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8/13/2019 Case World Watch

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lin ed to world )ar et"- In $%&' Swi"" wat h)a er" e6+orted virt!all# all of their o!t+!t* >a+ane"e fir)"e6+orted "li/htl# )ore than half of their o!t+!t* and A)eri an o)+anie" e6+orted al)o"t none of their o!t+!t- Inthe a"e of the United State"* the lar/e"t wat h )ar et in the world* do)e"ti +rod! tion a o!nted for "li/htl#le"" than half of it" need"- I)+ort"* "o)e fro) forei/n fir)" and "o)e fro) United State" 3 ontrolled +lant" "itedover"ea"* filled the void-

While data on the +rod! tion of wat he" (# o!ntr# are readil# availa(le* fi/!re" on )ar et "i=e (# o!ntr#are hard to o)e (#- Still* ro!/h e"ti)ate" (# )a5or /eo/ra+hi al area" are +o""i(le- In $%&'* E!ro+e in total

re+re"ented a )ar et a(o!t e !al to that of the United State" : wat h +!r ha"e" in (oth )ar et" ran at an ann!alrate of aro!nd 9, )illion !nit"- In the "a)e #ear* >a+an." ho)e )ar et wa" a(o!t a third of the "i=e of tho"e inE!ro+e or the United State"- And a" for the re"t of the world ;e6 l!din/ or the o))!ni"t o!ntrie"<* it" )ar etro!/hl# )at hed that of E!ro+e or the United State"-

The re)inder of thi" note e6a)ine" the three wat h)a in/ ind!"trie"* a" of the earl# $%&'"* were the )o"ta tive ontender" for do)inan e in the"e )ar et"- Se tion" II* III and I de" ri(e* in t!rn* the Swi""* >a+ane"e*and the United State" ind!"trie"- Se tion whi h on l!de" thi" note* di" !""e" the re ent te hnolo/i al advan e"that have t!rned the onte"t into o)+etitive t!r)oil-

II: The Swi"" Wat h Ind!"tr#

"Watchmaking - long presumed the private preserve of Swiss interests, has in the last decade or so

clearly become a field that's up for grabs. The lpine republic's one-time international hegemony in thetimekeeping business is now almost as full of holes as the country's !ustly famed cheese." alue #ineSelection and $pinion

%&idiculous'. (ecutive )irector, Watchmakers of Swit*erland +nformation entre.

Ind!"tr# i/hli/ht" in $%&'

Wat h)a in/ ha" alwa#" o !+ied an e"+e iall# i)+ortant +la e in the Swi"" e ono)# and the #ear $%&'wa" no e6 e+tion* ro!/hl# $*''' different fir)" and ?'*''' e)+lo#ee" were en/a/ed in )a in/ 0 B1' )illion ofwat h and wat h3related +rod! t" 1- Wat h)a in/ ontri(!ted al)o"t 17 to the total Swi"" GN24 in that #ear itwa" Swit=erland." fo!rth lar/e"t ind!"tr# and it e)+lo#ed lo"e to ?7 of all )an!fa t!rin/ wor er"-

Of ne e""it#* the Swi"" e ono)# de+end" heavil# on e6+ort"* and wat he" have ro!tinel# (een one of theo!ntr#." )a5or forei/n e6 han/e earner"- In $%&' a(o!t %&7 of total wat h +rod! tion ha" "hi++ed o!t"ide theSwi"" (order"- al!ed at 0 B$' )illion* the"e "hi+)ent" re+re"ented $87 of the total Swi"" e6+ort"* )a in/wat he" the o!ntr#." third )o"t i)+ortant e6+ort +rod! t-

In $%&'* wat h)a in/ ontri(!ted to the Swi"" e ono)# in "till another i)+ortant* if intan/i(le* wa#- A"the Swi"" an +!t it:

"The long-standing reputation of the Swiss watch industry also provides another free benefit to theSwiss economy. eing a typical symbol of uality and reliability it acts as an advertising medium forother Swiss products. Swiss industry, due to the absence of low-cost natural resources, is often at adisadvantage, in terms of cost, when competing against other countries' products. Therefore, thereputation of the Swiss watch does help to publici*e the uality of the %Swiss-made' brand and acts as a

powerful sales argument."

Not onl# wa" the Swi"" wat h)a in/ ind!"tr# i)+ortant at ho)e* it wa" i)+ortant to the world-E6 l!din/ +rod! tion in o))!ni"t o!ntrie"* ever# other wat h )ade in the world in $%&' a)e fro)Swit=erland- And three !arter" of all wat he" e6+orted fro) an# o!ntr# in $%&' a)e fro) Swi"" +lant"-

Tho!/h the Swi"" hold on the world )ar et in $%&' wa" i)+re""ive* it wa" not "o i)+re""ive a" it had (een "everal de ade" earlier- In the late $%9'" the Swi"" "hare of worldwide +rod! tion wa" over ?'7* and theSwi"" "hare of wat h e6+ort"* fro) all "o!r e"* wa" aro!nd %,7- In re"+on"e to tho"e who tal ed a(o!t thewea ne"" of the Swi"" ind!"tr#* +ointin/ o!t that it" "hare of the world )ar et had (een o!t in half d!rin/ $%,'"

3 Unless otherwise indicated all data originally stated inSwiss franc have been converted into US dollars at the 1970exchange rate 4.3 Swiss Franc = 1 US Dollar.



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and $%B'"* the Swi"" an"wered (# referrin/ to the three3fold /rowth in their wat h +rod! tion- a in the late$%9'" the Swi"" ind!"tr# +rod! ed aro!nd 8, )illion wat he" and wat h )ove)ent" ea h #ear4 (# the earl#$%&'" the ind!"tr# wa" +rod! in/ ann!all# at lo"e to the &, )illion !nit rate- E)+lo#)ent in the ind!"tr# hada t!all# in rea"ed "li/htl# "in e the +o"t3world War3II #ear"- In the Swi"" view the dra)ati /rowth in their wat ho!t+!t re+re"ented a on"idera(le a hieve)ent and indi ated that Swit=erland wo!ld re)ain the do)inant wat h3

+rod! in/ nation for #ear" to o)e-

Swi"" E6+ort" in $%&'Sin e* for all +ra ti al +!r+o"e"* the Swi"" e6+ort all the wat he" the# )a e* it i" ne e""ar# to loo at theo)+o"ition of e6+ort" in order to !nder"tand Swit=erland." o)+etitive +o"ition in forei/n )ar et"- #

+rod! tion ate/or#* the $%&' Swi"" e6+ort" were a" follow" :

Ta(le 3 8 Swi"" Wat h E6+ort" (# Sta/e of 2rod! tion 3 $%&'2er enta/e of E6+ort"

Cate/or# in al!e Ter)"Fini"hed Wat he" &&-'7Wat h Move)ent" $8-,7Mi" - wat h o)+onent" $'-,7

;in l!din/ a ")all a)o!nt of lo e6+ort"<The +er enta/e "hown a(ove were al)o"t identi al for 5eweled3lever and +in3lever wat he"-a)o!nt of lo e6+ort"<

Ta(le 3 1 Swi"" E6+ort" (# T#+e of Wat h 3 $%&'

Unit" al!e Avera/e val!e +er !nit ;)illion"< ;US 0 )ill-< ;U-S- 0<

>eweled3lever 1?-1 99' $$-,'2in Lever 18-& ?, 8-B8

Ele tri 3Ele troni '-1 ? 8B-''Ta(le" 8 and 1 )a e one +oint !ite lear- In $%&' the e6+ort of fini"hed 5eweled3lever wat he"

on"tit!ted the ore a tivit# of the Swi"" wat h)a in/ ind!"tr#- An#thin/ 5eo+ardi=in/ thi" "e/)ent o!ld 5eo+ardi=e the entire ind!"tr#-

Ta(le 39 "how"* (# )a5or /eo/ra+hi al re/ion* where the Swi"" e6+ort" went in $%B' and $%&'- Several +oint" "tand o!t- Fir"t of all* Swi"" e6+ort" of 5eweled3lever wat he" have (een "o)ewhat )ore di"+er"ed thantho"e of +in3lever wat he"- Se ond* d!rin/ the $%B'"* the U-S-3 Canadian )ar et de lined in it" relativei)+ortan e to the Swi"" while the E!ro+ean )ar et (e a)e )ore i)+ortant to the)- And third* (# $%&' A"ia had

(e o)e a )a5or )ar et for Swi"" +in3lever wat he"- When loo in/ at the"e fi/!re"* (ear in )ind that the val!e of 5eweled3lever e6+ort" wa" al)o"t five ti)e" that of +in3lever e6+ort"- Con"e !entl#* the "hift" i" )ar et that too +la e with 5eweled3lever wat he" had a far /reater effe t on the val!e of e6+ort" than did tho"e that too +la e with +in3lever wat he"-

Ta(le 3 9 Swi"" E6+ort" (# Ma5or Geo/ra+hi al Re/ion" 3 $%B' H $%&';for wat he" and wat h )ove)ent" o)(ined<

2er ent of total e6+ort" in !nit ter)">eweled3lever 2in 3 lever

$%B' $%&' $%B' $%&'E!ro+e 8B-87 18-&7 $?-87 8$-&7Afri a 1-%7 9-%7 $'-&7 ,-&7Middle Ea"t &-?7 $9-97 $-87 8-?7A"ia $1-17 $$-B7 %-97 8B-87USA 3 Canada 1$-B7 88-17 9,-87 1B-87



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Latin A)eri a $9-,7 $8-$7 $,-$7 &-$7O eania 8-&7 8-'7 '-87 '-17

Ta(le3,* whi h li"t" all the o!ntrie" to whi h the Swi"" "hi++ed a )illion or )ore wat he" in $%&'*ro!nd" o!t the e6+ort" +i t!re"- A" ta(le3, indi ate"* $$ o!ntrie" i)+orted the (!l 3three !arter" in !nit ter)"and two3third" in val!e ter)" of Swi"" wat h +rod! tion- A" the World." lar/e"t wat h )ar et* the United State"

wa"* !ite nat!rall#* n!)(er one in i)+ortan e to the Swi""- et* a" "!//e"ted (# Ta(le 3 9* the Swi"" "hare of theU-S- Mar et ha" (een erodin/ "teadil#- In fa t* in $%,'* %%7 of all wat he" i)+orted into the United State" wereof Swi"" ori/in4 (# $%&' thi" fi/!re" had dro++ed to aro!nd &'7- In the "a)e +eriod* the Swi"" "hare of totalwat h on"!)+tion in the United State" had de lined fro) ,'7 to a(o!t 9'7-

Ta(le 3 , Swi"" E6+ort" of Wat he" and Move)ent" to Ma5or Mar et" 3 $%&'

7 of total !nit" 7 of total val!eUnited State" 8&-9 8'-8

on/ on/ $9-8 $'-'United in/do) ?-& ,-,Ara(ia 9-? 1-?

We"t Ger)an# 9-$ ,-&Ital# 1-& B-,S+ain 1-B 1-?Ar/entina 8-8 8-8

ra=il 8-$ $-%Canada $-% $-,Me6i o $-B 8-'>a+an $-9 1-&

Total : &,-& BB-?

The n!)(er two e6+ort )ar et for Swit=erland in $%&'* on/ on/* wa" a re ent arrival on the " ene-One ite) lar/el# a o!nted for the ra+id e)er/en e of on/ on/ a" a Swi"" !"to)er- # $%&' al)o"t ?,7 of

all +in3lever )ove)ent ;not fini"hed +in3lever wat he"< )ade in Swit=erland were de"tined for on/ on/ wherethe# were a"ed and "!("e !entl# " attered over )an# for Ea"tern )ar et"- Deter)inin/ who a t!all# ontrolledwhat +art of the on/ on/ trade in $%&' wa" an al)o"t i)+o""i(le ta" - Several Swi"" +in3lever )an!fa t!rer"had a""e)(l# +lant" in on/ on/* #et lo al intere"t" were al"o involved in the (!"ine""- A(o!t all that o!ld (e"aid wa" that on/ on/ had (e o)e an i)+ortant hannel thro!/h whi h Swi"" +in3lever wat he" rea hed )an#over"ea" )ar et"-

One final +oint (ro!/ht o!t in Ta(le 3 , need" )entionin/- Note that >a+an* the "e ond lar/e"twat h)a er* wa" not a )a5or )ar et for the Swi""- Thi" fa t ha" ertainl# had a (earin/ on how the Swi"" haveviewed the o)+etitive +ro(le)" fa in/ their ind!"tr#- Wherea"* in an# "ort of onte"t a)on/ Swi""* >a+ane"e*and U-S- Wat h)a er"* the Swi"" o!ld afford to /ive !+ their +la e in the >a+ane"e )ar et* the# o!ld not affordto "ee their hold on the U-S- )ar et "erio!"l# 5eo+ardi=ed- A" well "hall "ee in a "!("e !ent "e tion* in $%&' theUnited State" wa" al"o >a+ane"e leadin/ e6+ort )ar et- It follow" that* if the $%&'" were to "ee a "tr!//le forleader"hi+ in the world wat h ind!"tr#* the (attle wo!ld ta e +la e +rin i+all# in the U-S- )ar et +la e-

Fra/)entation : the Swi"" Ind!"tr#." Main 2ro(le)

One fa t* )entioned at the (e/innin/ of the +re edin/ "e tion* i" the e# to the n!)(er one +ro(le) thatfa ed Swi"" wat h)a er" in $%&'- The ind!"tr#* whi h in l!ded aro!nd $*''' different enter+ri"e"* wa" far )orefra/)ented than that in an# other leadin/ wat h)a in/ nation- To !nder"tand wh# thi" wa" "o all" for a (riefreview of the develo+)ent of wat h)a in/ in Swit=erland-

Earl# Develo+)entThe Swi"" did not invent the wat h- Over 1'' #ear" a/o the r!di)entar# te hni !e" of wat h)a in/

were (ro!/ht to Swit=erland (# !/!enot" +la in/ reli/io!" +er"e !tion in Fran e- At fir"t the# "ettled aro!ndGeneva4 "!("e !entl# the# "+read thro!/ho!t northwe"t Swit=erland-



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For )ore than a ent!r# and half "everal fa tor" o)(ined to fo"ter a ver# inde+endent* fa)il#3oriented"+irit a)on/ the earl# wat h)a er"- In +art* wat h)a in/ wa" a raft whi h de+ended on " ill" (ein/ +a""ed onfro) one /eneration to the ne6t- In +art* where )an# of the wat h)a er" lived* in relative i"olation in the)o!ntain"* +ro)+ted a ver# inde+endent view- And in +art* the fa t that ea h fa)il# fa(ri ated a few o)+leteti)e +ie e" ea h #ear no!ri"hed a "en"e of a di"tin t fa)il# wat h)a in/ tradition- and lar/e* the attit!de"for)ed the) de" ri(ed (# "o)e a" a "t!dent individ!ali")* +er"i"ted into re ent ti)e"-

In the fir"t half of the $?''"* in re"+on"e to advan e" in )e hani=ation* individ!al +rod! t" "tarted to

"+e iali"e : "o)e fa)ilie" on entrated on )a in/ +art"* other" on a""e)(lin/ +art" into fini"hed wat he"- # the)id3$?''" the ind!"tr# had evolved into a two3tier )an!fa t!rin/ "#"te) with o)+onent )an!fa t!rin/ "e+aratefro) wat h a""e)(lin/- With few han/e"* the ind!"tr# retained thi" hara teri"ti !+ to the )id3"tr! t!re of theind!"tr#-

# $%'' wat h)a in/ in Swit=erland far o!tfa ed that ta in/ +la e an#where el"e in the world- !t theind!"tr# wa" )a e !+ of tho!"and" of ")all fa)il#3owned fir)"- Tho!/h the Swi"" do)inated wat h)a in/ on aworldwide " ale land had e"ta(li"hed JSwi"" MadeJ a" a "#)(ol of !alit# in wat he"* the# had done "o with anind!"tr# ill e !i++ed to o+e with an#thin/ other than the )o"t "!+erfi ial e ono)i diffi !ltie"- The ri"e" of the$%8'" and $%1'" )ade thi" +ainf!ll# a++arent to the Swi""-

The Ind!"tr#." and the Govern)ent." Re"+on"e : $%8'3$%1'In the earl# $%8'" Swi"" wat h)a er" "aw "ale" olla+"in/ and !ne)+lo#)ent "oarin/- The# "et o!t to

(rin/ order o!t of the hao" (# or/ani=in/ the)"elve" into a n!)(er of ind!"tr# a""o iation"* ea h )a e !+ offir)" en/a/ed in the "a)e t#+e of )an!fa t!rin/ o+eration"- The a""o iation" that "+ran/ !+ in the +eriod $%893$%8& were :

a- The Federation S!i""e de Fa(ri ant" D. orlo/eri ;F <: tho"e fir)" a""e)(lin/ wat he" fro) o)+onent" +art" "!++lied (# other" +l!" tho"e few fir)" with inte/rated )an!fa t!rin/ o+eration"- All of 4the o!t+!tof )e)(er fir)" wa" of the 6 5eweled3lever t#+e- The"e were the fir)" that a t!all# "old wat he" in the)ar et+la e-

(- E(a! he" SA : $& )an!fa t!rer" of e(a! he" /ro!+ed to/ether into a tr!"t-

- The Union de" ran he" Anne6e" de l . orlo/erie ;U A <: the )an!fa t!rer" of o)+onent" other than

e(a! he"-The for)ation of the"e a""o iation" laid the fo!ndation for ind!"tr# arteli=ation- In $%8?* in a "erie" of

re"tri tive +rivate a/ree)ent a)on/ the three )a5or a""o iation"* the )an!fa t!rin/* +ri in/* and e6+ortin/ +oli ie" of )e)(er fir)" were (ro!/ht !nder ind!"tr# ontrol-

No "ooner had the wat h)a er" ta en the"e "te+" when the de+re""ion of the $%1'" /ot !nderwa#-Deterioratin/ ondition" in the ind!"tr# for ed the Swi"" /overn)ent to o)e to it" aid- A" a fir"t "te+* the/overn)ent* in $%1$* inve"ted in a "!+er holdin/ o)+an#* the So iete Generale de I . orlo/erie S!i""e SA;ASUAC <* whi h* in t!rn* a !ired the )a5orit# of the "hare" of E(a! he" SA and of "everal of the leadin/

o)+onent" )an!fa t!rer"- Thi" )ove ea"ed the finan ial woe" of a n!)(er of the wat h)a er" and )ade the/overn)ent a dire t +artner in ind!"tr# affair"- Then* in $%19* a federal "tat!te ratified the we( of the ind!"tr#."

