Tuesday, February 24, 2009

The survival of Luxury Watch Companies in the 1970's?

In this troubling economic times, I have decided to write about watch companies and their survival at the time of the quartz scare. A trying time for watch companies, who prided themselves with carefully crafted mechanical movements. Many Mechanical Watch Companies fearful of becoming mere historical artifacts fought for survival in different ways.

As I was tracking Harry Winston's Stock on the Dow (HDW), it was deeply troubling to me that it had dropped from $31.00 a share in May of 2008 to a gut wrenching $2.48 a share today. As I was staring at the graph, I realized that the mechanical watches had been through a scare like this, "the quartz scare" in the 1970's and many not only pulled through, but flourished. I decided to blog about a company every week who took the blow and survived. How did they survive? What did they do? How were they impacted? These stories of survival and hope are crucial in our times of economic duress where the future seems bleak and uncertain.

My first choice is IWC (International Watch Company) . A remarkable company, founded in 1868 by an American, Florentine Ariosto Jones, and saved a town of Schaffusen who had paused in its industrial development. In 1888 IWC installed electricity in its factory. Ironically, in 1944 its factory was bombed by the American air force, a fatal error. In 1957, Hans Ernst Homberger, the founder's son added a new wing to the factory and bought new more efficient machines to keep up with the constant demand of highly predictable and precise mechanical watches. Hans ensured that the latest technologies were implemented in the watch manufacturing. IWC embraced the latest quartz technology and became co founder and shareholder in the "Centre Electronique l"Horlogerie Suisse" (CEH) making monitory contributions to the development of the Beta 21 quartz wristwatch movement, which was unveiled at the 1969 Basel Fair. This movement accounted for 5-6% of the total sale of quartz watches. With this success, IWC was able to expand its collection to jewelery watches with mechanical movements for ladies. In post war period, 1973 was IWC's most successful year.

Then a period of hardship struck. In 1974 gold prices rose to astronomical proportions - over 3 times the previous price, and the value of the Dollar fell 40% against the Swiss Franc so that the price of watch exports rose to 250%. To make matters worse Japan was now bombarding the market with cheap precise quartz watches.

IWC realized that drastic changes had to be implemented if the company was to survive. IWC kept its traditional watchmaking, but at the same time grew extremely technologically advanced, feeding the consumers more of what they wanted, one innovation after another. In 1978, the first compass watch was introduced followed by the introduction of a new material - titanium.

The man of the moment was Otto Heller, Director and Chief Executive Officer. In 1978 he secured venture capital from Swiss Banking Corporation. Otto retired and Gunter Blumlein stepped in, he strove for quick implementation of planned changes, upped the existing advertising campaign, and targeted a young and free-spending customer base, placing the company on the path to success. He founded the LMH group in 1991 with 100% stake in IWC, 60% in Jaeger-LeCoultre and 90% in A. Lange and Sohne. In July 0f 2000, the LMH Group was acquired by the Richemont Group guaranteeing the Independence and future of the LMH brands as a closed unit under the current management.

Today IWC is widely popular with a large young customer base.  A great example is the IWC Big Pilot's Men's Watch 7 Day Power Reserve 18K White Gold Case.

It has a large case - 46mm, and a dial with bold clear numbers.
The large screw down crown is instantly recognizable. The hand indicators are luminous. The automatic movement has a 7 day power reserve. It is a large watch meant to be worn.

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