steinway_wipv1[1]

8/4/2019 Steinway_wipv1[1]

http://slidepdf.com/reader/full/steinwaywipv11 1/13

Rixson Nelson – 079

Shalini Singh – 097

Sudhir Kumar jain – 101

Sunita – 102

Varun Arora - 108

Steinway & Sons :

Buying a Legend (A)



Piano Industry Trend In - 1994

• Piano sales have increasingly dropped from as

high as 223,000 units in the

1980s to nearly 100,000 in 1994 (Gourville).

• Industry under consolidation phase

• Many Asian piano manufacturers arose – 75%

• Change in market size• High-priced, high end pianos may limit piano

sales



Why Legend Buying looks Un -

Attractive

• No synergies between Selmer and S&S.

• Unit sales at S&S have dropped from 3,576 in

1990 to 2,698 in 1994.

• Yamaha is a very strong, aggressive

competitor.

• S&S had recently introduced a mid-priced lineof pianos marketed under the name Boston

Piano.



Why Legend Buying Looks Attractive

The acquisition was considered attractive for thefollowing reasons:

• S&S has the highest quality product and reputation

in the marketplace.• Economic conditions are improving in S&S’s two

largest markets – U.S. and Europe.

• S&S has yet to take advantage of the growing Asian

market.• S&S is a company that would be “fun to own

• Brand Equity



About Steinway & Sons

• Founded in 1853 by Henry Engelhard Steinway.

• Next thirty years, Henry and his sons developed the modernpiano.

• They built their pianos one at a time, applying skills that werehanded down from master to apprentice, generation aftergeneration.

• It crafts approximately 2,500 pianos a year worldwide

• In an age where many piano manufacturers have outsourcedthe building of their pianos to areas with cheaper labor,Steinway & Sons continues to handcraft its pianos only at itsAstoria, New York and Hamburg, Germany factories using

many of the same techniques developed by the Steinwayfamily.

• Over 1,500 prominent concert artists and ensembles acrossthe world bear the title Steinway Artist



The Legacy Brand : How was it built

• Basic Idea – Build the best piano possible and sell it at the

lowest price consistent with quality

• Technical Excellence – Won gold medal at Metropolitan Fair at

D.C. in 1984

• Artist Management – Inviting piano legends to Steinway’s

Concert & Artist Program. These Artists were like its Brand

Ambassadors and Evangelists

• Steinway Village – Self contained company town with its park,

library, kindergarten, etc.

• Uniqueness – No two grand pianos sounded the same



What could be done better

• All pianos were assembled by Craft method

• Limited use of Assembly line techniques

• Long Manufacturing cycle – 2 yrs

• Hence, small volumes were produced (~3k / yr)

Traditional Processes and inertia, along with the

Family Management problems, impacted theFinancials (5% return on Capital in 1970s) and the

co., eventually, was sold to CBS in 1972



Good things happened at CBS

• CBS invested several million dollars in the first fewyears for Capital improvements

• Piano production & dealer network grew which led

to increase in sales & profit

Not so Good

Questions on Quality – It was not the same co. what it

used to beRepairing Business boom – Original Steinway pianos

were repaired and sold

Management Turnover – Presidents changed one after

the other



The Birmingham (1985 – 1995)

John & Robert ‘s aim was to re-establish Steinway as the maker of the highestquality Piano

Human Efforts – Pls put suitable heading

• Assurance to its employees, dealers & customers about their commitmentto core benefit – Quality

• Build sense of responsiveness by making personal visits to top dealers

• Unboxed 740 pianos & re-tune & re-voiced each one

Manufacturing

• Purchase of new machinery

• Introduction of statistical process control

• Documentation of piano manufacturing process



Dealear Network

• Efforts were focused on distribution

• Reduced over extended and unfocussed dealer network

• Development of partnership program

• Within dealer’s retail space, steinway’s product was showcased in a

separate quality environment

Product Line

• Mid priced piano - Boston Piano line was introduced in 1992

• Diversion from the old philosophy of staying in the exclusive niche – top ofthe line prestige piano

• Designed by Stainway, manufactured in Japan by Kawai

• Half the price of a stainway, to be sold through steinway dealers, competingwith Yamha for high margin product in mid market price range



Limited Edition

• Sold 140 units @ 25 % premium

• Every 2 years new limited edition models were sold with engraved names ofSteinway artist

Crown Jewel Collection

• Quality of wood was upgraded and sold @ 20%-30% premium

Financial constraints• Extensive investment in inventory management (over $75 Mio)

• Focus shifted from selling Pianos to negotiating with banks for funds andsurvival

In 1994, for personal reasons they decided to sell off stainway.



• Steinway should continue with its high end niche strategy because

technical excellence is its brand DNA “build the best piano possible”

Steinway entry into mid segment may initially boost its sales but would

eventually lead to brand dilution damage Steinway reputation for

exclusivity and quality

• Boston Pianos could be marketed as a separate brand not mentioning

much about the mother brand. This would not much affect Steinway

brand image and would still add to bottom-line.

• Steinway need to take care of prominent Artist remaining involved and

loyal to ‘Steinway Artist concert’. Defection of prominent ‘Steinway Artist’

to competitors could prove deterring for Steinway brand.

Recommendations

steinway_wipv1[1]

Documents