case study

Time Marches On: The Worldwide Industry

M. Edgar Barrett

“…the , like t’s hard to imagine functioning other machines, is in today’s world without a brutal and callously efficient in its task. It watch. The modern business takes raw material, person may depend on the time- in this case time, and Ipiece in order to catch a train, processes and refines remember an important meet- it into something more useful to human ing, or download information. beings. It breaks time serve as status symbols down into abstract and fashion accessories. They concepts called hours, keep near-perfect time in wildly minutes and seconds, and then doles them erratic climates from Siberia to out to us, always at Sudan, from thousands of miles the same maddening in the air to hundreds of feet 1 pace.” below the surface of the ocean— even on trips to the moon. Prices range from affordable to outrageous, making timepieces 1 From “Tyrant of Time, Master of Minutes” by Jay available, if not essential, to Bookman, Atlanta Journal and Constitution, Jan. 3, 1995. almost everyone in the world.

Copyright © 1999 Thunderbird, The American Graduate School of International Management. All rights reserved. This case was prepared by M. Edgar Barrett, J. Kenneth and Jeannette Seward Chair in Global Strategy, and Research Assistants Jennifer L. Barrett and T. Hawk Sunshine for the purpose of classroom dis- cussion only, and not to indicate either effective or ineffective management.

Thunderbird International Business Review, Vol. 42(3) 349–372 • May–June 2000 Published 2000 John Wiley & Sons, Inc. 349 M. Edgar Barrett

But while the watch’s main func- The first watches were spring- tion—telling time—has not powered mechanical models, changed over the past 500 years, sharing smaller versions of the the worldwide watch industry same components found in has. The center has shifted . Though the face was sim- among three different conti- ple, many were enclosed in elabo- nents, and while Switzerland, rate casings that were painted and Japan, Hong Kong, and the sometimes engraved. When the United States are the industry watch was wound, the motion leaders today, there is no guaran- was transferred through a series of tee that any of them will remain gears. These gears, in turn, on top tomorrow. moved the hands of the watch. Decorative, and often very expen- This case describes the evolution sive, the watch was kept in the of the worldwide watch industry pocket and treated like a fine from its inception in the early piece of jewelry—even passed sixteenth century to the mid- down as a family heirloom. 1990s. “The watch was far from accurate, but it was pretty, so it was THE EARLY EUROPEAN worn more as jewel- INDUSTRY ry than for time- keeping,” The world’s oldest known watches were made around wrote one watch expert, after 3 1500 in Germany. They consist- studying the early timepieces. ed of plated movements mount- ed in egg-shaped cases. Early Though the watch was invented watches made in Nuremberg, in Germany, the craft skills the German city widely regard- quickly spread into the neigh- ed as one of the first centers of boring countries of France and watchmaking, contained a sin- Switzerland. By the late 1500s, gle stubby steel arm that spun the French were leading the around a 12-hour dial. Knobs European watchmakers in design at each hour allowed the watch- and innovation. Over the next wearer to feel the hour in the century, however, many French dark. The watches never ran for and German (Protestant) more than 15 to 16 hours at a Huguenots, fleeing religious per- time, and had to be wound secution, moved to England or twice a day.2 Switzerland, taking their watch- making expertise with them.

2 Jaquet, Eugene, Technique and History of the Swiss Watch: From its Beginnings to the Present Day, Otto 3 Bruton, Eric, The History of Clocks and Watches, Walter Ltd. (Olten, Switzerland, 1953), p. 21. Crescent Books (New York, 1979), pp. 109–110.

350 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry

Geneva proved especially appeal- By this time, there were so many ing to the religious refugees as watchmakers in Geneva that they the Swiss Protestants had formed their own guild and stormed its cathedral and driven began adopting statutes setting out Catholic religious authorities standards and regulating the in August of 1535. After the activities of local watchmakers. Protestant Revolt, Jean Calvin In 1701, new decrees forbade (founder of the Presbyterian foreigners from working in the creed) took charge. In 1541, he trade. introduced the Sumptuary Laws, moral legislation designed to put In addition, only Swiss citizens an end to the hedonistic lifestyle and residents of Geneva could then enjoyed by the Swiss living become master watchmakers in in Geneva. The laws forbade cit- that city. Applicants were izens from dancing or wearing required to submit an alarm jewelry and extravagant clothing. watch (traditional jeweled-lever In 1566, Calvin went a step fur- watches were considered too ther and prohibited the fabrica- ornamental) to a jury of guild tion of most jewelry.4 masters. If the watch was approved, its maker would be Many of the foreign watchmak- awarded the prestigious title. In ers who had sought refuge in 1746, there were 550 master- Geneva soon teamed up with watchmakers in Geneva. By Swiss jewelers, whose livelihood 1760, the number had grown to faced extinction as a result of the more than 800 and as many as rigid legislation. Working 6,000 Geneva citizens were together, they produced highly involved in some branch of the ornate, yet functional, watches industry.6 that were among the few accept- able accessories under Calvin’s Despite efforts by the Geneva strict edicts. government and the local guild to restrict the manufacturing of Swiss watches initially kept time watches to that city, the industry through an oscillating bar, with soon spread into nearby villages knobs at each end, called the and then into other regions all dumbbell balance. In 1675, the across the country, including the spiral hairspring was invented Jura Mountains in northwest which tremendously improved Switzerland. The Jura farming the accuracy of the watch when it families quickly picked up the was applied to the balance.5 watchmaking craft from their new neighbors and began mak-

4 Encyclopedia Britannica, 1983, Volume 4, p. 747. 5 Bruton, E., op. cit., p. 118. 6 Jacquet, E., op. cit., pp. 37–38.

Thunderbird International Business Review • May–June 2000 351 M. Edgar Barrett

ing watches to supplement their SWISS DOMINATION income from farming. Though Swiss watches sold well,9 As they relied increasingly on the English were widely consid- their new craft, Jura farm families ered the top watchmakers in banded together to form com- Europe and led the world in munity schools aimed at training watch production until 1840. young apprentices in various Zedler observed in the Universal aspects of the watchmaking Lexicon of 1746: “The English process. Specialized workshops watches are considered best of quickly developed in different all…. The Geneva watches are locales for various stages of the thought little of, because they manufacturing process. Often, are to be had so cheaply; they are separate families specialized in made in such quantities that one particular parts of the process. buys them in lots.”10 Many sold individual movements to watchmakers in Geneva, who Based near industrial areas in then assembled the watches. The London, Liverpool, and Jura watchmakers were also Coventry, the watchmaking quick to take advantage of the industry in England developed new tools and techniques being under a unique system of labor developed in England, as well as division. Watchmakers assem- 7 to design their own. bled parts made by specialists— each responsible for only one No large factories existed in watch component. Despite the Geneva in the 18th century in tedious nature of the produc- which a complete watch could be tion process, English watch- produced from start to finish. makers continued the method Most Genevan watchmakers for centuries, giving other relied on the watchmakers from countries the chance to catch nearby districts or the family-run up and eventually surpass them workshops in the Jura Mountain in watch production. villages for the watch compo- nents. As a result, by the end of The Swiss established their first that century more than 30 differ- full-fledged, mechanized watch ent categories of workers were factory in 1839, and the process employed in the Swiss watch- quickly allowed Swiss watchmak- making industry. The division of ers to overtake their English labor resulted in the production counterparts. By mid-century, of watches that varied in quality Swiss exports were estimated at as well as design.8

