Situation Analysis for Swatch Group

Company: Swatch

Mission Statement

• Swatch is always reinventing itself. “Colorful, happy, loud, shrill and forever re- interpreted in different ways... Known for revolutionary concepts, creative models and the pleasure it takes in provocation, Swatch loves to keep on surprising its audience. Swatch watches are a popular canvas for artists working in a great range of styles, and arguably the world’s largest art gallery on the wrist” (The Swatch Group).

Stated Vision

• “In the years ahead, the core business of the world’s largest manufacturer of finished watches will clearly remain in the watch industry. Swatch Group companies are constantly adding innovative new watches to the brand product lines, inspired by the grand traditions of Swiss quality and craftsmanship and made possible by the enormous resources the Group brings to bear through its technology research and development teams” (The Swatch Group). • Continue to be an innovative powerhouse while keeping the foundation and prestige of Swiss watch design (The Swatch Group).

Why was the company started?

• Swatch was started to save the Swiss watch industry. The Swatch Group streamlined their industrial production and created the “second watch,” comprising of 51 parts and encased in plastic (The Swatch Group).

History • In the 1970s, the Quartz Revolution began. Japanese company, Seiko, created a watch made of quartz and turned away from mechanical watches. They created analog and digital watches and by 1977 their revenues totaled $700 million. This emerging market for cheaper watches, put many Swiss watchmakers out of business. Swiss banks bailed out the watch industry and hired Nicolas G. Hayek to find a solution. Hayek’s idea was to merge the last two largest watch companies, SSIH and ASUAG, creating The Swatch Group. They merged in 1983 with Hayek in the main leadership role with a new focus on marketing, design, and sales. The Swiss shocked the world by coming back even stronger and introducing Swatch, one of the first plastic and affordable Swiss watches. Swatch and Nicolas Hayek saved the Swiss watch industry (Hodinkee). • “Under the leadership of Nicolas G. Hayek (1928-2010), the Swatch Group achieved worldwide renown as the crown jewel of the watchmaking industry. In the early 1980s, Mr. Hayek led the firm’s recovery from a severe crisis. His decisive leadership was critical to the launch of the Swatch watch in 1983 and subsequently drove the continuous development and improvement of all Swatch Group brands. His innovative strategies also served as important models for the Swiss watchmaking industry as a whole and played a key role in the revival of the industry” (The Swatch Group).

Core Values

• Staying true to the brand.

• “Colorful, happy, loud, shrill and forever re-interpreted in different ways” (The Swatch Group).

Core Competencies

• Number one manufacturer of finished watches in the world.

• Tradition of Swiss watchmaking.

• Streamlined industrial design with 51 pieces.

Financials

• The Swatch group had a net income of CHF 748 million in 2019. There was growth in all markets besides Hong Kong (The Swatch Group).

• Key drivers of revenue and profits • Watches

• The Swatch Group owns 18 watch brands. Each with the same goal of keeping the integrity of Swiss watch craftsmanship. Brands include: Breguet, Harry Winston, Blancpain, Glasshütte, Jacquet Droz, Léon Hatot, Omega, Longines, Rado, Union, Tissot, Balmain, Certina, Mido, Hamilton, Calvin Klein, Swatch, Flik Flak (The Swatch Group).

Business Strategy • Creating premium Swiss watches, affordable and luxury. o Category • Largest watch maker in the world • Swiss craftsmanship

• Top Competitors: Fossil, Seiko, Timex, etc. (Owler). • What do they perceive are their competitive advantages?

• Technology

• Develops “high-tech components for the computer, telecommunications, medical applications, automotive and electronics industries” (The Swatch Group).

• Large production capacity • Largest manufacturer of finished watches § Swiss Craftsmanship • Ability to patent

Successes • Restarting the Swiss watch market after the Quartz Revolution. • Diversifying their products from affordable to luxury.

Failures

• Failing to keep up with new innovations before almost being wiped out in the 1980s. • Tiffany & Co. merger failure and failure to provide distribution capacity (Fool.com).

Current Promotional Efforts • #Swatchtakesmeplaces • Customers post photos and videos of their favorite destinations. The posts with the highest engagements earn “Swatch Miles” and the top five most engaging will win a trip to their favorite destination (Swatch).

Past Promotional Efforts • Swatch at Art Festivals • Swatch Faces at Biennale Arte 2019 § Festival Locarno • Swatch x ECAL • Swatch x The Louvre • SwatchPay!

