Synopsis of the Steinway and Sons
1) The case and response of Steinway & Sons can be further understood with the use and with reference to two concepts, namely, Strategy and Management, and with which, theories can be applied for its interpretation. In terms of Strategy, a specific theory can be used in order to explain the vision of Steinway & Sons, and this involves providing customer value that is under the concept of strategic marketing. Providing customer value means the delivery of a whole range of promises to customers, such as products and services that they perceive to have a superior value compared to the offerings of the company’s competitors. In this regard, the concept of “value-added” is important, as it is defined as the element of customer value that is provided by an organization within the overall business system, and this value is derived from the system from which the organization operates (2006). With this, it can be understood that Steinway & Sons has been focusing on providing value-added features to its products that would be perceived by its customers to have superior value over the products of its competitors. In addition, value-added features cannot only be observed in terms of the tangible changes in Steinway pianos, but can also be exhibited by the company through their strategy of improving the image of their products. In this regard, the concept of providing customer value can be applied using the specific action of Steinway & Sons to promote their pianos not only as a musical instrument, but also as an investment. Being emphasized as an investment, having a Steinway piano stressed the importance of owning a Steinway, as it depicts family values, the appreciation for art and music, and the high regard for technical excellence. Because the use of a Steinway piano is related to such causes, it improves the status quo of families in the society, as it can be compared to having luxury items, including Mercedes Benz, powerboats, wine, and gold. This strategy has been successful in letting the public know of the superior quality and elegance of the Steinway piano, thus, further improving its sales from the market.
Another concept to be used in explaining the strategies of Steinway & Sons is related to Management, specifically Customer Relationship Management or CRM. Gustafsson and Johnson (2000) reports that the goal of every company is to satisfy and retain customers, as it is the key to its business performance, thus, this is done through investment in research and development and in advertising. This is a strategic activity that aims to develop and manage long-term relationships on a customer-by-customer basis, where the key is customer satisfaction. As such, the satisfaction of the customer leads to loyalty through long-term relationships, which would present economic advantages, including increase profits derived from profit margins produced over the term of the relationship, increased revenues from greater purchase volume, lower costs of serving loyal customers, referrals to new customers, and price premiums (2004). As such, the action of Steinway & Sons to promote their product as an investment falls under this category, for in a way, the company has established and managed good relationships with its customers in offering them value and service for antique pianos. Because the company has already existed for the last century, pianos created during those times can still be restored, regardless of its age or neglect, thus, emphasizing the value of the piano despite antiquity. As such, this further increased the cost of a Steinway piano, with products created between 1929 and 1958 amounting to nearly six times its original cost, and products created between 1959 and 1978 amounting to nearly three times it original cost. This not only emphasized the reputation of the Steinway piano, but also its management, which was maintained and sustained from its original methods of construction, dating back from the past century.
2) The case study emphasized the fact that the company aims to establish a reputation in the market as a piano-manufacturing firm that builds the best piano for musicians and concert artists, and to establish itself as being a contributor, supporter, and leader in the cultural arts. As such, Steinway & Sons did so by doing their best in letting their market know that they manufactured a fine piano, not only by literally informing the public of the high-quality pianos made by the company, but by also educating the public of their appreciation of good music. The company did this by supporting great piano concert artists and virtuosos from both the United States and Canada. One of their strategies to establish the reputation of their pianos and obtain profit from it was through the establishment of the Steinway Hall, which provided and housed great piano and musical concerts. The Steinway Hall helped in the inauguration of a new era in the musical life of the United States, as it provided musical education and appreciation on the part of the people. In this particular hall, famous piano and music artists flourished, including Anton Rubenstein, Annette Essipoff, Ignace Jan Paderewski, Teresa Carreno, Rafael Joseffy, and many others. The advertisement and the endorsements of such famous piano artists and musicians helped build the image of Steinway pianos, through promotions and tours. This not only increased revenues for the company from press coverage and acclaim, but also paved a way for Steinway & Sons to lay the foundations for a broad national culture. In this regard, the company’s emphasis for its superior quality of products was emphasized by indicating that buying a Steinway piano is depicted as an indication of appreciation for high cultural taste, thus, becoming a sign of high achievement.
