English2: old marketing assignment

●●●Contents●●●

Introduction P. 3

The company’s businesses P. 4-5

The performance of the company

from 2005-2009 P. 6

Segmentation, targeting and

positioning P. 7

Market entry modes P. 8-9

Product strategy P. 10

Promotion and Pricing strategy P. 11-12

Corporate Social Responsibility p. 13

Conclusion P. 14

References P. 15

Appendix P. 16-18

●●●Introduction●●●

In this report we have focused on the international marketing strategy of Swatch, a multinational company. The report will start with an overview of the firms activities, which will voobe followed by a description of the company’s performances in the last 5 years. After that there will follow a description of the company’s international marketing strategies and the report will end with a short conclusion.

General introduction company.

The swatch group is a Swiss company who manufacturers watches and jewelry. However the emphasis lies on the manufacturing of watches. The swatch group was established in 1983 out of a merger between ASUAG and SSIH witch. These were two Swiss watchmakers who were established in the beginning of the 1930s. The companies both had several brands, but where facing high competition during the 1970s of the Japanese watchmakers. For this reason the companies started to think of a way to become profitable again and this resulted in the establishment off SMH (Swiss Corporation for Microelectronics and Watch making Industries Ltd.), which name was later on changed into the Swatch Group. After the merger, it only took the company 5 years to become the biggest watch manufacturer in the world, which it still is today.

Today Swatch is also active in the jewelry market, but is still upcoming. Swatch has 19 different watch brands, which are sold in different segments of the market. The brands are:

Breguet, Blancpain, Glashütte-Original, Léon Hatot, Jaquet-Droz, Omega, Longines, Rado, Union Glashütte, Tissot, ck Calvin Klein, Certina, Mido, Hamilton, Balmain, Swatch, Flik Flak, Endura and Tourbillon.

At the moment Swatch is also focusing on Research and Development, in order to attain their market position. And at the moment they are also active in the automobile sector, telecommunications and sports timing measurement equipment (which they already provided at several big events e.g. Olympic games.)

http://www.swatchgroup.com/en/group_profile/history/yesterday

http://www.swatchgroup.com/en/group_profile/history/today

March 15

●●●The company’s businesses●●●

This part of the report will provide an overview of the company’s activities.

Swatch its main products are watches and all their other activities are related to this in some way.

The products which Swatch delivers (according to their annual report website 1, footnote ) are watches in different market segments, jewelry, electronic systems and different parts of watches.

Their most important products are the watches, because that is their core business. They are the biggest watch manufacturer in the world and a market leader. The market share of Swatch lies probably around 20%, because the number we found was 18%, but that was in the year of 2005 and there are several sources (websites 2,3 and 4, footnote) that say it has increased in the year of 2009, so it lies probably around 20%.

The jewelry market is small for Swatch, because their main focus is on watches. The jewelry they sell is matching with their watches and therefore the amount of jewelry they sell is high enough to be profitable.

Electronic systems, this activity of the Swatch group consists out of 7 companies in different parts of the world who are all interrelated. The 7 companies are: EM Microelectronic, Micro Crystal, Renata, Microcomponents, Oscilloquartz, Lasag and Swiss timing. These companies all work together and, because of their geographical disparity and their technical expertise they are not only able to gain market share in their own market, but also supplementary market shares in other markets, e.g. the automotive industry. The Swiss timing company is active at sport events for doing the timing of the athletes, they even have a contract with the IOC (International Olympic Comittee) that they will do the time measurements until 2020 on the upcoming Olympics. This company has a leading position on his market.

The last market they are active on is actually still the watch market, only are they now selling parts of watches instead of complete ones. In the market of producing, supplying and selling components of watches, Swatch is also a market leader, with 156 production centers around the world. They are the suppliers for the whole industry. So even if you buy a brand that does not belong too Swatch, there is a good chance that some parts of the watch actually are from Swatch.