+rivate ontrol" and i)+o"ed new one"- Thereafter* wat h )an!fa t!rin/ and e6+ortin/ were +er)itted onl# with/overn)ent a++roval- Fro) $%19 thro!/h $%B,* the "tr! t!re of the Swi"" wat h)a in/ ind!"tr# and the )a e!+ of the )an# re"tri tive ovenant" !nder whi h it o+erated re)ained al)o"t !n han/ed- A li"t of the +rin i+al/overn)ent3"an tioned r!le" of the ind!"tr# in l!de" the followin/:

< a<The )e)(er" of E(a! he" SA and U A a/reed to "ell o)+onent" onl# to the )e)(er" of F -

(<In t!rn* the )e)(er" of F a/reed* with one e6 e+tion* to (!# o)+onent" onl# fro) )e)(er fir) ofE(a! he" SA and U A - The fir)" in F did re"erve the ri/ht to (!# forei/n3)ade o)+onent"* (!tthe# al"o a/reed not to (!# "! h o)+onent" !nle"" the# were +ri ed )ore than 8'7 !nder the Swi""level-

<In addition* the )e)(er" of F a/reed to fi6 their "ellin/ +ri e" in a ord with a o)+le6 inter3a""o iation +ri in/ "#"te) and a )ar et for)!la- E(a! he" SA and U A "!++lied the o)+onent" at



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"+e ified +ri e"* "!(5e t to han/e onl# after inter3a""o iation ne/otiation- And the wat h a""e)(ler" andinte/rated )an!fa t!rer" e"ta(li"hed their +ri e" !"in/ a "tandard )ar !+ a(ove a""o iation deter)ined)an!fa t!rin/ o"t"-

d<Finall#* F )e)(er" a/reed to li)it their /!arantee" on fini"hed wat he" to one #ear-

e<A" re/ard" /overn)ent r!le" fir)" o!ld onl# en/a/e in wat h)a in/ after o(tainin/ a!thori=ation

fro) a federal de+art)ent- The federal le/i"lation effe tivel# fro=e the "tr! t!re of the ind!"tr# : fir)"o!ld not e6+and* )ove or "ell o!t* a !ire other"* or han/e the nat!re of their o+eration" witho!t/overn)ent a++roval-

f<In addition* the /overn)ent r!le" re/!lated the Swi"" ind!"tr#." lin " with the re"t of the world- To +re"erve order in over"ea" )ar et"* fir)" were re !ired to o(tain +er)it" to e6+ort fini"hed wat he"*)ove)ent"* and o)+onent"- More i)+ortantl#* to en"!re that new forei/n o)+etitor" wo!ld not "+rin/!+ and that e6i"tin/ forei/n o)+etitor" wo!ld not (enefit fro) advan e" in Swi"" Te hnolo/#*Govern)ent a++roval wa" re !ired for the e6+ort of tool" and die"* en/ineerin/ drawin/"* andwat h)a in/ )a hiner#-

Thi" ela(orate "#"te)* de"i/ned to +rote t the "tat!" !o in a hi/hl# fra/)ented ind!"tr#* +er"i"ted for

al)o"t 9' #ear"- et (# the late $%,'" event" in the )ar et +la e were )a in/ it o(vio!" that "o)ethin/ had tohan/e-

The rea down of the Wat h CartelDi" ontent with the artel aro"e fir"t a)on/ the )e)(er fir)" of F * for the# were the one" who had to

)eet o)+etition fa e to fa e- De"+ite the Swi"" atte)+t to +an !+ wat h)a in/ te hnolo/#* d!rin/ the $%,'"forei/n rival e6+anded +rod! tion and (e/an to )a e inroad" into Swi"" "ale"- On the ontinent* Fren h andGer)an wat h)a er" !t into the Swi"" )ar et "hare4 in the United State"* Ti)e6 i)+eriled at lea"t a +ortion ofSwi"" e6+ort"4 and in the Far Ea"t* where the threat wa" "till in the offin/* )ar et" were ri+e for an o(vio!"l#i)+endin/ >a+ane"e inva"ion-

The )al ontent" in the F lai)ed that the artel r!le" +rote ted the )ar/inal a""e)(lin/ fir)" andfo"tered ineffi ien # a)on/ the o)+onent )an!fa t!rer"- The# al"o +ointed o!t that* in the fa e of )o!ntin/

+ri e o)+etition in over"ea" )ar et"* the artel +ro)oted a t#+e of ond! t on the +art of "o)e wat h)a er" that 5eo+ardi=ed the !alit# i)a/e of the whole Swi"" ind!"tr#- Wherea" the effi ient re"id!al +rofit" to i)+rove their)an!fa t!rin/ effi ien # and the !alit# of their o!t+!t "till f!rther* the )ar/inal fir)"* in order to "!rvive* hadt!rned to +rod! in/ low !alit# wat he" whi h the# d!)+ed at /ive awa# +ri e" in forei/n )ar et"-

After "everal #ear" of ne/otiation" within the ind!"tr#* the )al ontent" won the fir"t ro!nd of on e""ion"-The ind!"tr# a/ree)ent" were revi"ed to +rovide for /reater leewa# in the +ri in/ of o)+onent" to the F)e)(er" and in the a++li ation of the +ri in/ for)!la for fini"hed wat he"-

Then in $%B$ the /overn)ent (owed to the o(vio!" ne e""it# of (rin/in/ the ind!"tr# !+ to date- Itre" ind* effe tive a" of >an!ar# $* $%BB* the re !ire)ent for )an!fa t!rin/ +er)it"- After that date fir)" werefree to e6+and* ontra t* )er/e* "ell o!t to forei/n o)+anie"* or (!# forei/n o)+anie"- Th!" the /overn)ent)ove o+ened the wa# for ind!"tr# on entration- A" +art of the "a)e le/i"lative +a a/e* the /overn)ente"ta(li"hed a wat h "tandard" o))i""ion to +!t an end to the de(a"e)ent of the wat he" (# the ")all +rod! er"-And finall#* the /overn)ent de reed that the re !ire)ent for e6+ort +er)it" wo!ld e6+ire in $%&$- After that datethere wo!ld (e no offi ial i)+edi)ent" to the tran"fer over"ea" of wat h)a in/ te hnolo/#-

The $%B$ le/i"lation "o!nded the death nell for the Swi"" wat h artel- It finall# died in $%BB when theind!"tr# a""o iation" a(oli"hed all the re)nant" of the fi6ed3+ri e "#"te)-

The death of the wat h artel did not* however* "+ell the end for the i)+ortant ind!"tr# a""o iation"*whi h have ontin!ed to "erve a" "+o e")an for the vario!" "e tor" of the ind!"tr#- E6hi(it I* whi h "how" the

o)+o"ition of the ind!"tr# a" of $%&'* de)on"trate" that it" "tr! t!re re)ained defined (# the a""o iation"- Nordid the death of the wat h artel )ean the end to 5oint a tion" a)on/ Swi"" wat h)a er"- To the ontrar#* thea""o iation" have ontin!ed to (e the (a (one of a olle tive a++roa h to ind!"tr# a tivitie"* e"+e iall# in

+ro)otional +ro/ra)" and R H D +ro5e t"- The"e olle tive a tivitie" will (e di" !""ed "hortl#* (!t fir"t it i"ne e""ar# to loo at the "te+" the Swi"" have ta en to o+e with the +ro(le) of fra/)entation-

Ind!"tr# Con entration



7

In the earl# $%B'" a(o!t 8*''' "e+arate enter+ri"e" were en/a/ed in one fa et or another of wat h)a in/in Swit=erland* Ro!/hl# "+ea in/* the"e 8*''' fir)" fell into the followin/ ate/orie" :3

Fini"hed Wat h Man!fa t!rer"a< A(o!t ,'' fir)" "olel# a""e)(lin/ 5eweled3lever wat he"-

(< A(o!t B' inte/rated )an!fa t!rer" of 5eweled3lever wat he"-< A(o!t &' inte/rated )an!fa t!rer" of +in3lever wat he"-

Co)+onent Man!fa t!rer"d< $& )an!fa t!rer" of E(a! he"* all )e)(er" of E(a! he" SA-e< A(o!t B,' )an!fa t!rer" of "e+arate +art"-f< Aro!nd ,'' other fir)" +erfor)in/ )i" ellaneo!" f!n tion"-

Tho!/h the"e fi/!re" a !ratel# refle t the e6tent of fra/)entation that e6i"ted a)on/ fini"hed wat h)an!fa t!rer"* the# )i"re+re"ent the "it!ation that e6i"ted a)on/ o)+onent )an!fa t!rer"- The"e or/ani"ation"*ori/inall# tr!"t" o)+o"ed of )an# ")all o)+anie"* do)inated individ!al 2art" )an!fa t!rin/- The# were :

Fabriques D' Assortiments Reunies SA ;the )a5or "!++lier of e" a+e)ent )e hani")"<

Fabriques e !a"an#iers S ;the )a5or "!++lier of (alan e wheel"<$rou%ment es Fabri#ants Suisses e S%rau& ;the )a5or "!++lier of hair"+rin/"<-

To/ether with E(a! he" SA* the"e three /ro!+" "!++lied a(o!t three3 !arter" of the Swi"" ind!"tr#."re !ire)ent" for E(a! he" and "e+arate +art" 9- Sin e the# a o!nted for "! h a lar/e "hare of o)+onent"

+rod! tion* it i" o(vio!" that the h!ndred" of other fir)" in the o)+onent "e tor either f!lfilled hi/hl# "+e iali=edrole" or were !ite )ar/inal fir)"-

A" we have "een a de ade later* the n!)(er of fir)" in the Swi"" wat h ind!"tr# wa" down to aro!nd$*'''* "in e $%BB* when the Swi"" /overn)ent." re"tri tion on the "ale or a !i"ition of wat h o)+anie" la+"ed*the ind!"tr# e6+erien ed a re" endo of )er/er"- The Swi"" were h!rriedl# "o)e o("erver" "aid franti all# 3 tr#in/to reate wat h)a in/ fir)" )at hin/ the "i=e and o)+etitive lo!t of the )a5or forei/n rival"- Wh# the ind!"tr#

wa" a!/ht !+ in the )er/er." wave and where it wa" headin/ wa" "!))ed !+ (# one leadin/ Swi"" wat h)a erin the"e ter)" :

/or many years far-sighted representatives of the watch industry stubbornly tries to introducenew methods, to overcome outmoded structures. To eliminate the compartmentali*ation typical of Swiss

production, to channel the interest of technically-minded Swiss Watchmakers more into modernmarketing, to overcome difficulties rooted in outmoded protectionist ideas and to surmount assorted

similar problems. With few e(ceptions, however, they had to wait until very recently before there wereany visible signs of a trend towards industry cooperation and corporate concentration.

This development is irreversible and will doubtless accelerate in the future. +t is already uiteconceivable that, under the growing pressure of competition from within and without the watchindustry, there will soon be a considerable increase in the number of medium-si*e companies 0ratherthan hundred of small ones1. The only product lines likely to escape this trend will be a few specialityitems and e(clusive products, the success of which does not depend on mass turnover.

2nder these circumstances we do not think it overly bold to predict that, aside from the fewe(ceptions mentioned, in five years there may be only about ten watch producing enterprises operatingin this country 3.

4 In 1968 another holding-company type arrangement wasestablished within the component sector. A number of smallwatch jewel manufacturers became members of Pierrea Holding SA .Altogether, the members of this new group supplied about 60% ofthe total Swiss jewel-lever production.

5 Robert Brandt, "The Position of the Watch Industry",Credit Swisse Bulletin.



8

A" of $%&8 there wa"* at lea"t on +a+er* a)+le eviden e that the Swi"" were "! eedin/ at on"olidatin/the ind!"tr#- Whether the Swi"" were al"o "! eedin/ at onvertin/ the )an# newl# for)ed o)+anie" intoo+erationall# effe tive or/ani=ation wa" "till an o+en !e"tion- Then world re eived a fairl# "tead# "trea) ofre+ort" a(o!t )er/er" and +lan" for )er/er"4 it did not hear )! h of what wa" "aid within the (oardroo)" and

or+orate offi e" of the Swi"" o)+anie"- Undo!(tedl#* the +ain" and +ro(le)" of tran"ition were ta6in/ the)ana/erial " ill" of )an# Swi"" e6e !tive"-

Still* +ro/re"" loo ed i)+re""ive- oth hori=ontal and verti al )er/er" were han/in/ the ind!"tr# +rofo!ndl#- For in"tan e"* a" the re"!lt of a "erie" of hori=ontal )er/er"* the Swi"" finall# had one wat h o)+an#that o!ld )at h the "i=e of lar/e forei/n rival"* Fo!nded in $%1'* the So iete Swi"" de $ .Ind!"trie orlo/er";SSI <* the )an!fa t!rer of "! h fa)o!" (rand" a" O)e/a and Ti""ot* had alwa#" (een a leader in the wat h3)a in/ ind!"tr#- In the earl# $%B'" it ontrolled a(o!t %7 of total Swi"" wat h e6+ort"- !t even with that "hareof e6+ort"* SSI wa" ")all o)+ared to the leadin/ >a+ane"e and U-S- wat h)a er"- Then* after $%BB* SSI

(roadened it" a tivitie" and* in $%&$* )er/ed with E ono)i Swi"" Ti)e oldin/ ;EST <- Thi" "e ond /ro!+*o)+o"ed of a n!)(er of +in3lever )an!fa t!rer"* a o!nted for 8'7 3 8,7 of total Swi"" +in3lever o!t+!t- #

the end of $%&$* the enlar/ed SSI ontrolled over 8'7 of Swi"" wat h e6+ort" and had an ann!al t!rnover oflo"e to 0 $1' )illion-

ASUAG* the J"!+er3tr!"tJ ontrollin/ a )a5orit# intere"t in E(a! he" SA and in the three lar/e"to)+onent )an!fa t!rer"* /ave (irth to another lar/e hori=ontal /ro!+* when* in $%&$* it o)(ined the

a""e)(lin/ fir)" "ellin/ "even different (rand" into the General Wat h oldin/ Co)+an#- Thi" )ove for/edi)+ortant new finan ial and )ana/erial lin " (etween the o)+onent )an!fa t!rin/ and a""e)(lin/ "e tor" of thewat h ind!"tr#-

Meanwhile* E(a! he" SA entered into another "et of arran/e)ent" with (oth hori=ontal and verti al)er/er hara teri"ti "- In $%&' the Lon/ine"3Re ord Wat h Co)+an# and the Rotar# Wat h Co)+an# 5oined tofor) oldin/" Lon/ine" SA- Then* in $%&$* E(a! he" (e a)e )a5or +artner in thi" new vent!re- A" in the a"ewith ASUAC* the Swi"" 5oined to/ether o)+anie" who"e f!nda)ental a tivitie" were a""e)(lin/ and )ar etin/wat he" and "i)!ltaneo!"l# lin ed the a)al/a)ation to the o)+onent )an!fa t!rin/ "e tor-

The !+"hot of the"e )er/er"* and do=en" )ore* had (een the reation of a +artiall# on entrated ind!"tr#-# $%&$ al)o"t three3 !arter" of all Swi"" wat h e6+ort" were a o!nted for (# ei/ht wat h3)a in/ /ro!+"- !t

the ind!"tr# "tr! t!re wa" "till lo+"ided- A re"id!e of "everal h!ndred ")all fir)" ontri(!ted the other !arter ofSwi"" e6+ort"- Th!" there wa" a /rowin/ /a+ (etween the (i/ wat h)a in/ o)(ination" and the little

inde+endent +rod! er"- Under the"e ir !)"tan e"* it "ee)ed fairl# ertain that onl# one of two different f!t!re"fa ed )o"t of the ")all o)+anie": a("or+tion (# the (i/ holdin/ /ro!+" or olla+"e-A" for the lar/e wat h o)+anie"* the )ere fa t that )o"t of the) had )!lti+lied their "i=e thro!/h a

"erie" of )er/er" did not /!arantee that the# wo!ld en5o# the (enefit" of "i=e- The# "till had to ta le "! h ta" " a"eli)inatin/ d!+li ate +rod! t line"* o)(inin/ +rod! tion fa ilitie"* "trea)linin/ )ana/e)ent "#"te)"* and "o on-A" "!//e"ted a(ove* in the earl# $%&'" the eviden e of +ro/re"" alon/ the"e line" wa" "till "+ar"e-

Swi"" Inve"t)ent in the U-S- Wat h Ind!"tr#The Swi"" effort to (ol"ter the o)+etitive +o"ition of their ind!"tr# wa" two3+ron/ed- At the "a)e ti)e

that the# were on entratin/ it at ho)e* the# were +rote tin/ it (# inve"tin/ in U-S- wat h)a in/ fir)"- In the"e ond half of the $%B'" the# )ade the followin/ )ove":

a< I"e a SA* a on"orti!) of Swi"" wat h )an!fa t!rer"* a !ired $''7 of the Waltha) Wat hCo)+an#-

(< So+inter SA* a Swi"" holdin/ o)+an#* a !ired a $B7 intere"t in El/in-< Chrono" oldin/ SA* a finan ial o)+an# "et !+ for the e6+re"" +!r+o"e of +ro)otin/

a)al/a)ation within the Swi"" ind!"tr#* +!r ha"ed 8'7 of Gr!en-

And in $%&$ the Swi"" too another "te+ whi h o!ld !lti)atel# /ive the) ontrol of one of the )o"tfa)o!" na)e" in A)eri an wat h)a in/* the a)ilton Wat h Co)+an#- A+art fro) it" +ro!d tradition in

onventional wat h3)a in/* a)ilton had (een on the te hnolo/i al forefront on )ore than one o a"ion- In $%,&it had (een the fir"t U-S- fir) to )ar et an ele tri wat h- In $%&$* with it" J2!l"arJ ;whi h !"ed li/ht 3 e)ittin/diode"< it wa" the fir"t U-S- fir) to )ar et a di/ital wat h- Still* a)ilton a)e !+on hard ti)e"-

