marketing report revised

●●●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 firm’s activities, which will be followed by a description of the company’s performance in the last 5 years. After that, a description of the company’s international marketing strategies will follow before the report will end with a short conclusion.

General introduction.
The Swatch group is a Swiss company which mainly manufactures watches and jewelry. However, the emphasis lies on the manufacturing of watches. The Swatch group was established in 1983 as a result of a merger between ASUAG and SSIH witch. These were two watch makers from Switzerland who were established in the beginning of the 1930s. Both companies had several brands, but they were facing high competition from Japanese watch makers during the 1970s. In order to get a strong market position the two companies merged and therefore established the SMH (Swiss Corporation for Microelectronics and Watch making Industries Ltd.), which later on became the Swatch Group. It only took 5 years for the newly merged company to become the biggest watch manufacturer in the world, which it still is today. 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 focusing on Research and Development in order to attain the market position of its brands. Furthermore, the Swatch group is also active in the automobile sector, telecommunications and it provides sports timing measurement equipment (e.g. for the Olympic games.)

http://www.swatchgroup.com/en/group_profile/history/yesterday
http://www.swatchgroup.com/en/group_profile/history/today
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●●●The company’s businesses●●●

This part of the report will provide an overview of the company’s activities.
Swatch mainly produces watches and even all other activities are related to the watch production 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 several parts of watches.

The watch production is the company’s core business. Swatch is the biggest watch manufacturer in the world and therefore a market leader. We estimate market share of Swatch at around 20%. This we derived from the fact that in 2005 the market share was at 18% and it is indicated by several sources (websites 2,3 and 4, footnote) that it increased in the year of 2009.

Since Swatch mainly focuses on the manufacturing of watches, its involvement in the jewelry market is relatively low. The jewelry is created to match with the watches, which aims to attract Swatch watch owners to purchase the complementing jewelry.

Seven companies of the Swatch group are engaging in the production of electronic systems. The 7 companies are: EM Microelectronic, Micro Crystal, Renata, Microcomponents, Oscilloquartz, Lasag and Swiss timing. These companies are located in different parts of the world and they are interrelated. The geographical disparity and the technical expertise of every single company create a pool of collective knowledge. This pool enables all of the companies to gain market share in both geographical and industrial terms.

In the market of producing, supplying and selling components of watches, Swatch is also a market leader, with 156 production centers around the world. Its responsibility in this field reaches the whole watch industry. So even if you buy a brand that does not belong to Swatch, there is a good chance that some parts of the watch are produced by Swatch.

Swatch serves the global market. It has subsidiaries all over the world and in the countries where this is not the case, there is still the possibility to buy a Swatch product via a local distributor. To give an indication, the following countries have Swatch subsidiaries, 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
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●●●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. This is indicated by the gross sales, which increased by 20.55% from 4497 million CHF in 2005 to 5421 million in 2009. Furthermore, the fact that in 2009 the gross sales were 9.1% less than in 2008 leads us to conclude that the financial crisis had an impact on sales, which would probably have been much higher if this event would not have taken place.
Until 2008 the company was constantly growing, sales as well as the net income were up, their assets were rising. This is illustrated in appendix 1. But during the financial crisis 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 can also be derived from appendix 3, where you can see that 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 by 22% in 2009 while the company was gaining market share. In appendix 3 you can already see signs of recovery in the cash flows from operating activities in comparison to 2008. This means that the company is doing business again and therefore sales and profits will be going up again in the future.

By looking at the numbers given in the appendix, one could get the wrong impression about Swatch´s performance in 2009. Although it seems that 2009 has been an entirely bad year for Swatch, this is not the case as sales were already improving in the second half of 2009. Therefore the numbers can be interpreted as a consequence of what happened in 2008.

We conclude that over the last 5 years Swatch has done a good job. 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 a market. Since Swatch produces and sells watches and jewellery, we will focus on the needs in this market. There are several reasons to buy a watch; some of these are that it is a handy tool used to be aware of the time in regular daily life and in sports. Besides this, it can be used as jewellery and therefore provide you with a certain status.
The benefit of watches for manufacturers 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 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 the usefulness and quality of a watch.

