International Strategy individual assignment Wang Hanzi Steinway & Sons: Buying a Legend 8th Nov. 2011 1) Historically, why has Steinway been successful? • For 140 years, Steinway & Son has been recognized as a leader in the market for high-quality grand pianos. In 1854, it introduced the cross-stringing technique in a piano with a cast-iron frame, an innovation that is now universal in all grand pianos. Based on these technical advances, order grew rapidly. • Steinway also emphasis on brand visibility by opening the Steinway Hall in 1866, and had engaged in artist management. Strong back up support could be another issue; Steinway Village had developed in 1871. The develop of this village is not only put the whole production line together, but also provide a convenient living and working environment, so that the staffs can concentrate on their work. • When Steinway start to produce high-quality pianos with consistent volume, the worldwide piano markets seem not mature around 1871-1900. Less competition also consider as an issue. • Succeeding generations of guided the company by following the advice of its founder to “build the best piano possible and sell it at the lowest price consistent with quality”.
Identify its Marketing mix: “product,” “pricing” “promotion,” and “distribution/place”. • Product: 1. Technical excellence 2. Cross-stringing technique in a piano with a cast-iron frame 3. Assembled by craft methods, with limited use of assembly-line techniques. 4. High quality of raw materials: Steinway relied on its own wood technologists to aid in the purchase of million of dollars worth of wood annually. 5. Unique – no two Steinway grand pianos sounded the same. This attention to detail contributed to the legendary sound and durability of a Steinway. • Pricing Exclusive niche market Selling only a top-of-the-line prestige piano Promotion 1. Served as NY city’s major concert facility for many years 2. Steinway’s Concert and Artist Program. 3. Pianos were specially adjusted and tuned to suit the individual performer’s temperament and style. Steinway was granted exclusive use of the artist’s names for publicity purpose. In addition, convert pianists served as informal testers of the company’s pianos. • Place/distribution Steinway and Boston pianos were sold through a network of 93 dealers in North and South America and 92 dealers in Europe, Africa and Asia. Steinway developed a “Partnership Program” which included; 1. formal sales training programs 2. ormal technical support programs 3. promotional events planning 4. coordinated advertising and public relations 5. institutional sales programs 6. concert and artist activities 7. extensive merchandising support • People (here is another P which I think is also very important! ) Steinway’s workers are averaging 15 years with the company and with many workers representing second or third generation Steinway employees. These worker kept on bring their values to the company; it becomes a competitive advantage to Steinway. What are the relative positioning of Steinway products and the types of consumers that buy Steinway pianos? Steinway products |Type of consumers | |Steinway |Major music school/Individuals who had a serious interest in music | |Boston |”customer who were not yet ready to acquire a Steinway” | |Steinway Limited Editions |Steinway’s artists or their fans | |The Crown Jewel Collection |Professional in music/ who really have serious interest in playing piano | ) What have been the recent challenges to Steinway’s value creation? 1. Industry Trends • Involved a sustained downturn in the piano industry • Consolidation of the piano manufacturing industries in the United States and Europe • Four Asian companies combined for 75% of global sales starting from a near zero share in 1950 • Opening of new and potentially large markets in Asia such as Japan, South Korea and China 2. Competition There are four major competitors in the market which are Baldwin, Yamaha, Kawai and Bosendorfer and Fazioli.
Don’t waste your time!
Order your assignment!
They compete with Steinway in different levels of consumers. 3. New Piano Distribution Independent dealers purchased pianos directly from the manufacturers and sold those pianos at margins that varied across brands. 4. The use Piano Market For every new piano sold in the US, 10 used pianos also changed hands. There also was an active commercial market for use pianos. At Steinway, management believed that a used Steinway represented a serious threat to the sale of a new Steinway.
May be because: • This was partly due to the fine reputation that both new and used Steinways possessed • It also was due to the extremely long life that characterized a properly maintained Steinway piano-70 to 80 years without a major restoration and many years longer with one. 3) What do you think of Steinway’s 1992 decision to launch the Boston line of pianos? I think the decision of launch the Boston line was reasonable. • To gain the mid-price market share worldwide Use Boston to be the sub-brand of Steinway could also be the guarantee of quality but not affect the Steinway’s brand image • To enter Asia market (new potential market) must have a competitive price What impact might this new line of pianos have on the company? The launch of this new line could be totally failed due to high competition of mid-price market. Boston must be well-know as a sub-brand of Steinway, so that with the image and reputation of Steinway, Boston will be easier for customer to remember and considering.
However, if the marketing activities are not enough to promote Boston, Yamaha and Kawai those high-volume piano producer will rapidly occupy the market. And if Boston can not bring more profit than expectation, it will destroy the legend that used to create by Steinway for hundred years. Having just purchased the company in 1995, what should Messina and Kirkland do with the Boston piano line? As I mentioned in the above part, Asian is a new potentially large market. There are also many new young Chinese pianists well know in China such as: Li Yundi and Langlang.
Boston defiantly needs to study the Asian market and work closely with these young pianists. Advertisements are so important in China; especially Steinway has a legend history and background to be promoted in all their advertisements and public activities. In the generation around 80’s, parents are recognizing brands. And there are huge amount of parents have oversea studying or working experiences. They are well educated and much rich compare with local talents. They have the purchasing power to buy the piano either for themselves or for their children.
Boston’s price is an advantage of entering Asian market. The economic has booming since last decade. Especially China will be the 2nd largest luxury market world wide in next decade. Messina and Kirkland should enter this market by Boston’s price advantages and followed by introducing the Steinway pianos which are more high-end in ex-Asia market. Their mission is to continue Steinway’s legend! Finally to be successful by making the customer feels that one slogan said by L’Oreal —“you worth it! “