Switzerland was an industry leader in the watch market up until the 1970's when the digital watch was introduces to consumers. The digital watch was inexpensive to manufacture and could be produced in mass. It created a whole new market by making watches inexpensive enough for all classes of people. The Swiss did not respond to this new competition and began to lose their market share. The Swiss watchmakers still produced high end watches for the wealthy, but did not compete for the lower end market.
In the 1980's the Swiss watchmakers began to realize they needed to change their business model to fit in to the new global market place. They needed to not only change their views of the market but the infrastructure of watch manufacturing. In order to compete on a global level they needed to improve their technology, design products that would appeal to new markets and be able to compete with other companies both in quality and cost.
The development of Swatch ® allowed one company, the Swiss Corporation for Microelectronics and Watchmaking Industries (SMN), to do just that. SMN developed a product that was appealing to a younger target market. Their new design, distribution and production strategies created a niche market that became popular worldwide. The company developed an advertising campaign that was new to the watch industry and was strongly directed at a younger audience. .
BACKGROUND.
For years the Swiss watch industry had a competitive advantage on the watch market, in fact they had little or no competition and often had waiting lists for their watches. In fact, in the 1950's the Swiss held an estimated eighty percent of the free-market share (Keegan, p 219). Their product was of high quality and held great appeal to their target market. Despite their success they only had a small corner of the potential market as the majority of the world's population could not afford a Swiss watch.