“…the clock, likeother machines, isbrutal and callouslyefficient in its task. Ittakes raw material,in this case time, andprocesses and refinesit into somethingmore useful to humanbeings. It breaks timedown into abstractconcepts called hours,minutes and seconds,and then doles themout to us, always atthe same maddeningpace.”1
349Thunderbird International Business Review, Vol. 42(3) 349–372 • May–June 2000Published 2000 John Wiley & Sons, Inc.
1 From “Tyrant of Time, Master of Minutes” by JayBookman, Atlanta Journal and Constitution, Jan.3, 1995.
t’s hard to imagine functioningin today’s world without awatch. The modern businessperson may depend on the time-piece in order to catch a train,remember an important meet-ing, or download information.Watches serve as status symbolsand fashion accessories. Theykeep near-perfect time in wildlyerratic climates from Siberia toSudan, from thousands of milesin the air to hundreds of feetbelow the surface of the ocean—even on trips to the moon.Prices range from affordable tooutrageous, making timepiecesavailable, if not essential, toalmost everyone in the world.
But while the watch’s main func-tion—telling time—has notchanged over the past 500 years,the worldwide watch industryhas. The center has shiftedamong three different conti-nents, and while Switzerland,Japan, Hong Kong, and theUnited States are the industryleaders today, there is no guaran-tee that any of them will remainon top tomorrow.
This case describes the evolutionof the worldwide watch industryfrom its inception in the earlysixteenth century to the mid-1990s.
THE EARLY EUROPEANINDUSTRY
The world’s oldest knownwatches were made around1500 in Germany. They consist-ed of plated movements mount-ed in egg-shaped cases. Earlywatches made in Nuremberg,the German city widely regard-ed as one of the first centers ofwatchmaking, contained a sin-gle stubby steel arm that spunaround a 12-hour dial. Knobsat each hour allowed the watch-wearer to feel the hour in thedark. The watches never ran formore than 15 to 16 hours at atime, and had to be woundtwice a day.2
The first watches were spring-powered mechanical models,sharing smaller versions of thesame components found inclocks. Though the face was sim-ple, many were enclosed in elabo-rate casings that were painted andsometimes engraved. When thewatch was wound, the motionwas transferred through a series ofgears. These gears, in turn,moved the hands of the watch.Decorative, and often very expen-sive, the watch was kept in thepocket and treated like a finepiece of jewelry—even passeddown as a family heirloom.
“The watch was farfrom accurate, but itwas pretty, so it wasworn more as jewel-ry than for time-keeping,”
wrote one watch expert, afterstudying the early timepieces.3
Though the watch was inventedin Germany, the craft skillsquickly spread into the neigh-boring countries of France andSwitzerland. By the late 1500s,the French were leading theEuropean watchmakers in designand innovation. Over the nextcentury, however, many Frenchand German (Protestant)Huguenots, fleeing religious per-secution, moved to England orSwitzerland, taking their watch-making expertise with them.
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2 Jaquet, Eugene, Technique and History of the SwissWatch: From its Beginnings to the Present Day, OttoWalter Ltd. (Olten, Switzerland, 1953), p. 21.
3 Bruton, Eric, The History of Clocks and Watches,Crescent Books (New York, 1979), pp. 109–110.
Geneva proved especially appeal-ing to the religious refugees asthe Swiss Protestants hadstormed its cathedral and drivenout Catholic religious authoritiesin August of 1535. After theProtestant Revolt, Jean Calvin(founder of the Presbyteriancreed) took charge. In 1541, heintroduced the Sumptuary Laws,moral legislation designed to putan end to the hedonistic lifestylethen enjoyed by the Swiss livingin Geneva. The laws forbade cit-izens from dancing or wearingjewelry and extravagant clothing.In 1566, Calvin went a step fur-ther and prohibited the fabrica-tion of most jewelry.4
Many of the foreign watchmak-ers who had sought refuge inGeneva soon teamed up withSwiss jewelers, whose livelihoodfaced extinction as a result of therigid legislation. Workingtogether, they produced highlyornate, yet functional, watchesthat were among the few accept-able accessories under Calvin’sstrict edicts.
Swiss watches initially kept timethrough an oscillating bar, withknobs at each end, called thedumbbell balance. In 1675, thespiral hairspring was inventedwhich tremendously improvedthe accuracy of the watch when itwas applied to the balance.5
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By this time, there were so manywatchmakers in Geneva that theyformed their own guild andbegan adopting statutes settingstandards and regulating theactivities of local watchmakers.In 1701, new decrees forbadeforeigners from working in thetrade.
In addition, only Swiss citizensand residents of Geneva couldbecome master watchmakers inthat city. Applicants wererequired to submit an alarmwatch (traditional jeweled-leverwatches were considered tooornamental) to a jury of guildmasters. If the watch wasapproved, its maker would beawarded the prestigious title. In1746, there were 550 master-watchmakers in Geneva. By1760, the number had grown tomore than 800 and as many as6,000 Geneva citizens wereinvolved in some branch of theindustry.6
Despite efforts by the Genevagovernment and the local guildto restrict the manufacturing ofwatches to that city, the industrysoon spread into nearby villagesand then into other regions allacross the country, including theJura Mountains in northwestSwitzerland. The Jura farmingfamilies quickly picked up thewatchmaking craft from theirnew neighbors and began mak-
6 Jacquet, E., op. cit., pp. 37–38.
4 Encyclopedia Britannica, 1983, Volume 4, p. 747. 5 Bruton, E., op. cit., p. 118.
ing watches to supplement theirincome from farming.
As they relied increasingly ontheir new craft, Jura farm familiesbanded together to form com-munity schools aimed at trainingyoung apprentices in variousaspects of the watchmakingprocess. Specialized workshopsquickly developed in differentlocales for various stages of themanufacturing process. Often,separate families specialized inparticular parts of the process.Many sold individual movementsto watchmakers in Geneva, whothen assembled the watches. TheJura watchmakers were alsoquick to take advantage of thenew tools and techniques beingdeveloped in England, as well asto design their own.7
No large factories existed inGeneva in the 18th century inwhich a complete watch could beproduced from start to finish.Most Genevan watchmakersrelied on the watchmakers fromnearby districts or the family-runworkshops in the Jura Mountainvillages for the watch compo-nents. As a result, by the end ofthat century more than 30 differ-ent categories of workers wereemployed in the Swiss watch-making industry. The division oflabor resulted in the productionof watches that varied in qualityas well as design.8
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Though Swiss watches sold well,9
the English were widely consid-ered the top watchmakers inEurope and led the world inwatch production until 1840.Zedler observed in the UniversalLexicon of 1746: “The Englishwatches are considered best ofall…. The Geneva watches arethought little of, because theyare to be had so cheaply; they aremade in such quantities that onebuys them in lots.”10
Based near industrial areas inLondon, Liverpool, andCoventry, the watchmakingindustry in England developedunder a unique system of labordivision. Watchmakers assem-bled parts made by specialists—each responsible for only onewatch component. Despite thetedious nature of the produc-tion process, English watch-makers continued the methodfor centuries, giving othercountries the chance to catchup and eventually surpass themin watch production.