The hi"tor# of the Swi"" )ove to ta e over a)ilton "tarted in $%&' when !"h Univer"al* In -* adiver"ified fir) that lea"ed +ier" and (!ildin/" in roo l#n* New or * (o!/ht ,'-87 of the al)o"t (an r!+t



9

a)ilton Co)+an#- S!("e !entl#* after a)ilton." lo""e" dee+ened f!rther* !"h "+!n off the wat h (!"ine""into a new "!("idiar# and "old $&7 of it to Aeto"* a" +art of the deal* al"o a e+ted a note fro) a)ilton whi h*if onverted after three #ear"* wo!ld in rea"e the Swi"" Co)+an#." intere"t in a)ilton to ,$7- a)ilton "ee)edde"tined to (e o)e a )e)(er of the Swi"" a)+-

The (a"i )otivation for all the"e inve"t)ent" wa" fairl# lear- Tho!/h the "e ond tier of U-S-Wat h)a er"* tho"e that had not attained the "i=e of !lova and Ti)e"* were* (arel# a(le to )eet the )o!ntin/

o)+etition within the ind!"tr#* the# all +o""e""ed one val!a(le a""et4 e"ta(li"hed trade na)e"- To the Swi""*

ontrol of the na)e"* in +art or in whole* o+ened the door to in rea"ed +enetration of the U-S- )ar et- There wa""o)e eviden e that the Swi"" intended to fi/ht the ele troni wat h (attle in the United State" with trade na)e"whi h A)eri an on"!)er" wo!ld a""!)e were tho"e of fine old U-S- wat h)a er"-

What el"e were the Swi"" doin/ to in"!re the ontin!ed +ro"+erit# of their wat h)a in/ ind!"tr# K

2ro)otional 2ra ti e" :U+ !ntil the late $%B'" Swi"" wat h)a er" relied )ainl# on an in"tit!tional a++roa h to +ro)otion- The#

hanneled a hi/h +ro+ortion of their +ro)otional e6+endit!re" thro!/h ind!"tr# 3 wide or/ani=ation"* li e theFederation of Swi"" Wat h)a er"* into olle tive a)+ai/n" in over"ea" )ar et"- The a)+ai/n" "tre""ed the

!alit# and re+!tation of JSwi""3MadeJ wat he" rather than "+e ifi (rand"- Of o!r"e* a few of the lar/er Swi""wat h)a er" "!++le)ented the ind!"tr#." a tivitie" (# +ro)otin/ their own (rand"- Na)e" li e Role6 and O)e/a

(e a)e world3renowned- Still* the "ale of wat he" (earin/ e"ta(li"hed (rand na)e" on"tit!ted a ")all fra tion oftotal Swi"" e6+ort"- Thi" wa" +arti !larl# tr!e in the a"e of wat he" fallin/ in the low and )edi!) 3 +ri eate/orie"-

A" of the earl# $%&'" thi" all "tarted to han/e- The $%&$ Ann!al Re+ort of the Federation of Swi""Wat h)a er" ;F < de" ri(ed the new a++roa h :

")uring 4564, the /7 continued on the new course adopted after the concentrating on designing,carrying out, and financing promotional activities with fuller co-operation from the brands involved.This change in the /7's approach to promotion consisted in a shift away from collective promotionmainly benefiting the industry as a whole in favour of programmes integrating the brands involved inevery way................"

Even tho!/h Swi"" wat h)a er" reallo ated )ore and )ore of their +ro)otional f!n a fro) ind!"tr# too)+an# a)+ai/n"* the# "till ontin!ed to "!++ort the ind!"tr#." )an# lon/3"tandin/ te hni al +ro/ra))e-Sin e the Se ond World War* the Swi"" "+on"ored wat h3re+air trainin/ " hool" in )an# o!ntrie"- The#e"ta(li"hed te hni al entre" and after3"ale" "ervi e entre" in a n!)(er of forei/n )ar et"- The# fre !entl# held"e)inar"* in Swit=erland and over"ea"* on a wide ran/e of "!(5e t" related to the wat h ind!"tr#- And the#

ond! ted a variet# of trainin/ +ro/ra))e" overin/ the )ana/e)ent* )ar etin/* and di"tri(!tion a"+e t" of thewat h (!"ine""- Al)o"t all of the"e effort" were olle tive !nderta in/"- # and lar/e* the# were re/arded a"e""ential to the "! e"" of the ind!"tr#-

And there were no "i/n" that Swi"" effort" alon/ the"e line" wo!ld di)ini"h in the $%&'"-

Re"ear h and Develo+)ent:A" the +ro)otional a tivitie"* the Swi"" wat h)a er" have tended to a++roa h re"ear h and develo+)ent

fro) and ind!"tr# rather than fro) an individ!al3fir) "tand+oint- The two )a5or Swi"" re"ear h and develo+)ent +ro/ra))e (e/!n in the $%B'"* (oth related to the develo+)ent of the ele troni wat h* hi/hli/ht thi" +oint-

In $%B8 E(a! he" SA* the other )ain o)+onent )an!fa t!rer"* and a n!)(er of the wat h a""e)(lin/fir)" 5oined to/ether to e"ta(li"h the Centre Ele troni !e orli/er ;CE <- The initial /oal of the ele troni wat h

entre wa" to develo+ a new ti)e3deter)inin/ devi e to o)+ete with !lova." t!nin/3for )e hani")- Later* theCE al"o too on the ta" of develo+in/ a !art= r#"tal wat h )ove)ent- The role of the CE wa" defined a"e6tendin/ (e#ond the la(orator#- It wa" hartered to +rod! e +rotot#+e" of new wat he" for the +!r+o"e of te"t)ar etin/ the)- On e the +rotot#+e" +roved the)"elve" in the )ar et +la e* the lient" of CE wo!ld +i the)!+ for f!ll3" ale )an!fa t!rin/ and )ar etin/-

Whether the fir"t de ade of o+eration of the CE wa" re/arded a" a "! e"" or not "ee)ed to de+end onwho wa" )a in/ the a""e"")ent- A)eri an wat h)a er +ointed o!t that the CE failed at develo+in/ a t!nin/3for devi e that did not violate !lova." +atent"- The Swi"" lai)ed that the CE had o)e !+ with an a e+ta(le



10

alternative- Still* in $%B? E(a! he" SA entered into a li en"e a/ree)ent with !lova to )an!fa t!re and "ellwat he" (a"ed on !lova." t!nin/3for )ove)ent- A" for re"ear h on the !art= r#"tal wat h* the Swi"" "tre""edthat the CE had +erfe ted a o))er ial )odel (efore an#one el"e- et when the Swi"" introd! ed their fir"t

!art= wat he" in $%&$* A)eri an wat h)a er" noted that the ontained inte/rated ir !it" )ade (# U-S- fir)"-The Swi"" had ho+ed to avoid thi" t!rn of event"- In fa t* thi" ho+e had +ro)+ted their "e ond )a5or re"ear h anddevelo+)ent effort of the $%B'"-

In $%BB the Federation of Wat h Man!fa t!rer" ;F <* two Swi"" o)+anie" ; rown overi and Landi"

H C#r-<* and 2hili+" of the Netherland" for)ed FASEC* a La(orator# for 5oint re"ear h in the field" of "e)i3ond! tor"* inte/rated ir !it"* and la"er"- The +!r+o"e of the +ro5e t wa" lear eno!/h: to )a e "!re that theSwi"" wat h)a in/ ind!"tr# wo!ld not (e de+endent on U-S- ele troni " )an!fa t!rer"- et "o)e o("erver"inter+reted the for)ation of FASEC a" an indi ation of the wea ne"" of the Swi"" wat h)a in/ ind!"tr#* for ithad to t!rn to a forei/n o)+an#* 2hili+"* for advan ed ele troni " te hnolo/#- A" of $%&8 there wa" no wa# foro!t"ider" to )ea"!re what FASEC had a o)+li"hed* "in e Swi"" ele troni wat he" "till ontained A)eri an 3)ade ir !it# and the Swi"" were reti ent a(o!t de" ri(in/ FASEC." re"ear h o!t+!t-

ow )! h ha" the Swi"" ind!"tr# "+ent on develo+in/ the ele troni wat hK Unfort!natel#* the fi/!re"are not availa(le to an"wer the !e"tion with an# +re i"ion- What follow"* therefore* i" (a"ed on the r!de"t ofe"ti)ate"- A ordin/ to "o)e re+ort"* the Swi"" have "+end aro!nd 8-, )illion +er #ear CE ." re"ear h a tivitie"-The Swi"" ind!"tr# ha" (a ed !+ FASEC to the "a)e e6tent* 33 the ind!"tr# ha" (een +!ttin/ a(o!t 0 , )illion a#ear into re"ear h and develo+)ent related to the ele troni wat h- Thi" fi/!re loo " re"+e ta(le !ntil it i"

o)+ared to total ind!"tr# t!rnover4 it a)o!nt" to a(o!t '-?7 of ind!"tr# "ale"- S!++o"e* and thi" i" rather!nli el#* that individ!al Swi"" fir)" have )at hed the re"ear h and develo+)ent e6+endit!re" of the ind!"tr# 3"+on"ored +ro/ra))e"- Total o!tla#"* even then* wo!ld have added !+ to not )! h )ore than the half +er ent ofind!"tr# "ale"-

If the"e fi/!re" de" ri(e* even in ro!/h ter)"* the level of re"ear h and develo+)ent o))it)ent of theSwi"" ind!"tr# in the late $%B'" and earl# $%&'"* the# rai"e the !e"tion of whether that o))it)ent wa" hi/heno!/h- It." "afe to a""!)e that the Swi"" were a" in/ the)"elve" that "o)e riti al !e"tion-

Diver"ifi ation :Thro!/ho!t the la"t de ade Swi"" wat h)a er" have tal ed at len/th a(o!t the advanta/e" of

diver"ifi ation- et it i" fair to "a# that a" of the earl# $%&'" no Swi"" wat h)a er* (i/ or ")all* wa" in an# "en"ediver"ified- Tr!e* "o)e +rod! ed ite)" other than wat he" and lo "* (!t al)o"t witho!t e6 e+tion the"e other

/ood" were inti)atel# related to the te hnolo/# of ti)e ee+in/-In the a"e of the )an# ")all fir)"* the rea"on" wh# the# held fa"t to their narrow +rod! t line" werefairl# o(vio!"- A lo"e fa)il# orientation* 1' #ear" of +rote tion !nder artel r!le"* and a +er e+tion of their

(!"ine"" in "+e ifi te hni al ter)" did not fo"ter a)on/ the ")all wat h)a er" the in lination or the (a"i" fordiver"ifi ation- And the a"e of the lar/e fir)"* the# had (een "o +reo !+ied "in e the )id3$%B'" )a in/ anddi/e"tin/ )er/er" that it i" !nli el# the# had either the ti)e or the re"o!r e" to +!r"!e diver"ifi ation "erio!"l#-Whatever the a!"e"* the Swi"" wat h)a er" fa ed the +ro(le) of the $%&'" fro) a ver# narrowl# defined

(!"ine"" (a"e-

III: The >a+ane"e Wat h Ind!"tr#

Swiss watch manufacturer was asked if the &ussians posed a threat in his business."The &ussians" he laughed. "They always seem to be ten years behind." " nd the 8apanese9 7ow far behind are they9" " bout three weeks ................."

8ewelers' ircular - :eystone

Earl# Develo+)entWat h)a in/ "tarted in >a+an in the $??'"* For the ne6t ,' #ear" >a+ane"e wat h)a er" on entrated

al)o"t e6 l!"ivel# on "!++l#in/ their ho)e )ar et and on )a in/ 5eweled3lever wat he"- The# "tre""ed 5eweled3lever +rod! tion (e a!"e the# wanted to e)!late the (e"t in we"tern wat h)a in/- et* (# )o"t "tandard"* the

!alit# of the ti)e3+ie e" )ade in >a+an in the ind!"tr#." earl# da#" wa" inferior to that of ti)e3+ie e )ade in theWe"t- And* in fa t* the Swi"" do)inated the +re)i!) end of the )ar et* "!++l#in/ a(o!t %'7 of >a+ane"ei)+ort"-

# the late $%1'" >a+ane"e +rod! tion of wat he" and wat h )ove)ent" had rea hed the level of aro!nd



11

, )illion !nit" +er #ear- One fir) had e)er/ed a" the ind!"tr# leader4 alone it a o!nted for al)o"t one3half of>a+ane"e +rod! tion- Then the Se ond World War and it" after)ath +o"t+oned f!rther /rowth of the ind!"tr# foral)o"t 8' #ear"- >a+ane"e wat h)a er" did not +rod! e at the , )illion !nit level a/ain !ntil the $%,?3$%,%

+eriod- # then* and had "i/nifi antl# !+/raded the !alit# of it" +rod! t- The >a+ane"e were read# to )a e their +re"en e nown a" a f!ll3fled/ed )e)(er of the world wat h ind!"tr#

The E6+an"ion of the Ind!"tr# in the $%B'" :

In $%B'" >a+ane"e +rod! tion of wat he" and wat h )ove)ent" hit the &3)illion !nit level* e !ivalent to"li/htl# )ore than &7 of world3wide wat h o!t+!t- Still* al)o"t all the >a+ane"e +rod! tion wa" a("or(ed atho)e4 the ind!"tr# e6+orted onl# 8''*''' wat he" and )ove)ent" that #ear-

Then d!rin/ the $%B'" >a+ane"e wat h +rod! tion )ore than tre(led in !nit ter)"- In $%&' the ind!"tr# +o!red forth al)o"t 89 )illion wat he" and )ove)ent"* a(o!t $97 of entire world " wat h o!t+!t- And (# $%&'over one3half of thi" +rod! tion wa" de"tined for over"ea" )ar et"- Or* to +!t the develo+)ent in +er"+e tive* theind!"tr# e6+orted al)o"t twi e a" )an# wat he" and )ove)ent" in $%&' a" it had +rod! ed for total ho)e

on"!)+tion in $%B'-In +art* the >a+ane"e had +!"hed the)"elve" into forei/n )ar et": in +art* the# had (een +!lled into

forei/n )ar et"- A" the $%B'" rolled on* the >a+ane"e wat h)a er" o!ld "ee that their ho)e )ar et wa" (e o)in/ in rea"in/l# "at!rated- Con"e !entl#* the# loo ed over"ea"- The# a//re""ivel# involved the So!thea"tA"ian )ar et* lon/ the +rivate do)ain of the Swi""- In a "o)ewhat )ore haltin/ fa"hion* the# "tarted to )ove into

We"tern E!ro+ean )ar et" and into the United State"- !t in the a"e of the United State"* the >a+ane"e were al"o +!lled into the )ar et (# U- S- wat h3)a er" who i)+orted lar/e !antitie" of ine6+en"ive >a+ane"e )ove)ent"and +art" for a""e)(l# here or in the ir/in I"land"- # the late $%B'" the >a+ane"e e6+ort +!"h (e/an to ta e on a

lear +attern- Al)o"t two3third" of all >a+ane"e wat h and wat h3)ove)ent e6+ort" were de"tined for two )ar et:the United State" or on/ on/-

The /rowth of the ind!"tr# and the "! e"" of it" "!r/e over"ea" wa" +arti !larl# re)ar a(le (e a!"e itinvolved "o few fir)"-

Ind!"tr# Str! t!reIn "har+ ontra"t to the "it!ation in Swit=erland and to the "tate of the U-S- ind!"tr# !ntil re ent #ear"- the

>a+ane"e wat h ind!"tr# ha" alwa#" (een hi/hl# on entrated- Over the #ear"* fo!r fir)" have a o!nted foral)o"t all >a+ane"e wat h +rod! tion- More "tri in/l#* two fir)" have a o!nted for al)o"t %'7 of the

+rod! tion- A" of $%&'* the ind!"tr# "tr! t!re loo ed li e thi" :Ta(le 3 B :>a+ane"e Wat h 2rod! tion 3 $%&'

Fir) E"ti)ated "hare E"td- 2rod! tion E6+ort" a" aof >a+ane"e +ro3 Wat he" Move3 +er ent of d! tion )ent" ;)il-!nit"<+rod! tion

- attori H Co- B'7 $97 8'7Citi=en Wat h 8?7 &7 9,7Orient Wat h %7 87 B'7Ri oh Wat h 17 '-?7 N-A-

$''7 81-?7 N-A-

@ In ter)" of val!e-

O(vio!"l#* - attori H Co- i" the General Motor" of the >a+ane"e wat h ind!"tr#- To !nder"tand theind!"tr#* therefore* one ha" to now "o)ethin/ a(o!t thi" do)inant leader- ow did the o)+an# o+erate in $%&%KA t!all#* - attori wa" onl# the "ale" ar) of a l!"ter of fir)" nown a" the Sei o Gro!+- Two "!("idiarie" inthe /ro!+* Daini Sei o"ha and S!wa Sei o"ha* +rod! ed wat he"* )ove)ent"* and o)+onent"- Another"!("idiar# +rod! ed lo "- Still other "!("idiarie" )an!fa t!red +rod! t" o!t"ide the ti)e3+ie e field- - attori)ana/ed all the "ale" a tivitie" for the /ro!+* )ar etin/ it" +rod! t" worldwide !nder the Sei o trade na)e-

# the )id3$%B'" the Sei o /ro!+ had (e o)e the world." lar/e"t +rod! er of 5eweled3lever wat he"- Therea"on" for Sei o." "! e"" are "+elled o!t in the "e tion" that follow- ear in )ind* that even tho!/h the



12

di" !""ion fo !"e" in the entire ind!"tr#* what Sei o ha" done ha" (een the e# to what the ind!"tr# ha"a o)+li"hed-

