Steinway & Sons : Buying a Legend

BUYING A LEGEND

In April 1995, Steinway & Sons was bought by

Dana Messina and Kyle Kirklamd for

$100 MILLION !!

Who

are

Steinway & Sons

Leader in the market for high-quality grand pianos

Established in New York City in 1853 by Henry Engelhard Steinway

Had reputation of building best piano in the world for 140 years

What were

the types of

pianos

produced by

them

Grand Piano

Vertical Piano

FAVOURABLE CONDITIONS

In 1994, about 500 concert pianos were

manufactured worldwide with 350 Steinway

pianos bought and sold

UNFAVOURABLE

CONDITIONS

The company has changed hands several times and product

quality has been a problem.

The piano Industry saw a down turn in current years with global sales falling by 40%

Despite these

Steinway showed

productiveness in

the first 3 months

itself. The gross

profit of the two

companies

combined increased

from 31.6% to 33%

HOW CAN STEINWAY RESTORE ITS POSITION OF BEST PIANO PRODUCERS IN THE MARKET

AGAIN

1. Manufacturing

• Steinway decided to build low priced pianos of

high and consistent quality

• Assembled using skilled labour without use of

assembly line technique which resulted in less

production,less profit

2. Marketing

Steinway had Concertand Artist Program in which an artist found eligible by the company was allowed to use the

concert piano for all performances

Yamaha loaned pianos to music institues and

conservatoried to expose budding artist to their band

3. Used Piano Market

Pianos of many brands last for more than

40 years.

Certain strategies were used to enhance

the market of these used pianos

1 New Piano 10 Old Pianos

4. Competitions

The Competitors are…

• Yamaha

• Baldwin

• Kawai

• Faziloi

Largest producer of

piano in the world.

Produced limited number

of concert grand piano

with traditional craft

method.

Duplicated or used

better technology than

Steinway

By 1996,sole

remaining large

scale producer of

piano in USA

Produced wide range

of pianos ranging

from inexpensive

one to hand crafted

concert grand

Manufactured

pianos on highly

automated

assembly line

Focused on small

volume-top quality

grand pianos

Recognised as

being among the

highest quality in

the industry

UNIT SALES OF PIANO PRODUCERS IN 1994

• Yamaha – 175,000

• Baldwin – 20,000

• Kawaii – 100,000

• Fazioli – 60 grand pianos

STRENGTHS

• Brand name

• Highest Quality

• Traditional

handcraft

production

techniques

WEAKNESS

• Too much cost in

consuming

• The dealer

network is reduced

during Birmingham

• Lack of diversity

Financial Capabilities

• Owners has

changed many times

• Running in loss for

two consecutive

years (1992 & 1993)

• Seasonal downturn

in demand

1. Maintain high quality niche market

2. Should introduce new lower-priced piano to Asian

market as a flanker to compete against low-price

competitors

3. Should make good use of ‘THE CROWN JEWEL

COLLECTION’ as it represented 30% of unit sales in

1995

4. They should divide their roles into marketing and

finance section

Created by Aburvaa Ramesh, SVCE ,

during an internship By Prof. Sameer Mathur, IIM

Lucknow.www.IIMInternship.com