As stated earlier, the uniqueness of this approach lies on the fact that the company emphasized on stating that a Steinway piano does not only serve as a musical instrument, but as an investment in itself. The company was successful in letting the public know how valuable a Steinway piano is, through the cost of antique Steinway pianos, and the cost of restoring them. This approach was unique because there has not been any piano-manufacturing company stating such a cause of placing high regard to restoring antique pianos made in the past century. In this regard, the company does not only exhibit the intention or desire to profit from the manufacture of their pianos, but to emphasize their high-regard to superior quality and giving high value for priced and precious possessions.
3) Primarily, the competitive advantage or edge of Steinway & Sons is its scientific approach to manufacturing its products. The company aims to produce or develop reliable pianos that offered a more powerful tone, thus, involving experimentations, developing of theories and improvements in the design and manufacture, and using modern science in order to investigate and test the different kinds of wood that would be suitable in making the piano. This also involved the use of chemistry to aid the company in establishing the scientific basis for felts, glue, and varnish oils that would be used in the product. In the process of manufacturing, different parts and steps are checked many times before delivery and shipping. In this regard, the making of a particular Steinway piano involves a series of steps, where each step and parts comprising its manufacture must not be overlooked. Thus, this scientific approach in the manufacture of Steinway pianos, termed as the Steinway system, caused the revolution in piano manufacturing. The use of the Steinway system made the company as the pioneer of development, innovation, and application of unique approaches in piano manufacturing. More importantly, the manufacturing process of the company produced a unique piano, without any equal, thus, emphasizing the fact that each piano is a work or art. Each Steinway piano sounds unique, having its own personality.
Secondly, Steinway & Sons has its competitive advantage over its competitors through the uniqueness of its endorsements and advertising during that time, focusing on its marketing approach. This was achieved by the company through its endorsements and advertisements being supported by famous musicians and pianists. The company’s participation with worldwide exhibitions, demonstrations and competitions also helped in establishing its reputation in the market. More importantly, the reputation of the Steinway pianos was established in the market through the establishment of the Steinway Hall that housed and supported the performances of great piano virtuosos who use Steinway pianos. In this regard, the Steinway pianos are associated with excellence, class and quality. The uniqueness of the company’s approach in building its reputation in the market is its promotion of the product as a good investment, and not just any musical instrument. Such an approach proved to be an edge of the company over other piano manufacturers, as it emphasized the restoration of old pianos and the high value that antique pianos hold despite old age and use. In addition, this emphasized the financial success of the company, as the establishment of the Steinway Hall helped the company raise funds not only for the company but also for charity institutions and other government-related organizations that need financial support.
Third competitive advantage of the Steinway & Sons is the establishment of its reputation of having superior quality, high class, elegance, and high regard to culture and music. The edge of the company over other piano manufacturers around the world is the trust of renowned musicians and virtuosos of the quality and prestige associated with the Steinway piano. This was achieved by the company, as they participate and emphasize the role of a Steinway piano in recognizing the importance and value of music and culture in the society. In this regard, the company was able to give importance and emphasis on the use of a Steinway piano in creating good music that exceeds the use of other brands of pianos. Although the price of a Steinway piano is much higher than the price of a Yamaha piano, the company emphasized that its price is justifiable as it is equated with elegance and superior quality, thus, the sign of appreciation and high regard for creating good music. The price of the Steinway piano, although deemed expensive, was justified as it is also equated to the desire of the company to let the public know of their product’s role in giving high regard and respect to culture and the arts. This serves to be a good competitive advantage of the company over other piano manufacturers, as this aspect emphasizes the fact that the Steinway piano is not only a piano, but a Steinway, thus, uplifting the reputation of the company. This also emphasized the financial focus or strategy of the company, as the price of their pianos would help the company obtain profit from the sales of their products. The profit that they would obtain from the sales of their products would compensate the production and operations costs of the company. This would not only do the company good but would also provide improvement for the products, which would further meet the standards and demands of their customers.
Lastly, another practice that affirms the company’s competitive advantage over other piano manufacturers is the fact that throughout the factory, there are workers who represent families that have been with the firm of generations. This serves to be an advantage because this keeps the traditions of the company intact, thus, preserving the core of the business. In this way, the techniques of one worker are passed on to his family members, thus, preserving the integrity and quality of their work.
