The Swatch Group

1. INTERNAL ANALYSIS 1.1 Mission, Vision, Goals and Performance Mission and Vision: The explicit mission statement has not been announced, Swatch's mission is likely to be "to offer low cost, high quality, and accurate watch with synthetic material", targeting to young people who are most likely to buy low-priced watches. According to the low cost objective, the operation has been separately managed in global manner in Switzerland, Brazil, China, and India where the labor cost is low enough to compete with Japan and Hong Kong. Moreover, in order to keep reaching the efficiency and effectiveness, the fully automated assembly line is implemented without the human intervention. In addition, to keep Swatch competing with low cost manufacturers, the capital-investment is applied as a result of decreasing in costs. The lean and flat hierarchies help enhancing the innovativeness and creativity throughout the company. The hybrids of centralization and decentralization management allow Swatch to yield the benefit from the local knowledge while maintaining the control over the distribution and management. Goals: The quantifiable objective has not been stated explicitly, it is obvious that Swatch's general objective is "to become the creative and innovative leading brand in global market and establish strong brand image in the mind of consumers". This objective is obvious since the flat hierarchy management style of the company follows this objective in order to enhance the creativity and innovativeness. Furthermore, the company's culture, the controlled chaos support the creative and innovative thoughts since under this culture, the company believes that the circumstance keeps changing as a result of ever adapting to the environment. Performance: According to mission statement of "to offer low cost, high quality, and accurate watch with synthetic material", Swatch fails to achieve since the low cost manufacturers

BI4242 Global Strategic Management The Swatch Group

such as Japan and Hong Kong are able to construct even lower cost of production than Swatch. Moreover, Swatch fails to take into account for different values in each different country. Furthermore, the country-of-origin has put a great effect on Swatch's sales that Swatch is unable to cope with. However, Swatch is able to survive in the intense competition since Swatch is able to adapt to ever changing circumstance as it obviously notice from the continue increasing in sales, unlike other Swiss Companies which are unable to adapt to the changing market conditions and are reluctant to emphasize on the innovative and competitive products (Anonymous, 1974 - 1983, p. 5). 1.2 Current Corporate Strategies Vertical growth strategies: Swatch applies the vertical growth strategies through both backward integration and forward integration. It is obviously seen that the backward integration is implemented through the acquiring the shares of the watch manufacturing company, which were merged during the crisis. Moreover, the global production is implemented by establishing the facilities in low-cost countries such as Brazil, China, and India to yield the low cost of labor as a result of decreasing the cost of production while maintaining the control over the production as well as keeping the operation within the standard to reach the high quality concept. The forward integration is applied since Swatch is initially sold through special stores and department stores. Eventually; Swatch decided to move into regular watch stores in 1980s. Finally, Swatch decides to allow the individual investors and entrepreneurs who serve as distribution channel to open Swatch stores to sell anything that carries Swatch brand name. Horizontal growth strategies: Hayek planned to test the market of new watch in United States as a result of the establishment of joint venture with a Texan businessman.

BI4242 Global Strategic Management The Swatch Group

Diversification strategies: Swatch has developed the joint venture in telecom and car businesses with Siemens and Mercedes-Benz respectively. The diversification into telecom industry can be simply implied that Swatch is pursuing the concentric diversification strategy since the target market would be the new one with the related technology of Swatch, specializing in microcomponents. Diversification to car business with Mercedes-Benz has provided a great opportunity to Swatch to involve with various business transactions and obtain the valuable experience. The diversification has been implemented and targeted to the existing customers who are likely to be young people with the existing knowledge of microelectronics. Due to the differences in operation both with Siemens and Mercedes-Benz as a result of budget overrun as well as lack of decision-making power have put the lessons from the cooperation in term of joint venture. Retrenchment strategies: Swatch decided to terminate their unprofitable business unit to reassign the resources to more profitable business unit in order to be more profitable and effective. As mentioned, Swatch has diversified its business to telecom and car businesses with Siemens and Mercedes-Benz respectively. The result of the joint venture with Mercedes-Benz was the development of Smart car. Nonetheless, the conflict was raised according to the lateness in production and over budget as a result of selling of 19% interest in the joint venture to Mercedes-Benz. Moreover, the establishment of joint venture with Texan businessman did not generate the expected outcomes as a result of the termination of the project for overseas market. Swatch eventually decided to test the new watch market domestically before launching the new watch. Portfolio strategies: Swatch offers the wide variety of product line under different brand names to meet the customers' demand in different markets. The luxury brands such as Blancpain,

BI4242 Global Strategic Management The Swatch Group

Omega, Rado, and Longines offer wide variety of product to reach high-end market while offering the medium and low-end brands under the brand names of Tissot, Certina, Mido, Pieere Balmain, Calvin Klein, Hamilton, Flik Flak, Lanco, and Endura. Parenting strategies: Swatch responds the customers' demand through the wholesaler organization that is the division within the Swatch group subsidiaries around the world. Swatch is operating under the pattern of product-country matrix where the local division managers have to report to the country managers, who are directly responsible for total profits and losses as well as the brand headquarter in Switzerland (Anonymous, 1990, p. 7). 1.3 Current Competitive Strategies Swatch pursues the focused strategy, integrated cost leadership and differentiated strategy. It is obvious that Swatch has