The Swiss established their firstfull-fledged, mechanized watchfactory in 1839, and the processquickly allowed Swiss watchmak-ers to overtake their Englishcounterparts. By mid-century,Swiss exports were estimated at
9 By the early 1800s, Swiss watch exports numberedabout 50,000 units annually. Bruton, E., op.cit., p.124. 10 Bruton, E. cp. cit., p. 123.
7 Ibid., p. 87. 8 Jacquet, E., op. cit., p. 87.
about half a million watches ayear. Meanwhile, English watch-makers were producing about150,000 watches annually andemploying 10,470.11
Ironically, many of the high-pre-cision machine tools the Swissused to cut and form the tinyparts they designed were actuallybuilt in England. The Englishwatchmakers, worried that thenew tools would threaten theirlivelihood, persuaded Parliamentto pass a law barring their use inEngland’s watch industry. Inaddition, they insisted on theinclusion of some particular partsin their manufacturing processthat made the English watchesslightly more accurate but drovethe price up as well, allowing theSwiss and other competitors toundersell them.
A turning point in the Swisswatchmakers’ productionprocess—and reputation—camewith a little help from a newcompetitor: the United States.After Swiss watchmaker EdouardFavre-Perret returned homefrom the 1876 PhiladelphiaExhibition, with both a reporton the Exhibition and anAmerican watch which hedeclared performed better thancomparable Swiss timepieces, hegave a series of lectures advocat-ing adoption of the Americanfactory method of production.The Swiss were quick to heed his
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call, and even began developingtheir own sophisticated machinetools.12
By the 1920s, watchmaking hadbecome one of the most impor-tant and lucrative Swiss indus-tries. To maintain theirtechnological advantage, theSwiss watchmakers formed theSwiss Laboratory for Watch-making Research (LSRH) in1924. By the Second World War,the Swiss had introduced water-proof watches. They also led theway with such innovations asshock-resistant and automaticallywinding watches.13
In response to worldwidedepression, several of the smallerwatchmaking firms bandedtogether in 1931 under oneholding company, ASUAG.Three years later, the Swiss gov-ernment became a minorityinvestor and provided enoughcapital to allow the group to buymost of the shares of EbauchesSA and other leading watchmanufacturers. Each member ofASUAG continued to operateindependently. The same year,the government introduced afederal statute requiring thatSwiss firms obtain permits tomanufacture and export wholewatches, movements or individ-ual components. The govern-ment regulated the transfer of
12 Bruton, E., op. cit., pp. 195–196. 13 Jacquet, E., op. cit., pp. 267–268. 11 Ibid., pp. 190–191.
permits as well. In addition, for-eign firms were not allowed topurchase assets or invest in Swisswatchmaking companies.
Meanwhile, the Swiss beganstressing quality and promotingthe reputation of the “Swissmade” label. The firms soldexclusively through jewelers andcertain upscale retail outlets.Though the ad budgets were notbig, export sales were.
THE EARLY AMERICANINDUSTRY
There were more than 100watch manufacturers in theUnited States by 1870. Despitethis, a variety of watches wereimported—with the Swiss beingthe largest providers. In the late1920s, three quarters of allAmerican watch imports camefrom Switzerland, even thoughAmerican companies were pro-ducing more watches by volumethan the Swiss.14
The Swiss, after adopting theAmerican factory methods ofproduction, eventually surpassedthe United States in watch pro-duction in the mid-1930s.Cheaper labor in Switzerlandallowed Swiss watchmakers tocut costs, even as they beganmanufacturing better quality,jeweled-lever watches. In 1936,
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the United States joined theReciprocal Trade Treaty, oneresult of which was a 50% tariffcut on Swiss imports.
The tariff reduction resulted in adoubling of watches withimported movements, from anaverage of 20% of total US watchconsumption to an average of41%.15
World War II provided anotherturning point for the worldwidewatch industry. Swiss watchexports virtually ceased duringthe conflict. American watch-makers, meanwhile, turned tolucrative defense contracts andfocused their attention on manu-facturing timing devices andother war-related equipment.16
When the war ended, so did mostof the contracts. American com-panies such as U.S. Time andBulova found themselves strug-gling to secure a position in theworldwide watch industry—notto mention the domestic mar-ket—against foreign, mostlySwiss, competition. In 1937, a lit-tle over 44% by value of all watchexports from Switzerland went tothe United States. In 1946, thepercentage of exports to the UShad jumped to nearly 60%.17
14 Milham, Willis I., Time and Timekeepers,Macmillan Co. (New York, 1923), p. 429.
15 Bruton, E., op. cit., pp. 197–198. 16 “Would Ease Rules on Watch Imports: U.S. TariffCommission Urges Changes to Aid in NationalDefense,” New York Times, February 3, 1947,Business Section, p. 30.17 Morison, George, “Swiss End Control of WatchExports,” New York Times, June 23, 1947, FinancialSection, p. 27.
Swiss watchmakers were furtherinclined to focus on the US mar-ket as other countries, strugglingto recover from damages sus-tained during World War II andshort on hard currency, had clas-sified watches as unessential andhad cut down on the number ofallowable Swiss imports. Importsof Swiss watches in the UnitedStates rose dramatically—from2,500,000 in 1938 to 8,200,000a decade later.18
To curb the influx of foreign-made watches, US watch indus-try leaders lobbied thegovernment to impose a tariffon imports. Labor costs were solow in Switzerland (about 40%of U.S. wages in 1949) thatU.S. watchmakers were unableto offset the disparity, even withthe cuts in labor costs whichresulted from dramatic techno-logical advances made duringthe war. Watchmakers alsoappealed to the nation’s sense ofsecurity, claiming that their abil-ity to meet possible war emer-gency demands had beenundermined by the tariff reduc-tion of 1936.19
In late July of 1954, PresidentDwight D. Eisenhower orderedtariff increases of up to 50% onsome imported watches. Theincrease applied both to the tariff
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on nonjeweled watches and tothose watches containing notmore than 17 jewels.20
The tariff had a dramatic effect.By 1959, Swiss watch exports tothe United States fell to two-thirds of pre-war levels, or $90million a year. Now it was theSwiss watchmakers’ turn toprotest, claiming that the tariffwas a serious threat to theirlivelihood. Nonetheless, it wouldremain in place until PresidentLyndon B. Johnson removed itin January 1967.
