INDIAN INSTITUTE OF MANAGEMENT CALCUTTA STRATEGIC MANAGEMENT

THE WATCH INDUSTRIES IN SWITZERLAND JAPAN AND THE UNITED STATES I: An Overview of the World Wat h Ind!"tr# in $%&' A" (e"t a" an (e e"ti)ated* worldwide wat h and wat h )ove)ent +rod! tion in $%&' rea hed the level of $&, )illion !nit"- At )an!fa t!rer". "ellin/ +ri e" thi" +rod! tion had a val!e of a(o!t 0 $-1 (illion- 2in3lever wat he" on"tit!ted "li/htl# )ore than half of the total o!t+!t4 5eweled3lever wat he" )ade !+ the re"t with the e6 e+tion of $7 3 87 of the total whi h (elon/ed to a variet# of ele tri and ele troni )odel"-$ Sin e the earl# $%,'"* when worldwide wat h +rod! tion wa" at an ann!al rate of a(o!t 9, )illion !nit"* the o!t+!t of the ind!"tr# had in rea"ed fo!rfold- In the $' #ear" leadin/ !+ to $%&'* worldwide o!t+!t in rea"ed at ann!al rate" that ran/ed (etween &7 and $$7- Tal: a(o!t )ar:et "at!ration +er"i"ted a)on/ "o)e wat h)a:er"* #et a" of $%&' the overall /rowth of the ind!"tr# and not "hown an# noti ea(le "i/n of "lowin/ down-;Ta(le3$ "how" the ori/in" of the $%&' o!t+!t8-< The"e fi/!re" in Ta(le3$ ill!"trate "everal i)+ortant +oint"- The fir"t i" a well3:nown one : Swit=erland i" far and awa# the do)inant wat h )a:in/ nation- In $%&' it" +rod! tion a)o!nted to 987 of Worldwide o!t+!tTa(le 3$ Leadin/ Wat h)a:in/ Nation" 3 $%&' ;)illion" of wat he" and wat h )ove)ent< Co!ntr# Swit=erland >a+an USSR United State" Fran e We"t Ger)an# Mainland China ,-'@ Ea"t Ger)an# United Ain/do) $-8 Ital# Other" 2rod! tion &1-& 81-? 8$-,@ 8'-' $$-' ?-8 3 ,-1 $-' 8-B@ 8-'@ CCCCCCCC $&9-, '-B 3 CCCCCCC %?-& $-? E6+ort" &$-9 $1-& $-? '-8@ 9-$ 9-$ E6+ort" a" 7 of +rod! tion %&7 ,?7 ?7 $7 1&7 ,'7 3 ,$7 1$7 817 3 CCCCCC

@ E"ti)atedThe "e ond +oint i" le"" well3:nown: there i" on"idera(le +rod! tion in o!ntrie" !rrentl# o!t"ide the )ain"trea) of We"tern o))er e- In $%&' o!t+!t in the USSR* Ea"t Ger)an# and )ainland China re+re"ented a(o!t $&7 of the World total- For the ti)e (ein/* at lea"t the (!l: of thi" o!t+!t "ta#" within the Ea"tern (lo :A ordin/l#* the o))!ni"t o!ntrie"* and in +arti !lar the Soviet Union* will (e e6 l!ded fro) thi" note." anal#"i" of the "tr!//le for the world wat h )ar:etWith the Ea"tern (lo : o!t of the +i t!re* the Swi"" do)ination of wat h)a:in/ (e o)e" all the )ore "tri:in/- In $%&' ever# other wat h)a:er in the non3 o))!ni"t world a)e fro) a Swi"" +lantThe third +oint had to do with how the wat h)a:in/ in Swit=erland* >a+an and the United State" are
1

For a brief guide to watch technology, see Appendix `A'

Data provided in Tables 1 through 5 are provided by the Federation of Swiss Watchmakers.
2

lin:ed to world )ar:et"- In $%&' Swi"" wat h)a:er" e6+orted virt!all# all of their o!t+!t* >a+ane"e fir)" e6+orted "li/htl# )ore than half of their o!t+!t* and A)eri an o)+anie" e6+orted al)o"t none of their o!t+!t- In the a"e of the United State"* the lar/e"t wat h )ar:et in the world* do)e"ti +rod! tion a o!nted for "li/htl# le"" than half of it" need"- I)+ort"* "o)e fro) forei/n fir)" and "o)e fro) United State" 3 ontrolled +lant" "ited over"ea"* filled the voidWhile data on the +rod! tion of wat he" (# o!ntr# are readil# availa(le* fi/!re" on )ar:et "i=e (# o!ntr# are hard to o)e (#- Still* ro!/h e"ti)ate" (# )a5or /eo/ra+hi al area" are +o""i(le- In $%&'* E!ro+e in total re+re"ented a )ar:et a(o!t eD!al to that of the United State" : wat h +!r ha"e" in (oth )ar:et" ran at an ann!al rate of aro!nd 9, )illion !nit"- In the "a)e #ear* >a+an." ho)e )ar:et wa" a(o!t a third of the "i=e of tho"e in E!ro+e or the United State"- And a" for the re"t of the world ;e6 l!din/ or the o))!ni"t o!ntrie"<* it" )ar:et ro!/hl# )at hed that of E!ro+e or the United State"The re)inder of thi" note e6a)ine" the three wat h)a:in/ ind!"trie"* a" of the earl# $%&'"* were the )o"t a tive ontender" for do)inan e in the"e )ar:et"- Se tion" II* III and IE de" ri(e* in t!rn* the Swi""* >a+ane"e* and the United State" ind!"trie"- Se tion E whi h on l!de" thi" note* di" !""e" the re ent te hnolo/i al advan e" that have t!rned the onte"t into o)+etitive t!r)oilII: The Swi"" Wat h Ind!"tr# "Watchmaking - long presumed the private preserve of Swiss interests, has in the last decade or so clearly become a field that's up for grabs. The lpine republic's one-time international hegemony in the timekeeping business is now almost as full of holes as the country's !ustly famed cheese." "alue #ine Selection and $pinion %&idiculous'. '(ecutive )irector, Watchmakers of Swit*erland +nformation ,entre.

Ind!"tr# Fi/hli/ht" in $%&' Wat h)a:in/ ha" alwa#" o !+ied an e"+e iall# i)+ortant +la e in the Swi"" e ono)# and the #ear $%&' wa" no e6 e+tion* ro!/hl# $*''' different fir)" and ?'*''' e)+lo#ee" were en/a/ed in )a:in/ 0 B1' )illion of wat h and wat h3related +rod! t"1- Wat h)a:in/ ontri(!ted al)o"t 17 to the total Swi"" GN24 in that #ear it wa" Swit=erland." fo!rth lar/e"t ind!"tr# and it e)+lo#ed lo"e to ?7 of all )an!fa t!rin/ wor:er"Of ne e""it#* the Swi"" e ono)# de+end" heavil# on e6+ort"* and wat he" have ro!tinel# (een one of the o!ntr#." )a5or forei/n e6 han/e earner"- In $%&' a(o!t %&7 of total wat h +rod! tion ha" "hi++ed o!t"ide the Swi"" (order"- Eal!ed at 0 B$' )illion* the"e "hi+)ent" re+re"ented $87 of the total Swi"" e6+ort"* )a:in/ wat he" the o!ntr#." third )o"t i)+ortant e6+ort +rod! tIn $%&'* wat h)a:in/ ontri(!ted to the Swi"" e ono)# in "till another i)+ortant* if intan/i(le* wa#- A" the Swi"" Gan: +!t it: "The long-standing reputation of the Swiss watch industry also provides another free benefit to the Swiss economy. -eing a typical symbol of .uality and reliability it acts as an advertising medium for other Swiss products. Swiss industry, due to the absence of low-cost natural resources, is often at a disadvantage, in terms of cost, when competing against other countries' products. Therefore, the reputation of the Swiss watch does help to publici*e the .uality of the %Swiss-made' brand and acts as a powerful sales argument." Not onl# wa" the Swi"" wat h)a:in/ ind!"tr# i)+ortant at ho)e* it wa" i)+ortant to the worldE6 l!din/ +rod! tion in o))!ni"t o!ntrie"* ever# other wat h )ade in the world in $%&' a)e fro) Swit=erland- And three D!arter" of all wat he" e6+orted fro) an# o!ntr# in $%&' a)e fro) Swi"" +lant"Tho!/h the Swi"" hold on the world )ar:et in $%&' wa" i)+re""ive* it wa" not "o i)+re""ive a" it had (een "everal de ade" earlier- In the late $%9'" the Swi"" "hare of worldwide +rod! tion wa" over ?'7* and the Swi"" "hare of wat h e6+ort"* fro) all "o!r e"* wa" aro!nd %,7- In re"+on"e to tho"e who tal:ed a(o!t the wea:ne"" of the Swi"" ind!"tr#* +ointin/ o!t that it" "hare of the world )ar:et had (een o!t in half d!rin/ $%,'"

Unless otherwise indicated all data originally stated in Swiss franc have been converted into US dollars at the 1970 exchange rate 4.3 Swiss Franc = 1 US Dollar.
3

and $%B'"* the Swi"" an"wered (# referrin/ to the three3fold /rowth in their wat h +rod! tion- Ga : in the late $%9'" the Swi"" ind!"tr# +rod! ed aro!nd 8, )illion wat he" and wat h )ove)ent" ea h #ear4 (# the earl# $%&'" the ind!"tr# wa" +rod! in/ ann!all# at lo"e to the &, )illion !nit rate- E)+lo#)ent in the ind!"tr# had a t!all# in rea"ed "li/htl# "in e the +o"t3world War3II #ear"- In the Swi"" view the dra)ati /rowth in their wat h o!t+!t re+re"ented a on"idera(le a hieve)ent and indi ated that Swit=erland wo!ld re)ain the do)inant wat h3 +rod! in/ nation for #ear" to o)eSwi"" E6+ort" in $%&' Sin e* for all +ra ti al +!r+o"e"* the Swi"" e6+ort all the wat he" the# )a:e* it i" ne e""ar# to loo: at the o)+o"ition of e6+ort" in order to !nder"tand Swit=erland." o)+etitive +o"ition in forei/n )ar:et"- G# +rod! tion ate/or#* the $%&' Swi"" e6+ort" were a" follow" : Ta(le 3 8 Swi"" Wat h E6+ort" (# Sta/e of 2rod! tion 3 $%&' 2er enta/e of E6+ort" Cate/or# in Eal!e Ter)" Fini"hed Wat he" &&-'7 Wat h Move)ent" $8-,7 Mi" - wat h o)+onent" $'-,7 ;in l!din/ a ")all a)o!nt of lo : e6+ort"< The +er enta/e "hown a(ove were al)o"t identi al for 5eweled3lever and +in3lever wat he"a)o!nt of lo : e6+ort"< Ta(le 3 1 Swi"" E6+ort" (# T#+e of Wat h 3 $%&' Unit" ;)illion"< 1?-1 18-& '-1 Eal!e ;US 0 )ill-< 99' ?, ? Avera/e val!e +er !nit ;U-S- 0< $$-,' 8-B8 8B-''

>eweled3lever 2in Lever Ele tri 3Ele troni

Ta(le" 8 and 1 )a:e one +oint D!ite lear- In $%&' the e6+ort of fini"hed 5eweled3lever wat he" on"tit!ted the ore a tivit# of the Swi"" wat h)a:in/ ind!"tr#- An#thin/ 5eo+ardi=in/ thi" "e/)ent o!ld 5eo+ardi=e the entire ind!"tr#Ta(le 39 "how"* (# )a5or /eo/ra+hi al re/ion* where the Swi"" e6+ort" went in $%B' and $%&'- Several +oint" "tand o!t- Fir"t of all* Swi"" e6+ort" of 5eweled3lever wat he" have (een "o)ewhat )ore di"+er"ed than tho"e of +in3lever wat he"- Se ond* d!rin/ the $%B'"* the U-S-3 Canadian )ar:et de lined in it" relative i)+ortan e to the Swi"" while the E!ro+ean )ar:et (e a)e )ore i)+ortant to the)- And third* (# $%&' A"ia had (e o)e a )a5or )ar:et for Swi"" +in3lever wat he"- When loo:in/ at the"e fi/!re"* (ear in )ind that the val!e of 5eweled3lever e6+ort" wa" al)o"t five ti)e" that of +in3lever e6+ort"- Con"eD!entl#* the "hift" i" )ar:et that too: +la e with 5eweled3lever wat he" had a far /reater effe t on the val!e of e6+ort" than did tho"e that too: +la e with +in3lever wat he"Ta(le 3 9 Swi"" E6+ort" (# Ma5or Geo/ra+hi al Re/ion" 3 $%B' H $%&' ;for wat he" and wat h )ove)ent" o)(ined< 2er ent of total e6+ort" in !nit ter)" >eweled3lever 2in 3 lever $%B' $%&' $%B' $%&' 8B-87 18-&7 $?-87 8$-&7 1-%7 9-%7 $'-&7 ,-&7 &-?7 $9-97 $-87 8-?7 $1-17 $$-B7 %-97 8B-87 1$-B7 88-17 9,-87 1B-87

E!ro+e Afri a Middle Ea"t A"ia USA 3 Canada

Latin A)eri a O eania

$9-,7 8-&7

$8-$7 8-'7

$,-$7 '-87

&-$7 '-17

Ta(le3,* whi h li"t" all the o!ntrie" to whi h the Swi"" "hi++ed a )illion or )ore wat he" in $%&'* ro!nd" o!t the e6+ort" +i t!re"- A" ta(le3, indi ate"* $$ o!ntrie" i)+orted the (!l:3three D!arter" in !nit ter)" and two3third" in val!e ter)" of Swi"" wat h +rod! tion- A" the World." lar/e"t wat h )ar:et* the United State" wa"* D!ite nat!rall#* n!)(er one in i)+ortan e to the Swi""- Iet* a" "!//e"ted (# Ta(le 3 9* the Swi"" "hare of the U-S- Mar:et ha" (een erodin/ "teadil#- In fa t* in $%,'* %%7 of all wat he" i)+orted into the United State" were of Swi"" ori/in4 (# $%&' thi" fi/!re" had dro++ed to aro!nd &'7- In the "a)e +eriod* the Swi"" "hare of total wat h on"!)+tion in the United State" had de lined fro) ,'7 to a(o!t 9'7Ta(le 3 , Swi"" E6+ort" of Wat he" and Move)ent" to Ma5or Mar:et" 3 $%&' United State" Fon/ Aon/ United Ain/do) Ara(ia We"t Ger)an# Ital# S+ain Ar/entina Gra=il Canada Me6i o >a+an 7 of total !nit" 8&-9 $9-8 ?-& 9-? 9-$ 1-& 1-B 8-8 8-$ $-% $-B $-9 Total : &,-& 7 of total val!e 8'-8 $'-' ,-, 1-? ,-& B-, 1-? 8-8 $-% $-, 8-' 1-& BB-?

The n!)(er two e6+ort )ar:et for Swit=erland in $%&'* Fon/ Aon/* wa" a re ent arrival on the " eneOne ite) lar/el# a o!nted for the ra+id e)er/en e of Fon/ Aon/ a" a Swi"" !"to)er- G# $%&' al)o"t ?,7 of all +in3lever )ove)ent ;not fini"hed +in3lever wat he"< )ade in Swit=erland were de"tined for Fon/ Aon/ where the# were a"ed and "!("eD!entl# " attered over )an# for Ea"tern )ar:et"- Deter)inin/ who a t!all# ontrolled what +art of the Fon/ Aon/ trade in $%&' wa" an al)o"t i)+o""i(le ta":- Several Swi"" +in3lever )an!fa t!rer" had a""e)(l# +lant" in Fon/ Aon/* #et lo al intere"t" were al"o involved in the (!"ine""- A(o!t all that o!ld (e "aid wa" that Fon/ Aon/ had (e o)e an i)+ortant hannel thro!/h whi h Swi"" +in3lever wat he" rea hed )an# over"ea" )ar:et"One final +oint (ro!/ht o!t in Ta(le 3 , need" )entionin/- Note that >a+an* the "e ond lar/e"t wat h)a:er* wa" not a )a5or )ar:et for the Swi""- Thi" fa t ha" ertainl# had a (earin/ on how the Swi"" have viewed the o)+etitive +ro(le)" fa in/ their ind!"tr#- Wherea"* in an# "ort of onte"t a)on/ Swi""* >a+ane"e* and U-S- Wat h)a:er"* the Swi"" o!ld afford to /ive !+ their +la e in the >a+ane"e )ar:et* the# o!ld not afford to "ee their hold on the U-S- )ar:et "erio!"l# 5eo+ardi=ed- A" well "hall "ee in a "!("eD!ent "e tion* in $%&' the United State" wa" al"o >a+ane"e leadin/ e6+ort )ar:et- It follow" that* if the $%&'" were to "ee a "tr!//le for leader"hi+ in the world wat h ind!"tr#* the (attle wo!ld ta:e +la e +rin i+all# in the U-S- )ar:et +la eFra/)entation : the Swi"" Ind!"tr#." Main 2ro(le) One fa t* )entioned at the (e/innin/ of the +re edin/ "e tion* i" the :e# to the n!)(er one +ro(le) that fa ed Swi"" wat h)a:er" in $%&'- The ind!"tr#* whi h in l!ded aro!nd $*''' different enter+ri"e"* wa" far )ore fra/)ented than that in an# other leadin/ wat h)a:in/ nation- To !nder"tand wh# thi" wa" "o all" for a (rief review of the develo+)ent of wat h)a:in/ in Swit=erlandEarl# Develo+)ent The Swi"" did not invent the wat h- Over 1'' #ear" a/o the r!di)entar# te hniD!e" of wat h)a:in/ were (ro!/ht to Swit=erland (# F!/!enot" +la in/ reli/io!" +er"e !tion in Fran e- At fir"t the# "ettled aro!nd Geneva4 "!("eD!entl# the# "+read thro!/ho!t northwe"t Swit=erland-