The market on which Swatch sell its products is globally, they have subsidiaries all over the world and when they do not have a subsidiary in a certain country, then you can still buy a Swatch product via a local distributor. To give an indication, these are the countries that they have subsidiaries in, according to their annual report of 2009 (website 1, footnote)

Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxemburg, The Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, United Kingdom and Ireland

Americas: Brazil, Canada, Mexico, Panama, USA

Oceania: Australia

Asia: China, Hong Kong, India, Japan, Macao, Malaysia, Singapore,

South Korea, Taiwan, Thailand

Middle East: United Arab Emirates

Africa: South Africa

1) http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports/annual_report_2009

2) http://www.marketing-online.nl/nieuws/index2005-43.html

3) http://www.tijd.be/nieuws/ondernemingen_consumptie/Horlogemaker_Swatch_klopt_verwachtingen.8294680-430.art

4) http://genevalunch.com/blog/2010/02/09/swatch-upbeat-for-2010-as-2009-losses-show-market-share-gained/

5) http://www.swatchgroup.com/en/brands_and_companies/electronic_systems

march 15

●●●The performances of the company from 2005-2009 ●●●

When we look at appendix 1 we can say that the company has grown in the last 5 years, because when you look at the gross sales, you can see that at in 2005 they were 4497 million CHF and that in 2009 this was 5421 million CHF so that is an increase in sales of 20.55% in only 5 years time, but this had probably been even more if the financial crises had not arisen. Because in 2009 the gross sales were 9.1% less than in 2008.

Until 2008 the company was only growing, sales were up, the net income was up, there assets were rising, when you look in appendix 1 you can read all those facts. But when the financial crisis arrived every account dropped, except for equity. When we look at appendix 2 we can see that sales dropped, net income dropped and that the net profits from 2008-2009 dropped with 24.9%, this is also very clear when you look at appendix 3, because both blue bars have shrunk. Something that you cannot read in appendix 1 2 or 3, but that was mentioned in the annual report of Swatch, is that the export had dropped with 22% in 2009, but that they did gain some market share. Although in appendix 3 you can already see signs of recovery, because the cash flows from operating activities has already increased again, in comparison to 2008 and this means that the company is doing business again and therefore sales and profits will be going up again in the future.

Although the numbers that are given do not give the right image (except for appendix 3 the flows from operating activities) , because not the entire year of 2009 was bad, because in the second half of 2009 sales were already improving again. So the numbers or more a consequence of what happened in 2008.

The conclusion is that over the last 5 years the company has done a job well done, because although there has been a financial crisis the company still did grow over the last 5 years.

●●●Segmentation, Targeting, Positioning ●●●

Segmentation is based on identifying the different consumer needs in the market. Since Swatch produces and sells watches and jewellery, the focus will be on the needs in this market. There are several reasons to buy a watch; some of these are because it’s a handy tool to be aware of the time in regular daily life but also in sports. Besides this, it can be used as jewellery and therefore provide you with a certain status.

The benefit of watches is that this product can be sold to all age groups, but these groups are looking for different benefits. Youngsters are in general looking for a trendy and watch, which in most cases is used as jewellery, since they use their cell phones to check the time. This is in contrast to the elderly; this group is interested in usefulness and quality of a watch.

In the 1980’s Swatch experienced foreign competition as realised that to stay successful they had to choose for a certain target market instead of trying to sell their products to all consumers in this market. Before deciding on a target market it is necessary to do some research on these markets, how large are they? How well are they served already? What segment fits our product best? Swatch realised that their strengths were their innovative, their ability to be artistic and create new designs and most importantly they were able to produce a low-cost, high quality watch. This was a large market, which wasn’t well served yet because most competitors were still selling mass-produced watches.

Nowadays they are familiar with the fact that specialization in a chosen market is more profitable that trying to reach all consumers on the market, they had a careful chosen target market. Their main goal was to produce an artistic, low-cost and high-tech watch. This turned out to be a very successful concept and they became world’s largest watch producer. This position made it possible to extend their range of products and to use a differentiated strategy.

Lately they are focusing on all market segments again. They are very important players in all segments they operate in (prestige and luxury range – high range- middle range- basic range – private label segment). Swatch understands the different needs in each of these segments and therefore they offer different brands with different benefits in each market segment.

