Case study of Swatch with 2 questions
Q1. According to you what operations management performance objectives does Swatch use to support its business strategies? Justify your answer with practical examples from the case.
The following are the operations management performance objectives that Swatch used to support its business strategies. One of them is delivering on a quality product. The parent company, SMH, carried out a research in its markets of watches and made an analysis of the behavior of the consumers. Then, the company heeded the advice it was given by its marketing experts that it could make a comeback on market share where it was slowly being edged out —by Far East manufacturers— by producing pocket-friendly analog watches, yet of good quality, contrary to the digital watches that flooded the market.
The second business strategy is time. Swiss watch industry was on the verge of dying because of the competitively cheap and high-quality products that were being manufactured in the Far East. When the industry saw that potential threat, it was advised by Nicolas Hayek not only to merge with another company but also to develop and produce watches that were plastic-cased (Osterwalder & Pigneur, 2010). These plastic-cased watches could use relatively fewer components and therefore their manufacture could be fully manufactured. Through automation, many watches could be produced at a given time. In a way, this business strategy conforms to the company’s mission statement, “Time is what you make of it.”
The third business strategy is reliability. The quartz watches that Japan began producing were seen as a mere passing fashion. Despite that perspective, quartz watches were so fashionable that as of 1983, the Swiss watch industry was at its lowest levels. However, according to its consumer behavior analysis, the parent company decided to focus on quartz analog watches rather than digital. Also, these watches came in different colors that were fashionable and various designs. The company came up with so many designs some of which never caught public imagination. There were also various novel models that were manufactured so as to match with different lifestyles and clothes; the models include Blancpain, Omega, and Longines. The company diversifies in its products in which there are casual, formal, sports, fashion, and Swatch lines.
The forth business strategy is cost. The company came up with innovatively designed products, effective marketing tactics, and developed a way through which watches could be produced in high volume and cheaply through full automation thereby requiring fewer human labor especially where they produced, Switzerland, which is among the places with the highest labor costs worldwide—it’s direct labor costs amounted to less that 7 per cent of the total production cost (Pycraft, 2000). The mechanism that the company developed whereby it could produce the plastic-cased watches implied that it could use lesser components, half the amount, to manufacture most watches. These factors enabled the company to increase its market share from the one that it had been commanding in the early 1980s, 25 per cent, to over 50 per cent a decade later. It is with this business strategy that the company was able to offer watches of good-quality at a cost-effective price, and making the watches fashionable accessories. There was also innovativeness in the way the company distributed the watches. For example, the British consumers could get it from them majorly from departmental stores and specialty dealers. The high-street dealers did not deal in the watches because the company believed that they were weak sales medium for the watches.
The last business strategy is dependability. The company’s philosophy is offering “low cost, high quality, and accurate watch with synthetic material.” The company stays true to its word as it offered a good watch at pocket-friendly price, making the watches have the potential to become fashion accessories.
Q2. 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? And what role did the use of process technology play? Justify your answer with practical examples from the case.
The marketing function, the product design and the operations function to the success of Swatch has been contributed by the following three factors. The first factor is the method that Swatch Company has used to produce its products; the second factor, how the company creates its products and services; and lastly, the method, through which the company has used to reclaim its place in the market and its market share.
The way the company produced its products; the Swatch Company was facing stiff competition from Far Eastern manufacturers like Seiko and Casio and these competitors were eating on its market share. Using Nicolas Hayek’s insight, one of the two companies that had merged started developing a new plastic-cased watch. Using this way of producing watches, there was a reduction in the cost of the materials that would be used in the casing, plastic, which implied that there was reduced cost of production compared to the alternatives—the production process used relatively lesser components than half in most other watches. Also, this implied that the watches could be produced in bulk. This process also enabled full automation, thereby, cutting on the production costs that could otherwise have resulted from labor. The products produced were cheaper as a result of the embracement of the plastic-cased watches. The increased production—in lesser time— of the new product design was crucial in helping the company reclaim its market share. As Carter, Melnyk, and Handfield (1995) put it, in an organization, Time-Based competition (TBC) is a crucial metastrategy which leads to reductions in lead time through processes and structures changes applied in design, production and delivery of products to its consumers. Swatch came up with a strategy that its commercial rivals would find it hard to imitate. The strategy aligns with today’s requirement for a competitive company, product design.
The tactic that Swatch has used to position itself in the competitive market; swatch brought a novel trend in the market which conforms to the company’s mission statement of offering “low cost, high quality, and accurate watch with synthetic material.” The company’s philosophy ushers in change and puts the company in a place that it can effortlessly and easily adopt, based on conditions on the market. The manufacture of plastic-cased watches has placed the company in a position that can enable it to quickly use its innovativeness to come up with novel products and launch them in the market. The full automation of the developed plastic-cased watches has placed the company in a position that can enable it to produce these novel products faster. The stiff competition in the market and how the Swatch Company was on the verge of being edged out of the market has put the company in a position that can enable it to consumers with different tastes and in a marketplace that is highly competitive.
Lastly, the way through which the Swatch Company has created its products; the company has created its products in that the products have created the impression that they are synonymous with pieces of fashion accessories. There before, the main purpose of watches was gadgets of telling time. Thus, there wasn’t any satisfaction got from purchasing or strapping the watches in one’s hand. The Swatch Company took this competitive advantage against the products produced by the Far Eastern manufacturers—Swatch introduced the idea that the watch could as well be a fashion accessory. The company also created the watches in a way that they would be easily recognizable and be associated with it. The use of process technology played a crucial role in the success of swatch. The company came up with a standardization of the internal mechanism of the watches, also, the company delivered on variety. Formerly, the watches manufactured by Swatches were exclusively black and white. The company broke the monotony of this black and white. During the production of the watches, the company was innovative in that it started producing watches in diverse and vivid colors. Also, the company diversified in designs which could conform to various tastes of the consumers and align with different lifestyles. The following is the way through which technology played this trick: it sold the idea to the consumers that they could buy more than one watch so that they could match with their different outfits and lifestyles. This increased the proceeds of the company through multiple purchases.
Handfield, R. H. (1995). Re-Engineering for Time-Based Competition: Benchmarks and Best Practices for Production, R & D, and Purchasing. Westport, CT: Greenwood Publishing Group.
Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Hoboken, New Jersey: John Wiley & Sons.
Pycraft, M. (2000). Operations Managemnt. Cape: Pearson South Africa.