9 By the early 1800s, Swiss watch exports numbered about 50,000 units annually. Bruton, E., op.cit., p. 7 Ibid., p. 87. 124. 8 Jacquet, E., op. cit., p. 87. 10 Bruton, E. cp. cit., p. 123.

352 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry about half a million watches a call, and even began developing year. Meanwhile, English watch- their own sophisticated machine makers were producing about tools.12 150,000 watches annually and employing 10,470.11 By the 1920s, watchmaking had become one of the most impor- Ironically, many of the high-pre- tant and lucrative Swiss indus- cision machine tools the Swiss tries. To maintain their used to cut and form the tiny technological advantage, the parts they designed were actually Swiss watchmakers formed the built in England. The English Swiss Laboratory for Watch- watchmakers, worried that the making Research (LSRH) in new tools would threaten their 1924. By the Second World War, livelihood, persuaded Parliament the Swiss had introduced water- to pass a law barring their use in proof watches. They also led the England’s watch industry. In way with such innovations as addition, they insisted on the shock-resistant and automatically inclusion of some particular parts winding watches.13 in their manufacturing process that made the English watches In response to worldwide slightly more accurate but drove depression, several of the smaller the price up as well, allowing the watchmaking firms banded Swiss and other competitors to together in 1931 under one undersell them. holding company, ASUAG. Three years later, the Swiss gov- A turning point in the Swiss ernment became a minority watchmakers’ production investor and provided enough process—and reputation—came capital to allow the group to buy with a little help from a new most of the shares of Ebauches competitor: the United States. SA and other leading watch After Swiss watchmaker Edouard manufacturers. Each member of Favre-Perret returned home ASUAG continued to operate from the 1876 Philadelphia independently. The same year, Exhibition, with both a report the government introduced a on the Exhibition and an federal statute requiring that American watch which he Swiss firms obtain permits to declared performed better than manufacture and export whole comparable Swiss timepieces, he watches, movements or individ- gave a series of lectures advocat- ual components. The govern- ing adoption of the American ment regulated the transfer of factory method of production. The Swiss were quick to heed his

12 Bruton, E., op. cit., pp. 195–196. 11 Ibid., pp. 190–191. 13 Jacquet, E., op. cit., pp. 267–268.

Thunderbird International Business Review • May–June 2000 353 M. Edgar Barrett

permits as well. In addition, for- the United States joined the eign firms were not allowed to Reciprocal Trade Treaty, one purchase assets or invest in Swiss result of which was a 50% tariff watchmaking companies. cut on Swiss imports.

Meanwhile, the Swiss began The tariff reduction resulted in a stressing quality and promoting doubling of watches with the reputation of the “Swiss imported movements, from an made” label. The firms sold average of 20% of total US watch exclusively through jewelers and consumption to an average of certain upscale retail outlets. 41%.15 Though the ad budgets were not big, export sales were. World War II provided another turning point for the worldwide watch industry. Swiss watch THE EARLY AMERICAN exports virtually ceased during INDUSTRY the conflict. American watch- makers, meanwhile, turned to There were more than 100 lucrative defense contracts and watch manufacturers in the focused their attention on manu- United States by 1870. Despite facturing timing devices and this, a variety of watches were other war-related equipment.16 imported—with the Swiss being the largest providers. In the late When the war ended, so did most 1920s, three quarters of all of the contracts. American com- American watch imports came panies such as U.S. Time and from Switzerland, even though Bulova found themselves strug- American companies were pro- gling to secure a position in the ducing more watches by volume worldwide watch industry—not than the Swiss.14 to mention the domestic mar- ket—against foreign, mostly The Swiss, after adopting the Swiss, competition. In 1937, a lit- American factory methods of tle over 44% by value of all watch production, eventually surpassed exports from Switzerland went to the United States in watch pro- the United States. In 1946, the duction in the mid-1930s. percentage of exports to the US Cheaper labor in Switzerland had jumped to nearly 60%.17 allowed Swiss watchmakers to cut costs, even as they began manufacturing better quality, 15 Bruton, E., op. cit., pp. 197–198. 16 “Would Ease Rules on Watch Imports: U.S. Tariff jeweled-lever watches. In 1936, Commission Urges Changes to Aid in National Defense,” New York Times, February 3, 1947, Business Section, p. 30. 17 Morison, George, “Swiss End Control of Watch 14 Milham, Willis I., Time and Timekeepers, Exports,” New York Times, June 23, 1947, Financial Macmillan Co. (New York, 1923), p. 429. Section, p. 27.

354 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry

Swiss watchmakers were further on nonjeweled watches and to inclined to focus on the US mar- those watches containing not ket as other countries, struggling more than 17 jewels.20 to recover from damages sus- tained during World War II and The tariff had a dramatic effect. short on hard currency, had clas- By 1959, Swiss watch exports to sified watches as unessential and the United States fell to two- had cut down on the number of thirds of pre-war levels, or $90 allowable Swiss imports. Imports million a year. Now it was the of Swiss watches in the United Swiss watchmakers’ turn to States rose dramatically—from protest, claiming that the tariff 2,500,000 in 1938 to 8,200,000 was a serious threat to their a decade later.18 livelihood. Nonetheless, it would remain in place until President To curb the influx of foreign- Lyndon B. Johnson removed it made watches, US watch indus- in January 1967. try leaders lobbied the government to impose a tariff Timex on imports. Labor costs were so Among the American companies low in Switzerland (about 40% that would benefit from the tar- of U.S. wages in 1949) that iff, as well as other innovations U.S. watchmakers were unable that came about during World to offset the disparity, even with War II, was the Timex Watch the cuts in labor costs which Company. Originally called US resulted from dramatic techno- Time (company officials report- logical advances made during edly changed the name to Timex the war. Watchmakers also as it sounded more Swiss), the appealed to the nation’s sense of company was founded in 1941 security, claiming that their abil- by two Norwegian refugees who ity to meet possible war emer- had fled their country after the gency demands had been 1940 German invasion. undermined by the tariff reduc- tion of 1936.19 The Norwegian businessmen purchased the nearly bankrupt In late July of 1954, President Waterbury Clock Company in Dwight D. Eisenhower ordered Connecticut and put into place a tariff increases of up to 50% on highly mechanized assembly some imported watches. The process to expedite the manufac- increase applied both to the tariff turing of military equipment. Company officials kept the auto- mated process in place after the 18 Morison, George, “U.S. Watch Tariff Resented by Swiss,” New York Times, February 28, 1949, Business Section, p. 27. 19 “Watchmakers Term Tariff Unrealistic,” New York 20 Egan, Charles, “President Raises Duty on Times, May 22, 1949, Business Section, p. 11. Watches,” New York Times, July 28, 1954, p. A1.