For )ore than a ent!r# and half "everal fa tor" o)(ined to fo"ter a ver# inde+endent* fa)il#3oriented "+irit a)on/ the earl# wat h)a:er"- In +art* wat h)a:in/ wa" a raft whi h de+ended on ":ill" (ein/ +a""ed on fro) one /eneration to the ne6t- In +art* where )an# of the wat h)a:er" lived* in relative i"olation in the )o!ntain"* +ro)+ted a ver# inde+endent view- And in +art* the fa t that ea h fa)il# fa(ri ated a few o)+lete ti)e +ie e" ea h #ear no!ri"hed a "en"e of a di"tin t fa)il# wat h)a:in/ tradition- GI and lar/e* the attit!de" for)ed the) de" ri(ed (# "o)e a" a "t!dent individ!ali")* +er"i"ted into re ent ti)e"In the fir"t half of the $?''"* in re"+on"e to advan e" in )e hani=ation* individ!al +rod! t" "tarted to "+e iali"e : "o)e fa)ilie" on entrated on )a:in/ +art"* other" on a""e)(lin/ +art" into fini"hed wat he"- G# the )id3$?''" the ind!"tr# had evolved into a two3tier )an!fa t!rin/ "#"te) with o)+onent )an!fa t!rin/ "e+arate fro) wat h a""e)(lin/- With few han/e"* the ind!"tr# retained thi" hara teri"ti !+ to the )id3"tr! t!re of the ind!"tr#G# $%'' wat h)a:in/ in Swit=erland far o!tfa ed that ta:in/ +la e an#where el"e in the world- G!t the ind!"tr# wa" )a:e !+ of tho!"and" of ")all fa)il#3owned fir)"- Tho!/h the Swi"" do)inated wat h)a:in/ on a worldwide " ale land had e"ta(li"hed JSwi"" MadeJ a" a "#)(ol of D!alit# in wat he"* the# had done "o with an ind!"tr# ill eD!i++ed to o+e with an#thin/ other than the )o"t "!+erfi ial e ono)i diffi !ltie"- The ri"e" of the $%8'" and $%1'" )ade thi" +ainf!ll# a++arent to the Swi""The Ind!"tr#." and the Govern)ent." Re"+on"e : $%8'3$%1' In the earl# $%8'" Swi"" wat h)a:er" "aw "ale" olla+"in/ and !ne)+lo#)ent "oarin/- The# "et o!t to (rin/ order o!t of the hao" (# or/ani=in/ the)"elve" into a n!)(er of ind!"tr# a""o iation"* ea h )a:e !+ of fir)" en/a/ed in the "a)e t#+e of )an!fa t!rin/ o+eration"- The a""o iation" that "+ran/ !+ in the +eriod $%893 $%8& were : aThe Federation S!i""e de Fa(ri ant" D. Forlo/eri ;FF<: tho"e fir)" a""e)(lin/ wat he" fro) o)+onent" +art" "!++lied (# other" +l!" tho"e few fir)" with inte/rated )an!fa t!rin/ o+eration"- All of 4the o!t+!t of )e)(er fir)" wa" of the 6 5eweled3lever t#+e- The"e were the fir)" that a t!all# "old wat he" in the )ar:et+la eE(a! he" SA : $& )an!fa t!rer" of e(a! he" /ro!+ed to/ether into a tr!"tThe Union de" Gran he" Anne6e" de l .Forlo/erie ;UGAF<: the )an!fa t!rer" of o)+onent" other than e(a! he"-

(-

The for)ation of the"e a""o iation" laid the fo!ndation for ind!"tr# arteli=ation- In $%8?* in a "erie" of re"tri tive +rivate a/ree)ent a)on/ the three )a5or a""o iation"* the )an!fa t!rin/* +ri in/* and e6+ortin/ +oli ie" of )e)(er fir)" were (ro!/ht !nder ind!"tr# ontrolNo "ooner had the wat h)a:er" ta:en the"e "te+" when the de+re""ion of the $%1'" /ot !nderwa#Deterioratin/ ondition" in the ind!"tr# for ed the Swi"" /overn)ent to o)e to it" aid- A" a fir"t "te+* the /overn)ent* in $%1$* inve"ted in a "!+er holdin/ o)+an#* the So iete Generale de I .Forlo/erie S!i""e SA ;ASUAC<* whi h* in t!rn* a D!ired the )a5orit# of the "hare" of E(a! he" SA and of "everal of the leadin/ o)+onent" )an!fa t!rer"- Thi" )ove ea"ed the finan ial woe" of a n!)(er of the wat h)a:er" and )ade the /overn)ent a dire t +artner in ind!"tr# affair"- Then* in $%19* a federal "tat!te ratified the we( of the ind!"tr#." +rivate ontrol" and i)+o"ed new one"- Thereafter* wat h )an!fa t!rin/ and e6+ortin/ were +er)itted onl# with /overn)ent a++roval- Fro) $%19 thro!/h $%B,* the "tr! t!re of the Swi"" wat h)a:in/ ind!"tr# and the )a:e !+ of the )an# re"tri tive ovenant" !nder whi h it o+erated re)ained al)o"t !n han/ed- A li"t of the +rin i+al /overn)ent3"an tioned r!le" of the ind!"tr# in l!de" the followin/: < a<The )e)(er" of E(a! he" SA and UGAF a/reed to "ell o)+onent" onl# to the )e)(er" of FF(<In t!rn* the )e)(er" of FF a/reed* with one e6 e+tion* to (!# o)+onent" onl# fro) )e)(er fir) of E(a! he" SA and UGAF- The fir)" in FF did re"erve the ri/ht to (!# forei/n3)ade o)+onent"* (!t the# al"o a/reed not to (!# "! h o)+onent" !nle"" the# were +ri ed )ore than 8'7 !nder the Swi"" level<In addition* the )e)(er" of FF a/reed to fi6 their "ellin/ +ri e" in a ord with a o)+le6 inter3 a""o iation +ri in/ "#"te) and a )ar:et for)!la- E(a! he" SA and UGAF "!++lied the o)+onent" at

"+e ified +ri e"* "!(5e t to han/e onl# after inter3a""o iation ne/otiation- And the wat h a""e)(ler" and inte/rated )an!fa t!rer" e"ta(li"hed their +ri e" !"in/ a "tandard )ar: !+ a(ove a""o iation deter)ined )an!fa t!rin/ o"t"d<Finall#* FF )e)(er" a/reed to li)it their /!arantee" on fini"hed wat he" to one #eare<A" re/ard" /overn)ent r!le" fir)" o!ld onl# en/a/e in wat h)a:in/ after o(tainin/ a!thori=ation fro) a federal de+art)ent- The federal le/i"lation effe tivel# fro=e the "tr! t!re of the ind!"tr# : fir)" o!ld not e6+and* )ove or "ell o!t* a D!ire other"* or han/e the nat!re of their o+eration" witho!t /overn)ent a++rovalf<In addition* the /overn)ent r!le" re/!lated the Swi"" ind!"tr#." lin:" with the re"t of the world- To +re"erve order in over"ea" )ar:et"* fir)" were reD!ired to o(tain +er)it" to e6+ort fini"hed wat he"* )ove)ent"* and o)+onent"- More i)+ortantl#* to en"!re that new forei/n o)+etitor" wo!ld not "+rin/ !+ and that e6i"tin/ forei/n o)+etitor" wo!ld not (enefit fro) advan e" in Swi"" Te hnolo/#* Govern)ent a++roval wa" reD!ired for the e6+ort of tool" and die"* en/ineerin/ drawin/"* and wat h)a:in/ )a hiner#Thi" ela(orate "#"te)* de"i/ned to +rote t the "tat!" D!o in a hi/hl# fra/)ented ind!"tr#* +er"i"ted for al)o"t 9' #ear"- Iet (# the late $%,'" event" in the )ar:et +la e were )a:in/ it o(vio!" that "o)ethin/ had to han/eThe Grea:down of the Wat h Cartel Di" ontent with the artel aro"e fir"t a)on/ the )e)(er fir)" of FF* for the# were the one" who had to )eet o)+etition fa e to fa e- De"+ite the Swi"" atte)+t to +an !+ wat h)a:in/ te hnolo/#* d!rin/ the $%,'" forei/n rival e6+anded +rod! tion and (e/an to )a:e inroad" into Swi"" "ale"- On the ontinent* Fren h and Ger)an wat h)a:er" !t into the Swi"" )ar:et "hare4 in the United State"* Ti)e6 i)+eriled at lea"t a +ortion of Swi"" e6+ort"4 and in the Far Ea"t* where the threat wa" "till in the offin/* )ar:et" were ri+e for an o(vio!"l# i)+endin/ >a+ane"e inva"ionThe )al ontent" in the FF lai)ed that the artel r!le" +rote ted the )ar/inal a""e)(lin/ fir)" and fo"tered ineffi ien # a)on/ the o)+onent )an!fa t!rer"- The# al"o +ointed o!t that* in the fa e of )o!ntin/ +ri e o)+etition in over"ea" )ar:et"* the artel +ro)oted a t#+e of ond! t on the +art of "o)e wat h)a:er" that 5eo+ardi=ed the D!alit# i)a/e of the whole Swi"" ind!"tr#- Wherea" the effi ient re"id!al +rofit" to i)+rove their )an!fa t!rin/ effi ien # and the D!alit# of their o!t+!t "till f!rther* the )ar/inal fir)"* in order to "!rvive* had t!rned to +rod! in/ low D!alit# wat he" whi h the# d!)+ed at /ive awa# +ri e" in forei/n )ar:et"After "everal #ear" of ne/otiation" within the ind!"tr#* the )al ontent" won the fir"t ro!nd of on e""ion"The ind!"tr# a/ree)ent" were revi"ed to +rovide for /reater leewa# in the +ri in/ of o)+onent" to the FF )e)(er" and in the a++li ation of the +ri in/ for)!la for fini"hed wat he"Then in $%B$ the /overn)ent (owed to the o(vio!" ne e""it# of (rin/in/ the ind!"tr# !+ to date- It re" ind* effe tive a" of >an!ar# $* $%BB* the reD!ire)ent for )an!fa t!rin/ +er)it"- After that date fir)" were free to e6+and* ontra t* )er/e* "ell o!t to forei/n o)+anie"* or (!# forei/n o)+anie"- Th!" the /overn)ent )ove o+ened the wa# for ind!"tr# on entration- A" +art of the "a)e le/i"lative +a :a/e* the /overn)ent e"ta(li"hed a wat h "tandard" o))i""ion to +!t an end to the de(a"e)ent of the wat he" (# the ")all +rod! er"And finall#* the /overn)ent de reed that the reD!ire)ent for e6+ort +er)it" wo!ld e6+ire in $%&$- After that date there wo!ld (e no offi ial i)+edi)ent" to the tran"fer over"ea" of wat h)a:in/ te hnolo/#The $%B$ le/i"lation "o!nded the death :nell for the Swi"" wat h artel- It finall# died in $%BB when the ind!"tr# a""o iation" a(oli"hed all the re)nant" of the fi6ed3+ri e "#"te)The death of the wat h artel did not* however* "+ell the end for the i)+ortant ind!"tr# a""o iation"* whi h have ontin!ed to "erve a" "+o:e")an for the vario!" "e tor" of the ind!"tr#- E6hi(it I* whi h "how" the o)+o"ition of the ind!"tr# a" of $%&'* de)on"trate" that it" "tr! t!re re)ained defined (# the a""o iation"- Nor did the death of the wat h artel )ean the end to 5oint a tion" a)on/ Swi"" wat h)a:er"- To the ontrar#* the a""o iation" have ontin!ed to (e the (a :(one of a olle tive a++roa h to ind!"tr# a tivitie"* e"+e iall# in +ro)otional +ro/ra)" and R H D +ro5e t"- The"e olle tive a tivitie" will (e di" !""ed "hortl#* (!t fir"t it i" ne e""ar# to loo: at the "te+" the Swi"" have ta:en to o+e with the +ro(le) of fra/)entationInd!"tr# Con entration

In the earl# $%B'" a(o!t 8*''' "e+arate enter+ri"e" were en/a/ed in one fa et or another of wat h)a:in/ in Swit=erland* Ro!/hl# "+ea:in/* the"e 8*''' fir)" fell into the followin/ ate/orie" :3 Fini"hed Wat h Man!fa t!rer" a< A(o!t ,'' fir)" "olel# a""e)(lin/ 5eweled3lever wat he"(< A(o!t B' inte/rated )an!fa t!rer" of 5eweled3lever wat he"< A(o!t &' inte/rated )an!fa t!rer" of +in3lever wat he"Co)+onent Man!fa t!rer" d< $& )an!fa t!rer" of E(a! he"* all )e)(er" of E(a! he" SAe< A(o!t B,' )an!fa t!rer" of "e+arate +art"f< Aro!nd ,'' other fir)" +erfor)in/ )i" ellaneo!" f!n tion"Tho!/h the"e fi/!re" a !ratel# refle t the e6tent of fra/)entation that e6i"ted a)on/ fini"hed wat h )an!fa t!rer"* the# )i"re+re"ent the "it!ation that e6i"ted a)on/ o)+onent )an!fa t!rer"- The"e or/ani"ation"* ori/inall# tr!"t" o)+o"ed of )an# ")all o)+anie"* do)inated individ!al 2art" )an!fa t!rin/- The# were : Fabriques D' Assortiments Reunies SA ;the )a5or "!++lier of e" a+e)ent )e hani")"< Fabriques e !a"an#iers S ;the )a5or "!++lier of (alan e wheel"< $rou%ment es Fabri#ants Suisses e S%rau& ;the )a5or "!++lier of hair"+rin/"<To/ether with E(a! he" SA* the"e three /ro!+" "!++lied a(o!t three3D!arter" of the Swi"" ind!"tr#." reD!ire)ent" for E(a! he" and "e+arate +art" 9- Sin e the# a o!nted for "! h a lar/e "hare of o)+onent" +rod! tion* it i" o(vio!" that the h!ndred" of other fir)" in the o)+onent "e tor either f!lfilled hi/hl# "+e iali=ed role" or were D!ite )ar/inal fir)"A" we have "een a de ade later* the n!)(er of fir)" in the Swi"" wat h ind!"tr# wa" down to aro!nd $*'''* "in e $%BB* when the Swi"" /overn)ent." re"tri tion on the "ale or a D!i"ition of wat h o)+anie" la+"ed* the ind!"tr# e6+erien ed a re" endo of )er/er"- The Swi"" were h!rriedl# "o)e o("erver" "aid franti all# 3 tr#in/ to reate wat h)a:in/ fir)" )at hin/ the "i=e and o)+etitive lo!t of the )a5or forei/n rival"- Wh# the ind!"tr# wa" a!/ht !+ in the )er/er." wave and where it wa" headin/ wa" "!))ed !+ (# one leadin/ Swi"" wat h)a:er in the"e ter)" : /or many years far-sighted representatives of the watch industry stubbornly tries to introduce new methods, to overcome outmoded structures. To eliminate the compartmentali*ation typical of Swiss production, to channel the interest of technically-minded Swiss Watchmakers more into modern marketing, to overcome difficulties rooted in outmoded protectionist ideas and to surmount assorted similar problems. With few e(ceptions, however, they had to wait until very recently before there were any visible signs of a trend towards industry cooperation and corporate concentration. This development is irreversible and will doubtless accelerate in the future. +t is already .uite conceivable that, under the growing pressure of competition from within and without the watch industry, there will soon be a considerable increase in the number of medium-si*e companies 0rather than hundred of small ones1. The only product lines likely to escape this trend will be a few speciality items and e(clusive products, the success of which does not depend on mass turnover. 2nder these circumstances we do not think it overly bold to predict that, aside from the few e(ceptions mentioned, in five years there may be only about ten watch producing enterprises operating in this country3.

In 1968 another holding-company type arrangement was established within the component sector. A number of small watch jewel manufacturers became members of Pierrea Holding SA. Altogether, the members of this new group supplied about 60% of the total Swiss jewel-lever production.
4

Robert Brandt, "The Credit Swisse Bulletin.

5

Position

of

the

Watch

Industry",

A" of $%&8 there wa"* at lea"t on +a+er* a)+le eviden e that the Swi"" were "! eedin/ at on"olidatin/ the ind!"tr#- Whether the Swi"" were al"o "! eedin/ at onvertin/ the )an# newl# for)ed o)+anie" into o+erationall# effe tive or/ani=ation wa" "till an o+en D!e"tion- Then world re eived a fairl# "tead# "trea) of re+ort" a(o!t )er/er" and +lan" for )er/er"4 it did not hear )! h of what wa" "aid within the (oardroo)" and or+orate offi e" of the Swi"" o)+anie"- Undo!(tedl#* the +ain" and +ro(le)" of tran"ition were ta6in/ the )ana/erial ":ill" of )an# Swi"" e6e !tive"Still* +ro/re"" loo:ed i)+re""ive- Goth hori=ontal and verti al )er/er" were han/in/ the ind!"tr# +rofo!ndl#- For in"tan e"* a" the re"!lt of a "erie" of hori=ontal )er/er"* the Swi"" finall# had one wat h o)+an# that o!ld )at h the "i=e of lar/e forei/n rival"* Fo!nded in $%1'* the So iete Swi"" de $ .Ind!"trie Forlo/er" ;SSIF<* the )an!fa t!rer of "! h fa)o!" (rand" a" O)e/a and Ti""ot* had alwa#" (een a leader in the wat h3 )a:in/ ind!"tr#- In the earl# $%B'" it ontrolled a(o!t %7 of total Swi"" wat h e6+ort"- G!t even with that "hare of e6+ort"* SSIF wa" ")all o)+ared to the leadin/ >a+ane"e and U-S- wat h)a:er"- Then* after $%BB* SSIF (roadened it" a tivitie" and* in $%&$* )er/ed with E ono)i Swi"" Ti)e Foldin/ ;ESTF<- Thi" "e ond /ro!+* o)+o"ed of a n!)(er of +in3lever )an!fa t!rer"* a o!nted for 8'7 3 8,7 of total Swi"" +in3lever o!t+!t- G# the end of $%&$* the enlar/ed SSIF ontrolled over 8'7 of Swi"" wat h e6+ort" and had an ann!al t!rnover of lo"e to 0 $1' )illionASUAG* the J"!+er3tr!"tJ ontrollin/ a )a5orit# intere"t in E(a! he" SA and in the three lar/e"t o)+onent )an!fa t!rer"* /ave (irth to another lar/e hori=ontal /ro!+* when* in $%&$* it o)(ined the a""e)(lin/ fir)" "ellin/ "even different (rand" into the General Wat h Foldin/ Co)+an#- Thi" )ove for/ed i)+ortant new finan ial and )ana/erial lin:" (etween the o)+onent )an!fa t!rin/ and a""e)(lin/ "e tor" of the wat h ind!"tr#Meanwhile* E(a! he" SA entered into another "et of arran/e)ent" with (oth hori=ontal and verti al )er/er hara teri"ti "- In $%&' the Lon/ine"3Re ord Wat h Co)+an# and the Rotar# Wat h Co)+an# 5oined to for) Foldin/" Lon/ine" SA- Then* in $%&$* E(a! he" (e a)e )a5or +artner in thi" new vent!re- A" in the a"e with ASUAC* the Swi"" 5oined to/ether o)+anie" who"e f!nda)ental a tivitie" were a""e)(lin/ and )ar:etin/ wat he" and "i)!ltaneo!"l# lin:ed the a)al/a)ation to the o)+onent )an!fa t!rin/ "e torThe !+"hot of the"e )er/er"* and do=en" )ore* had (een the reation of a +artiall# on entrated ind!"tr#G# $%&$ al)o"t three3D!arter" of all Swi"" wat h e6+ort" were a o!nted for (# ei/ht wat h3)a:in/ /ro!+"- G!t the ind!"tr# "tr! t!re wa" "till lo+"ided- A re"id!e of "everal h!ndred ")all fir)" ontri(!ted the other D!arter of Swi"" e6+ort"- Th!" there wa" a /rowin/ /a+ (etween the (i/ wat h)a:in/ o)(ination" and the little inde+endent +rod! er"- Under the"e ir !)"tan e"* it "ee)ed fairl# ertain that onl# one of two different f!t!re" fa ed )o"t of the ")all o)+anie": a("or+tion (# the (i/ holdin/ /ro!+" or olla+"eA" for the lar/e wat h o)+anie"* the )ere fa t that )o"t of the) had )!lti+lied their "i=e thro!/h a "erie" of )er/er" did not /!arantee that the# wo!ld en5o# the (enefit" of "i=e- The# "till had to ta :le "! h ta":" a" eli)inatin/ d!+li ate +rod! t line"* o)(inin/ +rod! tion fa ilitie"* "trea)linin/ )ana/e)ent "#"te)"* and "o onA" "!//e"ted a(ove* in the earl# $%&'" the eviden e of +ro/re"" alon/ the"e line" wa" "till "+ar"eSwi"" Inve"t)ent in the U-S- Wat h Ind!"tr# The Swi"" effort to (ol"ter the o)+etitive +o"ition of their ind!"tr# wa" two3+ron/ed- At the "a)e ti)e that the# were on entratin/ it at ho)e* the# were +rote tin/ it (# inve"tin/ in U-S- wat h)a:in/ fir)"- In the "e ond half of the $%B'" the# )ade the followin/ )ove": a< (< < I"e a SA* a on"orti!) of Swi"" wat h )an!fa t!rer"* a D!ired $''7 of the Waltha) Wat h Co)+an#So+inter SA* a Swi"" holdin/ o)+an#* a D!ired a $B7 intere"t in El/inChrono" Foldin/ SA* a finan ial o)+an# "et !+ for the e6+re"" +!r+o"e of +ro)otin/ a)al/a)ation within the Swi"" ind!"tr#* +!r ha"ed 8'7 of Gr!en-

