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Hattori Seiko And The World Watch Industry In 1980 Case Solution
The manufacturing of watches is one of the world’s oldest industries. However, in the 1900s, the watch industry became a global business. As is the case with all other industries, there had been several changes, and leadership had shifted between different manufacturers. The three main watch-manufacturing countries were Switzerland, the US and Japan. After 1957, the entire concept of watches changed – parts became smaller and the advancements in assembly techniques was a significant achievement.
Following questions are answered in this case study solution
Why did the watch industry become a global business?
How do you explain the evolution of the Swiss, American and Japanese producers in their respective periods of ascendancy?
What should Seiko do now?
Do you see any lessons from the watch industry that may apply to other industries or products today?
Case Analysis for Hattori Seiko And The World Watch Industry In 1980
1. Why did the watch industry become a global business?
There are several factors which led to the watch industry becoming a global business. After World War II ended, the international watch industry grew at a fast pace, especially in the 1950s and 1960s. By 1970, almost all adults in industrialized states owned a watch – a trend attributed to rising prosperity in these countries. For instance, in the US, disposable income per capita was rising at a steady rate. Simultaneously, the emergence of mass merchandising retail shops provided greater accessibility. The expansion of commercial television also allowed it to become an effective means for advertisement purposes. Therefore, demand conditions were strong.
The US is also a vertical-individualist society in which people tend to be concerned with bettering their own status and being more distinct – through power, achievement or competition. This factor also had an impact on the watch industry. The ascendancy of US manufacturers like Bulova and Timex was a key reason behind the watch industry becoming a global business. Watch manufacturers like Bulova also took advantage of the factor conditions of different countries for each of its product lines. For instance, its Caravelle line was manufactured in Japan, whilst the middle priced Bulova line was manufactured in Switzerland. According to its management, this was a vital competitive strength.
Moreover, Swiss watches were able to dominate the US market because of highly skilled labor and lower labor rates – two significant elements which created strong factor conditions for the Swiss. According to Porter, aspects of factor conditions are more significant in determining a nation’s comparative advantage compared to naturally inherited resources such as natural resources and land.
Lastly, growth in international trade during the 1960s allowed Swiss manufacturers to sell watches at low prices in Asia and North America. This facilitated greater growth in the international watch industry. In 1970, the Swiss exported 97% of the watches they produced.
2. How do you explain the evolution of the Swiss, American and Japanese producers in their respective periods of ascendancy?
One thing which can be observed amongst Swiss watchmakers is their quality of adapting quickly to changes in the marketplace. For instance, when US tariffs on jeweled-lever watches increased, Swiss watchmakers instead focused on selling highly expensive or cheap pin-lever watches to America. Moreover, the elimination of industry and government regulations further allowed the Swiss watch industry to evolve and become more consolidated. A part of this consolidation was the backward integration of manufacturers to improve efficiency and effectiveness. Therefore, this improved a key element of factor conditions – collaborations with related supporting industries.
The evolution of American producers is quite interesting and different from that of the Swiss. One of the most successful American companies, Timex, was involved in fuse production. Its low prices and pin-lever watches made it quite popular. Thus, in the case of both Timex and Bulova, their evolution was based on the idea of adapting to market conditions. If Waterbury’s sales had not declined, then a watch manufacturer would never have sprung in its place. It also capitalized on standardization and mechanization. Bulova, on the other hand, capitalized on the growth of international trade by having its own global production system.
The evolution of Hattori is also somewhat linked to the growth in international trade. Whilst, export sales made up less than 5% of its sales in the last 1950s, by 1970, Seiko was the dominant watch brand in several Asian countries. Moreover, Hattori also had international manufacturing operations similar to Bulova. The Japanese watchmaker also leveraged the advantages of vertically integrated plants by manufacturing lower priced, jeweled-lever watches and became a leading brand in Asia. This can be attributed to the vertical-collectivist cultures present in most countries which have strong links between collectivism and communal sharing.
3. What should Seiko do now?
After Casio’s entry into the watch market, the dynamics of the industry changed a lot. Therefore, to maintain its dominance in the watch business, Seiko should innovate and come up with a new watch using quartz. A differentiation strategy would set it apart from rival firms – something which Casio had done. To effectively differentiate, it is vital to look for a marketable attribute, find a particular segment of the market which considers these attributes important and sells to them. This is more advisable than pursuing a cost leadership strategy as such a strategy might not be sustainable and may not result in loyal consumers. Differentiation would increase loyalty amongst consumers. Loyal consumers will not only keep buying the products adopt but also recommend it to others – a great form of word of mouth marketing.
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