Thunderbird International Business Review • May–June 2000 355 M. Edgar Barrett

war, allowing the company to cut watches was introduced in 1950, the manufacturing costs for its with a women’s line introduced Timex brand watches. in the late 1950s.

Another advance resulting from Timex’s management insisted that wartime efforts was announced in their new watch designs be based March 1947, when the Elgin on simplicity and full interchange- National Watch Company intro- ability of parts. This made it very duced a new alloy known as easy to use mass-production tech- elgiloy, which combined eight niques and employ relatively chemical elements. The American unskilled labor, all while paying company’s new durapower watch constant attention to production mainspring proved to be far more efficiency and quality control. In resistant to rust than other watch addition, Timex employed several materials, as well as more sturdy hundred toolmakers who and longer-lasting. Its introduc- designed almost all of the firm’s tion allowed pin-lever watches to production equipment. be built that would more closely compare with jeweled-lever Nonetheless, jewelry stores and watches in terms of quality and high-end department stores— durability.21 A company official mainstays of the Swiss watch- predicted the alloy would cut makers— were reluctant to carry watch repairs in half.22 what many viewed as a cheap watch brand. Company officials Timex and other US watchmak- were forced to turn to drug- ers soon replaced jeweled move- stores and other nontraditional ments with similar more durable, outlets—including hardware less expensive alloys. In addition, stores, tobacco outlets, even by incorporating some of the auto accessory stores—to market technology developed for timing and distribute the low-priced devices and fuses used in World watches. Some sold for as little as War II, Timex was able to mass- $6.95.23 produce simply designed and sturdy watches that gained a rep- Though unintentional, the non- utation as highly reliable time- traditional distribution system pieces. A new men’s line of turned out to be a boon for Timex. By the 1960s, the com- pany had cornered the US mar- 21 Pin-lever watches did not use the jewel-tipped ket on low- to mid-priced teeth employed in jeweled-lever watches. Rather, they used metal pins. This allowed for greater sim- watches with a distribution net- plification and lower cost. Until the introduction of the hard alloy metals, however, pin-lever watches work that included 250,000 out- were widely viewed as less accurate and less durable than jeweled-lever watches. 22 Eckel, George, “Alloy Mainspring Developed by Elgin,” New York Times, March 5, 1947, Business 23 Jorgensen, Ed, Encyclopedia of Consumer Brands: Section, p. 37. Timex, Volume 2, p. 541 (St. James Press).

356 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry lets and annual sales of more Bulova than $70 million.24 Meanwhile, another American company was creating a stir with a Timex took advantage of a new new electronic watch introduced type of advertising as well—tele- in 1960. The Bulova Watch vision. The company spread its Company unveiled the Accutron message in a series of ad cam- brand, a combination of the paigns featuring, among others, words “accuracy” and “electron- the well-known and well-respect- ic,” on simultaneous closed-cir- ed news correspondent John cuit broadcasts to major Cameron Swazey, testing the media outlets in 13 cities across Timex watch to ensure that it— the country.28 as the tag line claimed— “takes a lickin’ and keeps on tickin’.”25 The watch, which was powered by vibrations of a miniature, Timex also managed to keep its electronic-charged , costs low by opening factories was actually based on a new tun- overseas. By 1960, it operated ing fork technology developed plants in Scotland, England, and patented by a Swiss engi- France, and West Germany, in neer, Max Hetzel. Unable to addition to its half-dozen find any Swiss companies inter- domestic facilities. Timex ested in his idea, the electronics imported watch movements, but engineer came to America, not complete watches, into the where the first space program United States.26 The world-wide was under way and NASA offi- operation proved successful cials were seeking a small yet enough that Timex would con- highly accurate time switch they tinue to expand its operations, could leave on the moon. The and its sales, throughout the Bulova Watch Company had a world. By the early 1970s, it contract with NASA and used employed 17,000 people around Hetzel’s invention to develop, the globe manufacturing watches not only a time switch that and was reputed to be the would be left on the moon dur- world’s largest watch producer in ing the first space landing in terms of unit volume.27 July 1969, but a wristwatch so accurate that it was guaranteed to lose less than a minute a 24 Sawinski, Diane M. and Wendy H. Mason, eds., Encyclopedia of Global Industries: SIC 3873, Gale month.29 Research (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 Street Journal, June 15, 1959. 28 27 Martin, Graeme and Martin Dowling, “Managing Williamson, George E., “Battery-Run Watches Change, Human Resource Management and Bid for Bigger Place in the US Market,” Wall Street Timex,” Journal of Strategic Change, Vol. IV, 1995, Journal, October 25, 1960. pp. 78–79. 29 Bruton, E., op. cit., p. 190.

