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Swatch

Swatch. Switzerland has long been known for its hold on the watch industry. However, by the early 1980s, owing to Japanese competitors like Seiko and Citizen, Swiss industry had control of 0% of ‘low-end’ and 3% of medium-priced watches.

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Swatch

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  1. Swatch • Switzerland has long been known for its hold on the watch industry. However, by the early 1980s, owing to Japanese competitors like Seiko and Citizen, Swiss industry had control of 0% of ‘low-end’ and 3% of medium-priced watches. • By 1983, two of the biggest Swiss watchmakers had become insolvent. On the advice of Nicloso Hayek, these were merged into the Swiss Corporation for Microelectronics and Watchmaking (SMH). In 1985, Hayek bought controlling interest in SMH. Swatch, Management of Technological Innovation, KV Patri

  2. Hayek, being a Europhile, asked “why can’t we compete with the Japanese? Why can’t we design a striking, low-cost, high-quality watch and build it in Switzerland?” This ‘dumb’ question neded a smart answer. • To produce a fashionable watch and sell it at an average price of US$40, he needed to make fundamental innovations in terms of design, manufacturing, and distribution. • Swatch’s highly innovative manufacturing trimmed labor costs to less than 10% of manufacturing costs and just to about 1% of the retail price. Swatch, Management of Technological Innovation, KV Patri

  3. Hayek boasted that Swatch would succeed even if the Japanese donated their labor free. The result, 25 million watches produced in 1992. Lesson: • Dreaming can be useful by creating a gap between aspirations and resources. The latter can be ‘stretched’ through innovations. • High wage levels (as in Switzerland) need not be a competitive death warrant. What are the implications for HKSAR? Swatch, Management of Technological Innovation, KV Patri

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