And in $%&$ the Swi"" too: another "te+ whi h o!ld !lti)atel# /ive the) ontrol of one of the )o"t fa)o!" na)e" in A)eri an wat h)a:in/* the Fa)ilton Wat h Co)+an#- A+art fro) it" +ro!d tradition in onventional wat h3)a:in/* Fa)ilton had (een on the te hnolo/i al forefront on )ore than one o a"ion- In $%,& it had (een the fir"t U-S- fir) to )ar:et an ele tri wat h- In $%&$* with it" J2!l"arJ ;whi h !"ed li/ht 3 e)ittin/ diode"< it wa" the fir"t U-S- fir) to )ar:et a di/ital wat h- Still* Fa)ilton a)e !+on hard ti)e"The hi"tor# of the Swi"" )ove to ta:e over Fa)ilton "tarted in $%&' when G!"h Univer"al* In -* a diver"ified fir) that lea"ed +ier" and (!ildin/" in Groo:l#n* New Ior:* (o!/ht ,'-87 of the al)o"t (an:r!+t

Fa)ilton Co)+an#- S!("eD!entl#* after Fa)ilton." lo""e" dee+ened f!rther* G!"h "+!n off the wat h (!"ine"" into a new "!("idiar# and "old $&7 of it to Aeto"* a" +art of the deal* al"o a e+ted a note fro) Fa)ilton whi h* if onverted after three #ear"* wo!ld in rea"e the Swi"" Co)+an#." intere"t in Fa)ilton to ,$7- Fa)ilton "ee)ed de"tined to (e o)e a )e)(er of the Swi"" a)+The (a"i )otivation for all the"e inve"t)ent" wa" fairl# lear- Tho!/h the "e ond tier of U-SWat h)a:er"* tho"e that had not attained the "i=e of G!lova and Ti)e"* were* (arel# a(le to )eet the )o!ntin/ o)+etition within the ind!"tr#* the# all +o""e""ed one val!a(le a""et4 e"ta(li"hed trade na)e"- To the Swi""* ontrol of the na)e"* in +art or in whole* o+ened the door to in rea"ed +enetration of the U-S- )ar:et- There wa" "o)e eviden e that the Swi"" intended to fi/ht the ele troni wat h (attle in the United State" with trade na)e" whi h A)eri an on"!)er" wo!ld a""!)e were tho"e of fine old U-S- wat h)a:er"What el"e were the Swi"" doin/ to in"!re the ontin!ed +ro"+erit# of their wat h)a:in/ ind!"tr# K 2ro)otional 2ra ti e" : U+ !ntil the late $%B'" Swi"" wat h)a:er" relied )ainl# on an in"tit!tional a++roa h to +ro)otion- The# hanneled a hi/h +ro+ortion of their +ro)otional e6+endit!re" thro!/h ind!"tr# 3 wide or/ani=ation"* li:e the Federation of Swi"" Wat h)a:er"* into olle tive a)+ai/n" in over"ea" )ar:et"- The a)+ai/n" "tre""ed the D!alit# and re+!tation of JSwi""3MadeJ wat he" rather than "+e ifi (rand"- Of o!r"e* a few of the lar/er Swi"" wat h)a:er" "!++le)ented the ind!"tr#." a tivitie" (# +ro)otin/ their own (rand"- Na)e" li:e Role6 and O)e/a (e a)e world3renowned- Still* the "ale of wat he" (earin/ e"ta(li"hed (rand na)e" on"tit!ted a ")all fra tion of total Swi"" e6+ort"- Thi" wa" +arti !larl# tr!e in the a"e of wat he" fallin/ in the low and )edi!) 3 +ri e ate/orie"A" of the earl# $%&'" thi" all "tarted to han/e- The $%&$ Ann!al Re+ort of the Federation of Swi"" Wat h)a:er" ;FF< de" ri(ed the new a++roa h : ")uring 4564, the /7 continued on the new course adopted after the concentrating on designing, carrying out, and financing promotional activities with fuller co-operation from the brands involved. This change in the /7's approach to promotion consisted in a shift away from collective promotion mainly benefiting the industry as a whole in favour of programmes integrating the brands involved in every way................" Even tho!/h Swi"" wat h)a:er" reallo ated )ore and )ore of their +ro)otional f!n a fro) ind!"tr# to o)+an# a)+ai/n"* the# "till ontin!ed to "!++ort the ind!"tr#." )an# lon/3"tandin/ te hni al +ro/ra))eSin e the Se ond World War* the Swi"" "+on"ored wat h3re+air trainin/ " hool" in )an# o!ntrie"- The# e"ta(li"hed te hni al entre" and after3"ale" "ervi e entre" in a n!)(er of forei/n )ar:et"- The# freD!entl# held "e)inar"* in Swit=erland and over"ea"* on a wide ran/e of "!(5e t" related to the wat h ind!"tr#- And the# ond! ted a variet# of trainin/ +ro/ra))e" overin/ the )ana/e)ent* )ar:etin/* and di"tri(!tion a"+e t" of the wat h (!"ine""- Al)o"t all of the"e effort" were olle tive !nderta:in/"- G# and lar/e* the# were re/arded a" e""ential to the "! e"" of the ind!"tr#And there were no "i/n" that Swi"" effort" alon/ the"e line" wo!ld di)ini"h in the $%&'"Re"ear h and Develo+)ent: A" the +ro)otional a tivitie"* the Swi"" wat h)a:er" have tended to a++roa h re"ear h and develo+)ent fro) and ind!"tr# rather than fro) an individ!al3fir) "tand+oint- The two )a5or Swi"" re"ear h and develo+)ent +ro/ra))e (e/!n in the $%B'"* (oth related to the develo+)ent of the ele troni wat h* hi/hli/ht thi" +ointIn $%B8 E(a! he" SA* the other )ain o)+onent )an!fa t!rer"* and a n!)(er of the wat h a""e)(lin/ fir)" 5oined to/ether to e"ta(li"h the Centre Ele troniD!e Forli/er ;CEF<- The initial /oal of the ele troni wat h entre wa" to develo+ a new ti)e3deter)inin/ devi e to o)+ete with G!lova." t!nin/3for: )e hani")- Later* the CEF al"o too: on the ta": of develo+in/ a D!art= r#"tal wat h )ove)ent- The role of the CEF wa" defined a" e6tendin/ (e#ond the la(orator#- It wa" hartered to +rod! e +rotot#+e" of new wat he" for the +!r+o"e of te"t )ar:etin/ the)- On e the +rotot#+e" +roved the)"elve" in the )ar:et +la e* the lient" of CEF wo!ld +i : the) !+ for f!ll3" ale )an!fa t!rin/ and )ar:etin/Whether the fir"t de ade of o+eration of the CEF wa" re/arded a" a "! e"" or not "ee)ed to de+end on who wa" )a:in/ the a""e"")ent- A)eri an wat h)a:er +ointed o!t that the CEF failed at develo+in/ a t!nin/3 for: devi e that did not violate G!lova." +atent"- The Swi"" lai)ed that the CEF had o)e !+ with an a e+ta(le

alternative- Still* in $%B? E(a! he" SA entered into a li en"e a/ree)ent with G!lova to )an!fa t!re and "ell wat he" (a"ed on G!lova." t!nin/3for: )ove)ent- A" for re"ear h on the D!art= r#"tal wat h* the Swi"" "tre""ed that the CEF had +erfe ted a o))er ial )odel (efore an#one el"e- Iet when the Swi"" introd! ed their fir"t D!art= wat he" in $%&$* A)eri an wat h)a:er" noted that the ontained inte/rated ir !it" )ade (# U-S- fir)"The Swi"" had ho+ed to avoid thi" t!rn of event"- In fa t* thi" ho+e had +ro)+ted their "e ond )a5or re"ear h and develo+)ent effort of the $%B'"In $%BB the Federation of Wat h Man!fa t!rer" ;FF<* two Swi"" o)+anie" ;Grown Goveri and Landi" H C#r-<* and 2hili+" of the Netherland" for)ed FASEC* a La(orator# for 5oint re"ear h in the field" of "e)i3 ond! tor"* inte/rated ir !it"* and la"er"- The +!r+o"e of the +ro5e t wa" lear eno!/h: to )a:e "!re that the Swi"" wat h)a:in/ ind!"tr# wo!ld not (e de+endent on U-S- ele troni " )an!fa t!rer"- Iet "o)e o("erver" inter+reted the for)ation of FASEC a" an indi ation of the wea:ne"" of the Swi"" wat h)a:in/ ind!"tr#* for it had to t!rn to a forei/n o)+an#* 2hili+"* for advan ed ele troni " te hnolo/#- A" of $%&8 there wa" no wa# for o!t"ider" to )ea"!re what FASEC had a o)+li"hed* "in e Swi"" ele troni wat he" "till ontained A)eri an 3 )ade ir !it# and the Swi"" were reti ent a(o!t de" ri(in/ FASEC." re"ear h o!t+!tFow )! h ha" the Swi"" ind!"tr# "+ent on develo+in/ the ele troni wat hK Unfort!natel#* the fi/!re" are not availa(le to an"wer the D!e"tion with an# +re i"ion- What follow"* therefore* i" (a"ed on the r!de"t of e"ti)ate"- A ordin/ to "o)e re+ort"* the Swi"" have "+end aro!nd 8-, )illion +er #ear CEF." re"ear h a tivitie"The Swi"" ind!"tr# ha" (a :ed !+ FASEC to the "a)e e6tent* 33 the ind!"tr# ha" (een +!ttin/ a(o!t 0 , )illion a #ear into re"ear h and develo+)ent related to the ele troni wat h- Thi" fi/!re loo:" re"+e ta(le !ntil it i" o)+ared to total ind!"tr# t!rnover4 it a)o!nt" to a(o!t '-?7 of ind!"tr# "ale"- S!++o"e* and thi" i" rather !nli:el#* that individ!al Swi"" fir)" have )at hed the re"ear h and develo+)ent e6+endit!re" of the ind!"tr# 3 "+on"ored +ro/ra))e"- Total o!tla#"* even then* wo!ld have added !+ to not )! h )ore than the half +er ent of ind!"tr# "ale"If the"e fi/!re" de" ri(e* even in ro!/h ter)"* the level of re"ear h and develo+)ent o))it)ent of the Swi"" ind!"tr# in the late $%B'" and earl# $%&'"* the# rai"e the D!e"tion of whether that o))it)ent wa" hi/h eno!/h- It." "afe to a""!)e that the Swi"" were a":in/ the)"elve" that "o)e riti al D!e"tionDiver"ifi ation : Thro!/ho!t the la"t de ade Swi"" wat h)a:er" have tal:ed at len/th a(o!t the advanta/e" of diver"ifi ation- Iet it i" fair to "a# that a" of the earl# $%&'" no Swi"" wat h)a:er* (i/ or ")all* wa" in an# "en"e diver"ified- Tr!e* "o)e +rod! ed ite)" other than wat he" and lo :"* (!t al)o"t witho!t e6 e+tion the"e other /ood" were inti)atel# related to the te hnolo/# of ti)e :ee+in/In the a"e of the )an# ")all fir)"* the rea"on" wh# the# held fa"t to their narrow +rod! t line" were fairl# o(vio!"- A lo"e fa)il# orientation* 1' #ear" of +rote tion !nder artel r!le"* and a +er e+tion of their (!"ine"" in "+e ifi te hni al ter)" did not fo"ter a)on/ the ")all wat h)a:er" the in lination or the (a"i" for diver"ifi ation- And the a"e of the lar/e fir)"* the# had (een "o +reo !+ied "in e the )id3$%B'" )a:in/ and di/e"tin/ )er/er" that it i" !nli:el# the# had either the ti)e or the re"o!r e" to +!r"!e diver"ifi ation "erio!"l#Whatever the a!"e"* the Swi"" wat h)a:er" fa ed the +ro(le) of the $%&'" fro) a ver# narrowl# defined (!"ine"" (a"eIII: The >a+ane"e Wat h Ind!"tr# Swiss watch manufacturer was asked if the &ussians posed a threat in his business. "The &ussians" he laughed. "They always seem to be ten years behind." " nd the 8apanese9 7ow far behind are they9" " bout three weeks ................." 8ewelers' ,ircular - :eystone Earl# Develo+)ent Wat h)a:in/ "tarted in >a+an in the $??'"* For the ne6t ,' #ear" >a+ane"e wat h)a:er" on entrated al)o"t e6 l!"ivel# on "!++l#in/ their ho)e )ar:et and on )a:in/ 5eweled3lever wat he"- The# "tre""ed 5eweled3 lever +rod! tion (e a!"e the# wanted to e)!late the (e"t in we"tern wat h)a:in/- Iet* (# )o"t "tandard"* the D!alit# of the ti)e3+ie e" )ade in >a+an in the ind!"tr#." earl# da#" wa" inferior to that of ti)e3+ie e )ade in the We"t- And* in fa t* the Swi"" do)inated the +re)i!) end of the )ar:et* "!++l#in/ a(o!t %'7 of >a+ane"e i)+ort"G# the late $%1'" >a+ane"e +rod! tion of wat he" and wat h )ove)ent" had rea hed the level of aro!nd

10

, )illion !nit" +er #ear- One fir) had e)er/ed a" the ind!"tr# leader4 alone it a o!nted for al)o"t one3half of >a+ane"e +rod! tion- Then the Se ond World War and it" after)ath +o"t+oned f!rther /rowth of the ind!"tr# for al)o"t 8' #ear"- >a+ane"e wat h)a:er" did not +rod! e at the , )illion !nit level a/ain !ntil the $%,?3$%,% +eriod- G# then* and had "i/nifi antl# !+/raded the D!alit# of it" +rod! t- The >a+ane"e were read# to )a:e their +re"en e :nown a" a f!ll3fled/ed )e)(er of the world wat h ind!"tr# The E6+an"ion of the Ind!"tr# in the $%B'" : In $%B'" >a+ane"e +rod! tion of wat he" and wat h )ove)ent" hit the &3)illion !nit level* eD!ivalent to "li/htl# )ore than &7 of world3wide wat h o!t+!t- Still* al)o"t all the >a+ane"e +rod! tion wa" a("or(ed at ho)e4 the ind!"tr# e6+orted onl# 8''*''' wat he" and )ove)ent" that #earThen d!rin/ the $%B'" >a+ane"e wat h +rod! tion )ore than tre(led in !nit ter)"- In $%&' the ind!"tr# +o!red forth al)o"t 89 )illion wat he" and )ove)ent"* a(o!t $97 of entire worldL" wat h o!t+!t- And (# $%&' over one3half of thi" +rod! tion wa" de"tined for over"ea" )ar:et"- Or* to +!t the develo+)ent in +er"+e tive* the ind!"tr# e6+orted al)o"t twi e a" )an# wat he" and )ove)ent" in $%&' a" it had +rod! ed for total ho)e on"!)+tion in $%B'In +art* the >a+ane"e had +!"hed the)"elve" into forei/n )ar:et": in +art* the# had (een +!lled into forei/n )ar:et"- A" the $%B'" rolled on* the >a+ane"e wat h)a:er" o!ld "ee that their ho)e )ar:et wa" (e o)in/ in rea"in/l# "at!rated- Con"eD!entl#* the# loo:ed over"ea"- The# a//re""ivel# involved the So!thea"t A"ian )ar:et* lon/ the +rivate do)ain of the Swi""- In a "o)ewhat )ore haltin/ fa"hion* the# "tarted to )ove into We"tern E!ro+ean )ar:et" and into the United State"- G!t in the a"e of the United State"* the >a+ane"e were al"o +!lled into the )ar:et (# U- S- wat h3)a:er" who i)+orted lar/e D!antitie" of ine6+en"ive >a+ane"e )ove)ent" and +art" for a""e)(l# here or in the Eir/in I"land"- G# the late $%B'" the >a+ane"e e6+ort +!"h (e/an to ta:e on a lear +attern- Al)o"t two3third" of all >a+ane"e wat h and wat h3)ove)ent e6+ort" were de"tined for two )ar:et: the United State" or Fon/ Aon/The /rowth of the ind!"tr# and the "! e"" of it" "!r/e over"ea" wa" +arti !larl# re)ar:a(le (e a!"e it involved "o few fir)"Ind!"tr# Str! t!re In "har+ ontra"t to the "it!ation in Swit=erland and to the "tate of the U-S- ind!"tr# !ntil re ent #ear"- the >a+ane"e wat h ind!"tr# ha" alwa#" (een hi/hl# on entrated- Over the #ear"* fo!r fir)" have a o!nted for al)o"t all >a+ane"e wat h +rod! tion- More "tri:in/l#* two fir)" have a o!nted for al)o"t %'7 of the +rod! tion- A" of $%&'* the ind!"tr# "tr! t!re loo:ed li:e thi" : Ta(le 3 B :>a+ane"e Wat h 2rod! tion 3 $%&' Fir) E"ti)ated "hare E"td- 2rod! tion E6+ort" a" a of >a+ane"e +ro3 Wat he" M Move3 +er ent of d! tion )ent" ;)il-!nit"<+rod! tion B'7 8?7 %7 17 $''7 @ In ter)" of val!eO(vio!"l#* A- Fattori H Co- i" the General Motor" of the >a+ane"e wat h ind!"tr#- To !nder"tand the ind!"tr#* therefore* one ha" to :now "o)ethin/ a(o!t thi" do)inant leader- Fow did the o)+an# o+erate in $%&%K A t!all#* A- Fattori wa" onl# the "ale" ar) of a l!"ter of fir)" :nown a" the Sei:o Gro!+- Two "!("idiarie" in the /ro!+* Daini Sei:o"ha and S!wa Sei:o"ha* +rod! ed wat he"* )ove)ent"* and o)+onent"- Another "!("idiar# +rod! ed lo :"- Still other "!("idiarie" )an!fa t!red +rod! t" o!t"ide the ti)e3+ie e field- A- Fattori )ana/ed all the "ale" a tivitie" for the /ro!+* )ar:etin/ it" +rod! t" worldwide !nder the Sei'o trade na)eG# the )id3$%B'" the Sei:o /ro!+ had (e o)e the world." lar/e"t +rod! er of 5eweled3lever wat he"- The rea"on" for Sei:o." "! e"" are "+elled o!t in the "e tion" that follow- Gear in )ind* that even tho!/h the $97 &7 87 '-?7 81-?7 8'7 9,7 B'7 N-AN-A-