4) Performance Analysis
Performance Indicator
2002
2003
2004
2005
2006
Net Sales
2,297
7,220
5,034
7,143
4,620
Gross Profit
,151
,553
9,133
1,534
7,407
Total Debt
0,636
6,602
1,208
4,692
8,411
Expenditures
,604
,462
,186
,004
,549
Quick Ratio = (Total Current Asset – Stock)/Total Current Liability
(267,346-15,853)/53,302 = 4.72
(288,270-15,853)/61,304 = 4.44
(308,761-47,436)/72,893 = 3.59
(295,731-47,436)/71,881 = 3.45
(287,413-66,048)/66,628 = 3.32
Accounts Receivable Turnover = Annual Credit Sales/Average Accounts Receivable
19,099/77,421 = 0.25
5,545/82,188 = 0.07
27,372/88,059 = 0.31
34,952/81,880 = 0.43
30,409/75,161 = 0.40
Inventory Turnover = Costs of Good Sold/Average Inventory
332,297/155,843 = 2.13
337,220/152,029 = 2.22
375,034/172,346 = 2.18
387,143/159,310 = 2.43
384,620/154,623 = 2.49
Account Payable Turnover
9,888
11,554
14,789
13,805
4,595
Debt to Equity Ratio = Total Liabilities/Shareholder’s Equity
292,523/131,208 = 2.23
293,030/152,635 = 1.50
331,992/145,553 = 2.28
306,825/148,830 = 2.06
289,174/158,001 = 1.83
Earnings per Share
Basic – 1.68
Diluted – 1.68
Basic – 1.09
Diluted – 1.09
Basic – 1.97
Diluted – 1.91
Basic – 1.71
Diluted – 1.67
Basic – 0.08
Diluted – 0.08
Achievements
Unveiling the Olympia-Chihuly Steinway art case piano
150 years of business success
Debut of Steinway Peace Piano to increase public awareness of UNICEF and fund raising for children in need for joy of music
Celebration of the 125th anniversary of Hamburg Steinway factory marked by large-scale music festival
New venture to create a series of Authorized Steinway Piano sample-based software instruments
This data indicate that throughout the years, the performance of the Steinway & Sons Company has been consistent in providing its customers with elegance, success, and superior quality of products. Performance indicators help the company to monitor and measure their success in the industry, through different quantifiable and non-quantifiable measurements. From the presented data, it can be seen that the highest sales of the company was exhibited in 2005, along with the highest gross profit. On the other hand, the lowest debt was exhibited in 2006 and the lowest expenditures in 2005. The highest sales and profit of the company can be attributed to the number of exposures the company has provided for its products, including Steinway concerts and programs, featuring famous pianists and artists from different parts of the world. In this regard, such exposures have helped further build the reputation and image of Steinway pianos. The company also exhibited lowest expenditures in 2005, as the company achieved more profit and sales. Thus, the activities mentioned also helped lessen the expenditures of the company, such as the cost for advertisement. Lowest debt was exhibited in 2006, which further indicated the good performance of the company. Less debt indicates that the company has more revenue or sales to pay for the debt it had incurred for its operations. As an overall evaluation, it can be perceived that the company was successful in its operations, production, and marketing approaches, which helped the overall increase of its sales and profit, thus, further establishing its name in the market.