TimexAmong the American companiesthat would benefit from the tar-iff, as well as other innovationsthat came about during WorldWar II, was the Timex WatchCompany. Originally called USTime (company officials report-edly changed the name to Timexas it sounded more Swiss), thecompany was founded in 1941by two Norwegian refugees whohad fled their country after the1940 German invasion.
The Norwegian businessmenpurchased the nearly bankruptWaterbury Clock Company inConnecticut and put into place ahighly mechanized assemblyprocess to expedite the manufac-turing of military equipment.Company officials kept the auto-mated process in place after the
18 Morison, George, “U.S. Watch Tariff Resented bySwiss,” New York Times, February 28, 1949,Business Section, p. 27. 19 “Watchmakers Term Tariff Unrealistic,” New YorkTimes, May 22, 1949, Business Section, p. 11.
20 Egan, Charles, “President Raises Duty onWatches,” New York Times, July 28, 1954, p. A1.
war, allowing the company to cutthe manufacturing costs for itsTimex brand watches.
Another advance resulting fromwartime efforts was announced inMarch 1947, when the ElginNational Watch Company intro-duced a new alloy known aselgiloy, which combined eightchemical elements. The Americancompany’s new durapower watchmainspring proved to be far moreresistant to rust than other watchmaterials, as well as more sturdyand longer-lasting. Its introduc-tion allowed pin-lever watches tobe built that would more closelycompare with jeweled-leverwatches in terms of quality anddurability.21 A company officialpredicted the alloy would cutwatch repairs in half.22
Timex and other US watchmak-ers soon replaced jeweled move-ments with similar more durable,less expensive alloys. In addition,by incorporating some of thetechnology developed for timingdevices and fuses used in WorldWar II, Timex was able to mass-produce simply designed andsturdy watches that gained a rep-utation as highly reliable time-pieces. A new men’s line of
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watches was introduced in 1950,with a women’s line introducedin the late 1950s.
Timex’s management insisted thattheir new watch designs be basedon simplicity and full interchange-ability of parts. This made it veryeasy to use mass-production tech-niques and employ relativelyunskilled labor, all while payingconstant attention to productionefficiency and quality control. Inaddition, Timex employed severalhundred toolmakers whodesigned almost all of the firm’sproduction equipment.
Nonetheless, jewelry stores andhigh-end department stores—mainstays of the Swiss watch-makers— were reluctant to carrywhat many viewed as a cheapwatch brand. Company officialswere forced to turn to drug-stores and other nontraditionaloutlets—including hardwarestores, tobacco outlets, evenauto accessory stores—to marketand distribute the low-pricedwatches. Some sold for as little as$6.95.23
Though unintentional, the non-traditional distribution systemturned out to be a boon forTimex. By the 1960s, the com-pany had cornered the US mar-ket on low- to mid-pricedwatches with a distribution net-work that included 250,000 out-
23 Jorgensen, Ed, Encyclopedia of Consumer Brands:Timex, Volume 2, p. 541 (St. James Press).
21 Pin-lever watches did not use the jewel-tippedteeth employed in jeweled-lever watches. Rather,they used metal pins. This allowed for greater sim-plification and lower cost. Until the introduction ofthe hard alloy metals, however, pin-lever watcheswere widely viewed as less accurate and less durablethan jeweled-lever watches. 22 Eckel, George, “Alloy Mainspring Developed byElgin,” New York Times, March 5, 1947, BusinessSection, p. 37.
lets and annual sales of morethan $70 million.24
Timex took advantage of a newtype of advertising as well—tele-vision. The company spread itsmessage in a series of ad cam-paigns featuring, among others,the well-known and well-respect-ed news correspondent JohnCameron Swazey, testing theTimex watch to ensure that it—as the tag line claimed— “takes alickin’ and keeps on tickin’.”25
Timex also managed to keep itscosts low by opening factoriesoverseas. By 1960, it operatedplants in Scotland, England,France, and West Germany, inaddition to its half-dozendomestic facilities. Timeximported watch movements, butnot complete watches, into theUnited States.26 The world-wideoperation proved successfulenough that Timex would con-tinue to expand its operations,and its sales, throughout theworld. By the early 1970s, itemployed 17,000 people aroundthe globe manufacturing watchesand was reputed to be theworld’s largest watch producer interms of unit volume.27
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Bulova Meanwhile, another Americancompany was creating a stir with anew electronic watch introducedin 1960. The Bulova WatchCompany unveiled the Accutronbrand, a combination of thewords “accuracy” and “electron-ic,” on simultaneous closed-cir-cuit television broadcasts to majormedia outlets in 13 cities acrossthe country.28
The watch, which was poweredby vibrations of a miniature,electronic-charged tuning fork,was actually based on a new tun-ing fork technology developedand patented by a Swiss engi-neer, Max Hetzel. Unable tofind any Swiss companies inter-ested in his idea, the electronicsengineer came to America,where the first space programwas under way and NASA offi-cials were seeking a small yethighly accurate time switch theycould leave on the moon. TheBulova Watch Company had acontract with NASA and usedHetzel’s invention to develop,not only a time switch thatwould be left on the moon dur-ing the first space landing inJuly 1969, but a wristwatch soaccurate that it was guaranteedto lose less than a minute amonth.29
24 Sawinski, Diane M. and Wendy H. Mason, eds.,Encyclopedia of Global Industries: SIC 3873, GaleResearch (Detroit, Mich., 1996), p. 494. 25 Kryhul, Angela, “A Timely Turnaround,”Marketing, September 6, 1993, p. 3. 26 Malabre, Alfred, “Watch Firms Automate Plants,Push to Boost Tariffs, Get Wage Cuts,” Wall StreetJournal, June 15, 1959. 27 Martin, Graeme and Martin Dowling, “ManagingChange, Human Resource Management andTimex,” Journal of Strategic Change, Vol. IV, 1995,pp. 78–79.
28 Williamson, George E., “Battery-Run WatchesBid for Bigger Place in the US Market,” Wall StreetJournal, October 25, 1960. 29 Bruton, E., op. cit., p. 190.
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More than half of all watchessold in the United States in 1959included foreign-made move-ments, compared to less than10% in 1930. This was a particu-larly significant item for Bulovaas it was, at the time, the largestproducer of jeweled-lever watch-es in the country. US watchmak-ers also hoped to cut down onmanufacturing costs with thenew electronic movements asthey contained fewer parts thanconventional mainspring-powerwatches.30 The Accutron provedextremely profitable for Bulova,which manufactured nearly fivemillion tuning fork watches—priced up to $395—before ceas-ing production in 1976.31
While Bulova was perhaps bestknown at the time for its Accutronbrand, it also introduced a low-end brand, the Caravelle, during1962–63. The new brandaccounted for 14% of Bulova’ssales in 1962, and 45% in 1965.32
In 1966, the company’s overallnet income of $3.9 million andsales of $123 million set a newrecord. By 1968, Caravelle wasthe best-selling jeweled-lever linein the United States.
