Seiko Go Upmarket
Executive Summary Seiko Watch Corporation and its predecessor had always been innovative in watch technology development and brought many industry firsts to the watch market, and Seiko was very successful before the 1990s. With competitive environment change started in the 1990s, Seiko found it was not in the right segment of the market for growth, this segment is high end watch market. Seiko tried to break into the high end watch segment, but the attempts haven’t been proved successful.
Based on detailed analysis of Seiko’s industry environment, competitive arena, and internal issues, conclusion was drawn that Seiko’s past vision, strategy and structure didn’t support its ambition to be an important player in the high end watch market. Countermeasures were then proposed: 1) have a clear and viable vision for future; 2) install a solid strategy of brands differentiation; and 3) match the strategy with organizational structure and resources. * Introduction
This case, “SEIKO WATCH CORPORATION: MOVING UPMARKET”, examined Japanese watch maker Seiko’s history, major technology developments, competitive environment, business expansion, and efforts and challenges to uplift brand image to compete in high end market segment. Seiko’s predecessor K. Hattori was established by 22-year-old founder Kintaro Hattori in 1881. The business was started with second-hand clocks sell and repair, and later on retailing and wholesaling of imported clocks.
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Hattori then established Seikosha (“Seiko” means exquisite and “sha” means house in Japanese) in 1892 to begin to produce wall clocks, launched the first wristwatch in Japan in 1913, and started to use Seiko brand on watches in 1923. Since then, Seiko had been enjoyed rapid growth in domestic market until 1950s when it accounted for 50% of total production in Japan, while Citizen and Orient shared the remaining 50%. Facing pressure from Swiss watch makers, Seiko started to upgrade its technology to improve accuracy and add features, and managed to be comparable with Swiss products in terms of accuracy in the early 1960s.
Around the same timeframe, after dominating the domestic competition in the late 1950s, Seiko started to go abroad. Through advertising initiatives such as being official time keeper of the 1964 Tokyo Olympic Games and continued technology focus such as being the world’s first company to introduce quartz wristwatch in 1969, Seiko earned its place in international market: it had become the leading watch brand in most Asian countries and successfully built sales channels in US and European countries by 1970s.
Though Seiko was historically accepted by domestic customers as luxury watches producer at top-end of the market in addition to mid-range watches, its several attempts to reposition itself to high-end segment in international watch market didn’t enjoy much success: in the late 1970s, Seiko bought Jean Lassale, a Swill watch brand, to form a sub-brand “Seiko Lassale” to sell luxury quartz dress watches at higher price points in international markets, but this brand was not successful in the US and Europe markets and eventually discontinued; another sub-brand “Grand Seiko”, once alive in 1960s aiming at the high end of the domestic watch market, was re-launched in the late 1980s to flight with Swiss watch makers in the high end segment, this attempt didn’t meet its desired effect otherwise Seiko would have not taken the third try in 2000s to move upward of the market through the spring drive technology. In 2007, doubt about brand upgrade was casted on Seiko again. * Analysis of the issues The myriad of problems facing Seiko can be traced to below three causes. Industry environment - Strategic context change of the horological industry
The first phase - before the late 1950s / early 1960s, everybody in the watch industry had competed in a pretty straight forward environment: watches were mainly used for chronometric purpose, watch’s core technology was homogenous (everybody in the horological industry used mechanical movements system), and main objectives for watch makers were to mass produce precise timepieces at competitive cost and sell to everybody needs a watch. Seiko did a nice job in this era. It occupied majority of Japanese domestic market share and caught Swiss rivals up in terms of production facility and product accuracy. The second phase - from the late 1950s / early 1960s through the 1970s and 1980s, technological revolution, mainly application of electronics and quartz technologies, reshaped the horological industry. Every watch shared certain common elements: a movement to measure the passage of time, any energy source, a display, a case, and a bracelet or strap.
Electronics altered the stereotype of energy source and display, while more significantly, quartz timekeeping technology broke the tradition of mechanical movement to bring much more accuracy to watch benefiting from its properties of a quartz crystal oscillating at precise frequencies. Comparing to mechanical components, electronics and quartz components could be produced and assembled at more stable, economic, and fashionable way, Watches then could be offered to customers with unprecedented accuracy, lower cost, and fashion statement. To embrace the change or be changed, all players of the industry went through an era of uncertainty and innovation. Seiko was very creative in the time and pioneered many watch technologies to the market. Seiko started expanding overseas and its international brand image was formed during the period. In the meanwhile, Seiko began efforts to setup sub-brand to move up in market.
People would not have known ramifications of what they were doing when in process of historical events, but looking back into history, we know today the seed of Seiko dilemma was planted in the 1970s and 1980s under the soil of its success. The third phase – the 1990s was a no name decade for Japanese watch makers including Seiko. Domestic economy was staggering. Watch technology was still in evolution, but there was no break-through invention like quartz could stir up the arena. Low cost economies such as China and Hongkong were arising to take over in mid-priced and low-end watch market. Swiss watch makers firmly seized hold of high-end watch market while fighting back in mid to low end market.
Watch Competitors came out from outside of the chronological industry: pocketable digital device made watch no longer a functional necessity for timekeeping purpose. Seiko sales declined in the decade. The fourth phase – after the millennium, prevalence of cell phones further deteriorated watches’ position as personal primary timekeeping accessory. People bought watches not for time telling but for social status and prestige distinguishing. Global demand for luxury goods grew, and high-end segment of the watch market was emerging as the most profitable and the fastest growing sector. Seiko was adjusting itself to the new era, but its brand image had never been perceived as luxury.
