The Birth of Swatch

1) Why was the Swatch so successful? In what way was this watch different from
others in the industry?
Before Swatch started, Nicolas Hayek said Why cant we design a striking low
cost, high quality watch and build it in Switzerland just by reading this statement
we can come to the conclusion that this was a new innovative idea, so what
separates swatch from the rest of the other watch producers? * High quality
* Build in Switzerland
* Very low cost
Why was swatch so successful? Hayek had led the way for the success of the
swatch by committing SMH to a business strategy that in many ways defied
industry wisdom about how global watch companies should be run, this strategy
was based on: * Strict commitment to vertical integration
* Decentralized marketing
* Portfolio management
Swatch watches were a not the typical Swiss watch however they managed to
maintain a high Swiss Quality image. They were the pioneers of a new-industry.
The swatch team decided that the Swatch would have a unique message, one
unlike that of any other watch brand in the market.
2) Do you agree with the original product strategy? The channel strategy? The
promotional strategy? What about the pricing strategy?
1. The product strategy: I do agree, if swatch did not exist, Swiss manufacturers
would have lost huge market share in the sale of watches because of the high
prices. Swatch with its innovative thinking not only created a new face for Swiss
watches but also kept the majority market share of watches in the nation of
Switzerland.
2. The channel strategy: Swatch promoted and sold there watches in supermarkets, food stores and small boutiques situating it in those places you dont
attract the normal person that has already come to the decision of buying a watch
you attract the person that just encounters it in their daily life and will buy it
although they never actually thought of buying a watch.

What do you think has been the contribution of the marketing function, the product design
function and the operations function to the success of Swatch?

The success of Swatch took place despite the other branded goods equal
desperation for growth and the value-conscious consumers resistance to price increases in
an era of low inflation (Noella, 2002), and are opting for high-quality private label goods
instead of brands (Devincentis and Kotcher, 1995). Thus, Swatchs innovative evolution had
essentially had broaden their consumer base.
For Swatch, the recuperation and improvement from their diminished market share
due to their high-priced watches and the availability of low-priced brands, can be attributed to
these three factors. First, the development of their product from the use of classy materials to
plastic cased watches and the subsequent cost reduction that they garnered allowed for lower
prices. Thus, enabling them to compete with other brands.
The production process having designed to be more efficient than its competitors
allowed for the manufacture of cheaper products. The development of the operation however
was due mainly to the change in the product design; both increasing the economies of scale
of Swatch making it able to increase its target market and thus, boosting its market share. As
illustrated by Carter, Melnyk and Handfield (1995) product design is one of the primary locus
of competitiveness in today's dynamic marketplace.
What Swatch did was introduced a new trend coupled by an inherent company philosophy that
welcomes change, and positions the firm to adopt, with flexibility and ease, differing goals and strategies
as conditions warrant. And, finally, Swatch had configure itself in order to swiftly develop and launch new
products, speedily manufacture these products, and deliver them to a more sophisticated, demanding,
and competitive marketplace through the use of cross-functional and concurrent engineering structures
and processes (Carter, Melnyk and Handfield, 1995). This strategy by Swatrch can be linked to the
fundamental idea behind cross-functional teams is to include marketing, engineering, manufacturing,
finance/accounting, R&D, purchasing, quality assurance, designers, suppliers, and even customer
representatives in the early, formulative stages of the design process. This approach helped to minimize
the cost of design changes and maximize results for Swatch. According to Thomas and Sadat-Hossieny
(1995), approximately 70% of Swatchs product's ultimate cost is determined during concept
formulation, when engineering designs are in their early stages and product objectives are being
determined by marketing.

Cleverly planned, the Swatch watch took on a different role, it had transformed itself to
a piece of accessory. The packaging accorded to the new look by Swatch had offset its former
image and included the younger crowd. Thus, the marketing strategy in line with its new
design had attain a marketability extended to ignore social stratification.

