As the history proven, American market is likely to accept lower price but good quality high tech and jewelry decisions, and together with expansive distribution channel worked out there, the strategy can be a winner. The middle market of watches from $50-299 accounts for 37% in value in the U.S.A., while in units terms, the 78% is attributable to selling mass produced watch with the price up to $50 per unit, and this is exactly the main type of watches sold by main competitors of Swatch, namely Timex, Casio, Seiko, Guess, Citizen and the others. Thus, in terms of profit margin/average price (thus affordability for purchasers in big USA market) to most demanded models ratio, the best choices to expand with for the Swatch company, are Rado (18% margin, 570 SFr. Average price), Longines (15%, 270 SFr), Tissot (10%, 100-150), and specific repositioning of Omega and Swatch. By achieving to lower production costs, Swatch can increase further its' market share for upper/luxury niche as if they already enjoy rather big niche, this reveals that in this segment buyers are less price sensitive, and are rather purchasing long company history and good quality. While reduction of costs will increase company margins and will be possible to gain more market share than the present 14% in the luxury, prestige niche. As Western Europe is another market where the amount of watches purchased by capita is rather high, and taking advantage of the fact that Swatch has very well established position here, the company by introducing a line of middle class watch is likely to create another class of stable purchase base, or Western Europeans with middle income,...

The campaign can be targeted at young and fancy Europeans who would like Swatch quality and fashion, together with buying Swatch history which has much higher brand prevalence than it means to American or Asian purchasers, but who cannot afford the present price.
It would not be strategically right to start production and completely switch the company to low cost and thus mass produced items, which could spoil the overall impression of the brand developed within century. The best strategic decision would be to emphasize that the company keeps the quality by attempting to lower the costs in the areas only where they do not affect the quality. The acquisition of Titan could be Publicly promoted as not attempt to lower costs and win markets, but as a means of better getting to know by purchasing local producer the tastes of Indian market which Swatch management believes is very promising in the future. Good decision would be to try to acquire some higher quality American brands and thus create a global watch company with exclusive target audience and production of good quality fancy time pieces for younger but still fashionable and higher than middle income generation.

References

D. Mitchell, C. Coles, Establishing a continuing business model innovation process, Journal of Business Strategy, Volume 25, No. 3, 2004, pp. 39-49. Available at http://www.businessweek

D. Mitchell, C. Coles, Establishing a continuing business model innovation process, Journal of Business Strategy, Volume 25, No. 3, 2004, pp. 39-49.

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