In 1971, the company introducedthe first American-made quartz
crystal wristwatch, theAccuquartz, which retailed foralmost $400. It was smaller andlighter than its predecessor andpowered by a micro-battery. Butit was more expensive than otherquartz watches developed andmarketed by competitors based inthe Far East. Bulova’s treasurertold reporters in 1971 that he feltno pressure to switch to quartztechnology. “We can afford towait and watch.”33 At the time,Bulova was said to be the largestproducer of watches in theworld—in monetary terms.
The next year, Timex introduceda cheaper version of the quartzwatch. The price tag was lessthan $200, and the watch wasaccurate to within 16 seconds amonth.34
TECHNOLOGY RUNS AMOK
The basic technology behindquartz watches was discovered inthe 1880s by Pierre Curie, afamous French scientist. He dis-covered that quartz, when sub-jected to pressure or alternatingelectric current, bends. Quartzwatches contain a speciallydesigned battery which activates(bends) the quartz crystal inside,causing it to vibrate approximate-ly 33,000 times a second. Thesevibrations are then translated into
33 “Money Abroad is a Corporate Crisis Here,” NewYork Times, May 5, 1971, p. 37. 34 “New Bulova Watch has Quartz Crystal,” NewYork Times, December 7, 1971, p. 81.
30 Williamson, G.E., op. cit. 31 “American Power Watch Wins European Market,”New York Times, May 27, 1963, p. 41. 32 Bulova contracted with Japan’s Citizen WatchCompany to produce the movements for the newwatches, which Bulova assembled in the UnitedStates. Bulova also granted Citizen the license tomarket the line in Asia.
pulses by a computer chip, whicheventually drive the hands of thewatch. Quartz watches displaytime in either digital or analogform. The hands on an analogwatch continuously move aroundthe face of the watch, while on adigital watch time is displayed innumeric form.
Two different types of technolo-gy were originally used for thedisplays of digital watches: light-emitting diode (LED) and liq-uid-crystal display (LCD).Light-emitting diodes are light-emitting circuits that show thetime when a button is pushed.Liquid-crystal-display watchesare light-reflective and displaytime constantly. LED watcheswere large, unattractive, andcumbersome, and were unpopu-lar with the fashion-consciouspublic. Some people considereddigital watches (in general) to bea passing fad; others, somethingmore sinister. In a New YorkTimes article, one writer noted:
Some see the digitalwatch as yet anothersad and alienatingsymbol of the culture, amicroelectronic mon-ster printing out ‘iso-lated minutes’ thathave no meaningwithout a face, with-out a tick to mark thepassing of a humanlifetime.35
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Introduction of the LED The production of LEDs wasmade possible as a result of thedevelopment of new integrat-ed-circuit (IC) manufacturingtechniques. These new tech-niques allowed integrated cir-cuits to be manufactured lessexpensively. Integrated-circuitproducers, such as TexasInstruments, Litronix Inc., andHughes Aircraft (who had pio-neered LED technology),decided to diversify operationsinto watches because of theintegrated circuit componentof this product. In the early1970s, these companies creat-ed watch product divisionsalmost overnight by hiring, enmasse, whole staffs to marketwatches. Texas Instruments’digital, solid-state LED watch-es sold at retail for between$95 and $175 when first intro-duced. To distribute its watch-es, Texas Instruments enlistedthe same retailers who soldtheir calculators.
Timex was the largest Americanwatch producer, with about 50%of the US market at the timeLEDs were introduced. Inresponse to the new technologythreat, the company producedan $85 digital watch, muchmore expensive than the $20average price of a Timex watch.The high retail price of LEDwatches was significant as the$20 (and below) price range forwatches represented about 70%of the world market at the
35 Dullea, Georgia, “Digital Watches: TheTechnologically Chic Way to Tell Time,” New YorkTimes, December 31, 1975, p. 26.
time.36 By 1974, 650,000 LED watches were being soldannually, and some industryanalysts were predicting that 10million units would be sold in1976.37
By 1976, however, the averageprice of LED watches had gonedown to $20, while annual LEDwatch sales had risen to about 2million units.38 Despite their risein popularity, LED watches stillhad many flaws. One unpopularcharacteristic of LED watches wasthat a button had to be pushed toactivate the time display. Thisprocess consumed a lot of energyand LED watch batteries woreout quickly. Additionally, somepeople felt that LED watcheswere a distraction while driving.LCD displays, the main alterna-tive to LED displays, consumedpower at a much lower rate butwere impossible to read in thedark, and hard to read in brightsunlight.
Skeptical of digital watches andbelieving them to be a fad,Timex continued to rely on tra-ditional mechanical watchesand remained profitable. In1971, Timex sold 19 millionwatches in the United Statesand 11 million overseas. In1970, sales were $181 million,
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and grew to over $200 millionin 1971.39
In a July 1973 New York Timesarticle following the resignationof General Omar Bradley asChairman of Bulova, the treas-urer of the company was quot-ed as saying that Bulova wouldstick with the tuning-fork tech-nology and not adopt the newquartz technology for itswatches.40
In the first nine months of 1975,Bulova lost $21.7 million, moremoney than it had made between1971 and 1974. Part of theselosses was attributable to a $40million write-off of tuning-forkand mechanical-watch inventory.Digital watches had gained pop-ularity so quickly that the trendcaught many watchmakers bysurprise.
At Timex, Fortune magazinereported that “there was flatpanic!”41 In 1979, Timex suf-fered losses of $4.7 million. In1981, the company announced itwould reduce the percentage ofmechanical watches it producedfrom 90% to 30% within a five-year period, and would beincreasingly aggressive in thehigher-end market by expanding
39 “The Mainspring of Timex: Lehmkuhl Pins Hopeon Quartz Watches,” Man In Business Profile,Business Section, New York Times, December 5,1971, p. 7. 40 “Money Abroad is a Corporate Crisis Here,” NewYork Times, May 5, 1971, p. 37. 41 Magnet, Myron, “Timex Takes the Torture Test,”Fortune, June 27, 1983, pp. 112–120.
36 Barmash, Isadore, “Upsurge in Digital Watches,”New York Times, Business Section, July 20, 1975, p.1. 37 Rattner, Steven, “Two Digital Watch MakersPrice Models at $19.95,” New York Times, January8, 1976, p. 47. 38 Ibid.
its distribution network into jew-elry stores.42
One Bulova official, referring tohis company’s dire financial situa-tion, regretted that the company“sat on the sidelines in 1973 and1974 while the parade to digitalwatches passed [us] by.”43 Bulovawas forced to seek new investorsto aid the company.44 Bulovaexecutives finally admitted thatthough “skeptical in the begin-ning about the future of the elec-tronic watch,” they now realizedit was here to stay.45 Bulova’sdomestic sales network at thetime was composed of about20,000 retailers, mostly jewelryand department stores, whichsold its higher-end watches.