Thunderbird International Business Review • May–June 2000 357 M. Edgar Barrett

More than half of all watches crystal wristwatch, the sold in the United States in 1959 Accuquartz, which retailed for included foreign-made move- almost $400. It was smaller and ments, compared to less than lighter than its predecessor and 10% in 1930. This was a particu- powered by a micro-battery. But larly significant item for Bulova it was more expensive than other as it was, at the time, the largest quartz watches developed and producer of jeweled-lever watch- marketed by competitors based in es in the country. US watchmak- the Far East. Bulova’s treasurer ers also hoped to cut down on told reporters in 1971 that he felt manufacturing costs with the no pressure to switch to quartz new electronic movements as technology. “We can afford to they contained fewer parts than wait and watch.”33 At the time, conventional mainspring-power Bulova was said to be the largest watches.30 The Accutron proved producer of watches in the extremely profitable for Bulova, world—in monetary terms. which manufactured nearly five million tuning fork watches— The next year, Timex introduced priced up to $395—before ceas- a cheaper version of the quartz ing production in 1976.31 watch. The price tag was less than $200, and the watch was While Bulova was perhaps best accurate to within 16 seconds a known at the time for its Accutron month.34 brand, it also introduced a low- end brand, the Caravelle, during 1962–63. The new brand TECHNOLOGY RUNS AMOK accounted for 14% of Bulova’s sales in 1962, and 45% in 1965.32 The basic technology behind In 1966, the company’s overall quartz watches was discovered in net income of $3.9 million and the 1880s by Pierre Curie, a sales of $123 million set a new famous French scientist. He dis- record. By 1968, Caravelle was covered that quartz, when sub- the best-selling jeweled-lever line jected to pressure or alternating in the United States. electric current, bends. Quartz watches contain a specially In 1971, the company introduced designed battery which activates the first American-made quartz (bends) the quartz crystal inside, causing it to vibrate approximate- ly 33,000 times a second. These 30 Williamson, G.E., op. cit. vibrations are then translated into 31 “American Power Watch Wins European Market,” New York Times, May 27, 1963, p. 41. 32 Bulova contracted with Japan’s Citizen Watch 33 Company to produce the movements for the new “Money Abroad is a Corporate Crisis Here,” New watches, which Bulova assembled in the United York Times, May 5, 1971, p. 37. States. Bulova also granted Citizen the license to 34 “New Bulova Watch has Quartz Crystal,” New market the line in Asia. York Times, December 7, 1971, p. 81.

358 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry pulses by a computer chip, which Introduction of the LED eventually drive the hands of the The production of LEDs was watch. Quartz watches display made possible as a result of the time in either digital or analog development of new integrat- form. The hands on an analog ed-circuit (IC) manufacturing watch continuously move around techniques. These new tech- the face of the watch, while on a niques allowed integrated cir- digital watch time is displayed in cuits to be manufactured less numeric form. expensively. Integrated-circuit producers, such as Texas Two different types of technolo- Instruments, Litronix Inc., and gy were originally used for the Hughes Aircraft (who had pio- displays of digital watches: light- neered LED technology), emitting diode (LED) and liq- decided to diversify operations uid-crystal display (LCD). into watches because of the Light-emitting diodes are light- integrated circuit component emitting circuits that show the of this product. In the early time when a button is pushed. 1970s, these companies creat- Liquid-crystal-display watches ed watch product divisions are light-reflective and display almost overnight by hiring, en time constantly. LED watches masse, whole staffs to market were large, unattractive, and watches. Texas Instruments’ cumbersome, and were unpopu- digital, solid-state LED watch- lar with the fashion-conscious es sold at retail for between public. Some people considered $95 and $175 when first intro- digital watches (in general) to be duced. To distribute its watch- a passing fad; others, something es, Texas Instruments enlisted more sinister. In a New York the same retailers who sold Times article, one writer noted: their calculators.

Some see the digital Timex was the largest American watch as yet another sad and alienating watch producer, with about 50% symbol of the culture, a of the US market at the time microelectronic mon- LEDs were introduced. In ster printing out ‘iso- response to the new technology lated minutes’ that have no meaning threat, the company produced without a face, with- an $85 digital watch, much out a tick to mark the more expensive than the $20 passing of a human average price of a Timex watch. lifetime.35 The high retail price of LED watches was significant as the $20 (and below) price range for 35 Dullea, Georgia, “Digital Watches: The watches represented about 70% Technologically Chic Way to Tell Time,” New York Times, December 31, 1975, p. 26. of the world market at the

Thunderbird International Business Review • May–June 2000 359 M. Edgar Barrett

time.36 By 1974, 650,000 and grew to over $200 million LED watches were being sold in 1971.39 annually, and some industry analysts were predicting that 10 In a July 1973 New York Times million units would be sold in article following the resignation 1976.37 of General Omar Bradley as Chairman of Bulova, the treas- By 1976, however, the average urer of the company was quot- price of LED watches had gone ed as saying that Bulova would down to $20, while annual LED stick with the tuning-fork tech- watch sales had risen to about 2 nology and not adopt the new million units.38 Despite their rise quartz technology for its in popularity, LED watches still watches.40 had many flaws. One unpopular characteristic of LED watches was In the first nine months of 1975, that a button had to be pushed to Bulova lost $21.7 million, more activate the time display. This money than it had made between process consumed a lot of energy 1971 and 1974. Part of these and LED watch batteries wore losses was attributable to a $40 out quickly. Additionally, some million write-off of tuning-fork people felt that LED watches and mechanical-watch inventory. were a distraction while driving. Digital watches had gained pop- LCD displays, the main alterna- ularity so quickly that the trend tive to LED displays, consumed caught many watchmakers by power at a much lower rate but surprise. were impossible to read in the dark, and hard to read in bright At Timex, Fortune magazine sunlight. reported that “there was flat panic!”41 In 1979, Timex suf- Skeptical of digital watches and fered losses of $4.7 million. In believing them to be a fad, 1981, the company announced it Timex continued to rely on tra- would reduce the percentage of ditional mechanical watches mechanical watches it produced and remained profitable. In from 90% to 30% within a five- 1971, Timex sold 19 million year period, and would be watches in the United States increasingly aggressive in the and 11 million overseas. In higher-end market by expanding 1970, sales were $181 million,

39 “The Mainspring of Timex: Lehmkuhl Pins Hope 36 Barmash, Isadore, “Upsurge in Digital Watches,” on Quartz Watches,” Man In Business Profile, New York Times, Business Section, July 20, 1975, p. Business Section, New York Times, December 5, 1. 1971, p. 7. 37 Rattner, Steven, “Two Digital Watch Makers 40 “Money Abroad is a Corporate Crisis Here,” New Price Models at $19.95,” New York Times, January York Times, May 5, 1971, p. 37. 8, 1976, p. 47. 41 Magnet, Myron, “Timex Takes the Torture Test,” 38 Ibid. Fortune, June 27, 1983, pp. 112–120.

360 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry its distribution network into jew- Ebauches S.A. of Switzerland to elry stores.42 supply its component needs.