A- Fattori H CoCiti=en Wat h Orient Wat h Ri oh Wat h

11

di" !""ion fo !"e" in the entire ind!"tr#* what Sei:o ha" done ha" (een the :e# to what the ind!"tr# ha" a o)+li"hedThe Ind!"tr#." 2rod! t and Mar:et Strate/# Tho!/h there have (een )inor differen e" in a++roa h a)on/ the fo!r >a+ane"e wat h)a:er"* in the la"t two de ade" the# all ado+ted )ore or le"" the "a)e +rod! t and )ar:et "trate/#- A" )entioned +revio!"l#* the ind!"tr# "tarted o!t )a:in/ onl# 5eweled3lever wat he"- G# and lar/e* the ind!"tr# ha" ontin!ed that +ra ti e into the $%&'"- The >a+ane"e have left +in3lever +rod! tion to other">!"t (e a!"e the >a+ane"e have not )ade +in3lever wat he" doe" not )ean that the# have not o)+eted in the low +ri e end of the )ar:et- To the ontrar#* at ho)e and in A"ian o!ntrie" the >a+ane"e have )ar:eted a o)+lete line of 5eweled3lever wat he" ran/in/ in +ri e fro) the hea+e"t to the )o"t e6+en"ive- Iet the )ain thr!"t of their )ar:etin/ atta : ha" (een in the )edi!)3+ri e ate/or#- The# have )at hed their o)+etitor"* )ainl# the Swi""* in ter)" of D!alit# and feat!re" of wat he" (!t have !nder !t the) in ter)" of +ri eIn +enetratin/ the United State" and E!ro+ean )ar:et"* the >a+ane"e have ta:en a "o)ewhat different ta :- The# have avoided "ellin/ their own wat he" at either end of the )ar:et- In +arti !lar* the# have let other" fi/ht it o!t at the (otto) of the )ar:et- More "o than in the Far Ea"t* the# have fo !"ed their "ellin/ effort" on wat he" in the )edi!)3+ri e ate/or#- Thi" )ean"* for in"tan e* that in the United State" the >a+ane"e have on entrated on )ar:etin/ wat he" retailin/ in the 01' 3 0$'' ran/e- Iet* within thi" "e/)ent of the )ar:et* the >a+ane"e have relied on their !"!al +ri e "trate/#: )ore wat h for the "a)e +ri e or a o)+ara(le wat h for le"" )one#Several rea"on" have :e+t the >a+ane"e o!t of the l!6!r# and of the wat h )ar:et in the United State" and in E!ro+e- Fir"t* a few fir)" have do)inated the l!6!r# wat h (!"ine"" for )an# #ear"4 the# have reated an entren hed +o"ition for the)"elve" a" +re"ti/e wat h3)a:er"- Allied to thi" i" the fa t that the l!6!r# wat h (!"ine"" i" a" )! h one of "ellin/ 5ewelr# a" it i" one of "ellin/ wat he"- To +enetrate the to+ end of the wat h )ar:et* the >a+ane"e wo!ld have had to inve"t heavil# in (!ildin/ !+ a +re"ti/e i)a/e and in develo+in/ new )ar:etin/ ":ill"- And even if the# had (een "! e""f!l* their "ale" wo!ld have (een li)ited in !nit ter)"- Th!"* the ver# nat!re of the l!6!r# (!"ine"" wa" ontrar# to a :e# feat!re of the >a+ane"e wat h "trate/#: )a"" +rod! tionThe "it!ation at the low3+ri e end of the )ar:et ha" (een D!ite a different )atter- The >a+ane"e wat h)a:er" have not ta:en on the +in3lever )an!fa t!rer"* li:e Ti)e6* dire tl#- G!t indire tl# the# have (een ver# )! h involved in the o)+etitive (attle* +arti !larl# the one in the United State"* (etween the +in3lever and the 5eweled3lever )an!fa t!rer"In the late $%,'" the >a+ane"e wat h)a:er"* e"+e iall# Sei:o and Citi=en* (e a)e )a5or "!++lier" of wat h )ove)ent" and o)+onent" to the U-S- ind!"tr#- So)e A)eri an 5eweled3lever )an!fa t!rer" i)+orted ine6+en"ive )ove)ent" fro) >a+an* +!t the )ove)ent" into their own a"e"* and )ar:eted the wat he" at +ri e" o)+ara(le to tho"e for the Ti)e6 line of wat he"- Other" i)+orted >a+ane"e )ove)ent" and +art" into the Eir/in I"land"* fini"hed the wat he" there in o)+an#3owned a""e)(l# +lant"* and "hi++ed the wat he"* d!t#3free* into the United State"- Fir)" li:e Genr!" and El/in /ot their )ove)ent" and +art" fro) Sei:o- Generall# "+ea:in/* arran/e)ent" li:e the"e have ontin!ed !+ thro!/h the earl# $%&'"Fow "! e""f!l have the >a+ane"e (een at +enetratin/ over"ea" )ar:et"K Relia(le data relatin/ to their )ar:et "hare in A"ia and in a n!)(er of We"tern E!ro+ean o!ntrie" do not e6i"t- Re/ardin/ the United State"* offi ial data relatin/ to the #ear $%B? )a:e it +o""i(le to arrive at a ro!/h an"wer to the D!e"tion- In $%B? a(o!t ,7 of the wat he" i)+orted dire tl# into the United State" o)e fro) >a+an and a(o!t half of all the o)+onent" i)+orted into the Eir/in I"land" in that #ear al"o o)e fro) >a+an- Addin/ to/ether dire t and indire t i)+ort"* the >a+ane"e "!++lied a(o!t ?7 of the U-S- )ar:et at that ti)eO(vio!"l#* within onl# a(o!t $97 of worldwide " ale" and ?7 of U-S- "ale" !nder their ontrol in $%&'* the >a+ane"e wat h)a:er" had a /ood di"tan e to /o to at h with the Swi""- Iet the >a+ane"e rea hed thi" +oint in not )! h )ore than a de ade* and what wor:ed in the +a"t o!ld well wor: in the f!t!re- Witho!t do!(t* what wor:ed in the +a"t )o"t "! e""f!ll# for the >a+ane"e wat h)a:er" wa" related to their )an!fa t!rin/ a+a(ilitie"Man!fa t!rin/ : A o)(ination of fo!r fa tor" ha" )ade it +o""i(le for the >a+ane"e to (e re)ar:a(l# effi ient low3 o"t wat h +rod! er"- The"e fa tor" have (een: a( (a read# "!++l# of di" i+lined* =ealo!" wor:er" at low wa/e rate"4 advan e" )e hani=ed and a!to)ated +rod! tion te hniD!e"4

12

d-

verti al inte/ration4 and )a"" +rod! tion of "tandardi=ed )ove)ent" and wat h )odel"(

G# +!ttin/ the"e to/ether* the >a+ane"e )an!fa t!rer" attained e ono)ie" of " ale !n)at hed an#where el"e in the world wat h ind!"tr#The la(o!r fa tor i"* of o!r"e* the fir"t that i))ediatel# o)e" to the o!t"ider." )ind- And there i" no do!(t that the >a+ane"e have had a "i/nifi ant ed/e over other +rod! er." in thi" re"+e t- Thi" ha" (een e"+e iall# tr!e in the a"e of 5eweled3lever wat he" "in e the la(o!r ontent a""o iated with their +rod! tion i" relativel# hi/h- For e6a)+le* a" late a" $%B, the wor:er" a""e)(lin/ 5eweled3lever )ove)ent" in >a+an were earnin/ a(o!t one3fifth of what their o!nter+art" were earnin/ in the United State"- G# the late $%B'"* however* ra+idl# ri"in/ wa/e rate" in >a+an were erodin/ the ind!"tr#." la(or3 o"t advanta/eThe re"+on"e of the ind!"tr# to )o!ntin/ wa/e" hi/hli/hted it" deter)ination to +re"erve it" o)+etitive advanta/e- >a+ane"e wat h)a:er" were not ontent to "ta# at ho)e "eein/ their o"t" "+iralin/ !+ward"- In"tead* the# were +re+ared to "hift +rod! tion* or at lea"t "o)e of it* to new low3wa/e o!ntrie"- G# $%&' (oth Sei:o and Citi=en had e"ta(li"hed )an!fa t!rin/ fa ilitie" in Fon/ Aon/- Th!"* the wat h)a:er"* li:e )an# other >a+ane"e )an!fa t!rer"* had few D!al)" a(o!t +!r"!in/ low3wa/e la(o!r wherever e6+andin/* the# did not have to fa e the +ro(le) of +rote tin/ e)+lo#)ent at ho)eStill* >a+an." la(o!r3 o"t advanta/e "ho!ld not (e overe)+ha"i=ed- It ha" (een onl# +art of the total )an!fa t!rin/ +i t!re- The >a+ane"e wat h)a:er" have al"o "tre""ed the !"e of the )o"t advan ed +rod! tion line te hniD!e"- A ordin/ to ind!"tr# le/end* thi" all a)e a(o!t a" the re"!lt of a vi"it to the United State" (# en/ineer" of A- Fattori H Co- After World War II the# "t!died the +rod! tion te hniD!e" !"ed (# a n!)(er of U-S- wat h)a:er" and al"o vi"ited the a!to3a""e)(l# +lant" in Detroit- A++arentl# the# were e"+e iall# i)+re""ed (# what the# "aw in the wat h ind!"tr# (!t were "tr! : (# what the# "aw in the a!to)o(ile ind!"tr#- In an# a"e* (# the )id3$%,'" A- Fattori H Co- had ada+ted it" wat h)a:in/ to a onve#or3(elt a""e)(l#3line o+eration- With thi" t#+e of +rod! tion Fattori o!ld !"e not onl# hea+ la(o!r* (!t al"o !n":illed la(o!r- The re"t of the >a+ane"e ind!"tr# "oon followed Fattori." leadThe ind!"tr# too: all other "te+" ne e""ar# to fo"ter low3 o"t +rod! tion- It inte/rated (a :ward into the )an!fa t!re of o)+onent"* 5ewel"* even wat h)a:in/ )a hiner#- And it "tandardi=ed +rod! tion whenever and wherever it o!ld- The re"!lt of o)(inin/ all the"e feat!re" of )an!fa t!rin/ ha" (een a total )a""3+rod! tion a++roa h to wat h)a:in/Co)+arin/ the Swi"" ind!"tr# to the >a+ane"e ind!"tr# dra)ati=e" the differen e in their a++roa h to )an!fa t!rin/- In Swit=erland* a" we have (een aro!nd $*''' fir)" were involved in +rod! in/* lar/el# thro!/h a two3tier "#"te)* a(o!t &9 )illion wat he" in $%&'- In the "a)e #ear two >a+ane"e fir)"* Sei:o and Citi=en* +rod! ed in3ho!"e the eD!ivalent of 1'7 of the total Swi"" o!t+!tWhat did thi" differen e )ean in ter)" of a t!al +rod! tion o"tK A" )i/ht (e e6+e ted* the wat h)a:er" were rel! tant to /ive o!t "+e ifi fi/!re"- One ha" to rel# on indire t )ea"!re" to /et at the an"wer- Ta(le3& +rovide" at lea"t a l!eTa(le3&: 2er3Unit Eal!e of Wat h Move)ent" I)+orted into the United State"@ ;Cal !lated fro) $%&' data< Move)ent" ' to $ 5ewel 8 to & 5ewel" ? to $, 5ewel"@@ $B to $& 5ewel" Over $& >ewel"@@@ Fro) Swit=erland 0 8-'? 1-B, $8-,, &-,' 8?-?' Fro) >a+an 0 $-$, 1-'B $'-?, 9-81 B-B1

@ Eal!ed at F-'-G the e6+ortin/ o!ntr# @@ I)+ort" of )ove)ent" in thi" ate/or# were well (elow tho"e in the $B to $& 5ewel" ate/or#* whi h e6+lain" the hi/h +er3 !nit +ri e@@@ Co)+ari"on of +ri e" for wat he" in thi" ate/or# i" +ro(a(l# invalid "in e the i)+ort" fro) Swit=erland in l!de a hi/h +ro+ortion of l!6!r# )odel"-

Are the"e fi/!re" a valid /!ide to the +rod! tion o"t differential (etween Swit=erland and >a+anK Undo!(tedl# the Swi"" wo!ld "a# no* lai)in/ that the >a+ane"e fi/!re" re+re"ent onl# )ar/inal +ri e"- 2erha+" thi" i" tr!e* (!t even "o the fi/!re" +in3+oint an advanta/e that the >a+ane"e have had over the Swi""- With a lar/e

13

)ar:et* the >a+ane"e have (een a(le to a("or( all fi6ed o"t" over their do)e"ti +rod! tion- The# o!ld* therefore* afford to "ell at or near )ar/inal o"t" in forei/n )ar:et"- With +ra ti all# no ho)e )ar:et* the Swi"" o!ld +!r"!e the "a)e +ri in/ "trate/# onl# with /reat diffi !lt#- Whether the fi/!re" in Ta(le3& refle t +rod! tion o"t" of +ri in/ +oli ie" or a o)(ination of the two* the# "how that the >a+ane"e had the a(ilit# to !nder !t Swi"" +ri e" an#where fro) $,7 to 9,7 in the lar/e"t wat h )ar:et in the worldOther Fa tor" in the Ind!"tr#." Growth : Of o!r"e Sei:o and the other >a+ane"e wat h)a:er" did not a hieve their "! e"" all on their own- The# had a n!)(er of thin/" /oin/ for the)* "! h a" a lar/e ho)e )ar:et fairl# well +rote ted fro) forei/n o)+etition- In the de ade" of the fiftie" and "i6tie" onl# e6+en"ive wat he" were i)+orted into the o!ntr#- In Unit ter)" the"e i)+ort" "eldo) a)o!nted to )ore than ,7 of >a+ane"e +rod! tion* altho!/h* (e a!"e of the +ri e fa tor* the# did a)o!nt to a" )! h a" 8'7 of the )ar:et in val!e ter)"Govern)ent +oli # hel+ed a" well- To fore"tall the +roliferation of )ar/inal wat h +rod! er" and to )ini)i=e the drain on forei/n re"erve" a!"ed (# the i)+ortation of wat h)a:in/ )a hiner#* the Govern)ent en o!ra/ed the hi/hl# on entrated ind!"tr# "tr! t!re- Con"eD!entl#* the leader" in the ind!"tr# did not have to wa"te or re"o!r e" ontendin/ with new o)+etitor"And then there wa" the dra)ati /rowth of the >a+ane"e e ono)#- It" e6+an"ion at a rate a(o!t two and a half ti)e" a" /reat a" that for the other" advan ed o!ntrie" ertainl# +ro)+ted >a+ane"e wat h)a:er" to enlar/e and !+/raded their +rod! tion fa ilitie"- The (!o#ant ho)e e ono)# !ndo!(tedl# ind! ed >a+ane"e wat h)a:er" to ta:e inve"t)ent ri":" that o)+etitor" el"ewhere "hied awa# fro)Re/ardin/ the f!t!re* it "ee)" li:el# that fa tor" "! h a" tho"e li"ted a(ove will +la# a "o)ewhat le"" i)+ortant role a" in/redient" of "! e""- At lea"t* over the ne6t de ade or "o the winner" in the world wat h ind!"tr# will (e tho"e fir)" )o"t adroit at )a"terin/ an arra# of new te hnolo/ie" and )e"hin/ the te hnolo/ie" with the )ar:et+la e- The >a+ane"e wat h)a:er" have ar)ed the)"elve" for the (attle in their own wa#Non3wat h 2rod! tion : The So!r e of New Te hnolo/# : Over the #ear" the J(i/3twoJ in the ind!"tr# have )oved into the )an!fa t!rin/ of +rod! t" o!t"ide the ti)e3+ie e field- G# $%&' Sei:o wa" +rod! in/ de":3to+ ele troni al !lator"* hi/h3"+eed +rinter" for !"e with o)+!ter"* )iniat!re ind!"trial ro(ot"* )a hine tool"* ele troni di"+la#" of vario!" t#+e"* and infor)ation eD!i+)ent- G# then* Citi=en Wat h wa" +rod! in/ )e hani al and ele troni al !lator"* offi e eD!i+)ent and )a hine tool"- To (e "!re* in neither a"e did the "ale" of the"e ite)" re+re"ent a )a5or +art of the fir)." total reven!e- G!t the )an!fa t!re of the"e non3ti)e3+ie e +rod! t line" did e6+o"e the fir)" to te hnolo/ie" that were in or+orated in the new t#+e" of wat he" !nder develo+)entAnd the two ")aller wat h)a:er" develo+ed their own )ean" for ta++in/ the new te hnolo/#- Ri oh Wat h* for in"tan e* (e o)e a +art of an ind!"trial o)(ine +rod! in/ o+ier"* a)era"* )otor"* lo :"* and related ite)"- Th!"* when the"e fir)" a D!ired a "ort of in3ho!"e a e"" to the ":ill" and :nowled/e needed to "!++ort re"ear h and develo+)ent a tivitie" for the new /eneration of wat he"G# the earl# $%&'" it wa" "till too earl# to deter)ine how "! e""f!l the >a+ane"e wo!ld (e at tran"+lantin/ the late"t +ha"e" of ele troni te hnolo/# into wat h)a:in/- Iet* there were "i/n" that the >a+ane"e were not a(o!t to (e o!t+la#ed- In $%&' Sei:o (e a)e the fir"t wat h)a:er in the world to introd! e a wat h e)+lo#in/ the D!art= r#"tal te hnolo/#- S!("eD!entl#* Sei:o had to withdraw the wat h fro) the )ar:et to "ort o!t te hni al +ro(le)"- G!t within the #ear Sei:o wa" (a : on the )ar:et with an i)+roved D!art= wat h 33 one (oa"tin/ Ja "+e ial te)+erat!re o)+en"ation devi e de"i/ned to )a:e the r#"tal." vi(ration a" +erfe t a" +o""i(le in order to +rovide e6tra a !ra #.- Clearl#* Sei:o wa" not a(o!t to /ive !+ it" lai) to a "hare of the ele troni wat h )ar:etOne A)eri an* o)+arin/ the overall "trate/ie" of the Swi"" and the >a+an a" wat h)a:in/ ind!"trie"* "!))ed !+ the "it!ation in the followin/ wa# : "/or years the Swiss ruled the world watch market with a regiment. The 8apanese are countering now with several giants. lot of the troops in the regiment aren't going to make it in a battle with giants. -esides, the industry can't hold very many giants. 7ow the 2.S. watchmakers will come out of this, in between the Swiss and the 8apanese trading punches, isn't at all clear. IE :T)e U( S( Wat#) In ustr* "We've been able to beat foreign competition simply because we are foreign competition"