In 1978, Bulova stopped manu-facturing watches in the US andmoved all manufacturing opera-tions to Switzerland. In early1979, the Loews Corporation, acompany with businesses rangingfrom insurance to tobacco andhotels to movie theaters,brought its total holdings to30.3% of the company. In late1979, Loews bought the rest ofthe company. Bulova ceased pro-duction of watch movements,and signed an agreement with
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Ebauches S.A. of Switzerland tosupply its component needs.
Bigger and Better in Texas Texas Instruments, meanwhile,had become one of the largestwatch manufacturers in theworld. Their experience withwatches was not a pleasant one,however. In 1976, one shipmentof LED watches had a 40% returnrate because of an error made inthe manufacturing process. LEDwatches, it turned out, were veryvulnerable to battery troublebecause of their high power-con-sumption rate. Many watchretailers correctly predicted theincrease in LCD popularity,which further hastened thedemise of LED watches.
Intense price wars ensued asLED manufacturers struggled toget rid of their rapidly buildinginventory. One poll showed thatLED watches had so many tech-nical flaws that most purchasersof such watches would never buyanother one.
Watchmakers Gruen and Benrusdropped out of the business in1976 and 1977, along with themaker of Quasor and Armitronwatches and semiconductormanufacturers American Micro-systems, Litronix, and Intel.46
Intel Corporation’s watchmak-ing subsidiary took a $1.4 mil-
46 “Armin Discontinues Manufacture of Light-Emitting Diode Watches,” New York Times,Corporate Affairs Section, November 27, 1976, p. 31.
42 Birnbaum, Jefferey H., “Stunned by FallingProfits, Foreign Competition, US WatchmakersTake Different Marketing Tack,” Wall StreetJournal, September 17, 1981, p. 29. 43 Barmash, Isadore, “Bulova Tries to Make Up LostTime,” New York Times, Business Section, June 13,1976, p. 3. 44 Jewelers Circular Keystone, April, 1982, p. 176. 45 Lusinchi, Victor, “Switzerland’s Watchmakers FallBehind Time,” New York Times, January 25, 1976.
lion after-tax charge to liquidateits watchmaking and relatedoperations. In 1981, TexasInstruments exited the watchindustry.
THE ASIAN WATCHMAKINGINDUSTRY
The Japanese and the QuartzRevolutionIn 1967, the first quartz wrist-watch was introduced by theSwiss Horological ElectronicCenter, a group founded by anumber of Swiss firms that hadpooled their resources to devel-op the new oscillating quartzwatch. The watch movementrevolved around a quartz crystalwhich could be stimulated tovibrate at a very high frequencyby the introduction of electricalcurrent. The oscillations con-verted into time increments soprecise that the accuracy of thenew quartz watches was meas-ured in seconds per year.
Leading Japanese watchmakerslike Hattori-Seiko, however,eagerly embraced the new tech-nology. Three years before thequartz wristwatch was intro-duced, the Japanese companyhad already manufactured aquartz chronometer47 to time the1964 Olympic Games.48
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The Japanese company marketedthe first commercially viablequartz-powered wall clock in1968, and quartz watch a yearlater, while most Swiss watch-makers continued to produce themore cumbersome and expen-sive—but less accurate—mechanical watches. Though itincluded more than 180 separateelectronic components and 128soldered connections, Seiko’sAston quartz-powered watchwas less than half-an-inch thick.The new quartz watch was dra-matically more accurate thanmechanical watches and fueled aline of mid-priced watches thatwas snapped up by consumersaround the world.49
Though the Seiko brandbecame a household namethroughout the United Stateswith the Quartz Revolution, theHattori-Seiko Company hadalready been manufacturingclocks and other timepieces formore than 100 years. Until wellinto the mid-20th century,however, Hattori-Seiko focusedlargely on the Japanese andAsian markets.
Kintaro Hattori founded his firstbusiness in 1881 at the age of21—a watch-importing companycalled K. Hattori & Co. inTokyo’s Ginza District. In 1913,Hattori opened his first foreignbranch, in Shanghai, and began
47 A chronometer is a highly accurate instrument. Itis capable of measuring time in increments of 0.5seconds. 48 Sawinski, Diane M. and Wendy H. Mason, op.cit., p. 495.
49 “Oscillating Crystals Now Rules the World,”Financial Times, Survey Section, April 10, 1997, p. 3.
exporting timepieces to theChinese.
Though an earthquake in 1923demolished its manufacturingfacility, the company perseveredand, a year later, introduced thebrand name Seiko—Japanese for“precision.”50 The same year, theShokosha Watch ResearchLaboratory—precursor to theCitizen Watch Company—pro-duced its first pocket watch.Citizen was incorporated in1930 and emerged as Seiko’smain competitor in both Japanand the broader Asian market bythe middle of the 20th century.
Through the first half of the cen-tury, Japanese watchmakers feltlittle need to expand their opera-tions beyond the Asian market.The market supplied cheap laborand millions of potential con-sumers and was relativelyuntouched by Western watch-makers. By 1936, Japan’s totalwatch and clock production hadreached 3.54 million units annu-ally—and Seiko was marketingmore than half of them.
World War II put a temporaryhalt to production as the watch-makers’ facilities were convertedto producing military equip-ment. But it didn’t take longafter the war ended for K.Hattori to return to its pre-warposition of dominance in and
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around Japan. By 1953, it hadregained a 55% market share inJapan. By now well entrenchedin the Asian market, the compa-ny turned its attention toAmerica.51
K. Hattori & Company made aquiet entrance into the U.S. mar-ket, selling watches and clocks todepartment stores and supplyingparts to American watchmakers.By 1968, K. Hattori was produc-ing watches for five of the largestAmerican watch companies.52
The company also entered themid-range US watch marketdirectly in 1966, granting 23 dis-tributors exclusive rights to mar-ket its Seiko watches in America.The watches were priced from$30 to $50.53
To service the retailers, K.Hattori opened Seiko repair cen-ters in New York and LosAngeles where retailers—whoreceived a fee for their efforts—could send the watches. Notonly did the Seiko brand havethe industry’s lowest repair fre-quency, but when watches didneed repairs, the service centerswere often able to fix them in afew days. The prompt serviceand low repair rate, coupled withthe exposure the company got asthe 1964 Olympics official time-
50 Hoover’s Handbook of World Business 1997: SeikoCorporation, pp. 470–471 (Reference Press).
51 Ibid. 52 “Seiko Finds Now is Time to Expand,” New YorkTimes, February 26, 1968, p. 53. 53 Jorgensen, Ed., Encyclopedia of ConsumerBrands: Seiko, Vol. 2, pp. 503–504 (St. JamesPress).
keeper, gave Seiko a reputationas one of the most reliable watchbrands in the world.
In 1960, exports accounted forabout one-fifth of Hattori-Seiko’stotal sales. By 1967, exports madeup 45% of total sales and theUnited States had surpassed theAsian market as the company’smajor export market.54
Citizen entered the US watchmarket in 1960, although itdidn’t introduce its own watchesthere for another 15 years.Throughout the 1960s, thecompany distributed watchesmanufactured by Bulova inAmerica, while it continued tomarket its own models in Japanand China. By 1965, Citizen andHattori accounted for about 80%of total watch production inJapan.
In 1968, K. Hattori launched theworld’s first quartz wall clock.That was followed a year later byits introduction of the world’sfirst commercial quartz watch—the Seiko Astron. In 1972, itoffered the world’s first quartzwatch for women. The next year,K. Hattori introduced a digitalwatch with a liquid crystal display(LCD)—another first.55
During the 1970s, K. Hattoriexpanded globally, establishing
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subsidiaries in the United States,Australia, Canada, the UnitedKingdom, West Germany, Brazil,Panama, Switzerland, Sweden,and Hong Kong. Like the SeikoGroup, Citizen introduced itsown watches to a receptiveAmerican market in the mid-1970s, with a line of quartz ana-log and digital models. Thepopular watches helped Citizenpost a significant increase in itsU.S. market share by the end ofthe decade.
While the Swiss continued todominate the upper end of thewatch market, the new quartztechnology—and the digitalwatch craze that followed—sparked a surge in low-endwatches on which Japanesewatchmakers were quick to capi-talize. By 1989, the SeikoCorporation accounted forabout 15% of the 690 millionwatches produced worldwide.56
But it was not the only companyto take advantage of the newtrends and technology.
Casio Inc., a Japanese joint ven-ture formed in 1978, went head-to-head with Timex watches,offering its low-priced models inelectronic stores, sporting goodsstores, and low-end retail outletsthroughout the United States.Like the Timex brand, Casiowatches were so cheap that con-
56 Sawinski, Diane M. and Wendy H. Mason, op.cit., pp. 493–496.
54 “Seiko Finds Now is Time to Expand,” op. cit. 55 Hoover’s Handbook of World Business 1997, op.cit.
sumers were encouraged toreplace them rather than repairthem. Building on the popularityof digital watches, Casio becamea close competitor of Timex inthe low-end market.
Far East Producers Japan was not the only Asiancountry to compete with theWest. In the late 1950s, itsneighbor Hong Kong beganmaking inexpensive watch com-ponents. By the late 1960s, theywere assembling both mechani-cal movements and watches. Bythe late 1970s to early 1980s,Hong Kong became the numberone watch producer (by volume)in the world.
Much of the Hong Kong pro-duction was the result of for-eign-based producers withfactories in the city. Timex,Seiko, and Citizen all shiftedsome of their production toHong Kong in order to takeadvantage of the lower laborcost and higher productivity.The island’s manufacturers ini-tially focused on the productionof mechanical watches, but sev-eral large semiconductor manu-facturers in Hong Kong beganto produce low-cost digitalquartz watches, which could besold at equally low cost.
Hong Kong and Japan tookturns as the top watch exporterin the world into the 1990s.Japan eclipsed Switzerland as thenumber one watch producer (by
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volume) in 1979 and the twojostled for the top position until1983, when Hong Kong tookthe lead (though Japan retaineda higher sales volume in mone-tary terms).
Over the next decade, the watchindustry became one of the topfour industries in Hong Kong.In the mid-1990s, more than600 watchmakers belonged tothe Hong Kong Watch Manu-facturer’s Association, Ltd.—allregistered companies in HongKong.57 By 1992, the country’swatch manufacturers were pro-ducing about one-fifth of thewatches worldwide.58
THE SWISS REBOUND
In the late 1960s, one of everytwo watches in the world wasmade in Switzerland—almostall of them mechanical. Thecountry was then exportingabout $418 million in watchesannually. Even into the mid-1970s, more than half of thewatches produced in Switzer-land were mechanical models,powered by a mainspring thathad to be wound periodicallyby the wearer.59
57 Net-Trade Hong Kong Watch Profile, HongKong Watch Manufacturer’s Association Ltd.,1997, p. 1. 58 Sawinski, Diane M. and Wendy H. Mason, op.cit., p. 498.59 “Swiss Watch Sales Climb in Needy Nations,”New York Times, June 1, 1966, p. 61.
By the end of the 1970s, theSwiss share of the world markethad plummeted from 43 to 15%,and the number of exports hadbeen slashed in half.60 In theUnited States—then the world’slargest watch market—Swissimports had decreased 40% dur-ing the 1970s (much of itabsorbed by Japanese companieslike Seiko). Nonetheless, manySwiss watchmakers opted to stickwith more traditional mechanicalmodels rather than incorporatethe new quartz technology. Theyboosted prices to compensate forshrinking sales.
In the 1970s, the rising Swissfranc dramatically increased thecost of a Swiss watch overseas.US brands like Timex, andJapanese companies Citizen andHattori-Seiko, were offeringsimilar models at considerablylower prices. The Japanesepromptly introduced cheapermodels in the upper market, andthe Swiss saw their global marketshare further diminish. In 1974,the Swiss produced 88.8 millionwatches (exporting all but 4.4million of them). A year later,exports dropped 25% in volume,and 20% in value.61
In 1970, there were 1,620 Swisswatch companies employing
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89,000 people. In 1985, thenumber of companies hadshrunk to just 600, and the workforce had been slashed by two-thirds as well, to about 32,500employees.62
Among those luxury watchmak-ers that remained, however, salesshowed a small yet significantincrease. In 1977, for example,Rolex produced only 200,000watches. Their total sales vol-ume, however, was $90 million.Only seven watchmakers fromaround the world took in higherrevenues that year—all of themproducing at least 3 millionwatches each. In 1980, Rolexsold $280 million in watches(from just 1% of Swiss watchesby volume), accounting for 19%of the Swiss industry’s exports invalue.63
Revenues from high-end watchmanufacturers in Switzerlandwere increasingly important asthe volume of Swiss watchesdropped, especially in the early1980s when Swiss watch produc-tion hit an all-time low.
Facing extinction, short on cash,and hounded by a coalition ofcreditors, the two largest Swisswatchmaking companies, ASUAG
62 Deutsch, Claudia, “Watchmakers are Ringing theOld Back In, as a Varied Industry Revives andThrives,” New York Times, December 5, 1991, p. 1,Special Section. 63 Anderson, Susan Heller, “The Rolex: How theSwiss Sell Status,” Leisure Section, New York Times,October 19, 1980, p. 6.