Today a day Swatch differentiate themselves from their competitors because they sell mass-production items which are customizable. Besides this, because of all the brands offered their products offer many different benefits and therefore there are products for every budget and taste.

●●●Market Entry Modes●●●

The worldwide known Swiss corporation Swatch has earned its reputation under the management of Nicolas G. Hayek, in the early ‘80s. Created by merging the two Swiss watch leader firms (SSIH and ASUAG), Swatch was SMH’s (Societe Suisse de Microelectronique et d'Horlogerie) most important brand name, an outcome of the Swiss watch industry crisis. The launching of the Swatch watch in 1983 only lead to many more brands under the same name, which have always been under continuous development and improvement processes. The Swatch group later began taking over smaller businesses that specialized in producing watches and under the highly innovative management of Mr. Hayek, it was able to expand quickly and build a strong position in the watch manufacturing industry.

Our research shows a general view of the company’s entry modes identified based on the firm’s historical information. By founding joint ventures with numerous less and more worldwide famous firms in time, the Swatch corporation entered new markets through intermediate modes, creating retail chains. Some of the most relevant joint ventures between the Swiss watch producer and other companies have been with:

German Daimler AG in 1994. The aim was to create the “Smart Car”, project which never got finalized due to withdrawal.
Guiness Tourneau watch retailer in 2006. The purpose of this venture was to launch watch stores in luxury outlet malls.
Chinese Jing Jiang Group in 2007. The Swiss holds 90 percent of the venture, focusing on the development of one of China’s most important monuments, the Peace Hotel.
Tiffany.Co in 2007. The agreement is to design and manufacture Tiffany brand watches. Specialists argue that Tiffany has lost money and properties in Swatch’s favor, therefore predicting a most likely unsuccessful venture.

However, apart from these, Swatch has also ownership of the luxurious watch brands Breguet, Jaquet Droz, Omega and some of Calvin Klein.

It is noticeable that the expansion of the company took place under the hierarchical entry mode, when Swatch set up subsidiaries under which it brought together several different watch manufacturers (GWC General Watch Co.Ltd.).

However, the forces beyond this global expansion of now the largest watch manufacturer in the world have also been strongly related with the internal and external factors. For one instance, the increasingly growing size of the Swatch group has played a major role in its international involvement over time, which helped later to overcome the sociocultural distances between the Swiss home country and host countries. This aspect remains highly questionable though, due to the fact that surprisingly, Swatch has shown stubbornness in considering the new markets it had entered. The company kept producing the same type of luxury watches, sold at exclusive stores, but it remained in its current position due to the affordability and customer value it delivers to its customers.

●●●Product Strategies●●●

During its long run activity, Swatch has been constantly focusing on creating new designs and improving its watches. It all started with the original plastic watches and later moved to a multitude of different kinds of watches.

The Swatch product line is quite impressive. It contains five “families” under one brand:

Swatch Originals – Plastic cased watches
Swatch Irony – Metal cased watches
Swatch Skin – The Original Skin and The Skin Chronograph watches
Swatch Beat – Digital watches that integrate “Internet Time”
Swatch Bijoux

However, that is not everything that Swatch has to offer. In the long run, the Swiss watchmaker came up with various colored watches and features (removable watch faces, etc.).

As we may clearly notice in the Swatch case, being competitive on any market involves, amongst others, product positioning. This aspect is highly important for managing successfully. The product, here the watch, must own a clear position in the customers’ minds, which makes them believe that that product is different or more special than others. Swatch differentiate themselves from their competitors because they sell mass-production items which are customizable.

Another crucial aspect in delivering delighting products is the country-of-origin effect. Switzerland has been baring its status of the world’s greatest watchmaker since the 16th century and since Swatch became the most famous producer, the product will have an even greater influence on the buyer’s perception. Therefore, the Swatch brand is known as a high quality product.