The Ind!"tr#." 2rod! t and Mar et Strate/#Tho!/h there have (een )inor differen e" in a++roa h a)on/ the fo!r >a+ane"e wat h)a er"* in the la"t

two de ade" the# all ado+ted )ore or le"" the "a)e +rod! t and )ar et "trate/#- A" )entioned +revio!"l#* theind!"tr# "tarted o!t )a in/ onl# 5eweled3lever wat he"- # and lar/e* the ind!"tr# ha" ontin!ed that +ra ti e into

the $%&'"- The >a+ane"e have left +in3lever +rod! tion to other"->!"t (e a!"e the >a+ane"e have not )ade +in3lever wat he" doe" not )ean that the# have not o)+eted inthe low +ri e end of the )ar et- To the ontrar#* at ho)e and in A"ian o!ntrie" the >a+ane"e have )ar eted a

o)+lete line of 5eweled3lever wat he" ran/in/ in +ri e fro) the hea+e"t to the )o"t e6+en"ive- et the )ainthr!"t of their )ar etin/ atta ha" (een in the )edi!)3+ri e ate/or#- The# have )at hed their o)+etitor"*)ainl# the Swi""* in ter)" of !alit# and feat!re" of wat he" (!t have !nder !t the) in ter)" of +ri e-

In +enetratin/ the United State" and E!ro+ean )ar et"* the >a+ane"e have ta en a "o)ewhat differentta - The# have avoided "ellin/ their own wat he" at either end of the )ar et- In +arti !lar* the# have let other"fi/ht it o!t at the (otto) of the )ar et- More "o than in the Far Ea"t* the# have fo !"ed their "ellin/ effort" onwat he" in the )edi!)3+ri e ate/or#- Thi" )ean"* for in"tan e* that in the United State" the >a+ane"e have

on entrated on )ar etin/ wat he" retailin/ in the 01' 3 0$'' ran/e- et* within thi" "e/)ent of the )ar et* the>a+ane"e have relied on their !"!al +ri e "trate/#: )ore wat h for the "a)e +ri e or a o)+ara(le wat h for le""

)one#- Several rea"on" have e+t the >a+ane"e o!t of the l!6!r# and of the wat h )ar et in the United State" andin E!ro+e- Fir"t* a few fir)" have do)inated the l!6!r# wat h (!"ine"" for )an# #ear"4 the# have reated anentren hed +o"ition for the)"elve" a" +re"ti/e wat h3)a er"- Allied to thi" i" the fa t that the l!6!r# wat h

(!"ine"" i" a" )! h one of "ellin/ 5ewelr# a" it i" one of "ellin/ wat he"- To +enetrate the to+ end of the wat h)ar et* the >a+ane"e wo!ld have had to inve"t heavil# in (!ildin/ !+ a +re"ti/e i)a/e and in develo+in/ new)ar etin/ " ill"- And even if the# had (een "! e""f!l* their "ale" wo!ld have (een li)ited in !nit ter)"- Th!"* thever# nat!re of the l!6!r# (!"ine"" wa" ontrar# to a e# feat!re of the >a+ane"e wat h "trate/#: )a"" +rod! tion-

The "it!ation at the low3+ri e end of the )ar et ha" (een !ite a different )atter- The >a+ane"ewat h)a er" have not ta en on the +in3lever )an!fa t!rer"* li e Ti)e6* dire tl#- !t indire tl# the# have (eenver# )! h involved in the o)+etitive (attle* +arti !larl# the one in the United State"* (etween the +in3lever andthe 5eweled3lever )an!fa t!rer"-

In the late $%,'" the >a+ane"e wat h)a er"* e"+e iall# Sei o and Citi=en* (e a)e )a5or "!++lier" ofwat h )ove)ent" and o)+onent" to the U-S- ind!"tr#- So)e A)eri an 5eweled3lever )an!fa t!rer" i)+ortedine6+en"ive )ove)ent" fro) >a+an* +!t the )ove)ent" into their own a"e"* and )ar eted the wat he" at +ri e"

o)+ara(le to tho"e for the Ti)e6 line of wat he"- Other" i)+orted >a+ane"e )ove)ent" and +art" into the ir/inI"land"* fini"hed the wat he" there in o)+an#3owned a""e)(l# +lant"* and "hi++ed the wat he"* d!t#3free* intothe United State"- Fir)" li e enr!" and El/in /ot their )ove)ent" and +art" fro) Sei o- Generall# "+ea in/*arran/e)ent" li e the"e have ontin!ed !+ thro!/h the earl# $%&'"-

ow "! e""f!l have the >a+ane"e (een at +enetratin/ over"ea" )ar et"K Relia(le data relatin/ to their)ar et "hare in A"ia and in a n!)(er of We"tern E!ro+ean o!ntrie" do not e6i"t- Re/ardin/ the United State"*offi ial data relatin/ to the #ear $%B? )a e it +o""i(le to arrive at a ro!/h an"wer to the !e"tion- In $%B? a(o!t,7 of the wat he" i)+orted dire tl# into the United State" o)e fro) >a+an and a(o!t half of all the o)+onent"i)+orted into the ir/in I"land" in that #ear al"o o)e fro) >a+an- Addin/ to/ether dire t and indire t i)+ort"*the >a+ane"e "!++lied a(o!t ?7 of the U-S- )ar et at that ti)e-

O(vio!"l#* within onl# a(o!t $97 of worldwide " ale" and ?7 of U-S- "ale" !nder their ontrol in $%&'*the >a+ane"e wat h)a er" had a /ood di"tan e to /o to at h with the Swi""- et the >a+ane"e rea hed thi" +ointin not )! h )ore than a de ade* and what wor ed in the +a"t o!ld well wor in the f!t!re- Witho!t do!(t* whatwor ed in the +a"t )o"t "! e""f!ll# for the >a+ane"e wat h)a er" wa" related to their )an!fa t!rin/

a+a(ilitie"-

Man!fa t!rin/ : A o)(ination of fo!r fa tor" ha" )ade it +o""i(le for the >a+ane"e to (e re)ar a(l# effi ient low3 o"t

wat h +rod! er"- The"e fa tor" have (een:

a( a read# "!++l# of di" i+lined* =ealo!" wor er" at low wa/e rate"4 (- advan e" )e hani=ed and a!to)ated +rod! tion te hni !e"4



13

- verti al inte/ration4 andd- )a"" +rod! tion of "tandardi=ed )ove)ent" and wat h )odel" (

# +!ttin/ the"e to/ether* the >a+ane"e )an!fa t!rer" attained e ono)ie" of " ale !n)at hed an#whereel"e in the world wat h ind!"tr#-

The la(o!r fa tor i"* of o!r"e* the fir"t that i))ediatel# o)e" to the o!t"ider." )ind- And there i" nodo!(t that the >a+ane"e have had a "i/nifi ant ed/e over other +rod! er." in thi" re"+e t- Thi" ha" (een e"+e iall#

tr!e in the a"e of 5eweled3lever wat he" "in e the la(o!r ontent a""o iated with their +rod! tion i" relativel#hi/h- For e6a)+le* a" late a" $%B, the wor er" a""e)(lin/ 5eweled3lever )ove)ent" in >a+an were earnin/ a(o!tone3fifth of what their o!nter+art" were earnin/ in the United State"- # the late $%B'"* however* ra+idl# ri"in/wa/e rate" in >a+an were erodin/ the ind!"tr#." la(or3 o"t advanta/e-

The re"+on"e of the ind!"tr# to )o!ntin/ wa/e" hi/hli/hted it" deter)ination to +re"erve it" o)+etitiveadvanta/e- >a+ane"e wat h)a er" were not ontent to "ta# at ho)e "eein/ their o"t" "+iralin/ !+ward"- In"tead*the# were +re+ared to "hift +rod! tion* or at lea"t "o)e of it* to new low3wa/e o!ntrie"- # $%&' (oth Sei o andCiti=en had e"ta(li"hed )an!fa t!rin/ fa ilitie" in on/ on/- Th!"* the wat h)a er"* li e )an# other >a+ane"e)an!fa t!rer"* had few !al)" a(o!t +!r"!in/ low3wa/e la(o!r wherever e6+andin/* the# did not have to fa ethe +ro(le) of +rote tin/ e)+lo#)ent at ho)e-

Still* >a+an." la(o!r3 o"t advanta/e "ho!ld not (e overe)+ha"i=ed- It ha" (een onl# +art of the total)an!fa t!rin/ +i t!re- The >a+ane"e wat h)a er" have al"o "tre""ed the !"e of the )o"t advan ed +rod! tion line

te hni !e"- A ordin/ to ind!"tr# le/end* thi" all a)e a(o!t a" the re"!lt of a vi"it to the United State" (#en/ineer" of - attori H Co- After World War II the# "t!died the +rod! tion te hni !e" !"ed (# a n!)(er ofU-S- wat h)a er" and al"o vi"ited the a!to3a""e)(l# +lant" in Detroit- A++arentl# the# were e"+e iall# i)+re""ed

(# what the# "aw in the wat h ind!"tr# (!t were "tr! (# what the# "aw in the a!to)o(ile ind!"tr#- In an# a"e* (# the )id3$%,'" - attori H Co- had ada+ted it" wat h)a in/ to a onve#or3(elt a""e)(l#3line o+eration- Withthi" t#+e of +rod! tion attori o!ld !"e not onl# hea+ la(o!r* (!t al"o !n" illed la(o!r- The re"t of the >a+ane"eind!"tr# "oon followed attori." lead-

The ind!"tr# too all other "te+" ne e""ar# to fo"ter low3 o"t +rod! tion- It inte/rated (a ward into the)an!fa t!re of o)+onent"* 5ewel"* even wat h)a in/ )a hiner#- And it "tandardi=ed +rod! tion whenever andwherever it o!ld- The re"!lt of o)(inin/ all the"e feat!re" of )an!fa t!rin/ ha" (een a total )a""3+rod! tiona++roa h to wat h)a in/-

Co)+arin/ the Swi"" ind!"tr# to the >a+ane"e ind!"tr# dra)ati=e" the differen e in their a++roa h to

)an!fa t!rin/- In Swit=erland* a" we have (een aro!nd $*''' fir)" were involved in +rod! in/* lar/el# thro!/h atwo3tier "#"te)* a(o!t &9 )illion wat he" in $%&'- In the "a)e #ear two >a+ane"e fir)"* Sei o and Citi=en* +rod! ed in3ho!"e the e !ivalent of 1'7 of the total Swi"" o!t+!t-

What did thi" differen e )ean in ter)" of a t!al +rod! tion o"tK A" )i/ht (e e6+e ted* the wat h)a er"were rel! tant to /ive o!t "+e ifi fi/!re"- One ha" to rel# on indire t )ea"!re" to /et at the an"wer- Ta(le3&

+rovide" at lea"t a l!e-

Ta(le3&: 2er3Unit al!e of Wat h Move)ent" I)+orted into the United State"@;Cal !lated fro) $%&' data<

Move)ent" Fro) Swit=erland Fro) >a+an' to $ 5ewel 0 8-'? 0 $-$,8 to & 5ewel" 1-B, 1-'B? to $, 5ewel"@@ $8-,, $'-?,

$B to $& 5ewel" &-,' 9-81Over $& >ewel"@@@ 8?-?' B-B1

@ al!ed at F-'- the e6+ortin/ o!ntr#@@ I)+ort" of )ove)ent" in thi" ate/or# were well (elow tho"e in the $B to $& 5ewel" ate/or#* whi h e6+lain" the hi/h +er3!nit +ri e-@@@ Co)+ari"on of +ri e" for wat he" in thi" ate/or# i" +ro(a(l# invalid "in e the i)+ort" fro) Swit=erland in l!de a hi/h

+ro+ortion of l!6!r# )odel"-

Are the"e fi/!re" a valid /!ide to the +rod! tion o"t differential (etween Swit=erland and >a+anKUndo!(tedl# the Swi"" wo!ld "a# no* lai)in/ that the >a+ane"e fi/!re" re+re"ent onl# )ar/inal +ri e"- 2erha+"thi" i" tr!e* (!t even "o the fi/!re" +in3+oint an advanta/e that the >a+ane"e have had over the Swi""- With a lar/e



15

- 7arry . 7enshal, ;resident, ulova Watch

i/hli/ht" a" of $%&' :In $%&' U-S- on"!)er" "+ent a++ro6i)atel# 0 $ (illion to +!r ha"e a(o!t 9, )illion wri"twat he"* of

whi h ro!/hl# 9'7* or a(o!t $? )illion had (een )an!fa t!red at ho)e* while the re)ainin/ B'7 had (eeni)+orted fro) forei/n o!ntrie" or fro) the ir/in I"land"- At the "a)e ti)e* U-S- wat h e6+ort"* a" the# had

(een for )an# #ear"* were nil- Th!" in $%&' the United State" wa" (oth the World." lar/e"t wat h )ar et and the

world." lar/e"t net i)+orter of wat he"- owever* a" we "hall "ee "hortl#* the"e fi/!re" do not )ean that forei/nwat h)a er" "!++lied B'7 of the U-S- )ar et-Altho!/h the United State" wa" the World." lar/e"t wat h )ar et* wat h)a in/ re+re"ented an

in"i/nifi ant +art of U-S- )an!fa t!rin/ ind!"tr#- Wor er" en/a/ed in wat h)a in/ on"tit!ted onl# one3tenth of$7 of total )an!fa t!rin/ e)+lo#)ent- In fa t* onl# two U-S- wat h o)+anie"* !lova and Ti)e6* wereinvolved in an# do)e"ti wat h +rod! tion- Thi" +oint i" r! ial- To !nder"tand an#thin/ a(o!t the U-S- wat hind!"tr# a" it )oved into the $%&'"* it i" fir"t i)+erative to di"tin/!i"h (etween tho"e wat h)a er" that are (othU-S- )an!fa t!rin/ and "ellin/ enter+ri"e" and tho"e that were )erel# U-S- )ar etin/ or/ani=ation"- Ma in/ thatdi"tin tion all" for "o)e hi"tor#-

The 2o"t3World War II Shift in Wat h 2rod! tion :Sin e the (e/innin/* U-S- o)+anie" have "tr!//led to o+e with the la(o!r re !ire)ent" of

wat h)a in/- Man!fa t!rin/ wat he" (# traditional te hni !e" ha" alwa#" (een la(o!r inten"ive4 (e#ond that itha" alled for it" own (rand of " illed la(o!r- Neither of the"e re !ire)ent" ha" ever (een ea"il# )et in the UnitedState"- So)e U-S- wat h "eller" never tried4 fro) the "tart i)+orted fini"hed wat he" or alternativel# i)+orted)ove)ent" and "i)+l# +!t the) in wat h a"e" here B- Other fir)" ta led the +ro(le) (# lo atin/ at lea"t +art oftheir +rod! tion over"ea"- !lova and Gr!en* for e6a)+le* e"ta(li"hed their own )an!fa t!rin/ +lant" inSwit=erland in the earl# #ear" of the $%?'"- Still other o)+anie" lo ated all their )an!fa t!rin/ a+a it# in theUnited State"* o!ntin/ on )e hani=ation to off"et forei/n +rod! t". la(o!r advanta/e"-

After the Se ond World War )o"t of the (i/ na)e" in the U-S- wat h ind!"tr# had the (etter +art of theiro!t+!t )an!fa t!red in the United State"* tho!/h a few did o(tain a "i/nifi ant "hare of their need" fro) their ownSwi"" +lant"- And after the War* 5eweled3lever wat he" do)inated the U-S- )ar et- Then d!rin/ the $%,'" andearl# $%B'" the "it!ation han/ed dra"ti all#- Ti)e6 fir"t "tor)ed the low3+ri e end of the wat h )ar et and later)oved !+ into the )iddle +ri e ran/e- At the "a)e ti)e )ar/inal Swi"" +rod! er" flooded the U-S- )ar et with

ine6+en"ive +in3lever and 5eweled3lever wat he" )a in/ +ri e o)+etition all the )ore "evere- And (# the earl#$%B'" the >a+ane"e (e/an to arve o!t their +ie e of the U-S- )ar et- On to+ of thi"* the )a""3)er handi"in/revol!tion of the $%,'" threw the traditional wat h di"tri(!tion "#"te)* "ale" thro!/h 5eweler" and fine de+art)ent"tore"* into hao"- To "!rvive in a )ar et do)inated (# +ri e o)+etition* one after another U-S- wat h o)+an#/ave !+ on do)e"ti wat h )an!fa t!rin/ !ntil* a" +ointed o!t a(ove* (# $%&' there were onl# two "!rvivor"-

So)e of tho"e who "hifted to forei/n "!++l# a !ired their own over"ea" +lant"* re"!ltin/ in an in rea"e inthe n!)(er of U-S- ontrolled +lant" in Swit=erland- A ordin/ to one e"ti)ate* in the "e ond half of the $%B'"a(o!t 9,7 of the 5eweled3lever wat he" i)+orted into the United State" fro) Swit=erland were )ade in +lant"owned (# A)eri an fir)"- Other U-S- o)+anie"* however* fo!nd inde+endent Swi"" or >a+ane"e fir)" whi h"!++lied the) with wat he"* whi h the# then "old in the United State" !nder their own fa)iliar trade na)e"- Inaddition* )an# of the U-S- wat h)a er" t!rned for at lea"t a +art of their need" to )an!fa t!rin/ and a""e)(l# inthe ir/in I"land" ;See A++endi6 C<-

The !+"hot of all thi" "hiftin/ wa" that d!rin/ the $%,'3$%&' +eriod a n!)(er of the well3 nown na)e" inthe U-S- wat h ind!"tr# (e a)e little )ore than )ar etin/ or/ani=ation"- Their ontrol of )an!fa t!rin/o+eration"* if indeed* the# en/a/ed in )an!fa t!rin/ at all* (e a)e "e ondar#- The# "!rvived lar/el# (# e6+loitin/the trade)ar " that the# had e"ta(li"hed over the #ear" in the United State"- # the earl# $%&'"* however* it wa"

(e o)in/ !e"tiona(le whether the"e wat h )ar eter" o!ld "!rvive-

Ind!"tr# Str! t!re :Even tho!/h )ar et3"hare data are not +!(li it# availa(le* it i" lear that two o)+anie" r!led the U-S-

wat h )ar et in the earl# $%&'"- 2ro(a(l# "o)ewhere (etween two3third" and three3 !arter" of all wat he" "old in

6 Since imports constitute such a high proportion of U.S.watch consumption, tariffs were a factor that could not beoverlooked by U.S. and foreign watchmakers. Appendix B brieflydiscusses the tariff issue.



