Electronics and the Swiss Watch Industry

By the early 1980s, the Swiss watch industry had gone from decades of

stable profits to a complete collapse.

By volume, the Swiss accounted for 40 percent of world export in 1974.

Ten years later, this figure had declined to 10 percent.

The shift to electronics altered the competitive landscape of this

industry.

In the Jura region, in Switzerland, a dense and stable production network had emerged over the years.

In the Jura region, in Switzerland, a dense and stable production network had emerged over the years.

The industry consisted of four sets of actors: movements and parts manufacturers, case

and bracelet manufacturers, subcontractors, andassemblers and integrated manufacturers.

In the Jura region, in Switzerland, a dense and stable production network had emerged over the years.

The industry consisted of four sets of actors: movements and parts manufacturers, case

and bracelet manufacturers, subcontractors, andassemblers and integrated manufacturers.

While the Swiss Watch industry federation invested in digital technology, it could never force a collection

of individual actors in the industry to adopt it.

In the Jura region, in Switzerland, a dense and stable production network had emerged over the years.

The industry consisted of four sets of actors: movements and parts manufacturers, case

and bracelet manufacturers, subcontractors, andassemblers and integrated manufacturers.

While the Swiss Watch industry federation invested in digital technology, it could never force a collection

of individual actors to adopt it.

Moreover, the Swiss were steeped in a manufacturing tradition related to specialized skills

in the workings of mechanical components.

Following rapid improvements in digital display technology and in integrated circuits, the industry’s delayed response

was punished.

Following rapid improvements in digital display technology and in integrated circuits, the industry’s delayed response

was punished.

Price reductions were stunning, in 1975 Texas Instruments launched a watch that cost only 20 USD. Four years earlier,

these products cost 2000 USD.

Following rapid improvements in digital display technology and in integrated circuits, the industry’s delayed response

was punished.

Price reductions were stunning, in 1975 Texas Instruments launched a watch that cost only 20 USD. Four years earlier,

these products cost 2000 USD.

Moreover, in the mechanical era, the Swiss controlled the technology, but with the shift to electronics it became

available to anyone, thus lowering entry barriers.

Following rapid improvements in digital display technology and in integrated circuits, the industry’s delayed response

was punished.

Price reductions were stunning, in 1975 Texas Instruments launched a watch that cost only 20 USD. Four years earlier,

these products cost 2000 USD.

Moreover, in the mechanical era, the Swiss controlled the technology, but with the shift to electronics it became

available to anyone, thus lowering entry barriers.

Those cheap watches were increasingly sold by discount retailers, while the Swiss were used to targeting jewelry

stores, who had little interest in selling cheap stuff. Existing sales channels were no longer an asset.

Facing collapse, the Swiss organized joint R&D efforts as the technological shift required an industry-wide response.

Facing collapse, the Swiss organized joint R&D efforts as the technological shift required an industry-wide response.

But being highly dispersed and wounded already, it was hard to mobilize firms to invest in something others would

also benefit from.

Facing collapse, the Swiss organized joint R&D efforts as the technological shift required an industry-wide response.

But being highly dispersed and wounded already, it was hard to mobilize firms to invest in something others would

also benefit from.The sophisticated production network which had sustained

the Swiss competitive advantage over the decades now turned into a rigidity that augmented the difficulties.

Facing collapse, the Swiss organized joint R&D efforts as the technological shift required an industry-wide response.

But being highly dispersed and wounded already, it was hard to mobilize firms to invest in something others would

also benefit from.The sophisticated production network which had sustained

the Swiss competitive advantage over the decades now turned into a rigidity that augmented the difficulties.

Many medium- and low-end Swiss manufacturers now went bankrupt while the high-end luxury watches could survive

through branding and image-building.

Facing collapse, the Swiss organized joint R&D efforts as the technological shift required an industry-wide response.

But being highly dispersed and wounded already, it was hard to mobilize firms to invest in something others would

also benefit from.The sophisticated production network which had sustained

the Swiss competitive advantage over the decades now turned into a rigidity that augmented the difficulties.

Many medium- and low-end Swiss manufacturers now went bankrupt while the high-end luxury watches could survive

through branding and image-building.

Funny how a core competence can become a core incompetence.

In the 1970s, each Japanese brand produced 6 million watches on average,

while the Swiss produced about 100 000.

Source: Glasmeier, A. (1991) Technological discontinuities and flexible

production networks: The case of Switzerland and the world watch industry,” Research Policy, vol. 20(5), pp. 469–485.

Christian Sandström, PhD, writes and speaks about

disruptive innovation and technological change.

www.christiansandstrom.org

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