Comparison of Competitor Performance
Piano Manufacturer
No. of Pianos Sold Yearly
Recent Achievements
Steinway & Sons
5,000 units per year
2007 – legendary piano tours, showcasing 3 remarkable pianos
Yamaha
200,000 units per year
2007 – establish sales subsidiary for musical instruments and AV equipments in the Russian market
Baldwin
20,000 units per year
2006 – Releases the Concert Master ATP-2 Baldwin Player Piano
Kawai
100,000 units per year
2007 – Kawai Pianos and other products made available in OnlineRock.com
From such data, it can be observed that among its competitors, Steinway & Sons has the least number of produced pianos per year, with Yamaha topping the list and producing 200,000 pianos per year, followed by Kawai, producing 100,000 pianos per year, and Baldwin, ranking third with 20,000 pianos per year. The numbers tell us that Steinway & Sons produced the least number of pianos per year, which can be attributed to the company manufacturing process that determines the products’ superior quality. The reason why its competitors can produce a vast number of pianos per year is their automated process in operations that significantly increase the number of piano units to be sold. However, the production of a single Steinway piano entails a meticulous and tedious process that securely checks the quality of the product. This is not to say that the quality of other pianos manufactured by other companies have lower quality. However, the process of producing the Steinway piano does not just assemble parts, but involves passion in every step of the way, thus, maintaining the tradition that has been passed from previous generations. In this regard, it can be understood that numbers do not indicate the success or the failure of a particular product in the market, but more importantly is based on how the company built its reputation and managed its operations that determines the success of the Steinway & Sons. In addition, it can also be understood that the success of the company was mostly attributed to its endeavors in building the image of its products to be associated with style, elegance, and passion in terms of cultural, artistic, and musical appreciation.
5) The company’s success can be traced and appreciated by tracing back all the significant events, including the problems that the company had encountered during its operations in the industry. The period between 1950 and 1960 was the boom of the television set in the United States, and the piano has been replaced to be the center of any American household. In this period, the Steinway & Sons has been rebuilding its company in terms of manufacturing, promotions, and marketing, as the production of piano manufacture has ceased at the outbreak of the Second World War. To help the company in terms of financial status, the Steinway Hall on the 57th street of Manhattan was sold, with its two lower floors leased. In addition, to help regain and establish the reputation of the Steinway piano, the company acquired several patents, including the “Grand Piano Design” in August 1953, the “Grand Piano with means for Adjusting the Touch Weight Resistance of the Keys” in October 1956, the “Means for Adjusting the Touch of Keys in Pianos and Like Musical Instruments” in October 1957, and the “Wrestplanks” in November 1959. In a way, the company was able to establish itself in the face of adversity, in competing with the television, through rebuilding its reputation in the American society.
During the 1960’s new competition in the piano manufacturing industry emerged from Asia, as Yamaha and Kawai began exporting thousands of pianos to the United States. During this time, the Yamaha piano sold in the United States cost about one-half the price of the equivalent Steinway model. In the 1970’s, the sales of the Japanese-made pianos raised a threat about the future of Steinway & Sons, thus, with this, the owner, Henry Z, decided to sell the company and merged with CBS Musical Instruments Division. Henry Z feels that with the merger, the company could enter their market effectively and become free from the restraints imposed by the antitrust legislation in the United States. In the period between 1970 and 1980, the company was totally under the supervision of CBS, which provided Steinway & Sons with 0,000 to million yearly. However, such supervision provided the company with a number of problems, including the lack of quality control, bureaucratic confusion, changing strategies, parades of experts, lack of understanding the traditions of the company, and lack of employee management. Due to the lack of development during these years, the company was sold to John and Robert Birmingham, thus, the company was under their supervision between 1985 to 1995. Lastly, it was sold the Selmer Company, and under the supervision of the new managers and president of in this period, the success of the company was soon observed, through the improvement and development of its manufacturing process, of its employees, of its dealers, and with the introduction of a new line, the Boston Pianos.
In recent times, after 10 years, the company still adopts its modern scientific approach, which enabled it to attain success in the piano manufacturing industry. During this time, the company continues to come up with new models and designs that would suit the personality of its user. In addition, because the manufacturing business has become stable, the company now only focuses on maintaining its image to be the center of concert halls and musical performances. It has been reported that during the major concert season of 2005 to 2006, 98% of these concerts were played in the United States using a Steinway piano, while the shares rise up to 99% if major symphonies and concert halls worldwide would be considered (2007). The incorporation of the modern scientific approach in manufacturing the pianos, including the dedication of the company to establish its reputation in the society and the support of its users helped established the success of the Steinway piano in the market. Despite intense competition from other piano manufacturing companies, and along with the internal and external problems the company faced, Steinway & Sons remained victorious and successful. This was attributed to their dedication, hard work, and effective strategy, which gave them their edge over their competitors.