Category • Economic trends • Watch market sales have increased “17 percent to $9.5 billion in the 12 months ending June 2019” (NPD Group). • Smartwatches are driving much of the growth • “20 percent of 18 to 34 year olds said smartwatches are the type of wrist watch they wear most often, another 13 percent identified fine and fine Swiss options as their primary watch – an increase from 2015” (NPD Group).

• Category health • Swiss watch exports were worth 21.7 billion francs in 2019 (Federation of the Swiss Watch Industry).

• It is growing. • Smart watch:

• “expected to expand at a CAGR of 12.8% from 2019 to 2025” (Grandview Research).

• Fitness watch:

• “the fastest growing segment with a CAGR of 13.7% from 2019 to 2025” (Grandview Research).

• Quartz watch: • “accounted for the largest share of 70.8% in 2018 due to its increasing utility in checking the body activities including heart rate and number of walking steps. Rising awareness regarding health fitness among working class adults on a global level is projected to promote the utility of quartz watches in the near future” (Grandview Research). • Mechanical watch: • “expected to expand at a CAGR of 13.7% from 2019 to 2025" (Grandview Research).

• The industry is mature, but new technology brings emerging products into the category, like smart watches.

• Product marketing • Watch ads often evoke a feeling of prestige and luxury. • Swatch’s marketing is fun and colorful. It feels accessible to all.

• Swatch embraces its ability to be creative and add levity to the seriousness of watches.

• What external factors might impact the category?

• Seasons • Summer would increase sales because of Swatch’s tendency to use bright and bold colors which evoke a sense of fun and lightness which is associated with summer.

Consumer • Consumer profile

• People age 18-35. • “20 percent of 18 to 34 year olds said smartwatches are the type of wrist watch they wear most often, another 13 percent identified fine and fine Swiss options as their primary watch – an increase from 2015” (NPD Group). • Swatch watches range in price from $55 to $205. They come in sleek, athletic, and durable styles for a large range of people. Their consumer is not specific to any gender.

• Trends • Smart watch • “Increasing demand for wireless sports and fitness devices is driving the market. Currently, the use of smartwatches among cyclers, runners, gym- goers, swimmers, and athletes is increasing rapidly, owing to their wide range of monitoring capabilities. The wireless synchronization of these watches with smartphones enables users to control music, notifications, alarms, auto sleep, and other functions, which drives the growth of the market” (Mordor Intelligence).

• Are they loyal, switchers, deal or variety-seeking? • Watch buyers are often loyal because of the high cost of luxury items like watches. • Established brands have a reputation of good quality from years of expertise.

• Who are they? • Psychographics

  • Watches are a symbol of status, the create a look of responsibility.

• They are a fashion statement – luxurious metal finishes to fun bright pops of color on your wrist.

• Attitudes

• People who wear watches are often more organized and put together. They are more stylish and prepared for the corporate world.

• They see accessories as a way to distinguish themselves from the rest of the pack. • Behaviors • They often spend money on material items that are fashionable and trendy. • They keep up with the trends and accessorize masterfully.

• What could make it more profitable?

• Watches are seen as luxury items that many cannot afford and never will be able to afford. By making watches seem more approachable and affordable, that will increase the profits and allow more people to wear them.

• Prospective Customer: Millennials and people from 18-35

• Demographics • “Millennials make up nearly a quarter of the total U.S. population, 30 percent of the voting age population, and almost two-fifths of the working age population” (Brookings).

• Anyone born between 1980-1996 are Millennials.

• These people will be middle to upper middle class.

• Psychographics

• Millennials are tech-savvy and interested in new technology. They are consuming content for 5-10 hours a day (Morris Creative).

• They care about how they look and are more into fashion.

• They want high quality for a reasonable price.

• Attitudes/Behaviors • They have an active and healthy lifestyle. • They want their clothes and accessories to coordinate together. § They like to be on the nose of culture and new trends.

• Purchase Cycle • Watches, like Swatch, are not an investment. They are an affordable watch that comes in many different styles. This allows people to have multiple and express themselves in more ways than one.

• Decision Process • Consumers have the option to purchase through Swatch’s website or through selected retailers around the globe.

• What can you identify about the purchase?

• Low involvement • Swatch is a less expensive product so consumers spend less time on the decision making process.

Competition

• Direct Competitors • Fossil, Seiko, Timex, etc. (Owler).

• Indirect Competitors

• Smart watches • Apple and Fitbit.

• Competitive Strategies

• The Swatch Group is the number one manufacturer of finished watches in the world. • It doesn’t need to outsource the work to other companies. • They can sell in their own stores around the world and don’t need to sell in it big stores like Walmart. • They are known for their innovation. • 27.5% of the market share compared to other Swiss watch companies (SJX).