16

the United State" were )ade (# either !lova or Ti)e6- Another half do=en U-S- wat h o)+anie" and a /ro!+ offorei/n wat h)a er" " ra)(led for the re"t of the U-S- )ar et-

E6hi(it 8 +re"ent" "o)e of the (a"i" fa t" a(o!t the fir)" traditionall# on"idered to (e +art of the U-S-wat h ind!"tr#- Three +oint" "tand o!t in the e6hi(it- Fir"t* )o"t of the o)+anie" did not )an!fa t!re in theUnited State"- Se ond* )o"t were lo"in/ )one# in the earl# $%&'"- And third* "everal had "old o!t to lar/er U-S-

o)+anie" or two Swi"" intere"t"- If E6hi(it 8 in l!ded (alan e3"heet data* it wo!ld al"o "how that a n!)(er ofthe o)+anie" were heavil# in de(t- A+art fro) !lova and Ti)e6* the on e +ro!d U-S- wat h ind!"tr# wa" in a

fairl# "orr# "tate a" of the earl# $%&'"- What had !lova and Ti)e6 done ri/ht to "e+arate the)"elve" fro)other"K

!lova :D!rin/ the $%B'" !lova." )ana/e)ent +!r"!ed fo!r )ain /oal":

$< )ar etin/ a line of wat he" overin/ all +ri e and !"er "e/)ent"48< reatin/ a worldwide +rod! tion (a"e41< e6+andin/ it" international o+eration"4 and9< e6+loitin/ to the f!lle"t it" t!nin/3for innovation-

ow !lova ta led the U-S- )ar et+la e i" indi ative of the +rod! t "trate/# the o)+an# i)+le)ented

aro!nd the world- Thro!/ho!t the $%B'" and into the $%&'" !lova "old a line of wat he" in ea h of the three)a5or )ar et "e/)ent"* low* )edi!)* and hi/h3+ri e* and e !alled or o!tfa ed o)+etition in ea h "e/)ent"-At the (otto) of the )ar et* in the +ri e ran/e of aro!nd 01' and !nder* !lova offered it" JCaravell"J

line- In $%B$ re"+on"e to Ti)e6* !lova had o!ntered with thi" line whi h* tho!/h +ri ed o)+etitivel# withTi)e6." +in3lever wat he"* on"i"ted "olel# of wat he" ontainin/ 5eweled3lever )ove)ent"- !lova wa" a(le to

hallen/e Ti)e6 (e a!"e it had t!rned to a >a+ane"e "!++lier* Citi=en Wat h* for ine6+en"ive 5eweled3lever)ove)ent"- # the )id3$%B'" !lova lai)ed that it wa" the leader in the 5eweled3lever +art of the ine6+en"ivewat h )ar et- 2arentheti all#* it "ho!ld (e noted here that !lova." "! e"" with the Caravelle line +ro(a(l#e6+lain" wh# Citi=en* >a+ane"e "e ond lar/e"t wat h)a er* ha" never )oved into the U-S- )ar et on it" own-

The )iddle of the )ar et* on"i"tin/ +rin i+all# of 5eweled lever wat he" "ellin/ in the 0 1' to 0 $'' +ri eran/e* ha" alwa#" (een !lova." "tron/hold- The o)+an# )ar eted literall# h!ndred" of )odel" !nder the !lovana)e* and within thi" "e/)ent of the )ar et re)ained +ri e o)+etitive (# )an!fa t!rin/ the wat h )ove)ent"

in it" own Swi"" +lant"- In fa t* "!++l#in/ the U-S- )ar et )ade !lova the lar/e"t "in/le )an!fa t!rer inSwit=erland-At the to+ of the )ar et* !lova." t!nin/3for wat h* the JA !tronJ* wa" in a la"" of it" own- Wh# thi"

wa" "o* all" for a little hi"tor#- Clo " (a"ed on the t!nin/ for +rin i+le dated fro) the t!rn of the ent!r#- In$%,8" #o!n/ Swi"" en/ineer* wor in/ at the !lova +lant in Swit=erland* /ot )ana/e)ent a++roval to develo+ a)iniat!ri=ed t!nin/3for )ove)ent- # the )id3$%,'" he had +artiall# "! eeded- !lova (ro!/ht hi" +rotot#+e"to the United State" and )iniat!ri=ed the) f!rther (# a++l#in/ advan ed ele troni " and )etall!r/i al te hni !e"-After +atentin/ the devi e* !lova +!t it on the )ar et in $%B' a" the A !tron. wat h-

Tho!/h the A !tron did not o)+ete head3on with l!6!r# )e hani al wat he"* tho"e "old )ore a" 5ewelr# than a" ti)e3+ie e"* it "oon /ra((ed the lion." "hare of wat h +!r ha"e" in the over 0 $'' +ri e ate/or#-Moreover* !lova "we+t the )ar et with a wat h de"i/ned "olel# for )en4 for te hni al rea"on"* JMini3A !tor"Jfor wo)en were not +!t on the )ar et !ntil $%&$-

Wherea" A !tron." !ni !ene"" !ndo!(tedl# a o!nted for )! h of !lova." "! e"" within the hi/h3 +ri e "e/)ent of the wat h )ar et* !ni !ene"" of +rod! t o!ld not a o!nt for !lova." "! e"" in the other two"e/)ent" of the )ar et- In"tead relied on a//re""ive )ar etin/- Adverti"in/ and di"tri(!tion "!++ort* for #ear."

!lova." forte* were the two riti al )ar etin/ fa tor"-# the "e ond half of the "i6tie"* !lova wa" "+endin/ a" )! h a" 0 9 )illion at a ra of it" "ea"onal

adverti"in/ a)+ai/n"- # the (e/innin/ of the "eventie" it wa" "+endin/ half of all wat h adverti"in/ dollar" inthe United State"- It )aintained the lar/e"t "ale" forte within the ind!"tr# and +rovided the di"tri(!tor"*

+arti !larl# 5eweler"* with do=en" of different "ellin/ and "ervi e +ro/ra))e"- In "hort* !lova* whi h a)e o!t ofthe "e ond World War "o)ewhat lar/er than it" rival"* in rea"ed the /a+ (# +o!rin/ f!nd" into )ar etin/ at a rate!n+aralleled in the ind!"tr#

Meanwhile* !lova )ana/e)ent (!ilt the )an!fa t!rin/ (a"e that en"!red the "! e"" of it" )ar etin/"trate/#- It e6+anded the o)+an#." )an!fa t!rin/ o+eration" !ntil* (# $%&'* it had 8' +lant" " attered aro!nd theworld- A" "!//e"ted (# the !otation at the (e/innin/ of thi" "e tion* !lova." )ana/e)ent "aw it" worldwide



17

+rod! tion "#"te) a" it" e# o)+etitive "tren/th- With thi" "#"te) !lova o!ld +i the ti)e and +la e for +rod! in/ a +arti !lar wat h- For in"tan e* it on entrated U-S- +rod! tion on the A !tron* whi h re !ire a lowla(o!r in+!t "o+hi"ti ated te hnolo/#-

F!rther)ore* a" it (roadened it" )an!fa t!rin/ (a"e* !lova (e a)e a+a(le of ond! tin/ re"ear h anddevelo+)ent and )ar et te"tin/ at )ore than one "ite- It develo+ed it" Mini3A !tron for wo)en in Swit=erlandand fir"t +!t it on the )ar et in Fran e-

A" +rod! tion "+read aro!nd the world* "o too* did "ale"- Wherea"* in $%B' international (!"ine""

a o!nted for not )! h than ,7 of !lova." on"!)er "ale" ;the"e e6 l!de defen"e and ind!"trial "ale"< a de adelater the +er enta/e wa" in the 8'7 ran/e- 2art of thi" "!r/e o!ld (e attri(!ted to the A !tron* whi h !lovaintrod! ed* with "! e""* in a n!)(er of over"ea" )ar et"- Th!" (# arr#in/ o)+etition into it" forei/n rival".own (a #ard"* !lova dil!ted "o)ewhat the effort" the# o!ld (rin/ to (ear on the U-S- )ar et+la e-

At the "a)e ti)e that !lova wa" +!"hin/ it" "ale" (a"e* it wa" al"o "horin/ !+ it" worldwide do)inan ein the field of t!nin/ for te hnolo/#- In $%B?* Swi"" )an!fa t!rer"* !na(le to develo+ a ver"ion of the t!nin/3for )ove)ent that did not onfli t with the !lova +atent* a/reed to enter into a li en"in/ a/ree)ent with !lova-Con"e !entl#* (# the earl# $%&'" "everal Swi"" +rod! er"* !lova." li en"ee"* were )a in/ and "ellin/ their ownver"ion" of the t!nin/3for wat h- And on the other "ide of the /lo(e* the Citi=en Wat h Co)+an#* >a+an." Se ondlar/e"t wat h)a er and )inorit# +artner with !lova in the 5oint )an!fa t!rin/ vent!re* wa" )a in/ and "ellin/A !tron" !nder another li en"e a/ree)ent with !lova-

The o)(ination of all the"e fa tor" t!rned !lova into the world." lar/e"t wat h "eller* in dollar ter)"-

Ti)e6 :Co)in/ o!t of nowhere in $%,'* Ti)e6 arved o!t a )a5or +la e for it"elf in the U-S- Wat h )ar et in

the $%,'" and in forei/n )ar et" in the $%B'"-* On al)o"t ever# o!nt Ti)e6." +rod! t and )ar et "trate/#differed fro) that of the traditional wat h)a er"- Ti)e6 did not (!ild it" re+!tation on the 5eweled3lever wat h-In"tead* it too a +in3lever )ove)ent* "i)+lified it even f!rther "o that it o!ld (e )a""3+rod! ed with a!to)atedte hni !e"* +!t in "i)+le (!t ta"tef!l a"e" and )ar eted it" fir"t wat h line to retail at 0B-%, to 0&-%,- ThenTi)e6 went o!t"ide the onventional di"tri(!tion "#"te)* fir"t "ellin/ )o"t of it" wat he" thro!/h dr!/ "tore" and"!("e !entl# thro!/h a n!)(er of )a"" )er handi"er"- Ne6t* Ti)e6 dr!))ed !+ "ale" thro!/h inten"iveadverti"in/- Li e !lova* Ti)e6 "+ent far )ore for it" adverti"in/ than wa" !"to)ar# in the ind!"tr# at the ti)e-

!t !nli e !lova or an# other rival Ti)e6 +ro)oted it" line in wa#" that were !northodo6 and* a ordin/ toriti "* "o)ewhat /ari"h- One e6a)+le of Ti)e6." off3 e# adverti"in/ a++roa h* it" Jtort!re te"t"J* (e a)e a

"tandard on networ T in the late $%,'"-# the earl# $%B'" Ti)e6 o!ld lai) that it wa" "ellin/ one o!t of ever# three wat he" in the UnitedState"- It then (roadened it" +rod! t line with ele tri wat he" and "o)e 5eweled3lever )odel"- Con"e !entl#* (#the late $%B'" Ti)e6 o!ld lai) that it wa" "ellin/ ever# other wat h in the United State"-

While Ti)e6 wa" "tren/thenin/ it" hold on the )ar et* it wa" al"o* li e !lova* (!ildin/ !+ a worldwide)an!fa t!rin/ "#"te)- # $%&'* it too had 8' +lant" " attered aro!nd the world- Th!"* (oth /iant" in the U-S-wat h ind!"tr# had )an!fa t!rin/ (a"e" )ore widel# di"+er"ed than an# of their U-S- rival"* or* for that )atter*than an# of their forei/n rival"-

Le""on" fro) !lova and Ti)e6 :The "! e"" of !lova and Ti)e6 all" attention to "everal i)+ortant +oint"* whi h* altho!/h the# relate

(a"i all# to the U-S- )ar et+la e* )a# a++l# el"ewhere a" well- The"e are :

$< # the end of the $%B'" wat h)a er" o!ld no lon/er (a"e their )ar etin/ "trate/ie" al)o"te6 l!"ivel# on the +!n h of the onventional di"tri(!tion "#"te)- oth !lova and Ti)e6 )ar eted their

+rod! t" dire tl# to on"!)er" and )ade their (rand na)e"* not the 5eweler." re o))endation* the e# towat h "ale"- In +art* thi" "wit h in )ar etin/ e)+ha"i" wa" a nat!ral on"e !en e of the "wee+in/

han/e" that affe ted the di"tri(!tion and retailin/ of )an# on"!)er /ood"- In +art* it wa" a""o iatedwith the "low (!t "tead# di"a++earan e in the United State" of an i)+ortant "o!r e of on"!)erinfor)ation4 the wat h re+air)an- It wa" al"o related to on"!)er onf!"ion over !alit#- In the $%,'"and $%B'" the ind!"tr# (affled the on"!)er with literall# tho!"and" of wat h )odel" and re !rrent +ri e

!ttin/- Una(le to deter)ine what wa" a /ood wat h at a fair +ri e* the on"!)er nat!rall# t!rned to theone or two (rand" with whi h he or "he wa" )o"t fa)iliar-

8< Une6+loited ni he" were a thin/ of the +a"t in the U-S- wat h )ar et- !lova wa" ver# e6+li it a(o!t



18

it" "trate/# in thi" re/ard- Note thi" o))ent in it" $%&' ann!al re+ort :

" ulova's market researches have sought to identify the particular needs of segments consumer groups. That we have succeeded in this crucial phase of our operations is evidenced by therecord number of more than <== different watch models offered to the 2nited States markets."

The re+ort went on to note that !lova "old wat he" in the +ri e ran/e of 0$'-%, to 0$$-'''- And* of

o!r"e* Ti)e6 o)+letel# (lan eted the low +ri e field and +art of the )id3+ri e field- The re"t ofo)+etition* the other U-S- wat h)a er" and do=en" of forei/n )an!fa t!rer"* offered h!ndred" ofadditional )odel"- # $%&'* the han e that a wat h)a er wo!ld find a ni he !nnoti ated (# o)+etitionwa"* for all +ra ti al +!r+o"e"* nil-

1< Finall#* the U-S- wat h o)+an# with a "tri tl# do)e"ti orientation wa" an ana hroni")- D!rin/ the$%B'" !lova and Ti)e6 redefined the)"elve" a" )!ltinational fir)"4 their o!tloo on )ar et" and

+rod! tion (e a)e worldwide- Over ti)e the# internationali=ed their )ar etin/* +rod! tion* and re"ear hand develo+)ent " ill" and o)+eted "! e""f!ll# (e a!"e the# e6+loited advanta/e" re/ardle"" of wherethe advanta/e" were lo ated- It i" !e"tiona(le if either fir)* or an# other )a5or wat h)a er* for that)atter* o!ld "!rvive in the $%&'" if it li)ited it" o+eration" to a "in/le o!ntr#-

What a(o!t "o)e of the other fa tor" that wo!ld deter)ine the o)+etitive a(ilit# of U-S- wat h)a er" inthe $%&'"K

Re"ear h and Develo+)ent :Govern)ent3"!++orted re"ear h and develo+)ent wor and defen"e3oriented +rod! tion e6+anded the

te hnolo/i al (a"e of the leadin/ U-S- wat h)a er" in a wa# not o+en to the wat h)a er" in Swit=erland and>a+an- Moreover* !nli e the Swi"" (!t li e the >a+ane"e the U-S- o)+anie" on entrated on a !irin/ advan edte hni al " ill" within their own or/ani=ation"-

For "o)e of the U-S- o)+anie"* the " ill" the# a !)!lated* lar/el# at /overn)ent e6+en"e* added !+ toan i)+re""ive li"t- Ta e !lova* for in"tan e- D!rin/ the $%,'" and $%B'" !lova develo+ed and +rod! ed awhole arra# of intri ate ele tro3)e hani al devi e" for )i""ile" and wa" a )a5or "!++lier of +art" for onventionala))!nition- Co))entin/ on it" te hni al a+a(ilitie" o!t"ide the wat h)a in/ field* !lova." $%B? Ann!al

Re+orted had "tated :"The products made in the company's four non-consumer areas have as a commondenominator, watch-making technology and miniature electronics, threading through the

production of artillery and mortar fuses, micro-circuit automation e uipment, testinstrumentation, crystals, oscillations, and serve-mechanisms, and production of millions of

pin-head si*ed synthetic !ewels."

The re+ort went on to e)+ha"i=e the advanta/e" inherent in the"e a tivitie" :"The esoteric-sounding inventory of principal products of the non-consumer units fuses, safeand arm devices, microbonders, crystal-filters, optical-choppers, tuning-fork oscillators, laserbeam choppers - seems remote from watch-design and manufacture> but they represent an in-house technological base whose impact can be company-wide with consumer or non-consumerinvolvement."