60 Rosenbaum, Andrew, “Switzerland’s WatchIndustry: Changing with the Times,” Hemispheres,June 1994, p. 39. 61 “ASUAG Group and Smaller SSIH WeighMerger,” New York Times, Business Section,February 23, 1981, p. 2.
and SSIH, merged in 1983. Theybecame SMH, the SwissCorporation for Microelectronicsand Watchmaking Industries,which went on to generate rev-enues of SFr 1.5 billion (or US$1.1 billion) that year, while it lostSFr 173 million (US $124 mil-lion). By 1992, however, losseswould be recouped and revenueswould nearly double to more than$2 billion.64
Nicholas Hayek, a Lebanese-born management consultant tothe Swiss watch industry, becameCEO of the new company afterassembling a group of investors.He initially approached Timex tobe a partner in the venture, butwas rebuffed.
Those who did choose to investpaid about SFr 100 per share.Ten years later, the shares weretrading at SFr 1,500 a share.65
What precipitated the meteoricrise in SMH stock value? A sim-ple, sporty watch encased in plas-tic that retailed for less than $50,the Swatch.
The Swatch Phenomenon According to Hayek, companyofficials initially were going to sellthe concept to another watch-maker, worried that the lower-end watch might damage thereputation of Swiss watchmakers.
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But with Hayek’s prompting,SMH decided to launch theSwatch brand in the spring of1983 with retail prices starting atjust $35. The low price wasn’t allthat set the Swatch apart fromother Swiss models. Its style,shape—even its size—wereunique for its price range.
Until 1979, Seiko held the recordfor the world’s thinnest watch.But that year, ASUAG launchedthe “Delirium” project. By pro-ducing a thinner battery andbonding the watch componentsto the casing (rather than layeringthem on the back), the companycreated the Concord Delirium,measuring just .0385 inches. Itsone setback? The watch retailedfor $16,000.
The Swatch, like the Delirium,was thinner than most of the tra-ditional analog watches pro-duced in Switzerland. SMHslimmed down the Swatch inpart by cutting the watch move-ment’s components to 51 (com-pared to as many as 150 in otherwatches on the market). Theparts were inserted inside a plas-tic case which was sealed withultrasonic welding, instead ofscrews, which made it shock-resistant and water-resistant (upto 100 feet below the surface).The watches came with a one-year warranty and a three-yearreplaceable battery.66
64 Taylor, William, “Message and Muscle: AnInterview with Swatch Titan Nicolas Hayek,”Harvard Business Review, March–April 1993, p. 99.65 Ibid.
66 Pinson, Christian, “Swatch: Case Study,”INSEAD-CEDEP, 1989, p. 6.
In 1992, production costs forthe Swatch were estimated at just7 Swiss francs per unit— largelyas a result of the automated pro-duction process. That, in part,allowed Swatch production toremain in a small mountain townin Switzerland, while other Swisswatchmakers began movingmanufacturing plants abroad tocut costs.
The company marketed thetrendy synthetic watches toyoung consumers with the ideathat as they grew older theywould upgrade their watches tohigher-end SMH brands likeOmega, Blancpain, or Longines.Customers often boughtSwatches in bulk, coordinatingdifferent watch styles with theirwardrobes. Swatch offered limit-ed editions of its designs, whichhelped transform some watchlines, like those created by popart artists Keith Haring andAlfred Hofkunst, into instantcollectors’ items.67
Within a decade, the company’searnings had risen to the equiva-lent of about $307 million onsales of $1.99 billion—of whichthe Swatch accounted for a sig-nificant portion. From 1983through 1993, SMH sold morethan 100 million Swatches (atabout $40 apiece).68
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In the 1990s, however, sales ofSwatch stagnated despite effortsby the company to change itsimage and appeal to older con-sumers. Swatch did enjoy somesuccess with new models like acombination chronograph,69 awatch that retailed for less than$100 (100,000 sold in the firstfew weeks), and a watch fordivers that sold for $50, consid-erably less than the competi-tion.70 Despite the initial successof the 1990s models, however,Swatch—and parent companySMH—suffered as the demandfor Swatch continued to slip.
In 1993, the SMH bearer sharelost a third of its value followingrumors that Swatch sales hadstalled. In February 1994, com-pany officials announced flatsales for the previous year, withnet income increasing just 7%.In addition, they conceded thatthe brand’s foray into otherproduct lines had met with lessthan stellar success.71 Three yearslater, company officials finallyunveiled the much-ballyhooedSwatchmobile—the tiny electriccar designed by Swatch andmanufactured by Mercedes.Behind schedule and belea-guered by a number of big-name
69 The chronograph is an instrument capable ofmeasuring time in intervals as small as 1/5 of a sec-ond. 70 Barmash, Isadore, “Fighting the Recession bySpotting Some Fads and Inventing Others,” NewYork Times, November 17, 1991, p. 1, SpecialSection. 71 “Worries Surface as Swatch Sales Mark Time,”Financial Times, June 6, 1994, p. 24.
67 Rosenbaum, Andrew, op. cit., p. 40. 68 Helliker, Kevin, “Swiss Movement: CanWristwatch Switch Swatch Cachet to Automobile?”Wall Street Journal, March 4, 1994, p. A1.
competitors, SMH announcedthe two-seater minicar wouldonly be available in Europe, andthen only after March 1998.72
Swatch may have been the bestknown, but it was not the onlybrand produced by SMH. Infact, most of the Swiss watch-maker’s brands were well-estab-lished, upper-end brands likeBlancpain, Longines, Tissot, andRado. Its flagship luxury brandwas Omega.
Omega: Last and First Launched in 1848 by Swisswatchmaker Louis Brandt, theluxury watch was named for thelast letter of the Greek alpha-bet, often associated withaccomplishment and perfec-tion. By 1900, about 200,000pieces were produced annually,employing nearly 1,000 watch-makers.73
By the early 1970s, Omega hadevolved into one of Switzerland’smost prestigious brands, toutedas the “crown jewel” of SSIH.But during the 1970s, the com-pany began flooding the marketwith double, even triple, thenumber of Omega timepieces. Italso allowed foreign agents tocontract with outside manufac-turers to produce their ownmodels that could carry the
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Omega name. At one point,there were about 2,000 Omegamodels.74
“The company gotarrogant. It also gotgreedy,” said Hayekin a 1993 interview.“It wanted to grow toofast, and it dilutedthe Omega name byselling too manywatches at absurdlylow prices.”75
When the former SSIH compa-ny was absorbed into SMH,Omega was heading towardoblivion. Company officialstrimmed the product line to130 models and concentratedon reviving its former image as aluxury timepiece.