In the 1980’s Swatch experienced foreign competition and the company realised that, in order to stay successful, it had to focus on a certain target market instead of trying to sell its products to everyone. Before deciding on a target market it is necessary to do some research on these markets and answer questions like: how large are they? How well are they served already? What segment fits our product best?. Swatch realised that its strengths are being innovative, artistic and being able to create new designs. But one of the most important abilities is Swatch’s ability to produce a low-cost, high quality watch. Since this was a large market, which wasn’t well served yet because most competitors were still selling mass-produced watches, Swatch decided to focus on this consumer segment.

Nowadays, Swatch is familiar with the fact that specialization in a chosen market is more profitable than trying to reach all consumers in the market. Therefore, the choice of its target market was made very carefully. 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 the world’s largest watch producer. This position made it possible to extend their range of products and to use a differentiated strategy.

Lately Swatch is focusing on more market segments again. The company became a very important player in all segments it operates 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 it offers different brands with different benefits in each market segment.

Today Swatch differentiates itself from its competitors by selling mass-production items which are customizable. Besides this, because of all the brands offered by Swatch, the products provide many different benefits for all kinds of customer. Therefore, Swatch is meeting a wide range of customers with different budgets and tastes.



●●●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 group 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 behind this global expansion, which lead Swatch to being the largest watch manufacturer in the world, have also been strongly related with internal and external factors. For instance, the increasing size of the Swatch group has played a major role in its international involvement over time. Later on, this was useful to overcome the sociocultural distances between Swatch’s home country and its 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 notice in the Swatch case, being competitive in any market involves, among other things, product positioning. This aspect is highly important for managing successfully. The product, in Swatch’s case the watch, must own a clear position in the customer’s mind, which makes him/her believe that that product is different or more special than others. Swatch differentiates itself from competitors by selling 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 being 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, Swatch is known as a high quality brand.













●●●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●●●

The Swatch Group understands the importance of Corporate Social Responsibility (CSR). Therefore, it aims to use ecological practices and protect the environment. Swatch tries to limit the use of raw materials and energy sources. Furthermore, it introduced waste management in order 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 practices is the recycling of batteries.




























●●●Conclusion●●●

Swatch’s international market strategy has been very successful. Its products are sold all over the world and nowadays Swatch is the world’s largest watch manufacturer. Its main strategy was to acquire joint ventures and set up several subsidiaries to bring together watch manufacturers. By analyzing Swatch’s international market strategy we noticed that it uses a multi-domestic approach, which is reached by offering products that are customizable and satisfying the different needs and conditions of customers. 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 its 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.


























●●●References●●●

Introduction:
www.swatch.com
http://www.swatchgroup.com/en/group_profile/history/yesterday
http://www.swatchgroup.com/en/group_profile/history/today

The company’s businesses: http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports/annual_report_2009
http://www.marketing-online.nl/nieuws/index2005-43.html http://www.tijd.be/nieuws/ondernemingen_consumptie/Horlogemaker_Swatch_klopt_verwachtingen.8294680-430.art
http://genevalunch.com/blog/2010/02/09/swatch-upbeat-for-2010-as-2009-losses-show-market-share-gained/
http://www.swatchgroup.com/en/brands_and_companies/electronic_systems

The performance of the company from 2005-2009:
http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports/annual_report_2009
http://www.tijd.be/nieuws/ondernemingen_consumptie/Horlogemaker_Swatch_klopt_verwachtingen.8294680-430.art

Segmentation, targeting and positioning:
www.swatch.com
www.swatchgroup.com

Market entry modes and Product strategies:
The Swatch Group Ltd – History of the Swatch Group
Book: Essentials of Global Marketing (Svend Hollensen)
Swatch and Global Brand Management – Temple University/Fox School of Business

Promotion and Pricing strategy:
www.swatch.com
Annual Report 2009 of Swatch Group: http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports
http://www.businessplans.org/Market.html

Corporate social responsibility:
www.swatchgroup.com




●●●Appendix●●●
1