Other wat h)a er" en/a/ed in "i)ilar a tivitie"- Ti)e6 develo+ed and )an!fa t!red /#ro" o+e andti)in/ devi e"- enr!" "!++lied hi/h3+re i"ion o)+onent" for )i""ile"* +ower3"!++l# "#"te)" for naval ve""el"*and ele troni in"tr!)entation for "atellite"- El/in )ade fli/ht in"tr!)ent"-

To (e "!re* not all of the U-S- wat h)a er" retained the te hni al nowled/e and e6+erti"e the# a !iredin the o!r"e of )eetin/ defen"e need"- Tho"e that had to "ell o!t to other o)+anie" or that had e6+erien ede"+e iall# hard tie" at the end of the $%B'" )ore than li el# "aw their re"ervoir of nowled/e and " ill" dwindlin/awa# or (e o)in/ o("ole" ent- In the earl# $%&'" the ")aller U-S- wat h o)+anie" "howed no "tri in/ eviden ethat the# had a te hnolo/i al lead over Swi"" and >a+ane"e o)+anie"- !lova and Ti)e6 were a different )atter*however* the# had +ro"+ered thro!/ho!t the $%B'"- The#* therefore* had the o++ort!nit# to (!ild !+ their



19

re"ervoir" of " ill"- In the earl# $%&'" the# were in the te hnolo/# van/!ard* and a" the de ade rolled on theira !)!lated te hni al a+a(ilitie" )i/ht well t!rn to (e their )o"t i)+ortant o)+etitive ed/e over Swi"" and>a+ane"e rival"-

Diver"ifi ation :At the end or another in the fiftie" and "i6tie" al)o"t all the U-S- wat h)a er" e6+eri)ented with

diver"ifi ation Generall# "+ea in/* none of the e6+eri)ent" wa" "! e""f!l- Several fir)" did develo+ line" of

ind!"trial +rod! t" li e +re i"ion +art" or ele tro)e hani al o)+onent"* (!t the "ale of the"e line" never (e a)e a)a5or +art of their o+eration"- And a" for on"!)er /ood"* the wat h)a er" de)on"trated a fairl# on"i"tentina(ilit# to )ar et "! e""f!ll# a "e ond on"!)er line-

So)e ind!"tr# o("erver" attri(!ted thi" wea ne"" to the wat h)a er." !ni !e (!t "+e ifi "et of )ar etin/" ill"- Other lai)ed that the wat h)a er" had "o )an# +ro(le)" to deal with that the# never had the han e northe re"o!r e" to +!r"!e diver"ifi ation "erio!"l#- And the #ni " "!//e"ted that it wa" "i)+l# another a"e of anind!"tr# with a fi6ation on one te hnolo/# and on one +rod! t- Whatever the a!"e* a" the ind!"tr# )oved into the$%&'" there wa" little eviden e that it" )e)(er" o!ld re/ard diver"ifi ation a" a readil# availa(le )ean" foradver"it# or for "ti)!latin/ /rowth-

U-S- Inve"t)ent in the Swi"" Ind!"tr#The e6+iration* at the end of $%B,* of the Swi"" Govern)ent." +rohi(ition a/ain"t the a !i"ition or "ale

of wat h)a in/ o)+anie" wa" followed (# a fl!rr# of U-S- inve"t)ent in the Swi"" ind!"tr#- A" "oon a" the (arrier" dro++ed* a)ilton and enr!" ea h +!r ha"ed Swi"" wat h)a er" in order to o(tain )an!fa t!rin/ "ite"in Swit=erland- The ne6t #ear* $%B&* !lova (o!/ht o!t Univer"al Geneva* a )a er of !alit# hi/h +ri edwat he"- A ordin/ to re+ort"* !lova had it" e#e on Univer"al Geneva." worldwide di"tri(!tion "#"te)- OtherU-S- wat h)a er" )i/ht have inve"ted in Swi"" o)+anie" a" well* had not the Swi"" /one on the offen"ive and"tarted to inve"t in U-S- o)+anie"-

An o!t"ider )ade the ne6t )a5or )ove into the Swi"" ind!"tr# in $%&$ when the A)eri an fir) enitha !ired a )a5orit# intere"t of the Movade3 enith3Monida oldin/ Co)+an#* Swit=erland." fo!rth lar/e"twat h)a er"- The )er/ed o)+anie" anno!n ed their intention to +arle# enith." ele troni " e6+erti"e with theSwi"" /ro!+" wat h)a in/ " ill" to o)+ete in the ele troni wat h )ar et-

2redi tin/ whether ro"" o!ntr# inve"t)ent ;U-S- o)+anie" in Swi"" fir)" and vi e ver"a< wo!ld ee+!+ it" +a e thro!/ho!t the re"t of the $%&'" wa" o)+li ated (# two o++o"in/ fa tor"- On the other hand* the

o++ort!nitie" for thi" t#+e of inve"t)ent were de linin/- In Swit=erland* the wave of hori=ontal and verti al)er/er" le""ened the n!)(er of andidate" for a !i"ition (# U-S- o)+anie"- And in the United State" al)o"t allof the wat h o)+anie"* with the e6 e+tion of !lova and Ti)e6* had o)e !nder +artial or o)+lete Swi""

ontrol- On the other hand* f!rther inve"t)ent in ea h other." ind!"trie" )i/ht (e the (e"t wa# for U-S- Swi""wat h o)+anie" to o+e with the in"ta(ilit# ari"in/ o!t of the ele troni wat h (attle- For e6a)+le* in an arti leentitled JSwi"" Wat h)a er" 2lan More A)eri an Mer/er"J* the dire tor of Federation of Swi"" Wat h)a er"*Mr- Retrona=* +redi ted )ore Swi"" a !i"ition" of A)eri an wat h i)+orter"-

: The Ele troni Wat h attle

"+t all shapes up as an intriguing struggle that can be safely watched by most investors fromthe security of the side lines".- alue #ine Selection ? $pinion

Mar et 2la e Develo+)ent + The O+enin/ Shot"# the "e ond half of the $%B'" wat h)a er" in Swit=erland* the United State"* and >a+an* 5oined in

earne"t the ra e to (e fir"t on the )ar et with a !art= r#"tal ele troni wat h- And it wa" inevita(le that the ra ewo!ld (e r!n in the world." lar/e"t wat h )ar et: the United State"- A)eri an on"!)er" o!ld well afford thenew t#+e wat he"4 ea h fir)." (e"t han e at attainin/ )a""3+rod! tion e ono)ie" rode on +enetratin/ the lar/eU-S- )ar et4 and the enter of the new te hnolo/# wa" the United State"-

Sei o te)+oraril# lai)ed the rown when in $%&' it introd! ed it" analo/3ver"ion in the United State"-!t +rod! t diffi !ltie" for ed Sei o to re all the wat h "hortl# after it had (een +!t on the )ar et- Then !lova

la!n hed it" analo/ A !art=. in a l!6!r# ver"ion retailin/ at 0$*1,'- The #ear $%&$ "aw other )an!fa t!rer"anno!n in/ the introd! tion of their own e6+en"ive ver"ion" of !art= wat he"- 2ia/et* for e6a)+le* (ro!/ht o!tone retailin/ at 08*%''- Toward the end of the #ear a)ilton la!n hed it" di/ital 2!l"ar at a retail +ri e of 08*$''-Clearl#* the ind!"tr# wa" fir"t tr#in/ to " i) the rea) off the )ar et (# +a a/in/ l!6!r# a"e" aro!nd the new



20

te hnolo/#- !t the rea) did not la"t lon/-At the end of $%&$ !lova (ro!/ht o!t an i)+roved ver"ion of the A ! !art= (earin/ a retail +ri e of

01%,- Sei o ret!rned to the )ar et+la e with a !art= line retailin/ in the 09,' 3 09&, ran/e- Then in A+ril $%&8the Swi""* thro!/h E(a! he" SA* anno!n ed a f!ll line of P!art= Cr#"tal wat he"* (oth of the analo/ and di/italvariet#* to retail +ri e" of 01'' and !nder- ardl# had the Swi"" "+r!n/ their new" when Ti)e6 anno!n ed that itwa" a(o!t to introd! e on analo/ !art r#"tal wat h to retail at 0$8,- In the )id"t of all thi" a tivit#* 5eweler"were o)+lainin/ that new +rod! t anno!n e)ent" were flowin/ o!t of or+orate head !arter" a lot fa"ter than

the )arvel wat he" were flowin/ of a""e)(l# line"&

- Ind!"tr# rival" were in a "ort of fren=# to (e the late"t withthe newe"t- Still* the U-S- wat h )ar et did "ettle down to a f!ll two )onth" of tran !ilit#-

Mid3$%&8 : The S ir)i"hin/ i" Over :Reader" of the >!l# i""!e" of the vario!" 5ewelr# trade )a/a=ine" +!(li"hed in the United State" a)e

a ro"" a n!)(er of e#e3"to++er"- For e6a)+le* one two3+a/e adverti"e)ent arried thi" o+#:

!enrus De,ies-me.a/ !u"o0a/ Sei o/ Time&

THE NEW !ENRUS S-LID STATE TECHNI1UARTZ WATCH IS UNE1UALLED IN

PERF-R2ANCE STANDARD AND PRICE(

enr!" th!" hallen/ed the ind!"tr# with the introd! tion of it" analo/ ver"ion of a !art" wat h* ati)e+ie e whi h wa" to arr# a "!//e"ted retail +ri e of 0%%- F!rther)ore* enr!" let it (e nown that it intendedto )ar et the wat h thro!/h all availa(le di"tri(!tion hannel"* in l!din/ )a"" )er handi"er"- U+ to that +oint allthe wat h)a er" in l!din/ Ti)e6 had re"tri t" di"tri(!tion of the new wat he" to the 5eweller# trade- enr!".)ana/e)ent had a++arentl# de ided to !"e a +a/e of the Ti)e6 )ar etin/ )an!al-

!t the enr!" adverti"e)ent wa" al)o"t (a to (a with other" "howin/ that the "olid3"tate wat h wa"a(o!t to (e o)e a realit# in the U-S- )ar et+la e- The Waltha) Wat h Co)+an#* a divi"ion of the Swi""

So ietede" Grade3Te)+"* anno!n ed that it wo!ld "oon have availa(le a !art= r#"tal* o)+letel# "olid3"tate*li !id r#"tal di"+la# wat h- 2ri ed at !nder 08'' retail* the wat h wo!ld o)e on the )ar et at le"" than half the +ri e for the fir"t few wat he" of thi" t#+e- A" i)+ortant a" it" +ri e wa" the fa t that it wa" an Jall3A)eri adevelo+ed and )an!fa t!red +rod! tJ-

At the ver# "a)e ti)e* Gr!en anno!n ed that it wa" a(o!t to introd! e it" Teleti)e* a wat h o)+ara(leto Waltha)."- The retail +ri e ta/ on the Gr!en wat h wa" to (e 0$,'-

All the"e anno!n e)ent" re+re"ented new" eno!/h* (!t the trade +re"" ontained another tit3(it that )a#have (een )ore i)+ortant than ever#thin/ el"e- Mi ro)a Univer"al of Mo!ntain iew* California* one of the

+rin i+al "!++lier" of inte/rated ir !it" and li !id r#"tal di"+la#" to wat h)a er"* di" lo"ed it" intention to "ellwat he" !nder it" own na)e- Mi ro)a "aid it +lanned to )ar et in analo/ !art= wat h at a retail +ri e of 0&%-,'and a di/ital "olid3"tate wat h at the retail +ri e of 0$9%-,'- Mi ro)a al"o "aid that it had a/reed to )a e !art=wat h for Sear"3Roe(! - Th!"* the fir"t of the ele troni " )an!fa t!rer"* al(eit a ")all one* wa" a(o!t to invadethe wat h)a er". do)ain- S!("e !entl#* another intere"tin/ a"+e t of Mi ro)a." vent!re wa" (ro!/ht to li/ht in atrade +re"" arti le whi h revealed that E(a! he" SA wo!ld "!++l# Mi ro)a with the )e hani al +art" re !ired forit" analo/ wat h-

The Role of the Ele troni " Man!fa t!rer" :A" of )id3$%&8 all !art= wat he"* in l!din/ tho"e +!t o!t (# Swi"" and >a+ane"e wat h)a er"*

ontained inte/rated ir !it" )ade (# U-S- ele troni " )an!fa t!rer"- Wherea" Mi ro)a had de ided to )ove7 Privately many jewelers greeted the introduction of theelectronic watch with dimay, for they did not understand itstechnology. Consequently, the electronic watch jeopardisedtheir traditional functions as advisors to consumers andrepairmen.(Jeweler's Circular - KEYSTONE , July 1972)



21

forward into wat h )ar etin/* what the re"t of the U-S- ele troni " )an!fa t!rer" wo!ld de ide to do wa" "till ano+en !e"tion- Te6a" In"tr!)ent"* for e6a)+le* "!++lied E(a! he" SA* the "+earhead of the Swi"" )ove into

!art= wat he"* with inte/rated ir !itr#- !t T-I- "aid nothin/ a(o!t (e o)in/ a wat h )ar et it"elf- et it hadre entl# de ided to "hift it" role in the ele troni al !lator (!"ine""- Until $%&8 T-I- had "i)+l# "!++lied lar/e" ale inte/rated ir !it" to other" for a""e)(l# into ine6+en"ive ele troni al !lator"- Then T-I- (ro!/ht o!t a

al !lator !nder it" own la(el- The +arallel +o""i(ilit# with wat he" wa" all too o(vio!"-Another o)+an#* Motorola* had re"ol!tel# de lared in earl# $%&8 it" intention to re)ain a o)+onent

"!++lier- Si6 )onth" later the wat h)a in/ trade +re"" wa" f!ll of r!)or" that Motorola wa" not "o re"ol!tean#)ore-Other ele troni " )an!fa t!rer" with a toe in the door in l!ded RCA* Inter"il ;the "!++lier of Sei o<*

Solid State Devi e"* and O+tel- Several of the"e were relativel# new o)+anie" "et !+ to +arti i+ate in theevolvin/ ele troni wat h (!"ine""- 2redi tin/ what their lon/3ter) role wo!ld (e wa" o)+li ated (# a ra+idl#develo+in/ "et of the)e" (etween the) and wat h)a er"-

The a"e of O+tel* In -* of 2rin eton* N->-* ill!"trate" thi" +oint- In $%B%* five " ienti"t" and en/ineer"*for)erl# with RCA* e"ta(li"hed the o)+an# to develo+ and "ell li !id r#"tal di"+la#"- Two #ear" later Swi""intere"t" finan e O+tel (# +!r ha"in/ for 0&''*''' it" entire i""!e of la"" !)!lative onverti(le +referred"to and (# loanin/ the fir) 0%''*'''- A" +art of the finan ial +a a/e* JO+tel a/reed to /ive )e)(er" of theSwi"" Gro!+ the ri/ht to re !e"t ertain +rioritie" fro) O+tel in onne tion with develo+)ent order" and +!r ha"eof O+tel ele troni +rod! t"J- # )id3$%&8 O+tel wa" in f!ll "win/* +rod! in/ o)+onent" for di/ital "olid "tate

wat he"- It" entire o!t+!t wa" de"tined for Swit=erland-Te hni al Fa tor" Relatin/ to the Ele troni Wat h :

A" of $%&8* it "ee)ed fairl# ertain that the followin/ te hni al and +rod! tion on"ideration wo!ld holdtr!e for the ele troni wat h :

a< Man!fa t!rin/ the ele troni wat h wo!ld all for ver# low la(o!r in+!t"- So)e o("erver" +redi ted that la(o!r o"t" )i/ht event!all# a)o!nt to no )ore than $'7 of total )an!fa t!rin/

o"t"- In ontra"t la(o!r o"t" o!ld r!n a" hi/h a" &'7 of total )an!fa t!rin/ o"t" for fine)e hani al wat he"4

(< Unli e the "it!ation with the t!rnin/3for wat h* when !lova ontrolled the te hnolo/#

thro!/h +atent"* no fir) wa" li el# to (!ild !+ an# "ort of +atent wall with the ele troni wat h-The relevant te hnolo/# wa" widel# held* in lar/e +art (# fir)" o!t"ide the wat h)a in/ field-

< Unli e the a"e with )e hani al wat he"* o"t red! tion" for the ele troni wat h wo!ld noto)e at the e6+en"e of !alit#- Even if the +ri e" for it did fall to ver# low level"* the ele troni

wat h* when o)+letel# +erfe ted* wo!ld not (e a 5!n wat h- In"tead* it wo!ld have the !alit#a""o iated with the )o"t e6+en"ive )e hani al wat he"-

d< The o"t of the ele troni wat h wo!ld (e deter)ined (# the o"t3vol!)e relation"hi+"onne ted with the )an!fa t!re of ele troni " o)+onent"- Con"e !entl#* the o"t advanta/e" of

vol!)e for the ele troni wat h )i/ht well e6 eed tho"e for the )e hani al wat h 4 and

e< And finall#* the ele troni wat h wo!ld !nder/o i)+ortant i)+rove)ent" in the ne6t five#ear"* a" of $%&8* wa" "till far fro) (ein/ a o)+letel# +erfe ted +rod! t- Neither of the two e#te hni al o)+onent"* the !art= r#"tal and the li !id r#"tal di"+la#* wa" free fro)"hort o)in/"-

In fa t* "everal leadin/ wat h)a er" a!tioned the ind!"tr# a/ain"t e6tollin/ too "tron/l# the )erit" of the!art= wat he" then on the )ar et- The !lova Wat h Co)+an#* for in"tan e* i""!ed a "tate)ent in >!l# $%&8

whi h li"ted the followin/ li)itation" to !art= r#"tal:

$< the# are all "!(5e t to a /ain and a ordin/l# "!(5e t to "o)e han/e in their vi(rationfre !en #4

8< the# are +arti !larl# "en"itive to "ho 4 and



22

1< the# are !ite "en"itive to te)+erat!re-

!lova warned that /!arantee" of a !ra # of within a )in!te3a3#ear* whi h "o)e fir)" offered* were!nreali"ti - !lova." "tate)ent want to "a# that it wo!ld not #et )ar et wat he" !"in/ li !id r#"tal di"+la#"

(e a!"e the larit# of the devi e" then availa(le wa" inade !ate and (e a!"e their effe tive lifeti)e wa" "till to (ee"ta(li"hed-

A""e""in/ the I)+a t of the Ele troni Wat h :Un ertaintie"* "! h a" tho"e related to the !lti)ate role of the ele troni " )an!fa t!rer" and tho"e related

to the re)ainin/ +rod! t defi ien ie"* +!t lar/e !e"tion )ar " after all +redi tion" of the f!t!re for the ele troniwat h- Still* thi" didn.t "te) the tide of +ro/no"ti ation" on ernin/ what the ele troni wat h wo!ld do to thewat h ind!"tr#-

