case

study

Time Marches On:

The Worldwide Watch
Industry
M. Edgar Barrett

I
“…the clock, 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 piece 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 Watches 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
pace.”1
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 clocks. 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
1500 in Germany. They consist- studying the early timepieces.3
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-
to design their own.7 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
teeth employed in jeweled-lever watches. Rather,
ket on low- to mid-priced
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 television 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 tuning fork,
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
24
Sawinski, Diane M. and Wendy H. Mason, eds.,
to lose less than a minute a
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.
27
Martin, Graeme and Martin Dowling, “Managing
28
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.
31
“American Power Watch Wins European Market,”
vibrations are then translated into
New York Times, May 27, 1963, p. 41.
32
Bulova contracted with Japan’s Citizen Watch
Company to produce the movements for the new
33
“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 Benrus
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.
cit., p. 498.
Japan eclipsed Switzerland as the 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
about $40 apiece).68 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
Rosenbaum, Andrew, op. cit., p. 40.
67
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
Soon be at Hand,” The Arizona Republic, April 22,
74
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.
years.77 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-
$2,100 to $150,000 apiece.79 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
mid-1990s.80 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. Sawinski, Diane M. and Wendy H. Mason, op.cit.,
88

86
Ibid. pp. 497–498.

372 Thunderbird International Business Review • May–June 2000