Organizational Behavior and Entrepreneurship

I would like to start by saying that Swatch is a popular brand of quartz and automatic watches produced by the Swatch Group LLC. Originally, Swatch was designed to compete with the Japanese watch manufacturers in the entry level market share lost to the Japanese companies in the late 1960s-early 1970s. the direct competitor of Swatch in the entry level segment was Japanese company Seiko.

The name Swatch implies not what many people think it is (i.e. Swiss Watch) yet rather the “Second Watch” concept developed by the chairmen of the corporation and intended for casual wear, fun and tight budgets. Unlike other brands of watches that competed directly with each other for the right to be worn on the client’s wrist, Swatch introduced the entrepreneurial concept of “Second Watch”, i.e. the watch in addition to the prestigious model most people possess. That model could be worn in bad weather conditions and to the parties or discos, a place where one would not risk to take an expensive wrist watch. The first collection comprising 12 Swatch watches was offered in 1983 in Zurich, Switzerland, the motherland of Swatch. The price ranged from 40 to 50 Swiss francs, yet later would be standardized to 50 Swiss francs. The original sales target was set 1 million for 1983 and 2.5 million in 1984. The company used aggressive marketing campaign and a lot of advertising which together with a moderate price per Swiss Watch prophesied success for Swatch. The reason why Swatch was able to remain profitable despite having great advertising costs and low price was its innovative design. Compared to conventional watches sold by Swiss or Japanese competitors in the home market which contained over 90 parts, Swatch could be made with only about 50 parts produced on a fully automated assembly line, cutting costs on mass production (Alavi, 55).

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The apparent peak in popularity for Swatch in the USA took place in the early 1980s, when Swatch opened its Swatch Stores as primary distribution channels for Swatch watches in the USA. Precisely when opening its operations in the USA and understanding an enormous size of the US market for branded watches, Swatch developed another entrepreneurial idea of cooperating with some popular artists such as Keith Haring or Andy Warhol to endorse the watch collection and perhaps move the swatch production to cover the markets other than trendy youth markets and the “second watch” concept (Koskinen, 311).

Early in its history Swatch understood the importance of innovative approach to advertising and pop culture. Swatch would align itself with punk rock, leg warmers, charm necklaces, and neon colors let alone popular jelly bracelets of the 1980s. As previously noted in the essay, Swatch revolutionized the watch industry in Switzerland by creating the second watch concept. Previously it was believed that one watch was enough for people of any income or status since it did a primitive function of showing time. Swatch would create different watches for different occasions altering the size, color, or weight. Unlike other watch manufacturers who would set up high markup on the selling price to assure profits in the absence of frequent and regular watch purchases, Swatch offered people a watch for frequent purchases. One watch could be used to go to the night club, one watch could be used to play golf, one watch is great in the swimming pool, and one watch is just right for a business meeting.

At present the sales of Swatch watches around the world are certainly lower than some 20 years ago, yet Swatch still remains the world’s largest wrist watch producing company, while the company made rapid strides towards covering upper-end luxury watch brands in the recent years. Among these brands are Rado, Omega, Breguet, Calvin Klein, Tissot, Flik Flak and Longines to name but a few. The company understood the primary need of the modern XXI century market for watches-diversity, unpredictability and quality. As a result Swatch now would issue more than a dozen of different variations of the same watch with the only difference being the color, material used for watch production, and some particular watch attributes (e.g. diving watches, skin/thin watches). The most recent innovation introduced at Swatch was the creation of the watch which connects to the Internet to synchronize its time with the global benchmark of time. That very watch is capable of browsing the internet, and download some useful information for its owner such as weather reports, news headlines, email (read-only mode), computer/watch games, and even the stock/bonds quotes from NYSE and other major stock exchanges. The most recent prototypes are said to possess a digital camera, a voice recorder, as well as an mp3 music player.

From what used to be the popular trendy branch, Swatch became a fashionable object comprising a series of models for every gender, and age group. One can find watches for children with durable crystal screen and diamond-decorated watches for affluent females.
Speaking about the most interesting, entrepreneurial and innovative marketing stunt Swatch started in Switzerland in the late 2004 and early 2005 I would like to note that in order to stay different from other watches on the market, Swatch recommends its clients to wear Swatch on the right hand rather than on the left hand as it is common for wrist watches. The primary reason why people used to wear wrist watches on the left hand was because of the need to wind up the watch every day and since the majority of the population are right-handed (rather than lefties) the winding knob was placed in such a way to make it easier for the right hand to wind up the watch. Swatch argues that since we live in the XXI century and the majority of Swatch watches are fully automated/battery-operated in order to be different from the antediluvian watch models of the past century, Swatch offers its clients to wear Swatch on the right hand. The punch line for such stunt is “Swatch, wear it right, times have changed. It feels better and it looks better!”(Rumizen, 242). Once again, the primary meaning here is that Swatch is different from its competitors.

