The Swatch Group had many early on successes due to repositioning strategies and a boost from acquisitions. On the surface, the Swatch Group was the world's leading manufacturer of watches in the late 1990's. They had 14 percent of the world market share and it appeared that gross sales and net profits were on the rise; however, under the covers, it was a much different story. Swatch was facing a myriad of issues that needed to be resolved in order for success to prevail. Management issues were plaguing Swatch; multiple key figures stepped down from the board in the mid 1990's citing the CEO's inability to listen to his staff. In addition to the management issues, Swatch was also facing fierce competition in many market spaces, including the largest consumer base space, the United States. In addition to lack of market penetration in the United States, Swatch had too many products, which equally distracted buyers and sellers.
Lastly, manufacturing costs continued to soar in Switzerland, the Swatch Group's home base. Other competitors were quickly cutting their costs by moving manufacturing overseas. The Swatch Group was at a crossroad; the strategy that had worked so well in the early 1990's was no longer viable - the question now was what to do about it?
Management Issues and Potential Resolutions
Although Swatch faced many issues, internal dissension can be the quickest death of a company. Hayek needs to ensure the people chosen to replace the board member's who stepped down are able to handle his leadership style. Equally as important as selecting a high-performing executive team, Hayek need's to realize that traditional organizational principles of functional hierarchies will inevitably lead to rifts in management. This is a social issue that Hayek needs to address. If ex-board members continue to bad mouth...