• Other Companies’ Strategies • Fossil • Has similar price points to Swatch. • More high-end looking products with leather straps for the same price.

• Manufacturing in both China and Switzerland (Reference.com). • More stores and sold in Target and Walmart.

• What can you learn from the competition? • Swatch can learn to add their products into bigger stores such as Target to create more sales and revenue for their brand.

• How does your budget compare? • Swatch and its competitors are often in the same price range. Swatch, however, can showcase their Swiss craftsmanship and innovation through their many collections to stand out from the crowd.

Summary This situation analysis highlights the factors Swatch must consider when launching their new smart watch. The Swatch Group has a long history of high-quality watches that have created a loyal customer base. They are trustworthy and transparent in their manufacturing as they are the sole manufacturer for their product. They do not outsource that job to different countries. Their customers expect quality and longevity from their products. They emphasize their Swiss craftsmanship alongside their innovation and creativity to the watch market. They have proven themselves to be innovators of not just watches but technology since their forming in 1983. Their longstanding history of expertise will entice the millennial generation and the affordable Swatch watches will allow them to purchase. The current consumer demographic will not invest in expensive pieces but will invest in durable and stylish. They will have multiple watches for any occasion. The unique styles give everyone an option in expressing themselves. Their smart watch should follow the same formula they have been using for decades. They thrive in style, quality, and expertise.

Situation Analysis Works Cited

About Swatch. (n.d.).

Retrieved from https://www.swatchgroup.com/en/companies-brands/watches-jewelry/swatch

Brands & Companies. (n.d.). Retrieved from https://www.swatchgroup.com/en/brands-companies#1

Federation of the Swiss Watch Industry. (2020). Swiss watch exports in 2019.

Retrieved from https://www.fhs.swiss/pdf/communique_190112_a.pdf

Frey, William H. (2018). The millennial generation: A demographic bridge to America’s diverse future. Retrieved from https://www.brookings.edu/research/millennials/

Innovation Powerhouse. (n.d.). Retrieved from https://www.swatchgroup.com/en/swatch-group/innovation-powerhouse

Marder, Andrew. (2013). A History of the Tiffany-Swatch Failure. Retrieved from https://www.fool.com/investing/general/2013/12/23/a-history-of-the-tiffany-swatch- failure.aspx

Müller, Oliver R. (2020). State of the Industry – Swiss Watchmaking in 2020. Retrieved from https://watchesbysjx.com/2020/03/swiss-watch-industry-report-2020.html

NPD Group. (2019). A New Breed of Watch-Wearer is Emerging, and They’re Not Just Sporting Smart, Reports NPD. Retrieved from https://www.npd.com/wps/portal/npd/us/news/press-releases/2019/a-new- breed-of-watch-wearer-is-emerging-and-theyre-not-just-sporting-smart-reports-npd/

Owler. (n.d.). Swatch's Competitors, Revenue, Number of Employees, Funding and Acquisitions.

Retrieved from https://www.owler.com/company/swatch

PERSONALITY TRAITS OF MILLENNIALS: HOW TO MARKET TO THIS GENERATION. (n.d.).

Retrieved from https://www.morriscreative.com/personality-traits-millennials-market-generation/

SMARTWATCH MARKET - GROWTH, TRENDS, AND FORECAST (2020 - 2025). (n.d.).

Retrieved from https://www.mordorintelligence.com/industry-reports/global-smart-watches-market- industry

Swatch Group History. (n.d.). Retrieved from https://www.swatchgroup.com/en/swatch-group/swatch-group-history

Swatch Group: Key Figures 2019. (2020).

Retrieved from https://www.swatchgroup.com/sites/default/files/media- files/pr_key_figures_2019_en.pdf

Thompson, Joe. (2017). Four Revolutions Part 1: A Concise History Of The Quartz Revolution.

Retrieved from https://www.hodinkee.com/articles/four-revolutions-quartz-revolution

Watches Market Size, Share & Trends Analysis Report By Product (Smart, Fitness), By Distribution Channel (Hypermarket/Supermarket, Online), By Operation, And Segment Forecasts, 2019 – 2025. (2019). Retrieved from https://www.grandviewresearch.com/industry-analysis/watches-market

Where are Fossil Watches Made?. (n.d.). Retrieved from https://www.reference.com/world-view/fossil-watches-made-4ff27f2f4d9dd0f6

#Swatchtakesmeplaces. (2020).

Retrieved from https://shop.swatch.com/en_us/collections/swatchtakesmeplaces-c111.html