At present the Swatch Group owns more than 160 production facilities in Switzerland, France, Germany, Italy, Thailand, Malaysia and China. Swatch besides its traditional approach to watch making currently is one the world’s largest manufacturers of watch components and supplies its 20 different branded watch companies around the world. Also the company has an interest stake in the production of decorative jewelry that the company uses its some of the brands of its watches. Swatch understood the importance of proper global distribution network and for this very reason would set up its own global distribution network of distributing organizations. Currently, Swatch Group LLC entered the electronic systems production sector and hopes to succeed there as much as it did with watches (Holsapple, 60).

Swatch just like any other company which reached some level of expertise and success on the market strives to sustain its position on the market by investing heavily in research and development. The greatest R&D expenditures of Swatch aim at improving competence in the semiconductor microelectronics and micromechanics. The Swatch group is very active in the telecommunication and automobile sectors providing its novel design and electronics solutions to various global companies. Just like major global leaders in consumer goods, Swatch would also get involved as a sponsor of the Olympic games providing accurate sports timing tools and solutions for various events.

So what had contributed to such rapid success of a Swiss company which originally was designed to compete with the Japanese in the low-end market niche for wrist watches? The use of innovations and practices had certainly played the role and thus need to be analyzed in a greater detail.

  1. Quality of products and service is certainly considered a good factor taking into account the wonderful positioning strategy of Swatch Group LLC. As noted earlier these watches are tailored to meet the need of absolutely any customer from around the world and the whole company has distinct yet outstanding services for every price category of customers. Continuous improvement of its products and services is a part of the organizational culture of Swatch Group LLC and this issue gets taught to all the new hires as well as constantly is brought up in top management meetings (Kouzes, 75). Swatch Group LLC is all about gradual improvement of its goods, processes, procedures and practices. It is why the group had already achieved leadership status in watch industry around the world. Expansion practices at Swatch Group LLC are worth noting since Swatch Group LLC had constantly prompted expansion of different brands of watches, technologies, services and activities around the world either by acquisition of other brands or by extending these brands abroad.
  2. Education training development. Employee training is another area that can be classified as a good practice since Swatch Group LLC had considered employees as key contributors to corporate profitability. After being hired each employee gets a 2 week paid training during which they learn more about the company they are going to work for and the brand they are going to represent. Training involves the work of each employee with a mentor who would in a much greater detail explain them their role in the company and assure that the employee gets all his/her questions answered (Kunz, 92). Employee motivation as a part of education training development is what I consider a truly superb area of good practice and the desire to promulgate excellence at Swatch Group LLC. The employees are motivated greatly at Swatch Group LLC with the financial package, stock options, and discounts on watches they are selling or manufacturing. The wrist watch discounts are worth especial note since they allow the person to cheaply purchase these watches in virtually unlimited quantities. This is, by the way another way the company strives to promote its watches among the family members and friends of its employees and agrees to sell some of the brands at deep discounts.
  3. People development can be considered a good factor at Swatch Group LLC still it shows clearly the areas that require improvement. For instance, Improper measurement of progress as a part of people development is what also needs to be improved at Swatch Group LLC. The watch manufacturer uses customer comments as the ultimate assessment tool of the company’s work while failing to take into account the fact that the customer notices only the overall picture, yet never comments on the efficiency involved. Swatch Group LLC should use peer-evaluation sheets where each employee is to look at the work of his/her peer and fill out the evaluation sheet. While the customer sees that the watch is well done, it is the peer worker who can notice that another employee uses twice the amount of time and resources to do the job, thus causing inefficiency (Davenport, 231).
  4. Technology factors represent the good factors that still might need improvement and attention from Swatch Group LLC. Despite the fact that Swatch Group LLC owns all the aforementioned watch brands as well as production facilities it does not have a uniform corporate information system that would unite all these brands under one management and information system. Each watch production group that was acquired rather than created by Swatch Group LLC has its distinct system and culture, so for the communication to go both ways, one needs to make certain adaptations and changes in style just like the format. Introducing a uniform system at all watch manufacturers that make up Swatch Group LLC would ease up the control of the management over different hotels and will contribute to the overall efficiency. Still, one can dispute that differences in corporate cultures and information systems is what contributes to the uniqueness of each of the Swatch brands, be they acquired or created.