14

- 7arry -. 7enshal, ;resident, -ulova Watch Fi/hli/ht" a" of $%&' : In $%&' U-S- on"!)er" "+ent a++ro6i)atel# 0 $ (illion to +!r ha"e a(o!t 9, )illion wri"twat he"* of whi h ro!/hl# 9'7* or a(o!t $? )illion had (een )an!fa t!red at ho)e* while the re)ainin/ B'7 had (een i)+orted fro) forei/n o!ntrie" or fro) the Eir/in I"land"- At the "a)e ti)e* U-S- wat h e6+ort"* a" the# had (een for )an# #ear"* were nil- Th!" in $%&' the United State" wa" (oth the World." lar/e"t wat h )ar:et and the world." lar/e"t net i)+orter of wat he"- Fowever* a" we "hall "ee "hortl#* the"e fi/!re" do not )ean that forei/n wat h)a:er" "!++lied B'7 of the U-S- )ar:etAltho!/h the United State" wa" the World." lar/e"t wat h )ar:et* wat h)a:in/ re+re"ented an in"i/nifi ant +art of U-S- )an!fa t!rin/ ind!"tr#- Wor:er" en/a/ed in wat h)a:in/ on"tit!ted onl# one3tenth of $7 of total )an!fa t!rin/ e)+lo#)ent- In fa t* onl# two U-S- wat h o)+anie"* G!lova and Ti)e6* were involved in an# do)e"ti wat h +rod! tion- Thi" +oint i" r! ial- To !nder"tand an#thin/ a(o!t the U-S- wat h ind!"tr# a" it )oved into the $%&'"* it i" fir"t i)+erative to di"tin/!i"h (etween tho"e wat h)a:er" that are (oth U-S- )an!fa t!rin/ and "ellin/ enter+ri"e" and tho"e that were )erel# U-S- )ar:etin/ or/ani=ation"- Ma:in/ that di"tin tion all" for "o)e hi"tor#The 2o"t3World War II Shift in Wat h 2rod! tion : Sin e the (e/innin/* U-S- o)+anie" have "tr!//led to o+e with the la(o!r reD!ire)ent" of wat h)a:in/- Man!fa t!rin/ wat he" (# traditional te hniD!e" ha" alwa#" (een la(o!r inten"ive4 (e#ond that it ha" alled for it" own (rand of ":illed la(o!r- Neither of the"e reD!ire)ent" ha" ever (een ea"il# )et in the United State"- So)e U-S- wat h "eller" never tried4 fro) the "tart i)+orted fini"hed wat he" or alternativel# i)+orted )ove)ent" and "i)+l# +!t the) in wat h a"e" hereB- Other fir)" ta :led the +ro(le) (# lo atin/ at lea"t +art of their +rod! tion over"ea"- G!lova and Gr!en* for e6a)+le* e"ta(li"hed their own )an!fa t!rin/ +lant" in Swit=erland in the earl# #ear" of the $%?'"- Still other o)+anie" lo ated all their )an!fa t!rin/ a+a it# in the United State"* o!ntin/ on )e hani=ation to off"et forei/n +rod! t". la(o!r advanta/e"After the Se ond World War )o"t of the (i/ na)e" in the U-S- wat h ind!"tr# had the (etter +art of their o!t+!t )an!fa t!red in the United State"* tho!/h a few did o(tain a "i/nifi ant "hare of their need" fro) their own Swi"" +lant"- And after the War* 5eweled3lever wat he" do)inated the U-S- )ar:et- Then d!rin/ the $%,'" and earl# $%B'" the "it!ation han/ed dra"ti all#- Ti)e6 fir"t "tor)ed the low3+ri e end of the wat h )ar:et and later )oved !+ into the )iddle +ri e ran/e- At the "a)e ti)e )ar/inal Swi"" +rod! er" flooded the U-S- )ar:et with ine6+en"ive +in3lever and 5eweled3lever wat he" )a:in/ +ri e o)+etition all the )ore "evere- And (# the earl# $%B'" the >a+ane"e (e/an to arve o!t their +ie e of the U-S- )ar:et- On to+ of thi"* the )a""3)er handi"in/ revol!tion of the $%,'" threw the traditional wat h di"tri(!tion "#"te)* "ale" thro!/h 5eweler" and fine de+art)ent "tore"* into hao"- To "!rvive in a )ar:et do)inated (# +ri e o)+etition* one after another U-S- wat h o)+an# /ave !+ on do)e"ti wat h )an!fa t!rin/ !ntil* a" +ointed o!t a(ove* (# $%&' there were onl# two "!rvivor"So)e of tho"e who "hifted to forei/n "!++l# a D!ired their own over"ea" +lant"* re"!ltin/ in an in rea"e in the n!)(er of U-S- ontrolled +lant" in Swit=erland- A ordin/ to one e"ti)ate* in the "e ond half of the $%B'" a(o!t 9,7 of the 5eweled3lever wat he" i)+orted into the United State" fro) Swit=erland were )ade in +lant" owned (# A)eri an fir)"- Other U-S- o)+anie"* however* fo!nd inde+endent Swi"" or >a+ane"e fir)" whi h "!++lied the) with wat he"* whi h the# then "old in the United State" !nder their own fa)iliar trade na)e"- In addition* )an# of the U-S- wat h)a:er" t!rned for at lea"t a +art of their need" to )an!fa t!rin/ and a""e)(l# in the Eir/in I"land" ;See A++endi6 C<The !+"hot of all thi" "hiftin/ wa" that d!rin/ the $%,'3$%&' +eriod a n!)(er of the well3:nown na)e" in the U-S- wat h ind!"tr# (e a)e little )ore than )ar:etin/ or/ani=ation"- Their ontrol of )an!fa t!rin/ o+eration"* if indeed* the# en/a/ed in )an!fa t!rin/ at all* (e a)e "e ondar#- The# "!rvived lar/el# (# e6+loitin/ the trade)ar:" that the# had e"ta(li"hed over the #ear" in the United State"- G# the earl# $%&'"* however* it wa" (e o)in/ D!e"tiona(le whether the"e wat h )ar:eter" o!ld "!rviveInd!"tr# Str! t!re : Even tho!/h )ar:et3"hare data are not +!(li it# availa(le* it i" lear that two o)+anie" r!led the U-Swat h )ar:et in the earl# $%&'"- 2ro(a(l# "o)ewhere (etween two3third" and three3D!arter" of all wat he" "old in

Since imports constitute such a high proportion of U.S. watch consumption, tariffs were a factor that could not be overlooked by U.S. and foreign watchmakers. Appendix B briefly discusses the tariff issue.
6

15

the United State" were )ade (# either G!lova or Ti)e6- Another half do=en U-S- wat h o)+anie" and a /ro!+ of forei/n wat h)a:er" " ra)(led for the re"t of the U-S- )ar:etE6hi(it 8 +re"ent" "o)e of the (a"i" fa t" a(o!t the fir)" traditionall# on"idered to (e +art of the U-Swat h ind!"tr#- Three +oint" "tand o!t in the e6hi(it- Fir"t* )o"t of the o)+anie" did not )an!fa t!re in the United State"- Se ond* )o"t were lo"in/ )one# in the earl# $%&'"- And third* "everal had "old o!t to lar/er U-So)+anie" or two Swi"" intere"t"- If E6hi(it 8 in l!ded (alan e3"heet data* it wo!ld al"o "how that a n!)(er of the o)+anie" were heavil# in de(t- A+art fro) G!lova and Ti)e6* the on e +ro!d U-S- wat h ind!"tr# wa" in a fairl# "orr# "tate a" of the earl# $%&'"- What had G!lova and Ti)e6 done ri/ht to "e+arate the)"elve" fro) other"K G!lova : D!rin/ the $%B'" G!lova." )ana/e)ent +!r"!ed fo!r )ain /oal": $< 8< 1< 9< )ar:etin/ a line of wat he" overin/ all +ri e and !"er "e/)ent"4 reatin/ a worldwide +rod! tion (a"e4 e6+andin/ it" international o+eration"4 and e6+loitin/ to the f!lle"t it" t!nin/3for: innovation-

Fow G!lova ta :led the U-S- )ar:et+la e i" indi ative of the +rod! t "trate/# the o)+an# i)+le)ented aro!nd the world- Thro!/ho!t the $%B'" and into the $%&'" G!lova "old a line of wat he" in ea h of the three )a5or )ar:et "e/)ent"* low* )edi!)* and hi/h3+ri e* and eD!alled or o!tfa ed o)+etition in ea h "e/)ent"At the (otto) of the )ar:et* in the +ri e ran/e of aro!nd 01' and !nder* G!lova offered it" JCaravell"J line- In $%B$ re"+on"e to Ti)e6* G!lova had o!ntered with thi" line whi h* tho!/h +ri ed o)+etitivel# with Ti)e6." +in3lever wat he"* on"i"ted "olel# of wat he" ontainin/ 5eweled3lever )ove)ent"- G!lova wa" a(le to hallen/e Ti)e6 (e a!"e it had t!rned to a >a+ane"e "!++lier* Citi=en Wat h* for ine6+en"ive 5eweled3lever )ove)ent"- G# the )id3$%B'" G!lova lai)ed that it wa" the leader in the 5eweled3lever +art of the ine6+en"ive wat h )ar:et- 2arentheti all#* it "ho!ld (e noted here that G!lova." "! e"" with the Caravelle line +ro(a(l# e6+lain" wh# Citi=en* >a+ane"e "e ond lar/e"t wat h)a:er* ha" never )oved into the U-S- )ar:et on it" ownThe )iddle of the )ar:et* on"i"tin/ +rin i+all# of 5eweled lever wat he" "ellin/ in the 0 1' to 0 $'' +ri e ran/e* ha" alwa#" (een G!lova." "tron/hold- The o)+an# )ar:eted literall# h!ndred" of )odel" !nder the G!lova na)e* and within thi" "e/)ent of the )ar:et re)ained +ri e o)+etitive (# )an!fa t!rin/ the wat h )ove)ent" in it" own Swi"" +lant"- In fa t* "!++l#in/ the U-S- )ar:et )ade G!lova the lar/e"t "in/le )an!fa t!rer in Swit=erlandAt the to+ of the )ar:et* G!lova." t!nin/3for: wat h* the JA !tronJ* wa" in a la"" of it" own- Wh# thi" wa" "o* all" for a little hi"tor#- Clo :" (a"ed on the t!nin/ for: +rin i+le dated fro) the t!rn of the ent!r#- In $%,8" #o!n/ Swi"" en/ineer* wor:in/ at the G!lova +lant in Swit=erland* /ot )ana/e)ent a++roval to develo+ a )iniat!ri=ed t!nin/3for: )ove)ent- G# the )id3$%,'" he had +artiall# "! eeded- G!lova (ro!/ht hi" +rotot#+e" to the United State" and )iniat!ri=ed the) f!rther (# a++l#in/ advan ed ele troni " and )etall!r/i al te hniD!e"After +atentin/ the devi e* G!lova +!t it on the )ar:et in $%B' a" the NA !tron. wat hTho!/h the A !tron did not o)+ete head3on with l!6!r# )e hani al wat he"* tho"e "old )ore a" 5ewelr# than a" ti)e3+ie e"* it "oon /ra((ed the lion." "hare of wat h +!r ha"e" in the over 0 $'' +ri e ate/or#Moreover* G!lova "we+t the )ar:et with a wat h de"i/ned "olel# for )en4 for te hni al rea"on"* JMini3A !tor"J for wo)en were not +!t on the )ar:et !ntil $%&$Wherea" A !tron." !niD!ene"" !ndo!(tedl# a o!nted for )! h of G!lova." "! e"" within the hi/h3 +ri e "e/)ent of the wat h )ar:et* !niD!ene"" of +rod! t o!ld not a o!nt for G!lova." "! e"" in the other two "e/)ent" of the )ar:et- In"tead relied on a//re""ive )ar:etin/- Adverti"in/ and di"tri(!tion "!++ort* for #ear." G!lova." forte* were the two riti al )ar:etin/ fa tor"G# the "e ond half of the "i6tie"* G!lova wa" "+endin/ a" )! h a" 0 9 )illion at a ra : of it" "ea"onal adverti"in/ a)+ai/n"- G# the (e/innin/ of the "eventie" it wa" "+endin/ half of all wat h adverti"in/ dollar" in the United State"- It )aintained the lar/e"t "ale" forte within the ind!"tr# and +rovided the di"tri(!tor"* +arti !larl# 5eweler"* with do=en" of different "ellin/ and "ervi e +ro/ra))e"- In "hort* G!lova* whi h a)e o!t of the "e ond World War "o)ewhat lar/er than it" rival"* in rea"ed the /a+ (# +o!rin/ f!nd" into )ar:etin/ at a rate !n+aralleled in the ind!"tr# Meanwhile* G!lova )ana/e)ent (!ilt the )an!fa t!rin/ (a"e that en"!red the "! e"" of it" )ar:etin/ "trate/#- It e6+anded the o)+an#." )an!fa t!rin/ o+eration" !ntil* (# $%&'* it had 8' +lant" " attered aro!nd the world- A" "!//e"ted (# the D!otation at the (e/innin/ of thi" "e tion* G!lova." )ana/e)ent "aw it" worldwide

16

+rod! tion "#"te) a" it" :e# o)+etitive "tren/th- With thi" "#"te) G!lova o!ld +i : the ti)e and +la e for +rod! in/ a +arti !lar wat h- For in"tan e* it on entrated U-S- +rod! tion on the A !tron* whi h reD!ire a low la(o!r in+!t "o+hi"ti ated te hnolo/#F!rther)ore* a" it (roadened it" )an!fa t!rin/ (a"e* G!lova (e a)e a+a(le of ond! tin/ re"ear h and develo+)ent and )ar:et te"tin/ at )ore than one "ite- It develo+ed it" Mini3A !tron for wo)en in Swit=erland and fir"t +!t it on the )ar:et in Fran eA" +rod! tion "+read aro!nd the world* "o too* did "ale"- Wherea"* in $%B' international (!"ine"" a o!nted for not )! h than ,7 of G!lova." on"!)er "ale" ;the"e e6 l!de defen"e and ind!"trial "ale"< a de ade later the +er enta/e wa" in the 8'7 ran/e- 2art of thi" "!r/e o!ld (e attri(!ted to the A !tron* whi h G!lova introd! ed* with "! e""* in a n!)(er of over"ea" )ar:et"- Th!" (# arr#in/ o)+etition into it" forei/n rival". own (a :#ard"* G!lova dil!ted "o)ewhat the effort" the# o!ld (rin/ to (ear on the U-S- )ar:et+la eAt the "a)e ti)e that G!lova wa" +!"hin/ it" "ale" (a"e* it wa" al"o "horin/ !+ it" worldwide do)inan e in the field of t!nin/ for: te hnolo/#- In $%B?* Swi"" )an!fa t!rer"* !na(le to develo+ a ver"ion of the t!nin/3 for: )ove)ent that did not onfli t with the G!lova +atent* a/reed to enter into a li en"in/ a/ree)ent with G!lovaCon"eD!entl#* (# the earl# $%&'" "everal Swi"" +rod! er"* G!lova." li en"ee"* were )a:in/ and "ellin/ their own ver"ion" of the t!nin/3for: wat h- And on the other "ide of the /lo(e* the Citi=en Wat h Co)+an#* >a+an." Se ond lar/e"t wat h)a:er and )inorit# +artner with G!lova in the 5oint )an!fa t!rin/ vent!re* wa" )a:in/ and "ellin/ A !tron" !nder another li en"e a/ree)ent with G!lovaThe o)(ination of all the"e fa tor" t!rned G!lova into the world." lar/e"t wat h "eller* in dollar ter)"Ti)e6 : Co)in/ o!t of nowhere in $%,'* Ti)e6 arved o!t a )a5or +la e for it"elf in the U-S- Wat h )ar:et in the $%,'" and in forei/n )ar:et" in the $%B'"-* On al)o"t ever# o!nt Ti)e6." +rod! t and )ar:et "trate/# differed fro) that of the traditional wat h)a:er"- Ti)e6 did not (!ild it" re+!tation on the 5eweled3lever wat hIn"tead* it too: a +in3lever )ove)ent* "i)+lified it even f!rther "o that it o!ld (e )a""3+rod! ed with a!to)ated te hniD!e"* +!t in "i)+le (!t ta"tef!l a"e" and )ar:eted it" fir"t wat h line to retail at 0B-%, to 0&-%,- Then Ti)e6 went o!t"ide the onventional di"tri(!tion "#"te)* fir"t "ellin/ )o"t of it" wat he" thro!/h dr!/ "tore" and "!("eD!entl# thro!/h a n!)(er of )a"" )er handi"er"- Ne6t* Ti)e6 dr!))ed !+ "ale" thro!/h inten"ive adverti"in/- Li:e G!lova* Ti)e6 "+ent far )ore for it" adverti"in/ than wa" !"to)ar# in the ind!"tr# at the ti)eG!t !nli:e G!lova or an# other rival Ti)e6 +ro)oted it" line in wa#" that were !northodo6 and* a ordin/ to riti "* "o)ewhat /ari"h- One e6a)+le of Ti)e6." off3:e# adverti"in/ a++roa h* it" Jtort!re te"t"J* (e a)e a "tandard on networ: TE in the late $%,'"G# the earl# $%B'" Ti)e6 o!ld lai) that it wa" "ellin/ one o!t of ever# three wat he" in the United State"- It then (roadened it" +rod! t line with ele tri wat he" and "o)e 5eweled3lever )odel"- Con"eD!entl#* (# the late $%B'" Ti)e6 o!ld lai) that it wa" "ellin/ ever# other wat h in the United State"While Ti)e6 wa" "tren/thenin/ it" hold on the )ar:et* it wa" al"o* li:e G!lova* (!ildin/ !+ a worldwide )an!fa t!rin/ "#"te)- G# $%&'* it too had 8' +lant" " attered aro!nd the world- Th!"* (oth /iant" in the U-Swat h ind!"tr# had )an!fa t!rin/ (a"e" )ore widel# di"+er"ed than an# of their U-S- rival"* or* for that )atter* than an# of their forei/n rival"Le""on" fro) G!lova and Ti)e6 : The "! e"" of G!lova and Ti)e6 all" attention to "everal i)+ortant +oint"* whi h* altho!/h the# relate (a"i all# to the U-S- )ar:et+la e* )a# a++l# el"ewhere a" well- The"e are : $< G# the end of the $%B'" wat h)a:er" o!ld no lon/er (a"e their )ar:etin/ "trate/ie" al)o"t e6 l!"ivel# on the +!n h of the onventional di"tri(!tion "#"te)- Goth G!lova and Ti)e6 )ar:eted their +rod! t" dire tl# to on"!)er" and )ade their (rand na)e"* not the 5eweler." re o))endation* the :e# to wat h "ale"- In +art* thi" "wit h in )ar:etin/ e)+ha"i" wa" a nat!ral on"eD!en e of the "wee+in/ han/e" that affe ted the di"tri(!tion and retailin/ of )an# on"!)er /ood"- In +art* it wa" a""o iated with the "low (!t "tead# di"a++earan e in the United State" of an i)+ortant "o!r e of on"!)er infor)ation4 the wat h re+air)an- It wa" al"o related to on"!)er onf!"ion over D!alit#- In the $%,'" and $%B'" the ind!"tr# (affled the on"!)er with literall# tho!"and" of wat h )odel" and re !rrent +ri e !ttin/- Una(le to deter)ine what wa" a /ood wat h at a fair +ri e* the on"!)er nat!rall# t!rned to the one or two (rand" with whi h he or "he wa" )o"t fa)iliar8< Une6+loited ni he" were a thin/ of the +a"t in the U-S- wat h )ar:et- G!lova wa" ver# e6+li it a(o!t