One Bulova official, referring to Bigger and Better in Texas his company’s dire financial situa- Texas Instruments, meanwhile, tion, regretted that the company had become one of the largest “sat on the sidelines in 1973 and watch manufacturers in the 1974 while the parade to digital world. Their experience with watches passed [us] by.”43 Bulova watches was not a pleasant one, was forced to seek new investors however. In 1976, one shipment to aid the company.44 Bulova of LED watches had a 40% return executives finally admitted that rate because of an error made in though “skeptical in the begin- the manufacturing process. LED ning about the future of the elec- watches, it turned out, were very tronic watch,” they now realized vulnerable to battery trouble it was here to stay.45 Bulova’s because of their high power-con- domestic sales network at the sumption rate. Many watch time was composed of about retailers correctly predicted the 20,000 retailers, mostly jewelry increase in LCD popularity, and department stores, which which further hastened the sold its higher-end watches. demise of LED watches.

In 1978, Bulova stopped manu- Intense price wars ensued as facturing watches in the US and LED manufacturers struggled to moved all manufacturing opera- get rid of their rapidly building tions to Switzerland. In early inventory. One poll showed that 1979, the Loews Corporation, a LED watches had so many tech- company with businesses ranging nical flaws that most purchasers from insurance to tobacco and of such watches would never buy hotels to movie theaters, another one. brought its total holdings to 30.3% of the company. In late Watchmakers Gruen and 1979, Loews bought the rest of dropped out of the business in the company. Bulova ceased pro- 1976 and 1977, along with the duction of watch movements, maker of Quasor and Armitron and signed an agreement with watches and semiconductor manufacturers American Micro- systems, Litronix, and Intel.46 42 Birnbaum, Jefferey H., “Stunned by Falling Profits, Foreign Competition, US Watchmakers Intel Corporation’s watchmak- Take Different Marketing Tack,” Wall Street Journal, September 17, 1981, p. 29. ing subsidiary took a $1.4 mil- 43 Barmash, Isadore, “Bulova Tries to Make Up Lost Time,” New York Times, Business Section, June 13, 1976, p. 3. 44 Jewelers Circular Keystone, April, 1982, p. 176. 46 “Armin Discontinues Manufacture of Light- 45 Lusinchi, Victor, “Switzerland’s Watchmakers Fall Emitting Diode Watches,” New York Times, Behind Time,” New York Times, January 25, 1976. Corporate Affairs Section, November 27, 1976, p. 31.

Thunderbird International Business Review • May–June 2000 361 M. Edgar Barrett

lion after-tax charge to liquidate The Japanese company marketed its watchmaking and related the first commercially viable operations. In 1981, Texas quartz-powered wall clock in Instruments exited the watch 1968, and quartz watch a year industry. later, while most Swiss watch- makers continued to produce the more cumbersome and expen- THE ASIAN WATCHMAKING sive—but less accurate— INDUSTRY mechanical watches. Though it included more than 180 separate The Japanese and the Quartz electronic components and 128 Revolution soldered connections, Seiko’s In 1967, the first quartz wrist- Aston quartz-powered watch watch was introduced by the was less than half-an-inch thick. Swiss Horological Electronic The new quartz watch was dra- Center, a group founded by a matically more accurate than number of Swiss firms that had mechanical watches and fueled a pooled their resources to devel- line of mid-priced watches that op the new oscillating quartz was snapped up by consumers watch. The watch movement around the world.49 revolved around a quartz crystal which could be stimulated to Though the Seiko brand vibrate at a very high frequency became a household name by the introduction of electrical throughout the United States current. The oscillations con- with the Quartz Revolution, the verted into time increments so Hattori-Seiko Company had precise that the accuracy of the already been manufacturing new quartz watches was meas- clocks and other timepieces for ured in seconds per year. more than 100 years. Until well into the mid-20th century, Leading Japanese watchmakers however, Hattori-Seiko focused like Hattori-Seiko, however, largely on the Japanese and eagerly embraced the new tech- Asian markets. nology. Three years before the quartz wristwatch was intro- Kintaro Hattori founded his first duced, the Japanese company business in 1881 at the age of had already manufactured a 21—a watch-importing company quartz chronometer47 to time the called K. Hattori & Co. in 1964 Olympic Games.48 Tokyo’s Ginza District. In 1913, Hattori opened his first foreign branch, in Shanghai, and began 47 A chronometer is a highly accurate instrument. It is capable of measuring time in increments of 0.5 seconds. 48 Sawinski, Diane M. and Wendy H. Mason, op. 49 “Oscillating Crystals Now Rules the World,” cit., p. 495. Financial Times, Survey Section, April 10, 1997, p. 3.

362 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry exporting timepieces to the around Japan. By 1953, it had Chinese. regained a 55% market share in Japan. By now well entrenched Though an earthquake in 1923 in the Asian market, the compa- demolished its manufacturing ny turned its attention to facility, the company persevered America.51 and, a year later, introduced the brand name Seiko—Japanese for K. Hattori & Company made a “precision.”50 The same year, the quiet entrance into the U.S. mar- Shokosha Watch Research ket, selling watches and clocks to Laboratory—precursor to the department stores and supplying Citizen Watch Company—pro- parts to American watchmakers. duced its first pocket watch. By 1968, K. Hattori was produc- Citizen was incorporated in ing watches for five of the largest 1930 and emerged as Seiko’s American watch companies.52 main competitor in both Japan The company also entered the and the broader Asian market by mid-range US watch market the middle of the 20th century. directly in 1966, granting 23 dis- tributors exclusive rights to mar- Through the first half of the cen- ket its Seiko watches in America. tury, Japanese watchmakers felt The watches were priced from little need to expand their opera- $30 to $50.53 tions beyond the Asian market. The market supplied cheap labor To service the retailers, K. and millions of potential con- Hattori opened Seiko repair cen- sumers and was relatively ters in New York and Los untouched by Western watch- Angeles where retailers—who makers. By 1936, Japan’s total received a fee for their efforts— watch and clock production had could send the watches. Not reached 3.54 million units annu- only did the Seiko brand have ally—and Seiko was marketing the industry’s lowest repair fre- more than half of them. quency, but when watches did need repairs, the service centers World War II put a temporary were often able to fix them in a halt to production as the watch- few days. The prompt service makers’ facilities were converted and low repair rate, coupled with to producing military equip- the exposure the company got as ment. But it didn’t take long the 1964 Olympics official time- after the war ended for K. Hattori to return to its pre-war position of dominance in and 51 Ibid. 52 “Seiko Finds Now is Time to Expand,” New York Times, February 26, 1968, p. 53. 53 Jorgensen, Ed., Encyclopedia of Consumer 50 Hoover’s Handbook of World Business 1997: Seiko Brands: Seiko, Vol. 2, pp. 503–504 (St. James Corporation, pp. 470–471 (Reference Press). Press).