No matter how impressive a product may be, it must be marketed correctly to succeed. Hayek
realized that the Swatch required the public to think about watches differently. Until the 1970s
watches were considered purely functional items that one wore to tell time. There was no
fun involved with buying or wearing a watch. Harnessed correctly, this could be used to
create an advantage over the Japanese brands. Hayek, along with his newly hired advertising
agency, decided to position the Swatch as a fashion accessory. To appeal to the consumers
emotional side Hayek hired designers from all areas, not just accessories, to create an easily
recognizable image. Swatches would not be black and white like their predecessors; they
would be alive with vibrant colors and crazy designs to match moods and senses of style. The
underlying Technical Innovation and New Product Development: Swatch strategy was to
motivate customers to buy multiple Swatches.

How do you think Swatch compares with most watch manufacturers?

As a business, Swatch seems to be exemplary: it produces watches that work and are inexpensive, and
it makes use of talented artists and designers. Swatch watches are diverting, desirable and of-themoment. Originally sold as disposable watches, they are now sought by collectors precisely because of
their creative designs. Swatch has a wide-range of watches to suit practically all tastes and ages, but
one thing is common between all its four rangesthey represent freshness and trendiness in their
designs.
A reason why Swatch is so famous today is partly because of its enthralling history. Until the 1970s,
Switzerland had a near monopoly on watch making. Then, Japanese and Hong Kong manufacturers
diligently marketed the electronic watch (actually invented by the Swiss), worldwide. Almost overnight,
Swiss watchmakers lost almost all of their market for moderately priced watches, and the industry
seemed to be on the ropes. The company overcame the crisis and was actually responsible for the
survival of the Swiss watch industry.
The core of the Swatchs strategy lies in building and highlighting 'differentiators' at all points of contact,
while targeting a wide cross-section of trend conscious consumers. By adopting this route, Swatch aims
to build a credible and 'aspirational' brand image and provide the consumers a truly international brand
experience which it believes is very critical for success in the market. their study, extension evaluations
depended on both category similarity and brand concept consistency.
Arguably, Swatch had the most successful brand extension program. Compared with Timex and Rolex,
brands with dominant associations related to performance (e.g., Timex) extended best to categories
which shared the functional association (e.g., stopwatches), and symbolic brands with dominant
associations related to prestige (e.g., Rolex) extended best to categories which shared the prestige
association (e.g., bracelets), independent of category similarity, does not enjoy the level of success by
Swatch.

Unlike other brands, the company marketed the trendy synthetic watches to young
consumers with the idea that as they grew older they would upgrade their watches to higherend SMH brands like Omega, Blancpain, or Longines. Customers often bought Swatches in
bulk, coordinating different watch styles with their wardrobes, something that Rolex and Casio
have not done.
Furthermore, Swatch launches every three months a new set of designs would be
rolled out; each would be composed of the five basic Swatch lines: formal, active sports,
casual leisure, fashion, and art. The revolving change in the lineup enticed people to buy
Swatches more frequently than absolutely necessary, just as changing fashions frequently
created a wardrobe half-full of unstylish clothes.
What do you think the Swatch operation would look like in terms of inputs, the transformation process
and outputs? Sketch out a diagram that models the marketing, product design and operations functions.

In the 1960's, the name of the game was to produce low-cost products by employing
methods of mass production. Companies built facilities as large as could be properly
managed to take advantage of economies of scale. In the late 1970's and early 1980's,
Japanese and European producers introduced lower cost goods, and U.S. producers
responded by emphasizing increased production efficiency and waste reduction philosophies.
Manufacturing strategies of lean production, inventory reduction, and just-in-time were copied
from the successful Japanese manufacturers, who established themselves as world-class,
low-cost (cheaper) producers (Jurkus and Willins, 2001). In essence, there were three basic
ways in which companies can compete: development, production, and distribution (Carter,
Melnyk and Handfield, 1995). This is where Swatch built its competitive advantage. Following
the model, we can see that Swatch had first evaluated the market, created an innovative
product design and devised a production operation that will minimize cost without diminishing
the quality of the product. Coupled with an effective marketing plan, Swatch became one of
the best selling watches of all time.

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