The 2re"ident of one U-S- ele troni " o)+an# )ade the +redi tion that re eived the )o"t attention : JThe"olid3"tate wat h will +!t ,'*''' Swi"" o!t of wor J- Other e6e !tive" in U-S- ele troni " fir) +!t it thi" wa# :JThe ti)e ha" o)e for an A)eri an o)+an# to (e o)e the E(a! he"J- And the 2re"ident of enr!" "aw thef!t!re li e thi" : JAll eviden e +oint" to the e)er/en e of an A)eri an wat h ind!"tr# and to the "!()er/en e ofthe Swi"" and non3A)eri an wat h )an!fa t!rer"J-

The"e fore a"t" de+ended* of o!r"e* on a""e"")ent" of the "hare of the )ar et that the ele troni wat h

wo!ld a+t!re fro) the )e hani al wat h- Man# A)eri an" and >a+ane"e* +arti !larl# tho"e relativel#!n on erned (# the f!t!re for all )e hani al wat he"- The +re"ident of enr!"* for e6a)+le* +redi ted thatele troni wat he" wo!ld "oon a+t!re 8'7 of the wat h )ar et* and he added that he o!ld fore"ee a ti)e whenthe# wo!ld ontrol %'7 of the )ar et- E6e !tive in the U-S- ele troni " ind!"tr# +ro+he"i=ed* !ite nat!ral thatthe death of the )e hani al wat h wa" i))inent-

Undo!(tedl# the )ain rea"on wh# the ele troni " ind!"tr# held "! h hi/h ho+e" for the new /eneration ofwat he" wa" the lon/3ran/e +ri e +ro"+e t"- Tho"e (e"t a !ainted with the o"t" involved in )a in/ theele troni o)+onent" +redi ted ontin!in/ +ri e de line"- For in"tan e* the head of Motorola." !art= ti)e+ie eele troni " divi"ion "aid in A!/!"t $%&8 that he loo ed for !art= wat h +ri e" to "lide to 0$' (# $%&9- Lon/ ter)*he "aw no rea"on wh# their retail +ri e" o!ld not (e (ro!/ht down to 0$'-

>a+ane"e wat h)a er" "ee)ed to avoid the +ri e i""!e (!t tal ed a(o!t the ele troni wat h a+t!rin/,'7 of the total )ar et- Moreover* the# "!//e"ted that the Swi"" wo!ld (e the )o"t affe ted (# the ele troni

wat h- The# +redi ted that Swi"" wat h)a er" wo!ld (e for ed to t!rn in rea"in/l# to the +rod! tion ofde orative wat he"-To no(od#." "!r+ri"e* the Swi"" "aw the "it!ation in a different li/ht- Re"+ondin/ to a +redi tion that the

ele troni wat h "+elled the end for the onventional wat h* a i e32re"ident for E(a! he" SA had thi" to "a# :

"We have thoroughly e(amined this matter on both the technical and the marketing level, andwe are convinced that if a happy future is in store for the electronic watch, the mechanicalwatch, is doomed and would throw thousands of watchmakers in Swit*erland out of work".

2!t in +er"+e tive for the A)eri an reader thi" +redi tion wo!ld o)+are with a fore a"t of +!ttin/ $-1)illion A)eri an o!t of wor - Si)+le or a!to)ati ver"ion* al"o ha" (rilliant +o""i(ilitie"- In $%?'* the

on"!)+tion of wat he" will (e a++ro6i)atel# 1'' )illion" !nit" ;a" a/ain"t $?' )illion" in $%&8<- The )o"to+ti)i"ti fore a"t" fi6 the "hare of ele troni wat he" at one third* with the (alan e* at lea"t 8'' )illion +ie e"*

(ein/ )e hani al wat he"-Another "+o e")an for the Swi"" ind!"tr# e)+ha"i=ed that it" wat h)a er" were a" well +re+ared a" an#

to fi/ht it o!t in the ele troni wat h (attle:

enr# Altorfer* E6e !tive Dire tor of the Wat h)a er" of Swit=erland* !nderline" how E(a! he" SA hadlaid a +er)anent fo!ndation for wat h +ro/re"" and how (a in >!l# $%B&* lon/ (efore the >a+ane"e or an#(od#el"e had it* the Swi"" had eta38$* the +rotot#+e of the !art= wat h- # $%B%---- the Swi"" were read# to +rod! ethe !art= wat h in vol!)e-

"We have been and will continue to be world leaders in watch production and technology", ltorfer assured.



23

@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@



24

E&)ibit 3 4

Str! t!re of the Swi"" Wat h Ind!"tr# 3 $%&'

$- The a""o iation that re+re"ent" the entire ind!"tr# in /overn)ental and forei/n trade )atter"-8- The holdin/ o)+an#* 1'7 ontrolled (# the Swi"" Govern)ent that own" a )a5orit# intere"t of

E(a! he" SA and of three of lar/e"t o)+onent )an!fa t!rer"-1- The a""o iation of +in3lever wat h )an!fa t!rer"- In $%&' it had over ,' )e)(er"-9- The a""o iation of 5eweled3lever wat h )an!fa t!rer"- In $%&' it had 9?B )e)(er"-,- A tr!"t o)+o"ed of $& "!("idiarie" +rod! in/ Eda! he"-B- The a""o iation of o)+onent )an!fa t!rer"- It in l!de" h!ndred" of ")all fir)" a)on/ it" )e)(er" a"

well a" fo!r lar/e o)+onent +rod! in/ fir)" or /ro!+" of fir)"- The fo!r are :3Fa(ri !e" D. A""orti)ent" Re!nie" ;e" a+e)ent"<Fa(ri !e" de alan ier" SA ;(alan e wheel"<Gro!+)ent de" Fa(ri !e" Swi""e" de S+ira!6 ;hair"+rin/"<

2ierre" oldin/ SA ;>ewel"<-

SWISS WATCH CHAMBER(1)

ASUAG (2)

FEDERATIONHORLOGERS(3)

ASSOCIATIONROSKOPF (4)

EBAUCHES SA(5)

UBAH (6)0



25

EQ I IT 3 8: T E WATC INDUSTRIES

Leadin/ Na)e" in the U-S- Wat h Ind!"tr#

Re ent 2erfor)an e Stati"ti "

Co)+an# or Owner"hi+ Fi" al Sale" Net In o)e Wat h 2rod! tion (a"eDivi"ion #ear ;)ill< ;lo""<

enr!" U-S- $%&,@ 08, )- 09-, )-- Man!fa t!rin/ and a""e)3 - O+eratin/ at (lin/ in Swit=erland and

(rea 3even or ir/in I"land"- lo"" "in e $%B?

!lova U-S- $%&8@ 0$9& ) 01-% ) 8' 2lant" aro!nd the worldin l!din/ "everal in the U-S-

El/in Lar/el# U-S- $%&$ 0$1') 0$1-8) Man!fa t!rin/ and a""e)(l# inInd!"trie" Swi"" own Swit=erland and ir/in I"land"-

a(o!t ,7 ;a(o!t 8,7 inwat he"<

Gr!en ?'7 U-S- $%&$@@ 0%-B ) 08-$)- Man!fa t!rin/ and a""e)(l#Ind!"trie" 8'7 Swi"" in Swit=erland* Canada and U-S-

a)ilton Sin e $%&% $%&8@ 09&)- 08-9 ) Lea"e" )an!fa t!rin/ H a""e)(l# a ,'7 owned +lant" in Swit=erland and ir/in )ar etin/ "!("dr#

of !"h Univer"al4Swi"" own $&7* with

o+tion to (!# ,$7 in $%&9

Lon/ine"3 Sin e $%?'* a NA NA NA Man!fa t!rin/ and a""e)(l# in Swit=erlandWittna!er divi"ion of

We"tin/ho!"e

Sheffield U-S- $%&$ 0 $,)ill in (an r!+t # Man!fa t!rin/ and a""e)(l# in

Sin e $%&8 Swit=erland* or ir/in I"land" H G!a) I"land

Ti)e" 2rivatel# $%&$ 08'' )ill NA- 8' +lant" aro!nd the world in l!din/ "everal owned U-S- in the U-S-

Weltha) Sin e $%B?* NA NA NA Man!fa t!rin/ and a""e)(l# in Swit=erland and the US "!("idiar# for it" ele troni wat h in the U-S- of Swi"" Wat h

)a in/ on"orti!)

@ For fi" al #ear endin/ >an!ar# 1$-@@ For Fi" al #ear endin/ Mar h 1$-



26

A++endi6 A: T E WORLD WATC INDUSTR

A !RIEF $UIDE T- H-W WATCHES W-R5 AND THEIR PRINCIPAL T6PES

Wri"t wat he" o)e in inn!)era(le "i=e"* "ha+e"* de"i/n" and +ri e ran/e"- et !ntil the la"t de ade )o"tof the differen e" a)on/ r!nnin/ )e hani")" of wat he" were la""ed into a few /eneral ate/orie"- All wat he"were )e hani al and of the "+rin/ +owered t#+e- And (# tradition the# were +!t into onl# one or the other two

ate/orie": 5eweled3lever or +in3lever- The"e ter)" will (e e6+lained later- !t with the advent in the late $%,'"of the ele tri wat h and the "!("e !ent introd! tion of "everal t#+e" of ele troni wat he"* the +ro(le) ofde" ri(in/ how wat he" wor and la""if#in/ the) /rew in o)+le6it#-

Still* if )atter" are "i)+lified on"idera(l#* it i" +o""i(le to a !ire witho!t )! h diffi !lt# a wor in/fa)iliarit# with wat h te hnolo/#- That i" the ai) of thi" /!ide- It (e/in" the traditional "+rin/ +owered wat h* ati)e+ie e little han/ed in over 1'' #ear"* and then tra e" the )a5or innovation" that have "o dra)ati all# han/edthe nat!re of wri"twat he" in the la"t two de ade"-

The Standard S+rin/32owered Wat h:The traditional )e hani al wat h on"i"t" of two di"tin t* +art" : the e6terior vi"i(le ele)ent" ;the a"e*

r#"tal* dial and hand"< and the interior )ove)ent- What ha++en" on the o!t"ide of a wat h i" o(vio!"4 what /oe"on in"ide i" a )#"ter#* to )an#- The )ove)ent nor)all# on"i"t" of a h!ndred or )ore +art" whi h for) three

)a5or /ro!+" :$< The E(a! he* or )ove)ent (lan * whi h a o!nt" for )ore than three3fifth" of all +art"- It o)+ri"e" the

fra)ewor of the wat h ;the +art" and (rid/e"<* the /ear train ;the wheel" and +inion"<* and the windin/and "ettin/ )a hine"- In a ro!/hl# wa#* E(a! he" an (e tho!/ht of a" the ha""i" and en/ine of ana!to)o(ile-

8< The re/!latin/ o)+onent" ;the e" a+e)ent* (alan e wheel* and hair"+rin/<* whi h )a e the )ove)entwor at the orre t rate- Ro!/hl#* the"e an (e tho!/ht of a" the tran")i""ion of an a!to)o(ile-

1< Other )i" ellaneo!" +art" whi h annot (e la""ed !nder an# /eneri headin/

When the"e h!ndred or "o +art" are a""e)(led* how do the# wor - Windin/ a wat h ti/hten" the "+iral ofit" )ain"+rin/- A" the "+rin/ !nwind"* it drive" a "erie" of /ear" to whi h the hand" of the wat h are atta hed- !tthe !nwindin/ of the )ain"+rin/ ha" to (e re"trained and +re i"el# ontrolled to +rovide the ri/ht in re)ent" ofti)e- Thi" re !ire)ent i" what )a e" a wat h )ove)ent o)+le6-

The ta" of relea"in/ 4ener/# fro) the )ain"+rin/ in a +re i"e wa# i" arried o!t (# the re/!latin/o)+onent"* the heart of whi h i" the e" a+e)ent )e hani")- A /ear alled the e" a+e)ent wheel i" atta hed to

the )ain /ear train- The e" a+e)ent wheel i" re"trained fro) relatin/ freel#* there(# (lo in/ the !nwindin/ ofthe )ain"+rin/ (# two teeth in a +art alled the an hor for)- The an hor for) ro " (a and forth relea"in/ onetooth and i))ediatel# thereafter en/a/in/ the other 4tooth in the e" a+e)ent wheel- The alternative relea"e and4en/a/e)ent of the e" a+e)ent wheel +er)it" it to advan e (# tin# in re)ent" and the"e in re)ent" of rotationare onverted (# the other /ear" into the "e ond* )in!te* and ho!r )ove)ent" of the wat h hand"-

!t what )a e" the an hor fro) )oveK It i" onne ted to a (alan e wheel whi h rotate" (a and forth*and the (alan e wheel i"* in t!rn* onne ted to a hair"+rin/ whi h oil" and !n oil" to ee+ the (alan e wheel in)otion- A" ea h tooth on the an hor for) di"en/a/e" fro) the e" a+e)ent wheel ;the tooth a t!all# "lide" awa#fro) the wheel<* it tran")it" eno!/h +ower thro!/h the an hor for) and (alan e wheel to the hair"+rin/ to oil it"li/htl#- A" the 4hair"+rin/ !n oil"* it rotate" the (alan e wheel in the o++o"ite dire tion* whi h in t!rn ro " thean hor for) in the o++o"ite dire tion "tartin/ the ne6t # le in the re/!latin/ )e hani")- Thi" whole o)+le6 "etof )ove)ent" /oe" on a(o!t 1'' ti)e" a )in!te and +rod! e" the fa)iliar ti in/ in the "+rin/ +owered wat h-

Even tho!/h all )e hani al wat h 4)ove)ent" o+erate a ordin/ to the +rin i+al 5!"t de" ri(ed* not all)ove)ent" are of the "a)e !alit#- The !alit# of a )ove)ent i" deter)ined* in +art* (# the +re i"ion with whi hthe )an# tin# +art" are )ade and* in +art (# the are that /oe" into ad5!"tin/ the f!n tionin/ of the o)+onent"-For e6a)+le* Swi"" )an!fa t!rer" of +re)i!) wat he" have traditionall# e)+lo#ed )a"ter wat h3)a er" to )a eall the )an# and ti)e on"!)in/ ad5!"t)ent" needed to +rod! e a hi/hl# a !rate )ove)ent-

Then there i" the whole )atter of 5ewel"- Sin e wat h )ove)ent" on"i"t of )an# tin# +art"* it i" o(vio!"that fri tion 4and wear )!"t (e )ini)i=ed* if wat he" are to (e a !rate and lon/ la"tin/- In )an# wat he"*



27

tho!/h in far fro) all of the)* thi" i" a o)+li"hed (# +!ttin/ 5ewel" at all the riti al +ivot and onta t +oint" inthe )ove)ent- On "tandard Swi"" )ove)ent* for e6a)+le* ontain" $, 5ewel"- er# hi/h3 !alit# )ove)ent )a#

ontain a" )an# a" 1' 5ewel"- While the +!r+o"e of 5ewel" )ove)ent" i" /enerall# well !nder"tood* theontri(!tion that the# )a e to the o"t and !alit# of wat he" i" often )i"!nder"tood-

Man# +eo+le a""!)e that wat he" ontainin/ $, or )ore 5ewel" are e6+en"ive (e a!"e the 5ewel" aree6+en"ive- Moreover* the# a""!)e that the n!)(er of 5ewel" in wat h )ove)ent" indi ate" the !alit# of thewat h- The "e ond of 4the"e a""!)+tion" i" not ne e""aril# tr!e4 the fir"t i" 5!"t +lain fal"e- With are e6 e+tion"

all 5ewel" !"ed in wat h)a in/ 3 e6 l!din/* of o!r"e tho"e !"ed on the o!t"ide of a wat h for de orative +!r+o"e"3 are "#ntheti and !ite ine6+en"ive- Th!"* the n!)(er of 5ewel" in a )ove)ent ha" little to do with the +ri e of awat h- A" re/ard" the i""!e of !alit#* )o"t )ove)ent" ontainin/ $, or )ore 5ewel" are +rod! ed with the

+re i"ion and are re !ired to )a e a fine ti)e+ie e- et "o)e le"" " r!+!lo!" wat h)a er"* nowin/ thaton"!)er" erroneo!"l# e !ate the n!)(er of 5ewel" with !alit#* have fooled the +!(li (# +!ttin/ o!t e6+en"ive

(!t r!de ti)e+ie e" ontainin/ )an# 5ewel"- It follow" that e"ta(li"hin/ the tr!e !alit# of the "tandard "+rin/3 +owered wat h i" not an ea"# )atter for the avera/e on"!)er-

The i""!e i" f!rther o)+li ated (# the fa t that there are tow different 4t#+e" of "+rin/3+owered wat he"-

The Di"tin tion etween >eweled3lever and 2in3lever Wat he":A" a r!le all )e hani al wat he" are re/arded a" (ein/ either of the 5eweled3lever or the +in3lever variet#-

Altho!/h the di"tin tion i" (a"ed on "+e ifi te hni al differen e"* )an# wat h)a er" and 5eweler" ontend that

the di"tin tion i" an indi ation of overall wat h !alit#- Man!fa t!rer" of 5eweled3lever wat h on"ider +in3leverwat he" inferior in )an# re"+e t"- The# hara teri=e the +in3lever wat h a" a r!de ti)e+ie e* +oorl# )ade withlow3/rade )aterial"* whi h will not la"t and whi h will not ee+ a !rate ti)e- The# on ede that +in3leverwat he" are ine6+en"ive ;the# +refer to !"e the word hea+<* (!t the# lai) that the !"to)er i" /ettin/ 5!"t whathe or "he +a#" for- A" the !lti)ate in"!lt* the# refer to +in3lever wat he" a" Jthrowawa#"J-

A" )i/ht (e e6+e ted* )an!fa t!rer" of +in3lever wat he" have a different +oint of view- The# ontendthat their wat he" do a +erfe tl# ade !ate 5o(* that their wat he" are d!ra(le* and that on"!)er" do not have to