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it" "trate/# in thi" re/ard- Note thi" o))ent in it" $%&' ann!al re+ort : "-ulova's market researches have sought to identify the particular needs of segments consumer groups. That we have succeeded in this crucial phase of our operations is evidenced by the record number of more than <== different watch models offered to the 2nited States markets." The re+ort went on to note that G!lova "old wat he" in the +ri e ran/e of 0$'-%, to 0$$-'''- And* of o!r"e* Ti)e6 o)+letel# (lan:eted the low +ri e field and +art of the )id3+ri e field- The re"t of o)+etition* the other U-S- wat h)a:er" and do=en" of forei/n )an!fa t!rer"* offered h!ndred" of additional )odel"- G# $%&'* the han e that a wat h)a:er wo!ld find a ni he !nnoti ated (# o)+etition wa"* for all +ra ti al +!r+o"e"* nil1< Finall#* the U-S- wat h o)+an# with a "tri tl# do)e"ti orientation wa" an ana hroni")- D!rin/ the $%B'" G!lova and Ti)e6 redefined the)"elve" a" )!ltinational fir)"4 their o!tloo: on )ar:et" and +rod! tion (e a)e worldwide- Over ti)e the# internationali=ed their )ar:etin/* +rod! tion* and re"ear h and develo+)ent ":ill" and o)+eted "! e""f!ll# (e a!"e the# e6+loited advanta/e" re/ardle"" of where the advanta/e" were lo ated- It i" D!e"tiona(le if either fir)* or an# other )a5or wat h)a:er* for that )atter* o!ld "!rvive in the $%&'" if it li)ited it" o+eration" to a "in/le o!ntr#What a(o!t "o)e of the other fa tor" that wo!ld deter)ine the o)+etitive a(ilit# of U-S- wat h)a:er" in the $%&'"K Re"ear h and Develo+)ent : Govern)ent3"!++orted re"ear h and develo+)ent wor: and defen"e3oriented +rod! tion e6+anded the te hnolo/i al (a"e of the leadin/ U-S- wat h)a:er" in a wa# not o+en to the wat h)a:er" in Swit=erland and >a+an- Moreover* !nli:e the Swi"" (!t li:e the >a+ane"e the U-S- o)+anie" on entrated on a D!irin/ advan ed te hni al ":ill" within their own or/ani=ation"For "o)e of the U-S- o)+anie"* the ":ill" the# a !)!lated* lar/el# at /overn)ent e6+en"e* added !+ to an i)+re""ive li"t- Ta:e G!lova* for in"tan e- D!rin/ the $%,'" and $%B'" G!lova develo+ed and +rod! ed a whole arra# of intri ate ele tro3)e hani al devi e" for )i""ile" and wa" a )a5or "!++lier of +art" for onventional a))!nition- Co))entin/ on it" te hni al a+a(ilitie" o!t"ide the wat h)a:in/ field* G!lova." $%B? Ann!al Re+orted had "tated : "The products made in the company's four non-consumer areas have as a common denominator, watch-making technology and miniature electronics, threading through the production of artillery and mortar fuses, micro-circuit automation e.uipment, test instrumentation, crystals, oscillations, and serve-mechanisms, and production of millions of pin-head si*ed synthetic !ewels." The re+ort went on to e)+ha"i=e the advanta/e" inherent in the"e a tivitie" : "The esoteric-sounding inventory of principal products of the non-consumer units fuses, safe and arm devices, microbonders, crystal-filters, optical-choppers, tuning-fork oscillators, laser beam choppers - seems remote from watch-design and manufacture> but they represent an inhouse technological base whose impact can be company-wide with consumer or non-consumer involvement." Other wat h)a:er" en/a/ed in "i)ilar a tivitie"- Ti)e6 develo+ed and )an!fa t!red /#ro" o+e and ti)in/ devi e"- Genr!" "!++lied hi/h3+re i"ion o)+onent" for )i""ile"* +ower3"!++l# "#"te)" for naval ve""el"* and ele troni in"tr!)entation for "atellite"- El/in )ade fli/ht in"tr!)ent"To (e "!re* not all of the U-S- wat h)a:er" retained the te hni al :nowled/e and e6+erti"e the# a D!ired in the o!r"e of )eetin/ defen"e need"- Tho"e that had to "ell o!t to other o)+anie" or that had e6+erien ed e"+e iall# hard tie" at the end of the $%B'" )ore than li:el# "aw their re"ervoir of :nowled/e and ":ill" dwindlin/ awa# or (e o)in/ o("ole" ent- In the earl# $%&'" the ")aller U-S- wat h o)+anie" "howed no "tri:in/ eviden e that the# had a te hnolo/i al lead over Swi"" and >a+ane"e o)+anie"- G!lova and Ti)e6 were a different )atter* however* the# had +ro"+ered thro!/ho!t the $%B'"- The#* therefore* had the o++ort!nit# to (!ild !+ their

18

re"ervoir" of ":ill"- In the earl# $%&'" the# were in the te hnolo/# van/!ard* and a" the de ade rolled on their a !)!lated te hni al a+a(ilitie" )i/ht well t!rn to (e their )o"t i)+ortant o)+etitive ed/e over Swi"" and >a+ane"e rival"Diver"ifi ation : At the end or another in the fiftie" and "i6tie" al)o"t all the U-S- wat h)a:er" e6+eri)ented with diver"ifi ation Generall# "+ea:in/* none of the e6+eri)ent" wa" "! e""f!l- Several fir)" did develo+ line" of ind!"trial +rod! t" li:e +re i"ion +art" or ele tro)e hani al o)+onent"* (!t the "ale of the"e line" never (e a)e a )a5or +art of their o+eration"- And a" for on"!)er /ood"* the wat h)a:er" de)on"trated a fairl# on"i"tent ina(ilit# to )ar:et "! e""f!ll# a "e ond on"!)er lineSo)e ind!"tr# o("erver" attri(!ted thi" wea:ne"" to the wat h)a:er." !niD!e (!t "+e ifi "et of )ar:etin/ ":ill"- Other lai)ed that the wat h)a:er" had "o )an# +ro(le)" to deal with that the# never had the han e nor the re"o!r e" to +!r"!e diver"ifi ation "erio!"l#- And the #ni " "!//e"ted that it wa" "i)+l# another a"e of an ind!"tr# with a fi6ation on one te hnolo/# and on one +rod! t- Whatever the a!"e* a" the ind!"tr# )oved into the $%&'" there wa" little eviden e that it" )e)(er" o!ld re/ard diver"ifi ation a" a readil# availa(le )ean" for adver"it# or for "ti)!latin/ /rowthU-S- Inve"t)ent in the Swi"" Ind!"tr# The e6+iration* at the end of $%B,* of the Swi"" Govern)ent." +rohi(ition a/ain"t the a D!i"ition or "ale of wat h)a:in/ o)+anie" wa" followed (# a fl!rr# of U-S- inve"t)ent in the Swi"" ind!"tr#- A" "oon a" the (arrier" dro++ed* Fa)ilton and Genr!" ea h +!r ha"ed Swi"" wat h)a:er" in order to o(tain )an!fa t!rin/ "ite" in Swit=erland- The ne6t #ear* $%B&* G!lova (o!/ht o!t Univer"al Geneva* a )a:er of D!alit# hi/h +ri ed wat he"- A ordin/ to re+ort"* G!lova had it" e#e on Univer"al Geneva." worldwide di"tri(!tion "#"te)- Other U-S- wat h)a:er" )i/ht have inve"ted in Swi"" o)+anie" a" well* had not the Swi"" /one on the offen"ive and "tarted to inve"t in U-S- o)+anie"An o!t"ider )ade the ne6t )a5or )ove into the Swi"" ind!"tr# in $%&$ when the A)eri an fir) Oenith a D!ired a )a5orit# intere"t of the Movade3Oenith3Monida Foldin/ Co)+an#* Swit=erland." fo!rth lar/e"t wat h)a:er"- The )er/ed o)+anie" anno!n ed their intention to +arle# Oenith." ele troni " e6+erti"e with the Swi"" /ro!+" wat h)a:in/ ":ill" to o)+ete in the ele troni wat h )ar:et2redi tin/ whether ro"" o!ntr# inve"t)ent ;U-S- o)+anie" in Swi"" fir)" and vi e ver"a< wo!ld :ee+ !+ it" +a e thro!/ho!t the re"t of the $%&'" wa" o)+li ated (# two o++o"in/ fa tor"- On the other hand* the o++ort!nitie" for thi" t#+e of inve"t)ent were de linin/- In Swit=erland* the wave of hori=ontal and verti al )er/er" le""ened the n!)(er of andidate" for a D!i"ition (# U-S- o)+anie"- And in the United State" al)o"t all of the wat h o)+anie"* with the e6 e+tion of G!lova and Ti)e6* had o)e !nder +artial or o)+lete Swi"" ontrol- On the other hand* f!rther inve"t)ent in ea h other." ind!"trie" )i/ht (e the (e"t wa# for U-S- Swi"" wat h o)+anie" to o+e with the in"ta(ilit# ari"in/ o!t of the ele troni wat h (attle- For e6a)+le* in an arti le entitled JSwi"" Wat h)a:er" 2lan More A)eri an Mer/er"J* the dire tor of Federation of Swi"" Wat h)a:er"* Mr- Retrona=* +redi ted )ore Swi"" a D!i"ition" of A)eri an wat h i)+orter"E: The Ele troni Wat h Gattle "+t all shapes up as an intriguing struggle that can be safely watched by most investors from the security of the side lines".- "alue #ine Selection ? $pinion Mar:et 2la e Develo+)ent + The O+enin/ Shot" G# the "e ond half of the $%B'" wat h)a:er" in Swit=erland* the United State"* and >a+an* 5oined in earne"t the ra e to (e fir"t on the )ar:et with a D!art= r#"tal ele troni wat h- And it wa" inevita(le that the ra e wo!ld (e r!n in the world." lar/e"t wat h )ar:et: the United State"- A)eri an on"!)er" o!ld well afford the new t#+e wat he"4 ea h fir)." (e"t han e at attainin/ )a""3+rod! tion e ono)ie" rode on +enetratin/ the lar/e U-S- )ar:et4 and the enter of the new te hnolo/# wa" the United State"Sei:o te)+oraril# lai)ed the rown when in $%&' it introd! ed it" analo/3ver"ion in the United State"G!t +rod! t diffi !ltie" for ed Sei:o to re all the wat h "hortl# after it had (een +!t on the )ar:et- Then G!lova la!n hed it" analo/ NA D!art=. in a l!6!r# ver"ion retailin/ at 0$*1,'- The #ear $%&$ "aw other )an!fa t!rer" anno!n in/ the introd! tion of their own e6+en"ive ver"ion" of D!art= wat he"- 2ia/et* for e6a)+le* (ro!/ht o!t one retailin/ at 08*%''- Toward the end of the #ear Fa)ilton la!n hed it" di/ital 2!l"ar at a retail +ri e of 08*$''Clearl#* the ind!"tr# wa" fir"t tr#in/ to ":i) the rea) off the )ar:et (# +a :a/in/ l!6!r# a"e" aro!nd the new

19

te hnolo/#- G!t the rea) did not la"t lon/At the end of $%&$ G!lova (ro!/ht o!t an i)+roved ver"ion of the A !D!art= (earin/ a retail +ri e of 01%,- Sei:o ret!rned to the )ar:et+la e with a D!art= line retailin/ in the 09,' 3 09&, ran/e- Then in A+ril $%&8 the Swi""* thro!/h E(a! he" SA* anno!n ed a f!ll line of P!art= Cr#"tal wat he"* (oth of the analo/ and di/ital variet#* to retail +ri e" of 01'' and !nder- Fardl# had the Swi"" "+r!n/ their new" when Ti)e6 anno!n ed that it wa" a(o!t to introd! e on analo/ D!art r#"tal wat h to retail at 0$8,- In the )id"t of all thi" a tivit#* 5eweler" were o)+lainin/ that new +rod! t anno!n e)ent" were flowin/ o!t of or+orate headD!arter" a lot fa"ter than the )arvel wat he" were flowin/ of a""e)(l# line"&- Ind!"tr# rival" were in a "ort of fren=# to (e the late"t with the newe"t- Still* the U-S- wat h )ar:et did "ettle down to a f!ll two )onth" of tranD!ilit#Mid3$%&8 : The S:ir)i"hin/ i" Over : Reader" of the >!l# i""!e" of the vario!" 5ewelr# trade )a/a=ine" +!(li"hed in the United State" a)e a ro"" a n!)(er of e#e3"to++er"- For e6a)+le* one two3+a/e adverti"e)ent arried thi" o+#: !enrus De,ies -me.a/ !u"o0a/ Sei'o/ Time& THE NEW !ENRUS S-LID STATE TECHNI1UARTZ WATCH IS UNE1UALLED IN PERF-R2ANCE STANDARD AND PRICE(

Genr!" th!" hallen/ed the ind!"tr# with the introd! tion of it" analo/ ver"ion of a D!art" wat h* a ti)e+ie e whi h wa" to arr# a "!//e"ted retail +ri e of 0%%- F!rther)ore* Genr!" let it (e :nown that it intended to )ar:et the wat h thro!/h all availa(le di"tri(!tion hannel"* in l!din/ )a"" )er handi"er"- U+ to that +oint all the wat h)a:er" in l!din/ Ti)e6 had re"tri t" di"tri(!tion of the new wat he" to the 5eweller# trade- Genr!". )ana/e)ent had a++arentl# de ided to !"e a +a/e of the Ti)e6 )ar:etin/ )an!alG!t the Genr!" adverti"e)ent wa" al)o"t (a : to (a : with other" "howin/ that the "olid3"tate wat h wa" a(o!t to (e o)e a realit# in the U-S- )ar:et+la e- The Waltha) Wat h Co)+an#* a divi"ion of the Swi"" So ietede" Grade3Te)+"* anno!n ed that it wo!ld "oon have availa(le a D!art= r#"tal* o)+letel# "olid3"tate* liD!id r#"tal di"+la# wat h- 2ri ed at !nder 08'' retail* the wat h wo!ld o)e on the )ar:et at le"" than half the +ri e for the fir"t few wat he" of thi" t#+e- A" i)+ortant a" it" +ri e wa" the fa t that it wa" an Jall3A)eri a develo+ed and )an!fa t!red +rod! tJAt the ver# "a)e ti)e* Gr!en anno!n ed that it wa" a(o!t to introd! e it" Teleti)e* a wat h o)+ara(le to Waltha)."- The retail +ri e ta/ on the Gr!en wat h wa" to (e 0$,'All the"e anno!n e)ent" re+re"ented new" eno!/h* (!t the trade +re"" ontained another tit3(it that )a# have (een )ore i)+ortant than ever#thin/ el"e- Mi ro)a Univer"al of Mo!ntain Eiew* California* one of the +rin i+al "!++lier" of inte/rated ir !it" and liD!id r#"tal di"+la#" to wat h)a:er"* di" lo"ed it" intention to "ell wat he" !nder it" own na)e- Mi ro)a "aid it +lanned to )ar:et in analo/ D!art= wat h at a retail +ri e of 0&%-,' and a di/ital "olid3"tate wat h at the retail +ri e of 0$9%-,'- Mi ro)a al"o "aid that it had a/reed to )a:e D!art= wat h for Sear"3Roe(! :- Th!"* the fir"t of the ele troni " )an!fa t!rer"* al(eit a ")all one* wa" a(o!t to invade the wat h)a:er". do)ain- S!("eD!entl#* another intere"tin/ a"+e t of Mi ro)a." vent!re wa" (ro!/ht to li/ht in a trade +re"" arti le whi h revealed that E(a! he" SA wo!ld "!++l# Mi ro)a with the )e hani al +art" reD!ired for it" analo/ wat hThe Role of the Ele troni " Man!fa t!rer" : A" of )id3$%&8 all D!art= wat he"* in l!din/ tho"e +!t o!t (# Swi"" and >a+ane"e wat h)a:er"* ontained inte/rated ir !it" )ade (# U-S- ele troni " )an!fa t!rer"- Wherea" Mi ro)a had de ided to )ove

Privately many jewelers greeted the introduction of the electronic watch with dimay, for they did not understand its technology. Consequently, the electronic watch jeopardised their traditional functions as advisors to consumers and repairmen. (Jeweler's Circular - KEYSTONE, July 1972)
7

20

forward into wat h )ar:etin/* what the re"t of the U-S- ele troni " )an!fa t!rer" wo!ld de ide to do wa" "till an o+en D!e"tion- Te6a" In"tr!)ent"* for e6a)+le* "!++lied E(a! he" SA* the "+earhead of the Swi"" )ove into D!art= wat he"* with inte/rated ir !itr#- G!t T-I- "aid nothin/ a(o!t (e o)in/ a wat h )ar:et it"elf- Iet it had re entl# de ided to "hift it" role in the ele troni al !lator (!"ine""- Until $%&8 T-I- had "i)+l# "!++lied lar/e " ale inte/rated ir !it" to other" for a""e)(l# into ine6+en"ive ele troni al !lator"- Then T-I- (ro!/ht o!t a al !lator !nder it" own la(el- The +arallel +o""i(ilit# with wat he" wa" all too o(vio!"Another o)+an#* Motorola* had re"ol!tel# de lared in earl# $%&8 it" intention to re)ain a o)+onent "!++lier- Si6 )onth" later the wat h)a:in/ trade +re"" wa" f!ll of r!)or" that Motorola wa" not "o re"ol!te an#)oreOther ele troni " )an!fa t!rer" with a toe in the door in l!ded RCA* Inter"il ;the "!++lier of Sei:o<* Solid State Devi e"* and O+tel- Several of the"e were relativel# new o)+anie" "et !+ to +arti i+ate in the evolvin/ ele troni wat h (!"ine""- 2redi tin/ what their lon/3ter) role wo!ld (e wa" o)+li ated (# a ra+idl# develo+in/ "et of the)e" (etween the) and wat h)a:er"The a"e of O+tel* In -* of 2rin eton* N->-* ill!"trate" thi" +oint- In $%B%* five " ienti"t" and en/ineer"* for)erl# with RCA* e"ta(li"hed the o)+an# to develo+ and "ell liD!id r#"tal di"+la#"- Two #ear" later Swi"" intere"t" finan e O+tel (# +!r ha"in/ for 0&''*''' it" entire i""!e of la"" G !)!lative onverti(le +referred "to : and (# loanin/ the fir) 0%''*'''- A" +art of the finan ial +a :a/e* JO+tel a/reed to /ive )e)(er" of the Swi"" Gro!+ the ri/ht to reD!e"t ertain +rioritie" fro) O+tel in onne tion with develo+)ent order" and +!r ha"e of O+tel ele troni +rod! t"J- G# )id3$%&8 O+tel wa" in f!ll "win/* +rod! in/ o)+onent" for di/ital "olid "tate wat he"- It" entire o!t+!t wa" de"tined for Swit=erlandTe hni al Fa tor" Relatin/ to the Ele troni Wat h : A" of $%&8* it "ee)ed fairl# ertain that the followin/ te hni al and +rod! tion on"ideration wo!ld hold tr!e for the ele troni wat h : a< Man!fa t!rin/ the ele troni wat h wo!ld all for ver# low la(o!r in+!t"- So)e o("erver" +redi ted that la(o!r o"t" )i/ht event!all# a)o!nt to no )ore than $'7 of total )an!fa t!rin/ o"t"- In ontra"t la(o!r o"t" o!ld r!n a" hi/h a" &'7 of total )an!fa t!rin/ o"t" for fine )e hani al wat he"4 (< Unli:e the "it!ation with the t!rnin/3for: wat h* when G!lova ontrolled the te hnolo/# thro!/h +atent"* no fir) wa" li:el# to (!ild !+ an# "ort of +atent wall with the ele troni wat hThe relevant te hnolo/# wa" widel# held* in lar/e +art (# fir)" o!t"ide the wat h)a:in/ field< Unli:e the a"e with )e hani al wat he"* o"t red! tion" for the ele troni wat h wo!ld not o)e at the e6+en"e of D!alit#- Even if the +ri e" for it did fall to ver# low level"* the ele troni wat h* when o)+letel# +erfe ted* wo!ld not (e a 5!n: wat h- In"tead* it wo!ld have the D!alit# a""o iated with the )o"t e6+en"ive )e hani al wat he"d< The o"t of the ele troni wat h wo!ld (e deter)ined (# the o"t3vol!)e relation"hi+" onne ted with the )an!fa t!re of ele troni " o)+onent"- Con"eD!entl#* the o"t advanta/e" of vol!)e for the ele troni wat h )i/ht well e6 eed tho"e for the )e hani al wat h 4 and e< And finall#* the ele troni wat h wo!ld !nder/o i)+ortant i)+rove)ent" in the ne6t five #ear"* a" of $%&8* wa" "till far fro) (ein/ a o)+letel# +erfe ted +rod! t- Neither of the two :e# te hni al o)+onent"* the D!art= r#"tal and the liD!id r#"tal di"+la#* wa" free fro) "hort o)in/"In fa t* "everal leadin/ wat h)a:er" a!tioned the ind!"tr# a/ain"t e6tollin/ too "tron/l# the )erit" of the D!art= wat he" then on the )ar:et- The G!lova Wat h Co)+an#* for in"tan e* i""!ed a "tate)ent in >!l# $%&8 whi h li"ted the followin/ li)itation" to D!art= r#"tal: $< the# are all "!(5e t to a /ain and a ordin/l# "!(5e t to "o)e han/e in their vi(ration freD!en #4 8< the# are +arti !larl# "en"itive to "ho :4 and