6) It has been mentioned from past discussion that Steinway & Sons has a high regard for constantly upholding traditions of the company. The strong asset or advantage of the company can be observed in terms of its skilled and talented employees. More importantly, many of its workers have been present in the company, coming from different generations. In addition, another practice of the company is its high regard for a meticulous operations process involved in the piano manufacture. In this regard, such practices of the company in terms of upholding its tradition and in terms of its manufacturing process are suitable in the Chinese piano market. The Chinese have a high regard for upholding traditions, and the traditions observed by the company may not give a hard time to Chinese manufacturers, when the company pursues their plans of establishing a local plant in China. With this, the productivity and the effectiveness of Chinese workers would be ensured. In addition, it has been mentioned that the Chinese piano market is continually increasing as the society places increasing importance in the education of their children, including the importance of musical influence. In this regard, the introduction of the Steinway pianos in the market of China can provide them wide variety and options in terms of musical instruments. More importantly, that in the present era, the Chinese market is becoming more receptive with Western businesses and with this, Steinway & Sons would not have a difficult time penetrating the Chinese market, as they expand internationally to new and potential markets.
Using this perception and assurance, the promotion and introduction of the Steinway pianos in the Chinese market can be deemed successful. It has been reported that the Chinese have discovered a hunger for Western classical music, where in classical music is perceived by many Chinese citizens as a mark of quality. The Chinese believe that music is a means for expressing yearnings and emotions, which in a totalitarian Communist society, cannot often be put into words. Because of their high regard for Western classical music, Chinese musicians enjoy fame and prestige due to their expertise with Western music and in playing Western musical instruments, such as the Steinway grand piano. As such, the market of the company is increasing as millions of children are paying for piano lessons, where in the Steinway School can also be of service (2007). In figures, children aged from 3 to 10 years old learn to play the piano, with the support of their parents, who take them to concerts and buy them classical CDs. With this, these children are all potential customers of classical music and of musical instruments manufacturing companies such as Steinway & Sons (2005). It can be seen that the introduction of Steinway pianos was successful in the Chinese market, as Steinway and another company, Bechstein have set up joint ventures with Chinese makers, for every middleclass home seems to want a piano ( 2007). Furthermore, the company stated that it already earns more selling pianos in the Chinese market compared to what it spends in buying instruments there (2004). In this regard, this means that the sales of the company are higher than its expenses, which could indicate the success of Steinway pianos in the Chinese market.
7) Primarily, the option of Bruce Stevens is to enter the Chinese piano market through the recognition of the Chinese government policy of one child per family, which encouraged the parents to spend more money on their children. This would produce an increase in the number of unsatisfied demand for pianos, thus, providing a place for the high quality Steinway pianos. Second, the company plans to enter the Chinese market by introducing higher priced pianos in comparison with locally produced pianos in China. It has been mentioned that effects of demand from the increase in the prices of pianos in the market were still undetermined, thus, providing an opportunity for Steinway & Sons to introduce their higher priced products in the Chinese market. Bruce Stevens also plans to enter the Chinese market by building a plant in China that would help service the demand for pianos in the Asian market, being a potential piano market, next to its current market. In this regard, the quality of the products would not be put at risk.
From the plans or options of Bruce Stevens, I would suggest that the company could effectively enter the Chinese market using the first option, which is to provide a means for parents to spend more money for their children. This is because I believe that the government would be able to place higher importance on the needs of the youth of the country, aside from anything else, in its aim to develop the Chinese society. I believe that the increasing number of youth populations in China may provide a good opportunity for the company in order to introduce their products, as the increase in the number of youth populations in a society, changes the demand for a certain product, following the law of supply and demand. With this, it can be concluded that this recommendation would be useful because this puts the needs of the customers first before anything else, thus, upholding the primary objective of any business organization, which is to provide effective solutions or products to the market. I believe that this would be a successful strategy because it answers the need of its market, which is to provide Chinese parents with the option to spend more for their parents, which is not only expensive spending for an ordinary musical instrument, but also spending for an investment that places particular importance to culture, music, and art. In this regard, it can be concluded that with such a strategy, the company would not only have the opportunity to provide for their customers, but would also provide good opportunities to expand, profit, and become known internationally.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment