities. Case talks about
that Hayek noted: that every person who wears a watch shows it to 5-7000 people a year.
So it has to be Watch for everyone.
Point of different – high quality, low cost. If low cost product is of high quality, then high
cost would certainly be of much higher quality.