21

1< the# are D!ite "en"itive to te)+erat!reG!lova warned that /!arantee" of a !ra # of within a )in!te3a3#ear* whi h "o)e fir)" offered* were !nreali"ti - G!lova." "tate)ent want to "a# that it wo!ld not #et )ar:et wat he" !"in/ liD!id r#"tal di"+la#" (e a!"e the larit# of the devi e" then availa(le wa" inadeD!ate and (e a!"e their effe tive lifeti)e wa" "till to (e e"ta(li"hedA""e""in/ the I)+a t of the Ele troni Wat h : Un ertaintie"* "! h a" tho"e related to the !lti)ate role of the ele troni " )an!fa t!rer" and tho"e related to the re)ainin/ +rod! t defi ien ie"* +!t lar/e D!e"tion )ar:" after all +redi tion" of the f!t!re for the ele troni wat h- Still* thi" didn.t "te) the tide of +ro/no"ti ation" on ernin/ what the ele troni wat h wo!ld do to the wat h ind!"tr#The 2re"ident of one U-S- ele troni " o)+an# )ade the +redi tion that re eived the )o"t attention : JThe "olid3"tate wat h will +!t ,'*''' Swi"" o!t of wor:J- Other e6e !tive" in U-S- ele troni " fir) +!t it thi" wa# : JThe ti)e ha" o)e for an A)eri an o)+an# to (e o)e the E(a! he"J- And the 2re"ident of Genr!" "aw the f!t!re li:e thi" : JAll eviden e +oint" to the e)er/en e of an A)eri an wat h ind!"tr# and to the "!()er/en e of the Swi"" and non3A)eri an wat h )an!fa t!rer"JThe"e fore a"t" de+ended* of o!r"e* on a""e"")ent" of the "hare of the )ar:et that the ele troni wat h wo!ld a+t!re fro) the )e hani al wat h- Man# A)eri an" and >a+ane"e* +arti !larl# tho"e relativel# !n on erned (# the f!t!re for all )e hani al wat he"- The +re"ident of Genr!"* for e6a)+le* +redi ted that ele troni wat he" wo!ld "oon a+t!re 8'7 of the wat h )ar:et* and he added that he o!ld fore"ee a ti)e when the# wo!ld ontrol %'7 of the )ar:et- E6e !tive in the U-S- ele troni " ind!"tr# +ro+he"i=ed* D!ite nat!ral that the death of the )e hani al wat h wa" i))inentUndo!(tedl# the )ain rea"on wh# the ele troni " ind!"tr# held "! h hi/h ho+e" for the new /eneration of wat he" wa" the lon/3ran/e +ri e +ro"+e t"- Tho"e (e"t a D!ainted with the o"t" involved in )a:in/ the ele troni o)+onent" +redi ted ontin!in/ +ri e de line"- For in"tan e* the head of Motorola." D!art= ti)e+ie e ele troni " divi"ion "aid in A!/!"t $%&8 that he loo:ed for D!art= wat h +ri e" to "lide to 0$' (# $%&9- Lon/ ter)* he "aw no rea"on wh# their retail +ri e" o!ld not (e (ro!/ht down to 0$'>a+ane"e wat h)a:er" "ee)ed to avoid the +ri e i""!e (!t tal:ed a(o!t the ele troni wat h a+t!rin/ ,'7 of the total )ar:et- Moreover* the# "!//e"ted that the Swi"" wo!ld (e the )o"t affe ted (# the ele troni wat h- The# +redi ted that Swi"" wat h)a:er" wo!ld (e for ed to t!rn in rea"in/l# to the +rod! tion of de orative wat he"To no(od#." "!r+ri"e* the Swi"" "aw the "it!ation in a different li/ht- Re"+ondin/ to a +redi tion that the ele troni wat h "+elled the end for the onventional wat h* a Ei e32re"ident for E(a! he" SA had thi" to "a# : "We have thoroughly e(amined this matter on both the technical and the marketing level, and we are convinced that if a happy future is in store for the electronic watch, the mechanical watch, is doomed and would throw thousands of watchmakers in Swit*erland out of work". 2!t in +er"+e tive for the A)eri an reader thi" +redi tion wo!ld o)+are with a fore a"t of +!ttin/ $-1 )illion A)eri an o!t of wor:- Si)+le or a!to)ati ver"ion* al"o ha" (rilliant +o""i(ilitie"- In $%?'* the on"!)+tion of wat he" will (e a++ro6i)atel# 1'' )illion" !nit" ;a" a/ain"t $?' )illion" in $%&8<- The )o"t o+ti)i"ti fore a"t" fi6 the "hare of ele troni wat he" at one third* with the (alan e* at lea"t 8'' )illion +ie e"* (ein/ )e hani al wat he"Another "+o:e")an for the Swi"" ind!"tr# e)+ha"i=ed that it" wat h)a:er" were a" well +re+ared a" an# to fi/ht it o!t in the ele troni wat h (attle: Fenr# Altorfer* E6e !tive Dire tor of the Wat h)a:er" of Swit=erland* !nderline" how E(a! he" SA had laid a +er)anent fo!ndation for wat h +ro/re"" and how (a : in >!l# $%B&* lon/ (efore the >a+ane"e or an#(od# el"e had it* the Swi"" had Geta38$* the +rotot#+e of the D!art= wat h- G# $%B%---- the Swi"" were read# to +rod! e the D!art= wat h in vol!)e"We have been and will continue to be world leaders in watch production and technology", ltorfer assured.

22

@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@

23

E&)ibit 3 4 Str! t!re of the Swi"" Wat h Ind!"tr# 3 $%&'

SWISS WATCH CHAMBER (1)

ASUAG (2)

FEDERATION HORLOGERS(3)

ASSOCIATION ROSKOPF (4)

EBAUCHES SA (5)

UBAH (6)0

$819,B-

The a""o iation that re+re"ent" the entire ind!"tr# in /overn)ental and forei/n trade )atter"The holdin/ o)+an#* 1'7 ontrolled (# the Swi"" Govern)ent that own" a )a5orit# intere"t of E(a! he" SA and of three of lar/e"t o)+onent )an!fa t!rer"The a""o iation of +in3lever wat h )an!fa t!rer"- In $%&' it had over ,' )e)(er"The a""o iation of 5eweled3lever wat h )an!fa t!rer"- In $%&' it had 9?B )e)(er"A tr!"t o)+o"ed of $& "!("idiarie" +rod! in/ Eda! he"The a""o iation of o)+onent )an!fa t!rer"- It in l!de" h!ndred" of ")all fir)" a)on/ it" )e)(er" a" well a" fo!r lar/e o)+onent +rod! in/ fir)" or /ro!+" of fir)"- The fo!r are :3 Fa(riD!e" D. A""orti)ent" Re!nie" ;e" a+e)ent"< Fa(riD!e" de Galan ier" SA ;(alan e wheel"< Gro!+)ent de" Fa(riD!e" Swi""e" de S+ira!6 ;hair"+rin/"< 2ierre" Foldin/ SA ;>ewel"<-

24

EQFIGIT 3 8: TFE WATCF INDUSTRIES Leadin/ Na)e" in the U-S- Wat h Ind!"tr# Re ent 2erfor)an e Stati"ti "
Co)+an# or Divi"ion Genr!" Owner"hi+ U-SFi" al #ear $%&,@ Sale" ;)ill< 08, )Net In o)e ;lo""< 09-, )-O+eratin/ at (rea:3even or lo"" "in e $%B? 01-% ) 0$1-8) Wat h 2rod! tion (a"e Man!fa t!rin/ and a""e)3 (lin/ in Swit=erland and Eir/in I"land"8' 2lant" aro!nd the world in l!din/ "everal in the U-SMan!fa t!rin/ and a""e)(l# in Swit=erland and Eir/in I"land"-

G!lova El/in Ind!"trie"

U-SLar/el# U-SSwi"" own a(o!t ,7 ;a(o!t 8,7 in wat he"< ?'7 U-S8'7 Swi""

$%&8@ $%&$

0$9& ) 0$1')

Gr!en Ind!"trie" Fa)ilton

$%&$@@ 0%-B )

08-$)08-9 )

Man!fa t!rin/ and a""e)(l# in Swit=erland* Canada and U-SLea"e" )an!fa t!rin/ H a""e)(l# +lant" in Swit=erland and Eir/in

Sin e $%&% $%&8@ 09&)a ,'7 owned )ar:etin/ "!("dr# of G!"h Univer"al4 Swi"" own $&7* with o+tion to (!# ,$7 in $%&9 Sin e $%?'* a divi"ion of We"tin/ho!"e U-SNA NA

Lon/ine"3 Wittna!er Sheffield

NA

Man!fa t!rin/ and a""e)(l# in Swit=erland

$%&$ 0 $,)ill

in (an:r!+t # Sin e $%&8

Man!fa t!rin/ and a""e)(l# in Swit=erland* Ior: Eir/in I"land" H G!a) I"land 8' +lant" aro!nd the world in l!din/ "everal in the U-S-

Ti)e" Weltha)

2rivatel# owned U-S-

$%&$ 08'' )ill NA

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Sin e $%B?* NA the US "!("idiar# of Swi"" Wat h )a:in/ on"orti!)

Man!fa t!rin/ and a""e)(l# in Swit=erland and for it" ele troni wat h in the U-S-

@ For fi" al #ear endin/ >an!ar# 1$@@ For Fi" al #ear endin/ Mar h 1$-

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A++endi6 A: TFE WORLD WATCF INDUSTRI A !RIEF $UIDE T- H-W WATCHES W-R5 AND THEIR PRINCIPAL T6PES Wri"t wat he" o)e in inn!)era(le "i=e"* "ha+e"* de"i/n" and +ri e ran/e"- Iet !ntil the la"t de ade )o"t of the differen e" a)on/ r!nnin/ )e hani")" of wat he" were la""ed into a few /eneral ate/orie"- All wat he" were )e hani al and of the "+rin/ +owered t#+e- And (# tradition the# were +!t into onl# one or the other two ate/orie": 5eweled3lever or +in3lever- The"e ter)" will (e e6+lained later- G!t with the advent in the late $%,'" of the ele tri wat h and the "!("eD!ent introd! tion of "everal t#+e" of ele troni wat he"* the +ro(le) of de" ri(in/ how wat he" wor: and la""if#in/ the) /rew in o)+le6it#Still* if )atter" are "i)+lified on"idera(l#* it i" +o""i(le to a D!ire witho!t )! h diffi !lt# a wor:in/ fa)iliarit# with wat h te hnolo/#- That i" the ai) of thi" /!ide- It (e/in" the traditional "+rin/ +owered wat h* a ti)e+ie e little han/ed in over 1'' #ear"* and then tra e" the )a5or innovation" that have "o dra)ati all# han/ed the nat!re of wri"twat he" in the la"t two de ade"The Standard S+rin/32owered Wat h: The traditional )e hani al wat h on"i"t" of two di"tin t* +art" : the e6terior vi"i(le ele)ent" ;the a"e* r#"tal* dial and hand"< and the interior )ove)ent- What ha++en" on the o!t"ide of a wat h i" o(vio!"4 what /oe" on in"ide i" a )#"ter#* to )an#- The )ove)ent nor)all# on"i"t" of a h!ndred or )ore +art" whi h for) three )a5or /ro!+" : $< The E(a! he* or )ove)ent (lan:* whi h a o!nt" for )ore than three3fifth" of all +art"- It o)+ri"e" the fra)ewor: of the wat h ;the +art" and (rid/e"<* the /ear train ;the wheel" and +inion"<* and the windin/ and "ettin/ )a hine"- In a ro!/hl# wa#* E(a! he" an (e tho!/ht of a" the ha""i" and en/ine of an a!to)o(ileThe re/!latin/ o)+onent" ;the e" a+e)ent* (alan e wheel* and hair"+rin/<* whi h )a:e the )ove)ent wor: at the orre t rate- Ro!/hl#* the"e an (e tho!/ht of a" the tran")i""ion of an a!to)o(ileOther )i" ellaneo!" +art" whi h annot (e la""ed !nder an# /eneri headin/

8< 1<

When the"e h!ndred or "o +art" are a""e)(led* how do the# wor:- Windin/ a wat h ti/hten" the "+iral of it" )ain"+rin/- A" the "+rin/ !nwind"* it drive" a "erie" of /ear" to whi h the hand" of the wat h are atta hed- G!t the !nwindin/ of the )ain"+rin/ ha" to (e re"trained and +re i"el# ontrolled to +rovide the ri/ht in re)ent" of ti)e- Thi" reD!ire)ent i" what )a:e" a wat h )ove)ent o)+le6The ta": of relea"in/ 4ener/# fro) the )ain"+rin/ in a +re i"e wa# i" arried o!t (# the re/!latin/ o)+onent"* the heart of whi h i" the e" a+e)ent )e hani")- A /ear alled the e" a+e)ent wheel i" atta hed to the )ain /ear train- The e" a+e)ent wheel i" re"trained fro) relatin/ freel#* there(# (lo :in/ the !nwindin/ of the )ain"+rin/ (# two teeth in a +art alled the an hor for)- The an hor for) ro :" (a : and forth relea"in/ one tooth and i))ediatel# thereafter en/a/in/ the other 4tooth in the e" a+e)ent wheel- The alternative relea"e and 4en/a/e)ent of the e" a+e)ent wheel +er)it" :it to advan e (# tin# in re)ent" and the"e in re)ent" of rotation are onverted (# the other /ear" into the "e ond* )in!te* and ho!r )ove)ent" of the wat h hand"G!t what )a:e" the an hor fro) )oveK It i" onne ted to a (alan e wheel whi h rotate" (a : and forth* and the (alan e wheel i"* in t!rn* onne ted to a hair"+rin/ whi h oil" and !n oil" to :ee+ the (alan e wheel in )otion- A" ea h tooth on the an hor for) di"en/a/e" fro) the e" a+e)ent wheel ;the tooth a t!all# "lide" awa# fro) the wheel<* it tran")it" eno!/h +ower thro!/h the an hor for) and (alan e wheel to the hair"+rin/ to oil it "li/htl#- A" the 4hair"+rin/ !n oil"* it rotate" the (alan e wheel in the o++o"ite dire tion* whi h in t!rn ro :" the an hor for) in the o++o"ite dire tion "tartin/ the ne6t # le in the re/!latin/ )e hani")- Thi" whole o)+le6 "et of )ove)ent" /oe" on a(o!t 1'' ti)e" a )in!te and +rod! e" the fa)iliar ti :in/ in the "+rin/ +owered wat hEven tho!/h all )e hani al wat h 4)ove)ent" o+erate a ordin/ to the +rin i+al 5!"t de" ri(ed* not all )ove)ent" are of the "a)e D!alit#- The D!alit# of a )ove)ent i" deter)ined* in +art* (# the +re i"ion with whi h the )an# tin# +art" are )ade and* in +art (# the are that /oe" into ad5!"tin/ the f!n tionin/ of the o)+onent"For e6a)+le* Swi"" )an!fa t!rer" of +re)i!) wat he" have traditionall# e)+lo#ed )a"ter wat h3)a:er" to )a:e all the )an# and ti)e on"!)in/ ad5!"t)ent" needed to +rod! e a hi/hl# a !rate )ove)entThen there i" the whole )atter of 5ewel"- Sin e wat h )ove)ent" on"i"t of )an# tin# +art"* it i" o(vio!" that fri tion 4and wear )!"t (e )ini)i=ed* if wat he" are to (e a !rate and lon/ la"tin/- In )an# wat he"*

