Swiss watchmaking today is dominated by a single name: Swatch. It is thanks to Swatch that the industry recovered from a catastrophic drop in sales in the 1970s, when over-confident manufacturers failed to foresee the impact of new quartz technology and allowed cheap, accurate watches from the Far East to take over the market.

To the general public, the Swatch name is synonymous with cheerful fashion watches, cheap enough to enable customers to buy a new one according to season or to mood.

But Swatch also owns many of the old Swiss brand names, and its products cover the full price range, from as low as 45 dollars at the bottom to the sky at the top.

The Swatch group, whose headquarters is in Biel, in Canton Bern, is responsible for about a quarter of the world's watch sales in terms of value. It makes both finished watches and components: most production is in Switzerland, but it has units in countries ranging from the US to China.

It is the official timekeeper for many international sporting events, including the 2004 Olympics in Athens and the 2008 Olympics in Beijing. It has branched into micromechanics, telecommunications and even car production.

In addition to making its own watches, the Swatch Group produces parts for other watchmakers. ETA SA Fabriques d'Ebauches, in Grenchen in Canton Solothurn, is one of the world's leading makers of watch components.

History

Swatch has come a long way since its creation in 1983, when the country's two largest watchmakers, ASUAG and SSIH, realised desperate measures were needed to save themselves from liquidation. Some of the prestigious brands which they owned, such as Longines, Omega and Tissot, looked likely to be bought up by foreign competitors.

The two companies got together and invited Nicolas Hayek, CEO of the business consulting firm Hayek Engineering, to look into their affairs. In the face of fierce criticism he proposed some ground-breaking reforms. He amalgamated the two companies to form SMH (the company changed its name to Swatch in 1998); the Hayek Pool – Hayek himself and partners from Swiss industry - took over the majority of the shares, and Hayek became CEO. Then he revolutionised production – and marketing.

Technology and marketing

Technology and marketing have always gone hand in hand. While it was clear in the early 1980s that the Swiss watch industry had got into trouble by concentrating on the top end of the market, it was also clear that these brands were still important. The reason for amalgamating ASUAG and SSIH was to ensure that SMH would have world-famous brand names in every segment of the market.

The bottom end of the market was the subject of a technological revolution, which made watches much cheaper to produce. The famous plastic Swatch watch was launched on the Swiss market in 1983, with 12 models priced at between 39 and 50 francs. It contained 51 components, where traditional watches averaged about 90, and could be welded together by robots on a single assembly line – the first time this had been done in Switzerland. In a luxury watch, the cost of skilled labour accounts for by far the highest proportion of the total cost. By keeping direct wage costs to less than 10% of the cost of the finished product, Swatch could be competitive on world markets.

The Swatch was an instant success, first in Switzerland, later in the US. It was marketed as a fashion accessory; new designs were brought out every six months. In its first 21 months some 3.5 million were sold. By the time it celebrated its 20th birthday, it had sold 300 million, and launched 2,500 models.

Marketing has played an essential role in the success not only of the Swatch watch itself, but of all the brands in the group.

The advertising may be as innovative as the technology. For example, in Germany the company built a functioning watch 140 meters long and hung it on the side of a major bank building in Frankfurt (somewhat to the trepidation of the bank head.) It appeared with a three-word slogan: "60 DM, Swiss." The campaign lasted just four days, but at the end of it everyone in Germany knew what a Swatch watch was.