Thunderbird International Business Review • May–June 2000 363 M. Edgar Barrett

keeper, gave Seiko a reputation subsidiaries in the United States, as one of the most reliable watch Australia, Canada, the United brands in the world. Kingdom, West Germany, Brazil, Panama, Switzerland, Sweden, In 1960, exports accounted for and Hong Kong. Like the Seiko about one-fifth of Hattori-Seiko’s Group, Citizen introduced its total sales. By 1967, exports made own watches to a receptive up 45% of total sales and the American market in the mid- United States had surpassed the 1970s, with a line of quartz ana- Asian market as the company’s log and digital models. The major export market.54 popular watches helped Citizen post a significant increase in its Citizen entered the US watch U.S. market share by the end of market in 1960, although it the decade. didn’t introduce its own watches there for another 15 years. While the Swiss continued to Throughout the 1960s, the dominate the upper end of the company distributed watches watch market, the new quartz manufactured by Bulova in technology—and the digital America, while it continued to watch craze that followed— market its own models in Japan sparked a surge in low-end and China. By 1965, Citizen and watches on which Japanese Hattori accounted for about 80% watchmakers were quick to capi- of total watch production in talize. By 1989, the Seiko Japan. Corporation accounted for about 15% of the 690 million In 1968, K. Hattori launched the watches produced worldwide.56 world’s first quartz wall clock. But it was not the only company That was followed a year later by to take advantage of the new its introduction of the world’s trends and technology. first commercial quartz watch— the Seiko Astron. In 1972, it Casio Inc., a Japanese joint ven- offered the world’s first quartz ture formed in 1978, went head- watch for women. The next year, to-head with Timex watches, K. Hattori introduced a digital offering its low-priced models in watch with a liquid crystal display electronic stores, sporting goods (LCD)—another first.55 stores, and low-end retail outlets throughout the United States. During the 1970s, K. Hattori Like the Timex brand, Casio expanded globally, establishing watches were so cheap that con-

54 “Seiko Finds Now is Time to Expand,” op. cit. 55 Hoover’s Handbook of World Business 1997, op. 56 Sawinski, Diane M. and Wendy H. Mason, op. cit. cit., pp. 493–496.

364 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry sumers were encouraged to volume) in 1979 and the two replace them rather than repair jostled for the top position until them. Building on the popularity 1983, when Hong Kong took of digital watches, Casio became the lead (though Japan retained a close competitor of Timex in a higher sales volume in mone- the low-end market. tary terms).

Far East Producers Over the next decade, the watch Japan was not the only Asian industry became one of the top country to compete with the four industries in Hong Kong. West. In the late 1950s, its In the mid-1990s, more than neighbor Hong Kong began 600 watchmakers belonged to making inexpensive watch com- the Hong Kong Watch Manu- ponents. By the late 1960s, they facturer’s Association, Ltd.—all were assembling both mechani- registered companies in Hong cal movements and watches. By Kong.57 By 1992, the country’s the late 1970s to early 1980s, watch manufacturers were pro- Hong Kong became the number ducing about one-fifth of the one watch producer (by volume) watches worldwide.58 in the world.

Much of the Hong Kong pro- THE SWISS REBOUND duction was the result of for- eign-based producers with In the late 1960s, one of every factories in the city. Timex, two watches in the world was Seiko, and Citizen all shifted made in Switzerland—almost some of their production to all of them mechanical. The Hong Kong in order to take country was then exporting advantage of the lower labor about $418 million in watches cost and higher productivity. annually. Even into the mid- The island’s manufacturers ini- 1970s, more than half of the tially focused on the production watches produced in Switzer- of mechanical watches, but sev- land were mechanical models, eral large semiconductor manu- powered by a mainspring that facturers in Hong Kong began had to be wound periodically to produce low-cost digital by the wearer.59 quartz watches, which could be sold at equally low cost.

Hong Kong and Japan took 57 Net-Trade Hong Kong Watch Profile, Hong Kong Watch Manufacturer’s Association Ltd., turns as the top watch exporter 1997, p. 1. in the world into the 1990s. 58 Sawinski, Diane M. and Wendy H. Mason, op. Japan eclipsed Switzerland as the cit., p. 498. 59 “Swiss Watch Sales Climb in Needy Nations,” number one watch producer (by New York Times, June 1, 1966, p. 61.

Thunderbird International Business Review • May–June 2000 365 M. Edgar Barrett

By the end of the 1970s, the 89,000 people. In 1985, the Swiss share of the world market number of companies had had plummeted from 43 to 15%, shrunk to just 600, and the work and the number of exports had force had been slashed by two- been slashed in half.60 In the thirds as well, to about 32,500 United States—then the world’s employees.62 largest watch market—Swiss imports had decreased 40% dur- Among those luxury watchmak- ing the 1970s (much of it ers that remained, however, sales absorbed by Japanese companies showed a small yet significant like Seiko). Nonetheless, many increase. In 1977, for example, Swiss watchmakers opted to stick Rolex produced only 200,000 with more traditional mechanical watches. Their total sales vol- models rather than incorporate ume, however, was $90 million. the new quartz technology. They Only seven watchmakers from boosted prices to compensate for around the world took in higher shrinking sales. revenues that year—all of them producing at least 3 million In the 1970s, the rising Swiss watches each. In 1980, Rolex franc dramatically increased the sold $280 million in watches cost of a Swiss watch overseas. (from just 1% of Swiss watches US brands like Timex, and by volume), accounting for 19% Japanese companies Citizen and of the Swiss industry’s exports in Hattori-Seiko, were offering value.63 similar models at considerably lower prices. The Japanese Revenues from high-end watch promptly introduced cheaper manufacturers in Switzerland models in the upper market, and were increasingly important as the Swiss saw their global market the volume of Swiss watches share further diminish. In 1974, dropped, especially in the early the Swiss produced 88.8 million 1980s when Swiss watch produc- watches (exporting all but 4.4 tion hit an all-time low. million of them). A year later, exports dropped 25% in volume, Facing extinction, short on cash, and 20% in value.61 and hounded by a coalition of creditors, the two largest Swiss In 1970, there were 1,620 Swiss watchmaking companies, ASUAG watch companies employing

62 Deutsch, Claudia, “Watchmakers are Ringing the 60 Rosenbaum, Andrew, “Switzerland’s Watch Old Back In, as a Varied Industry Revives and Industry: Changing with the Times,” Hemispheres, Thrives,” New York Times, December 5, 1991, p. 1, June 1994, p. 39. Special Section. 61 “ASUAG Group and Smaller SSIH Weigh 63 Anderson, Susan Heller, “The Rolex: How the Merger,” New York Times, Business Section, Swiss Sell Status,” Leisure Section, New York Times, February 23, 1981, p. 2. October 19, 1980, p. 6.

366 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry and SSIH, merged in 1983. They But with Hayek’s prompting, became SMH, the Swiss SMH decided to launch the Corporation for Microelectronics Swatch brand in the spring of and Watchmaking Industries, 1983 with retail prices starting at which went on to generate rev- just $35. The low price wasn’t all enues of SFr 1.5 billion (or US that set the Swatch apart from $1.1 billion) that year, while it lost other Swiss models. Its style, SFr 173 million (US $124 mil- shape—even its size—were lion). By 1992, however, losses unique for its price range. would be recouped and revenues would nearly double to more than Until 1979, Seiko held the record $2 billion.64 for the world’s thinnest watch. But that year, ASUAG launched Nicholas Hayek, a Lebanese- the “Delirium” project. By pro- born management consultant to ducing a thinner battery and the Swiss watch industry, became bonding the watch components CEO of the new company after to the casing (rather than layering assembling a group of investors. them on the back), the company He initially approached Timex to created the Concord Delirium, be a partner in the venture, but measuring just .0385 inches. Its was rebuffed. one setback? The watch retailed for $16,000. Those who did choose to invest paid about SFr 100 per share. The Swatch, like the Delirium, Ten years later, the shares were was thinner than most of the tra- trading at SFr 1,500 a share.65 ditional analog watches pro- What precipitated the meteoric duced in Switzerland. SMH rise in SMH stock value? A sim- slimmed down the Swatch in ple, sporty watch encased in plas- part by cutting the watch move- tic that retailed for less than $50, ment’s components to 51 (com- the Swatch. pared to as many as 150 in other watches on the market). The The Swatch Phenomenon parts were inserted inside a plas- According to Hayek, company tic case which was sealed with officials initially were going to sell ultrasonic welding, instead of the concept to another watch- screws, which made it shock- maker, worried that the lower- resistant and water-resistant (up end watch might damage the to 100 feet below the surface). reputation of Swiss watchmakers. The watches came with a one- year warranty and a three-year replaceable battery.66

64 Taylor, William, “Message and Muscle: An Interview with Swatch Titan Nicolas Hayek,” Harvard Business Review, March–April 1993, p. 99. 66 Pinson, Christian, “Swatch: Case Study,” 65 Ibid. INSEAD-CEDEP, 1989, p. 6.

Thunderbird International Business Review • May–June 2000 367 M. Edgar Barrett

In 1992, production costs for In the 1990s, however, sales of the Swatch were estimated at just Swatch stagnated despite efforts 7 Swiss francs per unit— largely by the company to change its as a result of the automated pro- image and appeal to older con- duction process. That, in part, sumers. Swatch did enjoy some allowed Swatch production to success with new models like a remain in a small mountain town combination chronograph,69 a in Switzerland, while other Swiss watch that retailed for less than watchmakers began moving $100 (100,000 sold in the first manufacturing plants abroad to few weeks), and a watch for cut costs. divers that sold for $50, consid- erably less than the competi- The company marketed the tion.70 Despite the initial success trendy synthetic watches to of the 1990s models, however, young consumers with the idea Swatch—and parent company that as they grew older they SMH—suffered as the demand would upgrade their watches to for Swatch continued to slip. higher-end SMH brands like Omega, Blancpain, or Longines. In 1993, the SMH bearer share Customers often bought lost a third of its value following Swatches in bulk, coordinating rumors that Swatch sales had different watch styles with their stalled. In February 1994, com- wardrobes. Swatch offered limit- pany officials announced flat ed editions of its designs, which sales for the previous year, with helped transform some watch net income increasing just 7%. lines, like those created by pop In addition, they conceded that art artists Keith Haring and the brand’s foray into other Alfred Hofkunst, into instant product lines had met with less collectors’ items.67 than stellar success.71 Three years later, company officials finally Within a decade, the company’s unveiled the much-ballyhooed earnings had risen to the equiva- Swatchmobile—the tiny electric lent of about $307 million on car designed by Swatch and sales of $1.99 billion—of which manufactured by Mercedes. the Swatch accounted for a sig- Behind schedule and belea- nificant portion. From 1983 guered by a number of big-name through 1993, SMH sold more than 100 million Swatches (at 68 about $40 apiece). 69 The chronograph is an instrument capable of measuring time in intervals as small as 1/5 of a sec- ond. 70 Barmash, Isadore, “Fighting the Recession by Spotting Some Fads and Inventing Others,” New 67 Rosenbaum, Andrew, op. cit., p. 40. York Times, November 17, 1991, p. 1, Special 68 Helliker, Kevin, “Swiss Movement: Can Section. Wristwatch Switch Swatch Cachet to Automobile?” 71 “Worries Surface as Swatch Sales Mark Time,” Wall Street Journal, March 4, 1994, p. A1. Financial Times, June 6, 1994, p. 24.

368 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry competitors, SMH announced Omega name. At one point, the two-seater minicar would there were about 2,000 Omega only be available in Europe, and models.74 then only after March 1998.72 “The company got arrogant. It also got Swatch may have been the best greedy,” said Hayek known, but it was not the only in a 1993 interview. brand produced by SMH. In “It wanted to grow too fact, most of the Swiss watch- fast, and it diluted the Omega name by maker’s brands were well-estab- selling too many lished, upper-end brands like watches at absurdly Blancpain, Longines, Tissot, and low prices.”75 Rado. Its flagship luxury brand was Omega. When the former SSIH compa- ny was absorbed into SMH, Omega: Last and First Omega was heading toward Launched in 1848 by Swiss oblivion. Company officials watchmaker Louis Brandt, the trimmed the product line to luxury watch was named for the 130 models and concentrated last letter of the Greek alpha- on reviving its former image as a bet, often associated with luxury timepiece. accomplishment and perfec- tion. By 1900, about 200,000 SMH used the new and pieces were produced annually, improved brand name to main- employing nearly 1,000 watch- tain a strong hold in the higher- makers.73 end market. Omega watches retailed from a few hundred dol- By the early 1970s, Omega had lars up to $20,000 and were dis- evolved into one of Switzerland’s tributed through a service most prestigious brands, touted network spread across 130 coun- as the “crown jewel” of SSIH. tries. The watches were guaran- But during the 1970s, the com- teed internationally against all pany began flooding the market manufacturing defects and could with double, even triple, the be repaired at no cost at any of number of Omega timepieces. It the worldwide locations.76 also allowed foreign agents to contract with outside manufac- The success of high-end Omega turers to produce their own watches was reflective of a grow- models that could carry the ing interest in luxury timepieces as the 20th century drew to a

72 Jones, Terril Yue, “Swatchmobile’s Time Will 74 Soon be at Hand,” The Arizona Republic, April 22, Taylor, William, op. cit., p. 101. p. 15. 1997, pp. E1–2. 75 Ibid. 73 Omega, Ltd., On-Line Company Profile, 1997, 76 Omega, Ltd., On-Line Company Profile, 1997, p. 1. pp. 3–18.

Thunderbird International Business Review • May–June 2000 369 M. Edgar Barrett

close. In 1996, Swiss watchmak- TIMEX MARCHES ON ers generated about $3 billion from the sales of high-end In general, analog watches con- mechanical watches—a figure tinued to outsell digital watches that had held steady for several worldwide in the 1990s. 77 years. However, the best-selling watch in America—and the world, In the early 1990s, Switzerland according to company officials— accounted for just 6% (42.5 mil- was the exception. The Ironman lion) of watches produced Triathlon by Timex—a digital, worldwide. It garnered nearly sports-oriented watch—retailed half of the value at $4.3 billion, for $39.95 and sold about half a however. “You can buy a four- million units a year in the United dollar quartz watch that runs as States alone. It included a stan- accurately as the $11,500 Rolex dard time and date display, an President,” noted one high-end alarm, countdown timer, and watch retailer in 1991. “But it stopwatch able to store elapsed just won’t supply the ego grati- times for up to eight laps. fication.”78 The popularity of the Ironman In the mid-1990s, Patek Philippe Triathlon watch and other popu- was producing about 15,000 lar models in the 1980s helped watches a year. Vacheron resurrect Timex after a decade- Constantin, the oldest upper-end long slide in both the United company in the business, manu- States and overseas markets. In factured about 11,000. Rolex, the 1970s, the company was the best-known and one of the slow to pick up on the trend best-selling names in luxury toward quartz watches; it contin- watches, was making between ued to produce mechanical mod- 600,000 and 700,000 watches a els even as cheaper digital models year and selling them at retail for from Asia flooded the US mar- 79 $2,100 to $150,000 apiece. ket. Though it remained number Meanwhile, sales of Swiss plastic one in America, its market share watches, namely Swatch, contin- was slipping in the 1980s. ued to fall—by about a quarter in both volume and value in the In 1991, the company went 80 mid-1990s. through some major changes. It underwent massive corporate restructuring and then began 77 Whitaker, Barbara, “Wrapping Their Dreams building a base on which to Around Their Wrists,” New York Times, March 2, 1997, p. 10. establish a stronger market posi- 78 Deutsch, Claudia, op. cit. tion both inside and outside the 79 Whitaker, Barbara, op. cit., p. 10. US borders. The same year, the 80 AFX News, AFP-Extel News Ltd., August 8, 1996. company got a boost when it

370 Thunderbird International Business Review • May–June 2000 The Worldwide Watch Industry acquired the rights to distribute imported $1.84 billion worth of the more fashion-conscious, watches in 1991, while export- higher-priced Guess and Monet ing only $73.4 million. watches worldwide. While Swiss watchmakers started In 1993, Timex had total sales producing more quartz analog of $500 million in the US—five than mechanical models in the times larger than its internation- 1990s, Switzerland continued to al sales. But the company’s five- produce more mechanical mod- year goal was to reverse that els than any other country in the statistic. Though it predicted at world. After suffering a steady the time that some growth decline for over a decade, the could occur in Canada (where it mechanical models enjoyed a already claimed a one-third minor resurgence in popularity in market share), the company also the 1990s—particularly among focused on expanding into wealthy collectors.83 lucrative markets in the Far East—its second largest market in 1993.81 Overall, however, it was Japan that dominated the world mar- According to industry analysts, ket. In 1992, the country Timex was the biggest watch accounted for 44% of all watches manufacturer in the United produced worldwide; Hong States, and third in the world, in Kong, 20%; Switzerland, 17%; the mid-1990s.82 and the United States, a negligi- ble amount. Nonetheless, Japan collected only about one-fifth of THE WORLD WATCH SCENE the world’s total revenues for IN THE 1990S watches that year, despite being the top producer. Switzerland Though the Connecticut-based still garnered the most revenues Timex Enterprises, Inc. was the of any watch exporter in the largest watch manufacturer in world.84 The average export price America and the third largest in of a Swiss watch that year was the world, its home market, the $111.58 (based on a 1992 United States, entered the 1990s exchange of 1.4062 Swiss franc with a large trade deficit in to the dollar). According to the watches. Still the biggest single Federation of the Swiss Watch market on the globe, the country Industry, that was nearly six

83 “Watches, Clocks, Clockwork Operated Services 81 Kryhul, Angela, “A Timely Turnaround,” & Parts,” Encyclopedia of American Industries, pp. Marketing, September 6, 1993, pp. 1–3. 1305–1306 (Gale Research, Inc., 1994). 82 Sawinski, Diane M. and Wendy H. Mason, op.cit., 84 Sawinski, Diane M. and Wendy H. Mason, op.cit., p. 497. p. 497.

Thunderbird International Business Review • May–June 2000 371 M. Edgar Barrett

times the average export price mushroom, eventually making worldwide. the country responsible for about 70% of all watches. Other Asian The Federation of the Swiss countries also showed a contin- Watch Industry, worried about ued annual increase in watch pro- both fake Swiss watches from duction throughout the first half Asia flooding the worldwide of the 1990s, including new market and its own declining entrants such as China, Thailand, watch exports, announced in Malaysia, and the Philippines.87 1997 that it would launch an investigation into reports of Meanwhile, an increasing num- Arabian Gulf imports of fake ber of watchmakers turned their brand-name watches manufac- attention to emerging markets in tured in East Asia.85 The most Asia and Latin America after often-copied brands were Swiss, worldwide watch sales shrank including Rolex, Omega, and from double- to single-digit TAGHeuer.86 annual growth rates in the 1990s. By the turn of the centu- A 1994 Citizen Watch Company ry, analysts predicted global report on the industry predicted watch production would reach that Hong Kong’s role as an one billion, largely due to the intermediary center for the growing Asian and South worldwide watch industry would American Markets.88

85 The Reuters European Business Report, January 12, 87 AFX News Service, January 27, 1995. 1997. 88 Sawinski, Diane M. and Wendy H. Mason, op.cit., 86 Ibid. pp. 497–498.

372 Thunderbird International Business Review • May–June 2000