Competitive arena - Strong Swiss competitors in high end segment, fierce competition in mid and low end segments from LCE (low cost economy) watch makers, domestic rivals, and Swatch group In the high end segment, Swiss watch makers were lost in the 1970s when quartz technology was changing the game. Though painful, a number of Swiss watch companies such as Patek Philippe, Rolex, and Omega chose to stick to mechanical watch making, and they laughed at last. Below quotation could best describe the situation: We worked really hard in the 1980s where everybody was dead. The quartz movement came in the 1970s, so all the other watchmakers threw away everything, both their equipment and their movements. In the 1980s is when we started to redevelop all our complications.
At the time, my father [Philippe Stern] had a vision that only one type of watch should remain - the one with a mechanical complication. He believed there would always be people who appreciate fine mechanisms, whether it's manual winding or automatic. And he was right. It's like a nice painting. It's something unique, rare and made with passion. * Thierry Stern, Patek Philippe President, interviewed by Timezone. com in Sep 2012 In the mid and low end segments, Seiko’s attacks were from all around as technologies were easy to duplicate and consumers really cared about money they were spent, thus if you could provide fair quality watches with lower cost, e. g.
LCE watch manufacturers, you could win some share of the market segment; if you could provide good quality watches with comparable cost but more features and fashion styles, e. g. Japanese domestic competitors Citizen and Casio as well as Swatch group from Swiss, you could gain some other share of the segment of this market. Company vision, strategy and structure – Seiko had no clear vision and strategy for the era of watches as prestige symbol, its structure was prohibitive from effective decision making and resources utilization Vision - we know in the 1970s and 1980s, Seiko enjoyed much success and went global as an icon of precise and inexpensive quartz technology.
Seiko didn’t foresee that the greater success it appreciated the stronger consumer would tie it to the quartz brand, and fine craftsmanship of mechanical watch making would override in the future. Seiko has always been innovative in technology development, but failed to grasp a watch’s implication to today’s consumer: time is timeless and invaluable; consumers would eventually wish their watches as seen carrier of time are timeless and invaluable as well. Quartz or electronics is perceived by consumers as ephemeral and cheap consumable stuff. Strategy - Seiko made mistakes in brand portfolio strategy. It launched two sub-brands to go up of the market segment in the years.
The “Seiko Lassale” equipped with quartz movement was launched in the late 1970s and discontinued when it turns out not welcomed in US and European markets. The “Grand Seiko” featuring mechanical movement was alive from 1960-1975 within Japan domestic market only, and had been stopped for more than a decade in the quartz era until re-launch in 1988 for global market featuring quartz movement, after another decade, the “Grand Seiko” sluggishly began to shift to high grade mechanical movement. Both the “Seiko Lassale” and the “Grand Seiko” were too close to Seiko name and technology of quartz to reverse the quartz image of usually non-luxury items. In addition, it seemed Seiko didn’t have a carefully planned long range brand strategy.
High end sub-brands were created and abandoned. The recent example was that Spring Drive, Seiko’s latest breakthrough mechanical movement technology bared management hope to upgrade brand image, first debuted in lower “Seiko” product line rather than high end “Grand Seiko” line. Seiko’s another high end brand “Credor”, though had long history and good acceptance at home, had never been marketed in international markets. Structure - Seiko historically had too complicated structure arrangements: a sales company purchased Seiko watches from its parent company owned manufacturing arms, and the arms were competing with each other and developed into firms with watch as minor business.
The good thing was Seiko management realized this point and reorganized the company in 2001 to streamline decision making and focus on branding. * Conclusion and Recommendation Seiko’s vision, strategy, and structure didn’t help the company to gain advantage over its rivals in the competitive environment in recent two decades. Recommendation for Seiko is to build prudent and viable company vision ;amp; strategy, link the vision and strategy together with organization structure and resources, and get the vision and strategy realized. Details are following: Seiko needs to re-think that who are Seiko’s intended, actual, potential, and future customers, and what do these customers value in a watch.
Watch collectors and enthusiasts, successful executives, and younger generation of rich families should be target clients for top end watches. These people care about watches’ craftsmanship and uniqueness, aesthetic and intricate style, status and symbol indication, as well as investment and heritage value, much more than superior accuracy and function for daily use. Seiko should take care of the demands of these people. However, Seiko shouldn’t give up the mid to low end market. Consumers of this market segment need a quality watch for money, fashion, function features, and some kind of status symbol will be plus. Seiko needs to have a solid strategy of distinguishable brands to server different segment demands.
Seiko can get best practice idea and lessons learned from companies in the watch industry, such as Swatch group, and in other industries, such as VW group in automotive industry and L’Oreal group in cosmetic industry. Though the basic inner technology and formula could be shared across different brands and models, the exterior and style must be different. Different brands should convey clear different messages to customers. It would take too many resources and too long time to move the current Seiko brand up. The “Grand Seiko” name is no significant different from “Seiko” name thus is not appropriate to be a top end brand, but could cover the segment in between.
The brand “Credor” is suggested to carry over the high end segment responsibility and needs to expand globally under intensive and well-designed promotional campaign. Seiko made a positive move to centralize and streamline watch company organization; the next step would be to match brand differentiation needs with organizational structure and resources. The “Credor”, “Grand Seiko”, “Seiko”, and other brands could share R;amp;D, production facility, IT, finance, HR and administration. But segmental marketing and sales, brand management, and some other specialized tasks can’t be shared. Each brand should be led by experienced and proved executives and take its own profit and loss responsibility.
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Seiko Go Upmarket. (2018, Jun 30). Retrieved from https://phdessay.com/seiko-go-upmarket/
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