Speaking about the future of the Swatch Group as based on the use of some company-specific practices, I would like to note that it is rather foreseeable for the watch industry, where Swatch Group LLC will likely to remain in the leadership position due to its constant innovation in design, style, and watch type as endorsed by the Swiss quality manufacturers and lower costs due to the mass production. The enormous resources of the Swatch Group allow the company to stay on par with modern technological developments and innovations. The successful and profitable cooperation with the world’s renowned artists and the use of jewelry in decorating the watches allowed Swatch to turn its watches into collectible and highly valuable masterpieces. Proper distribution network allows Swatch not only to remain among the largest sellers, but also position itself as the supplier of the whole Swiss watch industry as well as some other companies outside that industry providing different companies with the parts and technology to manufacture branded watches (Neufeld, 123).

The Swatch Group LLC views its plans for the next 5 years as highly successful and innovative. Swatch sees great prospects in the production and co-development of high-tech chips, crystals and semiconductors for the computers, medical technology, and solutions for automobile industry. The company had accumulated vast potential and competence in the field of electronics, semiconductors and the internet sector for its Swatch Access watches/Paparazzi Swatch and is ready to apply it to areas other than watches (Barna, 187).

Swatch will place more attention to the upper-end market where the profit margins are the highest and which typically grows at a rate of 8% annually. The company plans to further push its Brequet, Blancpain and Glashutte brands in Europe and Asia. Cooperation of Swatch and Omega had been successful in the past and is expected to become even more profitable in the future. The companies open Tourbillon stores for distribution purposes around the world, something like Swatch did with Swatch Stores in the USA in the 1980s. Tourbillon on the other hand offers only luxury and exclusive watches focusing on the appeal of individually designed watches endorsed by some major artists in the world.

Swatch proved successful not because it provided some superior quality watches that were much better than everyone else’s watches on the market, but because of its ability to think long term while at the same time concentrating on the short term fads and changes. The company that was created in Switzerland only tried to kick out Japanese digital watch manufacturers who dominated the market with their highly accurate, digital clocks sold at a price below the price of Swiss watches. The Japanese used mass production to capture the market and generate profits while the majority of the Swiss watch manufacturers rather focused on limited production of watches yet extremely high markups. Swatch understood the importance of market share rather than focus solely on exclusivity and rarity (as it was applicable to traditional Swiss watch manufacturers) and would engage in mass production while at the same time staying close to the modern music and artistic world. As the music and artistic trends changed, so would the Swatch watches and their style. It did not take long to understand that by constantly changing with the environment, Swatch managed to mass produce just the right quantities of the very coveted watch. Once pop become more popular than hard rock, and punk rock more popular than pop, Swatch would produce different watches to meet the ‘cultural’/social needs of its clients, making the past series rare and thus collectible. At present swatch turned to the modern technology and the internet as well as high-end clients in an attempt to further increase its market share in other market niches.

Alavi, M. and Leidner, D.E. Knowledge Management Systems: Emerging Views and Practices from the Field. 32nd Hawaii International Conference on System Sciences, IEEE Computer Society. 1999.
Barna, Z. Knowledge Management: A Critical E-Business Strategic Factor. Unpublished Masters Thesis, San Diego State University. 2003.
Davenport, T.H., DeLong, D.W., and Beers, M.C. Successful Knowledge Management Projects. Sloan Management Review, 39(2), 1998.
Holsapple, C. W., and Joshi, K.D. An Investigation of Factors that Influence the Management of Knowledge in Organizations. Journal of Strategic Information Systems, 9, 2000.
Koskinen, K.U. Tacit Knowledge as a Promoter of Success in Technology Firms. 34th Hawaii International Conference on System Sciences, IEEE Computer Society. 2001.
Neufeld, W. P. Environmental scanning: Its use in forecasting emerging trends and issues in organizations. Futures Research Quarterly, 1(3), 1985.
Kouzes, James, The Leadership Challenge, 3rd Edition, Prentice Hall. 2000.
Rumizen, Clemmons, The Complete Idiot’s Guide to Knowledge Management, NY Random House, 2002.

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