+a# e6or(itant +ri e" to own relia(le ti)e+ie e"- The# al"o +oint o!t that there are inferior 5eweled3lever wat he"-!t leavin/ a"ide all the lai)" and o!nter lai)" that o)+etin/ wat h)a er" have h!rled at one

another." +rod! t"* what i" the te hni al differen e (etween the two t#+e" of wat he"K It relate" to whether a wat h)ove)ent" ontain" 5ewel" in it" e" a+e)ent )e hani")- In +in3lever wat he"* )etal +in" re+la e the 5ewel"3ti++ed teeth in the an hor for 4 thi" a o!nt" for the na)e J+in3leverJ- Other +art" of the e" a+e)ent )e hani")

are al"o "i)+lified* f!rther eli)inatin/ the need for 5ewel"- Si)+lifi ation* )ore "o than eli)ination of the 5ewel"*)a e" it +o""i(le to +rod! e +in3lever )ove)ent" at o"t" (elow tho"e for 5eweled3lever )ove)ent"- Indeed* theinventor of the +in3lever )ove)ent* a )an alled Ro" o+f* had a" hi" /oal the develo+)ent of a )ove)ent "o"i)+le that wat he" o!ld (e )ade for the o))on )an- i" ontri(!tion ha" not +a""ed !nnoti ed* for eventoda# wat h)a er" often refer to +in3lever )ove)ent" a" Ro" o+f )ove)ent".-

The S!(t#+e" of S+rin/32owered Wat he":The )an# wa#" in whi h )e hani al wat he"* either 5eweled3lever or +in3lever* are )odified to +rod! e a

variet# of "!(t#+e" an (e +a""ed over !i l#- In the $%&'" a n!)(er of the "+e ial feat!re* are ta en for/ranted- # and lar/e* ever#one !nder"tand" what i" involved when a wat h i" de" ri(ed a" (ein/ "ho +roof*water+roof* anti)a/neti * "elf3windin/* et - Calendar wat he"* tho"e "howin/ the da# and )onth on the fa e* are

o))on- So* too* are hrono/ra+h"* wat he" with "tart3and3"to+ )e hani")" to )ea"!re ela+"ed ti)e- Thei)+ortant +oint i" thi" : All tho"e "!(t#+e" all for "o)e added o)+le6it# in their )an!fa t!re* #et nonere+re"ent" a radi al de+art!re fro) the hara teri"ti " of the "tandard )e hani al wat h-

The New Generation of Wat he":

The Ele tri Wat h :Develo+)ent of )iniat!ri=ed (atterie" and ele tri )otor"* lar/el# the re"!lt of World War II re"ear h

and develo+)ent effort"* )ade +o""i(le the fir"t )a5or advan e in ti)e ee+in/ : the ele tri wat h- Co))er iall#availa(le for the fir"t ti)e in the United State" in $%,&* the ele tri wat h wa" )ar ed worldwide (# )an#)an!fa t!rer" in the earl# $%B'"-

A" re/ard" it" te hnolo/#* the ele tri wat h re+re"ent" onl# a +artial "te+ awa# fro) the "+rin/3+oweredwat h- It doe" not ontain a )ain"+rin/ nor )an# of the o)+onent" !"!all# fo!nd in e" a+e)ent )e hani")"-In"tead* !rrent fro) a (atter# drive" a tin# (alan e wheel )otor* whi h in t!rn i" onne ted thro!/h a /ear train



28

to the hand" of the wat h- et the wat h i" onventional in the "en"e that it "till de+end" on the o" illation of)ovin/ )e hani al +art" to deter)ine ti)e in re)ent"- Con"e !entl#* ele tri wat he" tho!/h )oderatel#"! e""f!l in the )ar et+la e thro!/ho!t the $%B'"* did not a+t!re the lion." of the )edi!) and hi/h +ri e wat h)ar et- And the innovation" that followed the ele tri wat h "everel# lo!ded it" lon/3r!n o))er ial f!t!re-

The T!nin/3For Wat h :Altho!/h the ele tri wat h re+re"ented the fir"t (rea with 1'' #ear" of wat h)a in/ tradition* it"

i)+a t on the wat h ind!"tr# wa" far le"" than the "e ond )a5or innovation in wat h te hnolo/#* the develo+)entof the t!nin/3for wat h- With it* the whole +rin i+le of deter)inin/ ti)e wa" han/ed- Greatl# "i)+lified* thet!nin/3for wat h wor " in the followin/ wa#- Ele tri !rrent fro) a ")all (atter# flow" thro!/h oil""!rro!ndin/ a t!nin/3for - The flow of !rrent "ti)!late" the t!nin/3for to vi(rate at 1B' # le" +er "e ond- Atin# "tri+ of )etal onne ted to the t!nin/3for tran")it" it" vi(ration" to a "et of /ear"* whi h* a" in the

onventional wat h* onvert the ti)e in re)ent" into the "wee+ of the hand" on the wat h fa e- e a!"e the ti)e3deter)inin/ ele)ent i" a t!nin/3for whi h vi(rate" over 1$8 )illion 4ti)e" +er da#* the a !ra # of the wat h"!r+a""e" that of even that )o"t finel# )an!fa t!red "+rin/3+owered wat he"- T!nin/3for wat he"* if +ro+erl#ad5!"ted* "ho!ld (e a !rate to within one )in!te +er )onth-

Until $%&$* all t!nin/3for wat he" "old were )en." )odel"- The after f!rther )iniat!ri=ation of thet!nin/3for )ove)ent wa" finall# a o)+li"hed* )odel" for wo)en (e a!"e availa(le-

The P!art= Cr#"tal Wat h :# the end of the $%B'" and other )a5or innovation in wat h)a in/ a++eared in the )ar et+la e- Thi"newe"t innovation* the !"e of !art= r#"tal a" the ti)e3deter)inin/ devi e in wat h )ove)ent"* o!ld at "o)e

+oint in the f!t!re* i)+rove the a !ra # of wat he" to !nheard of level"* and it al"o o+ened the door o theo)+letel# "olid "tate wat h- In fa t* a n!)(er of different 4t#+e" of wat he" were develo+ed aro!nd the new

te hnolo/#- The# all were* however* on the "a)e o+eratin/ +rin i+le-When ele tri !rrent i" +a""ed thro!/h a !art= r#"tal* it an (e "ti)!lated to vi(rate at a ver# hi/h

fre !en #- Thi" o" illation an (e onverted into ver# +re i"e ti)e in re)ent"- Mi ro3 ir !itr# "!(divide" ther#"tal." fre !en # into ele tri +!l"e" whi h then drive the wat h in one of "everal different wa#"- In "o)e !art=r#"tal wat he"* the +!l"e" o+erate a tin# ele tri "te++in/ )otor whi h* in t!rn* i" onne ted thro!/h a /ear train

to the hand" of a wat h with a onvention" fa e- In other !art= r#"tal wat he" the +!l"e" are !"ed to e6 ite at!nin/3for devi e- Fro) that +oint on* the o+eration of thi" t#+e of wat h i" identi al to that of the e6i"tin/

t!nin/3for wat he"- IN "till other"* the +!l"e" into the !"!al )in!te and "e ond ti)e in re)ent"- In the a"e ofthi" la"t t#+e of wat h* whi h in or+orate" no )ovin/ +art"* the onventional fa e and hand" of the wat h arere+la ed (# new )ethod" of di"+la#in/ ti)e- The"e develo+)ent" are di" !""ed in the followin/ "e tion-

Chan/e" in the Fa e of the Wat h :Until $%&8 all the dra)ati advan e" in wat h te hnolo/# re)ained !n"een )ira le" to tho"e who in the

la"t de ade or "o +!r ha"ed one of the newer wat he"- The wor " in"ide were different* (!t the fa)iliar fa e andhand" were "till there- In $%&8 tho!/h innovation (e a)e vi"i(le wat he" with o)+letel# different fa e"* with tin#di"+la#" re"e)(lin/ tho"e of a di/ital lo or of an ele troni al !lator* a++eared on the )ar et for fir"t ti)e;$<-The new fa e" in or+orated one or the other of two different 4devi e" whi h were the +rod! t of !ite re entte hni al advan e" li !id r#"tal di"+la#" and li/ht e)ittin/ diode"-

The devi e" wor " on two different +rin i+le"- A li !id r#"tal di"+la# on"i"t" of two +ie e" of /la""with a thin oatin/ of an ele tri all# "en"itive he)i al (etween the)- When !rrent i" +a""ed thro!/h the

he)i al* it han/e" it" r#"talline "tr! t!re- The "ilvered r#"tal" refle t a)(ient li/ht* that i"* the# refle t li/hto)in/ fro) an o!t"ide "o!r e- The advanta/e of the li !id" r#"tal di"+la# i" that it re !ire" a ver# low level of!rrent to o+erate "in e it i" not a t!all# /eneratin/ li/ht- It" di"advanta/e" are two3fold- Fir"t* the !alit# of the

i)a/e it 4+re"ent"* the ti/htne"" and +re i"ion of the n!)(er"* de+end" on the (ri/htne"" of e6ternal ill!)ination-Se ond* it" d!ra(ilit# and it" "ta(ilit# !nder e6tre)e te)+erat!re" are o+en to !e"tion- At lea"t* a" of $%&8* thedevi e had #et to (e o)+letel# de(!//ed-

A" for the other devi e* li/ht3e)ittin/ diode"* the# are* r!del# +!t* "e)i ond! tor" that /low- In theearl# $%&'" the# fo!nd their /reate"t !"e in the di"+la#" a" ")all ele troni al !lator"- Wherea" the# /ive off a

(ri/hter and )ore +re i"e i)a/e than li !id r#"tal di"+la#"* the# have the di"advanta/e of re !irin/ )ore !rrentto o+erate the) than li !id r#"tal di"+la#"- e a!"e the diode" re !ire "o )! h +ower* no wat h3"i=e (atter# an

ee+ the) ill!)inated at all ti)e"- A" of $%&8 onl# one wat h)a er had )ar eted a ti)e+ie e ontainin/ thi"devi e- To read the ti)e* the wearer had to +re"" a (!tton whi h ill!)inated the otherwi"e (lan fa e of the



29

wat h-oth di"+la# devi e" were "een a" rai"in/ another +ro(le)- Ind!"tr# e6+ert" "erio!"l# !e"tioned whether

on"!)er" wo!ld a e+t "! h a dra"ti han/e in the a++earan e of wri"twat he"- For thi" rea"on land (e a!"e ofte hni al "hort o)in/" di" !""ed a(ove* )an!fa t!rer" now refer" to ele troni wat he" with ontentional fa e"that i"* with hand" a" analo/ )odel" and to tho"e with n!)eri al di"+la#" a" di/ital )odel"- The fir)" introd! in/wat he" with the new fa e" did "o in a tentative wa#- Onl# li)ited !antitie" of the wat he" tri led into the)ar et+la e in $%&' and $%&$- So)e )an!fa t!rer"* in l!din/ leadin/ U-S- and non3U-S- fir)" re)ained o!t of

the ra e to /et a di/ital wat h on the )ar et- In"tead* the# +referred to wait !ntil the te hni al and )ar et+la ed!"t had "ettled (efore o))ittin/ the)"elve" to the Jnew loo J in wat he"-

A%%en i& 3 ! THE W-RLD WATCH INDUSTR6

The Tariff Sit!ation

The d!tie" on wat he" and wat h o)+onent" i)+orted into the United State" were initiall# e"ta(li"hed (#the Tariff A t of $%1'- ? Sin e then E6e !tive Order" have )odified the level of d!tie" on "everal o a"ion"- In$%1B* a" +art of a re i+ro al trade a/ree)ent with Swit=erland* the U-S- Govern)ent red! ed (# one third the

d!tie" levied on )ove)ent" ontainin/ $ to $& 5ewel"- The"e on e""ion" la"ted !ntil the +o"t3world War II #ear"-In $%,$* U-S- wat h)a er" a++lied for relief ;i-e-* a hi e in d!tie"< !nder the e" a+e3 la!"e revi"ion" of the TradeA/ree)ent E6ten"ion A t of that #ear- Three #ear" later the 2re"ident* re"+ondin/ to the U-S- Man!fa t!rer"

o)+laint" and to the Tariff Co))i""ion." findin/"* rai"ed (# ,'7 the d!tie" on )ove)ent" in the $ to $& 5ewelate/or#-

Thro!/ho!t the $%,'" the U-S- wat h ind!"tr# +re""ed !n"! e""f!ll# for additional +rote tion (# +lea"in/ the Jdefen"e e""entiall#J ar/!)ent-

The e" a+e3 la!"e rate"* "et in $%,9* were ter)inated in >an!ar# $%B& (# 2re"idential 2ro la)ation : on ea/ain the d!tie" on )ove)ent" in the $ to $& 5ewel ate/or# dro++ed (# a third- At the "a)e ti)e* at +art of the

enned# ro!nd GATT ne/otiation"* the U-S- Govern)ent /ranted the fir"t on e""ion" on )ove)ent" ontainin/)ore than $& 5ewel"- e/innin/ >an!ar# $* $%B? the d!t# on "! h )ove)ent" wa" to (e red! ed* in five ann!al"ta/e"* (# a ,'7 total of ,'7- The rate" a++li a(le to )ove)ent" with $& 5ewel" or le"" were left !nto! hed (#

the enned# ro!nd-A" of the earl# $%&'"* the tariff "it!ation wa" a" follow" :3

U(S( Rates o, Dut* A%%"i#ab"e to Im%orts o, Wat#) 2o0ements 7 Cases

Con e""ion" /ranted in $%B93B& Trade Conferen e

Rate a" of Se ond "ta/e effe tive Final "ta/e effe tiveI t e ) 1$-$8-$%B& >an- $* $%B% >an $* $%&8

Wat h )ove)ent" ;not "elf windin/<$- avin/ $& 5ewel" 0 $'-&, 0 ?-B' 0 ,-1&

8- avin/ no 5ewel" 0 '-&,3'-%'@ No han/e No han/e

1- avin/ $ to & 5ewel" 0 '-%'30$-?'@ No han/e No han/e

9- avin/ & to $& 5ewel" 0 '-%'30$-?'@ No han/e No han/e

8 Rates of duty are provided separately for the individualcomponents of watches, i.e., the movement and the case. Dutiesare assessed on each component.



30

A itiona" uties on 8at#)es 8it) 49 :e8e"s or "ess :

For ea h 5ewel in 0'-%' No han/e No han/ee6 e"" of &For ea h ad5!"t)ent 0 '-,' No han/e No han/e"elf3windin/ 0 '-,' No han/e No han/e

Wat h a"e" 0 '-&, ea h 0 '-B' ea h +l!" 0 '-1& ea h +l!"1'7 ad val- 8 97 ad valore) $,7 ad valore)

So!r e: U-S- Tariff Co))i""ion* S!))arie" of Trade and Tariff Infor)ation ;$%&'<-

Over the #ear" the U-S- Wat h ind!"tr#." in rea"in/ relian e on over"ea" +rod! tion ha" +ro)+ted theind!"tr# to han/e it" "tan e on the i""!e of tariff"- efore the Se ond World War and in the de ade i))ediatel#followin/ it* U-S- wat h )an!fa t!rer"* tho!/h not U-S- wat h i)+orter"* lo((ied hard for tariff +rote tion- !ta" the ind!"tr# in rea"ed it" de+enden e on forei/n of "!++l#* it "tarted to "in/ a different t!ne- The o)+anie"with over"ea" +lant" and tho"e i)+ortin/ fro) forei/n +rod! er" defe ted fro) the ind!"tr#." +rote tioni"t

+o"ition- # the )id3$%B'" the ind!"tr# wa" divided into two a)+"-The event" of $%B&* the ter)ination of the e" a+e3 la!"e rate"* and the enned# ro!nd on e""ion" +roved

the few fir)" with 5eweled3lever +rod! tion in the United State" to tran"fer it a(road- # the late $%B'" when all +rod! tion wa" either 4forei/n (a"ed or +art of !lova." and Ti)e6." world3wide )an!fa t!rin/ "#"te)"* theind!"tr# had ado+ted what o!ld (e re/arded a" a low e# free trade +o"ition-



A%%en i& ; C

NOTE ON T E WATC INDUSTR

Wat#) Assemb"* in t)e U(S( Insu"ar Possessions %

e a!"e of a loo+hole in the U-S- tariff law* in the late $%,'" )an# U-S- fir)" t!rned to wat h

a""e)(lin/ in the ir/in I"land"- The loo+hole hin/ed !+on the "ti+!lation l4that wat he" o!ld (e i)+orted d!t#free into the United State" fro) it" in"!lar +o""e""ion" +rovided that no arti le ontained forei/n )aterial" val!edat )ore than ,'7 of the total val!e of the arti le- With la(o!r o"t" "! h a hi/h +ro+ortion of total wat h)an!fa t!rin/ o"t"* it wa" not diffi !lt to )eet thi" riterion-

Wat he" a""e)(led in the ir/in I"land" fro) forei/n +art" fir"t "tarted to flow into the United State" in$%,%- Within a de ade $, different o)+anie" had a""e)(l# +lant" there- A(o!t half of the +art"* (# val!e* !"edin the ir/in I"land" o+eration" a)e fro) >a+an4 another !arter a)e fro) Ger)an#- The Swi"" re"tri ted (#law !ntil $%&$ fro) e6+ortin/ +art"* never /ained a foothold-

# $%B? al)o"t $,7 of total U-S- wat h i)+ort" a)e into thi" o!ntr# via the ir/in I"land" ro!te- #then arti le of i)+ort" and al"o "tarted to o)e in fro) G!a)- In order to li)it thi" (lo""o)in/ ir !)vention oftariff d!tie"* the U-S- Govern)ent had* in the +revio!" #ear* +!t a !ota on i)+ort" fro) the in"!lar +o""e""ionli)itin/ the) to one3ninth of U-S- on"!)+tion in the +rior #ear- Several fir)"* itin/ the !ota a" one rea"on for

their de i"ion* "h!t down their ir/in I"land" 2lant"- et )o"t wat h)a er" ontin!ed their ir/in I"land"o+eration" into the $%&'"-

9 The U.S. insular possessions ;include the Virgin Islands,Guam, and American Somoa.

case world watch

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