SMH used the new andimproved brand name to main-tain a strong hold in the higher-end market. Omega watchesretailed from a few hundred dol-lars up to $20,000 and were dis-tributed through a servicenetwork spread across 130 coun-tries. The watches were guaran-teed internationally against allmanufacturing defects and couldbe repaired at no cost at any ofthe worldwide locations.76
The success of high-end Omegawatches was reflective of a grow-ing interest in luxury timepiecesas the 20th century drew to a
74 Taylor, William, op. cit., p. 101. p. 15. 75 Ibid.76 Omega, Ltd., On-Line Company Profile, 1997,pp. 3–18.
72 Jones, Terril Yue, “Swatchmobile’s Time WillSoon be at Hand,” The Arizona Republic, April 22,1997, pp. E1–2. 73 Omega, Ltd., On-Line Company Profile, 1997,p. 1.
close. In 1996, Swiss watchmak-ers generated about $3 billionfrom the sales of high-endmechanical watches—a figurethat had held steady for severalyears.77
In the early 1990s, Switzerlandaccounted for just 6% (42.5 mil-lion) of watches producedworldwide. It garnered nearlyhalf of the value at $4.3 billion,however. “You can buy a four-dollar quartz watch that runs asaccurately as the $11,500 RolexPresident,” noted one high-endwatch retailer in 1991. “But itjust won’t supply the ego grati-fication.”78
In the mid-1990s, Patek Philippewas producing about 15,000watches a year. VacheronConstantin, the oldest upper-endcompany in the business, manu-factured about 11,000. Rolex,the best-known and one of thebest-selling names in luxurywatches, was making between600,000 and 700,000 watches ayear and selling them at retail for$2,100 to $150,000 apiece.79
Meanwhile, sales of Swiss plasticwatches, namely Swatch, contin-ued to fall—by about a quarterin both volume and value in themid-1990s.80
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TIMEX MARCHES ON
In general, analog watches con-tinued to outsell digital watchesworldwide in the 1990s.However, the best-selling watchin America—and the world,according to company officials—was the exception. The IronmanTriathlon by Timex—a digital,sports-oriented watch—retailedfor $39.95 and sold about half amillion units a year in the UnitedStates alone. It included a stan-dard time and date display, analarm, countdown timer, andstopwatch able to store elapsedtimes for up to eight laps.
The popularity of the IronmanTriathlon watch and other popu-lar models in the 1980s helpedresurrect Timex after a decade-long slide in both the UnitedStates and overseas markets. Inthe 1970s, the company wasslow to pick up on the trendtoward quartz watches; it contin-ued to produce mechanical mod-els even as cheaper digital modelsfrom Asia flooded the US mar-ket. Though it remained numberone in America, its market sharewas slipping in the 1980s.
In 1991, the company wentthrough some major changes. Itunderwent massive corporaterestructuring and then beganbuilding a base on which toestablish a stronger market posi-tion both inside and outside theUS borders. The same year, thecompany got a boost when it
77 Whitaker, Barbara, “Wrapping Their DreamsAround Their Wrists,” New York Times, March 2,1997, p. 10. 78 Deutsch, Claudia, op. cit. 79 Whitaker, Barbara, op. cit., p. 10. 80 AFX News, AFP-Extel News Ltd., August 8,1996.
acquired the rights to distributethe more fashion-conscious,higher-priced Guess and Monetwatches worldwide.
In 1993, Timex had total salesof $500 million in the US—fivetimes larger than its internation-al sales. But the company’s five-year goal was to reverse thatstatistic. Though it predicted atthe time that some growthcould occur in Canada (where italready claimed a one-thirdmarket share), the company alsofocused on expanding intolucrative markets in the FarEast—its second largest marketin 1993.81
According to industry analysts,Timex was the biggest watchmanufacturer in the UnitedStates, and third in the world, inthe mid-1990s.82
THE WORLD WATCH SCENEIN THE 1990S
Though the Connecticut-basedTimex Enterprises, Inc. was thelargest watch manufacturer inAmerica and the third largest inthe world, its home market, theUnited States, entered the 1990swith a large trade deficit inwatches. Still the biggest singlemarket on the globe, the country
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imported $1.84 billion worth ofwatches in 1991, while export-ing only $73.4 million.
While Swiss watchmakers startedproducing more quartz analogthan mechanical models in the1990s, Switzerland continued toproduce more mechanical mod-els than any other country in theworld. After suffering a steadydecline for over a decade, themechanical models enjoyed aminor resurgence in popularity inthe 1990s—particularly amongwealthy collectors.83
Overall, however, it was Japanthat dominated the world mar-ket. In 1992, the countryaccounted for 44% of all watchesproduced worldwide; HongKong, 20%; Switzerland, 17%;and the United States, a negligi-ble amount. Nonetheless, Japancollected only about one-fifth ofthe world’s total revenues forwatches that year, despite beingthe top producer. Switzerlandstill garnered the most revenuesof any watch exporter in theworld.84 The average export priceof a Swiss watch that year was$111.58 (based on a 1992exchange of 1.4062 Swiss francto the dollar). According to theFederation of the Swiss WatchIndustry, that was nearly six
81 Kryhul, Angela, “A Timely Turnaround,”Marketing, September 6, 1993, pp. 1–3.82 Sawinski, Diane M. and Wendy H. Mason, op.cit.,p. 497.
83 “Watches, Clocks, Clockwork Operated Services& Parts,” Encyclopedia of American Industries, pp.1305–1306 (Gale Research, Inc., 1994). 84 Sawinski, Diane M. and Wendy H. Mason, op.cit.,p. 497.
times the average export priceworldwide.
The Federation of the SwissWatch Industry, worried aboutboth fake Swiss watches fromAsia flooding the worldwidemarket and its own decliningwatch exports, announced in1997 that it would launch aninvestigation into reports ofArabian Gulf imports of fakebrand-name watches manufac-tured in East Asia.85 The mostoften-copied brands were Swiss,including Rolex, Omega, andTAGHeuer.86
A 1994 Citizen Watch Companyreport on the industry predictedthat Hong Kong’s role as anintermediary center for theworldwide watch industry would
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mushroom, eventually makingthe country responsible for about70% of all watches. Other Asiancountries also showed a contin-ued annual increase in watch pro-duction throughout the first halfof the 1990s, including newentrants such as China, Thailand,Malaysia, and the Philippines.87
Meanwhile, an increasing num-ber of watchmakers turned theirattention to emerging markets inAsia and Latin America afterworldwide watch sales shrankfrom double- to single-digitannual growth rates in the1990s. By the turn of the centu-ry, analysts predicted globalwatch production would reachone billion, largely due to thegrowing Asian and SouthAmerican Markets.88
85 The Reuters European Business Report, January 12,1997. 86 Ibid.
87 AFX News Service, January 27, 1995.88 Sawinski, Diane M. and Wendy H. Mason, op.cit.,pp. 497–498.