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tho!/h in far fro) all of the)* thi" i" a o)+li"hed (# +!ttin/ 5ewel" at all the riti al +ivot and onta t +oint" in the )ove)ent- On "tandard Swi"" )ove)ent* for e6a)+le* ontain" $, 5ewel"- Eer# hi/h3D!alit# )ove)ent )a# ontain a" )an# a" 1' 5ewel"- While the +!r+o"e of 5ewel" )ove)ent" i" /enerall# well !nder"tood* the ontri(!tion that the# )a:e to the o"t and D!alit# of wat he" i" often )i"!nder"toodMan# +eo+le a""!)e that wat he" ontainin/ $, or )ore 5ewel" are e6+en"ive (e a!"e the 5ewel" are e6+en"ive- Moreover* the# a""!)e that the n!)(er of 5ewel" in wat h )ove)ent" indi ate" the D!alit# of the wat h- The "e ond of 4the"e a""!)+tion" i" not ne e""aril# tr!e4 the fir"t i" 5!"t +lain fal"e- With are e6 e+tion" all 5ewel" !"ed in wat h)a:in/ 3 e6 l!din/* of o!r"e tho"e !"ed on the o!t"ide of a wat h for de orative +!r+o"e" 3 are "#ntheti and D!ite ine6+en"ive- Th!"* the n!)(er of 5ewel" in a )ove)ent ha" little to do with the +ri e of a wat h- A" re/ard" the i""!e of D!alit#* )o"t )ove)ent" ontainin/ $, or )ore 5ewel" are +rod! ed with the +re i"ion and are reD!ired to )a:e a fine ti)e+ie e- Iet "o)e le"" " r!+!lo!" wat h)a:er"* :nowin/ that on"!)er" erroneo!"l# eD!ate the n!)(er of 5ewel" with D!alit#* have fooled the +!(li (# +!ttin/ o!t e6+en"ive (!t r!de ti)e+ie e" ontainin/ )an# 5ewel"- It follow" that e"ta(li"hin/ the tr!e D!alit# of the "tandard "+rin/3 +owered wat h i" not an ea"# )atter for the avera/e on"!)erThe i""!e i" f!rther o)+li ated (# the fa t that there are tow different 4t#+e" of "+rin/3+owered wat he"The Di"tin tion Getween >eweled3lever and 2in3lever Wat he": A" a r!le all )e hani al wat he" are re/arded a" (ein/ either of the 5eweled3lever or the +in3lever variet#Altho!/h the di"tin tion i" (a"ed on "+e ifi te hni al differen e"* )an# wat h)a:er" and 5eweler" ontend that the di"tin tion i" an indi ation of overall wat h D!alit#- Man!fa t!rer" of 5eweled3lever wat h on"ider +in3lever wat he" inferior in )an# re"+e t"- The# hara teri=e the +in3lever wat h a" a r!de ti)e+ie e* +oorl# )ade with low3/rade )aterial"* whi h will not la"t and whi h will not :ee+ a !rate ti)e- The# on ede that +in3lever wat he" are ine6+en"ive ;the# +refer to !"e the word hea+<* (!t the# lai) that the !"to)er i" /ettin/ 5!"t what he or "he +a#" for- A" the !lti)ate in"!lt* the# refer to +in3lever wat he" a" Jthrowawa#"JA" )i/ht (e e6+e ted* )an!fa t!rer" of +in3lever wat he" have a different +oint of view- The# ontend that their wat he" do a +erfe tl# adeD!ate 5o(* that their wat he" are d!ra(le* and that on"!)er" do not have to +a# e6or(itant +ri e" to own relia(le ti)e+ie e"- The# al"o +oint o!t that there are inferior 5eweled3lever wat he"G!t leavin/ a"ide all the lai)" and o!nter lai)" that o)+etin/ wat h)a:er" have h!rled at one another." +rod! t"* what i" the te hni al differen e (etween the two t#+e" of wat he"K It relate" to whether a wat h )ove)ent" ontain" 5ewel" in it" e" a+e)ent )e hani")- In +in3lever wat he"* )etal +in" re+la e the 5ewel"3 ti++ed teeth in the an hor for:4 thi" a o!nt" for the na)e J+in3leverJ- Other +art" of the e" a+e)ent )e hani") are al"o "i)+lified* f!rther eli)inatin/ the need for 5ewel"- Si)+lifi ation* )ore "o than eli)ination of the 5ewel"* )a:e" it +o""i(le to +rod! e +in3lever )ove)ent" at o"t" (elow tho"e for 5eweled3lever )ove)ent"- Indeed* the inventor of the +in3lever )ove)ent* a )an alled Ro":o+f* had a" hi" /oal the develo+)ent of a )ove)ent "o "i)+le that wat he" o!ld (e )ade for the o))on )an- Fi" ontri(!tion ha" not +a""ed !nnoti ed* for even toda# wat h)a:er" often refer to +in3lever )ove)ent" a" NRo":o+f )ove)ent".The S!(t#+e" of S+rin/32owered Wat he": The )an# wa#" in whi h )e hani al wat he"* either 5eweled3lever or +in3lever* are )odified to +rod! e a variet# of "!(t#+e" an (e +a""ed over D!i :l#- In the $%&'" a n!)(er of the "+e ial feat!re* are ta:en for /ranted- G# and lar/e* ever#one !nder"tand" what i" involved when a wat h i" de" ri(ed a" (ein/ "ho :+roof* water+roof* anti)a/neti * "elf3windin/* et - Calendar wat he"* tho"e "howin/ the da# and )onth on the fa e* are o))on- So* too* are hrono/ra+h"* wat he" with "tart3and3"to+ )e hani")" to )ea"!re ela+"ed ti)e- The i)+ortant +oint i" thi" : All tho"e "!(t#+e" all for "o)e added o)+le6it# in their )an!fa t!re* #et none re+re"ent" a radi al de+art!re fro) the hara teri"ti " of the "tandard )e hani al wat hThe New Generation of Wat he": The Ele tri Wat h : Develo+)ent of )iniat!ri=ed (atterie" and ele tri )otor"* lar/el# the re"!lt of World War II re"ear h and develo+)ent effort"* )ade +o""i(le the fir"t )a5or advan e in ti)e:ee+in/ : the ele tri wat h- Co))er iall# availa(le for the fir"t ti)e in the United State" in $%,&* the ele tri wat h wa" )ar:ed worldwide (# )an# )an!fa t!rer" in the earl# $%B'"A" re/ard" it" te hnolo/#* the ele tri wat h re+re"ent" onl# a +artial "te+ awa# fro) the "+rin/3+owered wat h- It doe" not ontain a )ain"+rin/ nor )an# of the o)+onent" !"!all# fo!nd in e" a+e)ent )e hani")"In"tead* !rrent fro) a (atter# drive" a tin# (alan e wheel )otor* whi h in t!rn i" onne ted thro!/h a /ear train

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to the hand" of the wat h- Iet the wat h i" onventional in the "en"e that it "till de+end" on the o" illation of )ovin/ )e hani al +art" to deter)ine ti)e in re)ent"- Con"eD!entl#* ele tri wat he" tho!/h )oderatel# "! e""f!l in the )ar:et+la e thro!/ho!t the $%B'"* did not a+t!re the lion." of the )edi!) and hi/h +ri e wat h )ar:et- And the innovation" that followed the ele tri wat h "everel# lo!ded it" lon/3r!n o))er ial f!t!reThe T!nin/3For: Wat h : Altho!/h the ele tri wat h re+re"ented the fir"t (rea: with 1'' #ear" of wat h)a:in/ tradition* it" i)+a t on the wat h ind!"tr# wa" far le"" than the "e ond )a5or innovation in wat h te hnolo/#* the develo+)ent of the t!nin/3for: wat h- With it* the whole +rin i+le of deter)inin/ ti)e wa" han/ed- Greatl# "i)+lified* the t!nin/3for: wat h wor:" in the followin/ wa#- Ele tri !rrent fro) a ")all (atter# flow" thro!/h oil" "!rro!ndin/ a t!nin/3for:- The flow of !rrent "ti)!late" the t!nin/3for: to vi(rate at 1B' # le" +er "e ond- A tin# "tri+ of )etal onne ted to the t!nin/3for: tran")it" it" vi(ration" to a "et of /ear"* whi h* a" in the onventional wat h* onvert the ti)e in re)ent" into the "wee+ of the hand" on the wat h fa e- Ge a!"e the ti)e3 deter)inin/ ele)ent i" a t!nin/3for: whi h vi(rate" over 1$8 )illion 4ti)e" +er da#* the a !ra # of the wat h "!r+a""e" that of even that )o"t finel# )an!fa t!red "+rin/3+owered wat he"- T!nin/3for: wat he"* if +ro+erl# ad5!"ted* "ho!ld (e a !rate to within one )in!te +er )onthUntil $%&$* all t!nin/3for: wat he" "old were )en." )odel"- The after f!rther )iniat!ri=ation of the t!nin/3for: )ove)ent wa" finall# a o)+li"hed* )odel" for wo)en (e a!"e availa(leThe P!art= Cr#"tal Wat h : G# the end of the $%B'" and other )a5or innovation in wat h)a:in/ a++eared in the )ar:et+la e- Thi" newe"t innovation* the !"e of D!art= r#"tal a" the ti)e3deter)inin/ devi e in wat h )ove)ent"* o!ld at "o)e +oint in the f!t!re* i)+rove the a !ra # of wat he" to !nheard of level"* and it al"o o+ened the door o the o)+letel# "olid "tate wat h- In fa t* a n!)(er of different 4t#+e" of wat he" were develo+ed aro!nd the new te hnolo/#- The# all were* however* on the "a)e o+eratin/ +rin i+leWhen ele tri !rrent i" +a""ed thro!/h a D!art= r#"tal* it an (e "ti)!lated to vi(rate at a ver# hi/h freD!en #- Thi" o" illation an (e onverted into ver# +re i"e ti)e in re)ent"- Mi ro3 ir !itr# "!(divide" the r#"tal." freD!en # into ele tri +!l"e" whi h then drive the wat h in one of "everal different wa#"- In "o)e D!art= r#"tal wat he"* the +!l"e" o+erate a tin# ele tri "te++in/ )otor whi h* in t!rn* i" onne ted thro!/h a /ear train to the hand" of a wat h with a onvention" fa e- In other D!art= r#"tal wat he" the +!l"e" are !"ed to e6 ite a t!nin/3for: devi e- Fro) that +oint on* the o+eration of thi" t#+e of wat h i" identi al to that of the e6i"tin/ t!nin/3for: wat he"- IN "till other"* the +!l"e" into the !"!al )in!te and "e ond ti)e in re)ent"- In the a"e of thi" la"t t#+e of wat h* whi h in or+orate" no )ovin/ +art"* the onventional fa e and hand" of the wat h are re+la ed (# new )ethod" of di"+la#in/ ti)e- The"e develo+)ent" are di" !""ed in the followin/ "e tionChan/e" in the Fa e of the Wat h : Until $%&8 all the dra)ati advan e" in wat h te hnolo/# re)ained !n"een )ira le" to tho"e who in the la"t de ade or "o +!r ha"ed one of the newer wat he"- The wor:" in"ide were different* (!t the fa)iliar fa e and hand" were "till there- In $%&8 tho!/h innovation (e a)e vi"i(le wat he" with o)+letel# different fa e"* with tin# di"+la#" re"e)(lin/ tho"e of a di/ital lo : or of an ele troni al !lator* a++eared on the )ar:et for fir"t ti)e;$<The new fa e" in or+orated one or the other of two different 4devi e" whi h were the +rod! t of D!ite re ent te hni al advan e" liD!id r#"tal di"+la#" and li/ht e)ittin/ diode"The devi e" wor:" on two different +rin i+le"- A liD!id r#"tal di"+la# on"i"t" of two +ie e" of /la"" with a thin oatin/ of an ele tri all# "en"itive he)i al (etween the)- When !rrent i" +a""ed thro!/h the he)i al* it han/e" it" r#"talline "tr! t!re- The "ilvered r#"tal" refle t a)(ient li/ht* that i"* the# refle t li/ht o)in/ fro) an o!t"ide "o!r e- The advanta/e of the liD!id" r#"tal di"+la# i" that it reD!ire" a ver# low level of !rrent to o+erate "in e it i" not a t!all# /eneratin/ li/ht- It" di"advanta/e" are two3fold- Fir"t* the D!alit# of the i)a/e it 4+re"ent"* the ti/htne"" and +re i"ion of the n!)(er"* de+end" on the (ri/htne"" of e6ternal ill!)inationSe ond* it" d!ra(ilit# and it" "ta(ilit# !nder e6tre)e te)+erat!re" are o+en to D!e"tion- At lea"t* a" of $%&8* the devi e had #et to (e o)+letel# de(!//edA" for the other devi e* li/ht3e)ittin/ diode"* the# are* r!del# +!t* "e)i ond! tor" that /low- In the earl# $%&'" the# fo!nd their /reate"t !"e in the di"+la#" a" ")all ele troni al !lator"- Wherea" the# /ive off a (ri/hter and )ore +re i"e i)a/e than liD!id r#"tal di"+la#"* the# have the di"advanta/e of reD!irin/ )ore !rrent to o+erate the) than liD!id r#"tal di"+la#"- Ge a!"e the diode" reD!ire "o )! h +ower* no wat h3"i=e (atter# an :ee+ the) ill!)inated at all ti)e"- A" of $%&8 onl# one wat h)a:er had )ar:eted a ti)e+ie e ontainin/ thi" devi e- To read the ti)e* the wearer had to +re"" a (!tton whi h ill!)inated the otherwi"e (lan: fa e of the

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wat hGoth di"+la# devi e" were "een a" rai"in/ another +ro(le)- Ind!"tr# e6+ert" "erio!"l# D!e"tioned whether on"!)er" wo!ld a e+t "! h a dra"ti han/e in the a++earan e of wri"twat he"- For thi" rea"on land (e a!"e of te hni al "hort o)in/" di" !""ed a(ove* )an!fa t!rer" now refer" to ele troni wat he" with ontentional fa e" that i"* with hand" a" analo/ )odel" and to tho"e with n!)eri al di"+la#" a" di/ital )odel"- The fir)" introd! in/ wat he" with the new fa e" did "o in a tentative wa#- Onl# li)ited D!antitie" of the wat he" tri :led into the )ar:et+la e in $%&' and $%&$- So)e )an!fa t!rer"* in l!din/ leadin/ U-S- and non3U-S- fir)" re)ained o!t of the ra e to /et a di/ital wat h on the )ar:et- In"tead* the# +referred to wait !ntil the te hni al and )ar:et+la e d!"t had "ettled (efore o))ittin/ the)"elve" to the Jnew loo:J in wat he"RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR A%%en i& 3 ! THE W-RLD WATCH INDUSTR6 The Tariff Sit!ation The d!tie" on wat he" and wat h o)+onent" i)+orted into the United State" were initiall# e"ta(li"hed (# the Tariff A t of $%1'- ? Sin e then E6e !tive Order" have )odified the level of d!tie" on "everal o a"ion"- In $%1B* a" +art of a re i+ro al trade a/ree)ent with Swit=erland* the U-S- Govern)ent red! ed (# one third the d!tie" levied on )ove)ent" ontainin/ $ to $& 5ewel"- The"e on e""ion" la"ted !ntil the +o"t3world War II #ear"In $%,$* U-S- wat h)a:er" a++lied for relief ;i-e-* a hi:e in d!tie"< !nder the e" a+e3 la!"e revi"ion" of the Trade A/ree)ent E6ten"ion A t of that #ear- Three #ear" later the 2re"ident* re"+ondin/ to the U-S- Man!fa t!rer" o)+laint" and to the Tariff Co))i""ion." findin/"* rai"ed (# ,'7 the d!tie" on )ove)ent" in the $ to $& 5ewel ate/or#Thro!/ho!t the $%,'" the U-S- wat h ind!"tr# +re""ed !n"! e""f!ll# for additional +rote tion (# +lea"in/ the Jdefen"e e""entiall#J ar/!)entThe e" a+e3 la!"e rate"* "et in $%,9* were ter)inated in >an!ar# $%B& (# 2re"idential 2ro la)ation : on e a/ain the d!tie" on )ove)ent" in the $ to $& 5ewel ate/or# dro++ed (# a third- At the "a)e ti)e* at +art of the Aenned# ro!nd GATT ne/otiation"* the U-S- Govern)ent /ranted the fir"t on e""ion" on )ove)ent" ontainin/ )ore than $& 5ewel"- Ge/innin/ >an!ar# $* $%B? the d!t# on "! h )ove)ent" wa" to (e red! ed* in five ann!al "ta/e"* (# a ,'7 total of ,'7- The rate" a++li a(le to )ove)ent" with $& 5ewel" or le"" were left !nto! hed (# the Aenned# ro!ndA" of the earl# $%&'"* the tariff "it!ation wa" a" follow" :3 U(S( Rates o, Dut* A%%"i#ab"e to Im%orts o, Wat#) 2o0ements 7 Cases Con e""ion" /ranted in $%B93B& Trade Conferen e Ite) Rate a" of 1$-$8-$%B& Se ond "ta/e effe tive >an- $* $%B% 0 ?-B' No han/e No han/e No han/e Final "ta/e effe tive >an $* $%&8 0 ,-1& No han/e No han/e No han/e

Wat h )ove)ent" ;not "elf windin/< $- Favin/ S $& 5ewel" 0 $'-&, 8- Favin/ no 5ewel" 1- Favin/ $ to & 5ewel" 9- Favin/ & to $& 5ewel"
8

0 '-&,3'-%'@ 0 '-%'30$-?'@ 0 '-%'30$-?'@

Rates of duty are provided separately for the individual components of watches, i.e., the movement and the case. Duties are assessed on each component.

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itiona" uties on 8at#)es 8it) 49 :e8e"s or "ess : 0'-%' 0 '-,' 0 '-,' 0 '-&, ea h T 1'7 ad val8 No han/e No han/e No han/e 0 '-B' ea h +l!" 97 ad valore) No han/e No han/e No han/e 0 '-1& ea h +l!" $,7 ad valore)

For ea h 5ewel in e6 e"" of & For ea h ad5!"t)ent "elf3windin/ Wat h a"e"

So!r e: U-S- Tariff Co))i""ion* S!))arie" of Trade and Tariff Infor)ation ;$%&'<Over the #ear" the U-S- Wat h ind!"tr#." in rea"in/ relian e on over"ea" +rod! tion ha" +ro)+ted the ind!"tr# to han/e it" "tan e on the i""!e of tariff"- Gefore the Se ond World War and in the de ade i))ediatel# followin/ it* U-S- wat h )an!fa t!rer"* tho!/h :not U-S- wat h i)+orter"* lo((ied hard for tariff +rote tion- G!t a" the ind!"tr# in rea"ed it" de+enden e on forei/n of "!++l#* it "tarted to "in/ a different t!ne- The o)+anie" with over"ea" +lant" and tho"e i)+ortin/ fro) forei/n +rod! er" defe ted fro) the ind!"tr#." +rote tioni"t +o"ition- G# the )id3$%B'" the ind!"tr# wa" divided into two a)+"The event" of $%B&* the ter)ination of the e" a+e3 la!"e rate"* and the Aenned# ro!nd on e""ion" +roved the few fir)" with 5eweled3lever +rod! tion in the United State" to tran"fer it a(road- G# the late $%B'" when all +rod! tion wa" either 4forei/n (a"ed or +art of G!lova." and Ti)e6." world3wide )an!fa t!rin/ "#"te)"* the ind!"tr# had ado+ted what o!ld (e re/arded a" a low :e# free trade +o"ition-

30

A%%en i& ; C NOTE ON TFE WATCF INDUSTRI Wat#) Assemb"* in t)e U(S( Insu"ar Possessions% Ge a!"e of a loo+hole in the U-S- tariff law* in the late $%,'" )an# U-S- fir)" t!rned to wat h a""e)(lin/ in the Eir/in I"land"- The loo+hole hin/ed !+on the "ti+!lation l4that wat he" o!ld (e i)+orted d!t# free into the United State" fro) it" in"!lar +o""e""ion" +rovided that no arti le ontained forei/n )aterial" val!ed at )ore than ,'7 of the total val!e of the arti le- With la(o!r o"t" "! h a hi/h +ro+ortion of total wat h )an!fa t!rin/ o"t"* it wa" not diffi !lt to )eet thi" riterionWat he" a""e)(led in the Eir/in I"land" fro) forei/n +art" fir"t "tarted to flow into the United State" in $%,%- Within a de ade $, different o)+anie" had a""e)(l# +lant" there- A(o!t half of the +art"* (# val!e* !"ed in the Eir/in I"land" o+eration" a)e fro) >a+an4 another D!arter a)e fro) Ger)an#- The Swi"" re"tri ted (# law !ntil $%&$ fro) e6+ortin/ +art"* never /ained a footholdG# $%B? al)o"t $,7 of total U-S- wat h i)+ort" a)e into thi" o!ntr# via the Eir/in I"land" ro!te- G# then arti le of i)+ort" and al"o "tarted to o)e in fro) G!a)- In order to li)it thi" (lo""o)in/ ir !)vention of tariff d!tie"* the U-S- Govern)ent had* in the +revio!" #ear* +!t a D!ota on i)+ort" fro) the in"!lar +o""e""ion li)itin/ the) to one3ninth of U-S- on"!)+tion in the +rior #ear- Several fir)"* itin/ the D!ota a" one rea"on for their de i"ion* "h!t down their Eir/in I"land" 2lant"- Iet )o"t wat h)a:er" ontin!ed their Eir/in I"land" o+eration" into the $%&'"-

The U.S. insular possessions ;include the Virgin Islands, Guam, and American Somoa.
9

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