●●●Promotion and Pricing strategy ●●●

Concerning the promotion strategy, Swatch engages in a multi-domestic approach, which can be taken from the Annual Report 2009. There, a detailed description about the activities of each brand of the Swatch Group can be reviewed in categorization of countries. One example is that in Greece the Swatch-MTV playground event took place in 2009, which draws the attention of young people to the brand. It already shows the most important segment of the promotion strategy, the age. Most of the watches and jewelry designed by Swatch are colorful, modern and sporty. This lets us conclude, that the target group consists of young people and people who feel young. That is also reflected by the website, which is characterized by sophisticated technology, various colors, and snowboarders taken as advertising mediums. Even the chairman is displayed with a pose that makes him look like a person who stayed young. Furthermore, Swatch has a unique promotion activity with the introduction of its Snowpass watch, with which the access to skiing slopes is eased.

As indicated before, one of the promotion strategies is sponsorship. The joint event with MTV is only one of various events that Swatch organizes or sponsors in order to reach young people. There is the opportunity to join the Swatch club online of which members get informed about events taking place. Another example would be the partnership of Swatch with several snow- and bike parks where the firm offers to shoot videos from the stunts made by visitors and post them online. Visitors who want to review their performances can do so on the Swatch website. Swatch benefits from the positive association people make with the brand when they visit the events. Furthermore, a lot of the activities offered by Swatch do not only include the taking place of a single event but require to staying in touch with the company, as the videos reviewable online , for instance, do.

Another important factor of promotion for Swatch is its country of origin. Being a watch manufacturer from Switzerland, the company benefits from the good reputation the country has worldwide in manufacturing watches. Swatch is known to be one of the best quality serving watch manufacturers in the world.

The intense investment in advertisement made by Swatch suggests that it focuses on the pull strategy. This means, that the firm tries to reach its customers directly through strong advertisement by means of which demand is created.

The pricing strategy of Swatch is to offer goods at affordable price levels. It is stated in the Annual Report of 2009 that Switch aims to be accessible to customers. The prices given for watches on the official homepage reach from about 40 Euros up to about 200 Euros. The jewelry line falls into the same range of prices. Given the price range and the fact that Swatch is a high quality brand, one can say that its pricing strategy is set on a medium level. Regarding the fact that Swatch addresses young people with its promotion strategy, the price level appears to be accurate. A brand targeting young people would not be successful if the prices of its goods were not affordable for those.

Keeping the young target group in mind, one could consider the upper section of the price range to be set high. Swatch can therefore also be seen as a prestige brand. However, since the prices are relatively low in comparison to the prices of other high quality brands, we decided to stick to determining the prices as medium. Furthermore, it can be argued that Swatch follows a cost-leadership strategy. This means that the firm manages to produce its goods at a lower price than its competitors, while maintaining a high quality of the product. Swatch has established a routine in manufacturing watches, while investing intensively in R&D and the training of employees. This creates a good basis for a cost leadership position. Furthermore, the reputation and promotion strategy of the brand help to maintain such a position. All factors together compose a competitive advantage.

●●●Corporate Social Responsibility●●●

Swatch Group understands the importance of Corporate Social Responsibility (CSR). Their aim is to use ecological practises and protect the environment. They try to limit the use of raw materials and energy sources and introduced waste management, to reduce unnecessary waste. Besides the CSR, Swatch is still searching for cost reductions based on the best and most sustainable ways to protect the environment. An example of one of these practises is the recycling of batteries.

●●●Conclusion●●●

Swatch’s international market strategy has been very successful, their products are sold all over the world and nowadays they are worlds largest watch manufacturer. Their main strategy was to acquire joint ventures and they set up several subsidiaries to bring together watch manufacturers. By analyzing swatch’s international market strategy we noticed that they use a multi-domestic approach, which means that their product is customizable and they try to satisfy the different needs and conditions. They extended their range of products and offer several brands to satisfy the different needs in all segments of the watch-industry. They realize that consumers in all various segments are searching for different benefits, therefore differentiated market mixes for each segment are used. Each segment has his own pricing, promotion and product strategy, but there is also a similarity between all swatch brands; they offer high quality mass-production items which are customizable and have various designs.