steinway & sons:buying a legend
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Steinway & Sons: Buying a Legend
HARVARD BUSINESS SCHOOL CASE
A Little Introduction
Who are Steinway & Sons
o Leader in the market for high-quality grand pianos
o Established in New York City in 1853 by Henry Engelhard Steinway
On April 18,1995
o Steinway & Sons was Sold for $100 Million
o Purchased by Dana Messina and Kyle Kirkland
Questions facing Messina and Kirkland
o Whether Steinway would continue its high-end, niche strategy of being the world’s pre-eminent maker of high quality vertical and grand pianos?
o Might it make more sense to forego this long-standing strategy to pursue some bolder, more aggressive plan?
o Does it make sense for Steinway to sell a mid-priced line of vertical and grand pianos?
Types of Pianos
o Steinway grand pianos
o Steinway vertical
o Boston pianos
A Typical Grand Piano
A Typical Vertical Piano
In 1994, Steinway & Sons had sales of $100 million
Steinway grand pianos
Steinway vertical
Boston pianos
0 500 1000 1500 2000 2500 3000
2698
600
2300
Sales
Market Share of Steinway and Sons
United States
Germany
Japan
England
Switzerland
0 10 20 30 40 50 60 70
58%
8.6%
7.3%
6.1%
2.9%
Share in 1994
Price Range in the year 1995
o Steinway grands-$26,400 to over $70,000
o Steinway verticals-$11,900 to over $17,000
o Boston pianos-$6,395 to over $30,000
The Piano Industry
Worldwide unit sales
o Vertical pianos-540,000 units
o Grand Pianos-60,000 units
Industry Trends-1/4
o Downturn in the piano industry-global sales dropping by 40% since 1980
1980
1994
0 50000 100000 150000 200000 250000
233000
100000
United States-No of units sold
Industry Trends-2/4
o Consolidation of the piano manufacturing industries
o several hundred piano makers at the turn of the century
o only eight piano makers by 1992
Industry Trends-3/4
Emergence of several Asian manufacturers
o 75% of global sales by the 1990s
o Yamaha (~ 200,000 units) and Kawai (~100,000 units)
o Young Chang and Samick (~ 75,000 to 100,000 units each)
Impact in United States due to Asian Manufacturers
o Zero share in 1950
By 1994
o 35% unit share of the vertical pianos
o 80% unit share of the grand piano
Industry Trends-4/4
o Opening of new and potentially large markets.
o Japan, South Korea and China now represented huge opportunities.
Major Competition is from
o Baldwin
o Yamaha
o Kawai
o Bosendorfer and Fazioli
Baldwin
o High-quality grand pianos
o In 1994-sold about 20,000 pianos-generating revenues of $122 million
o Has a network of 700 dealers
o Respected by trained musicians
Yamaha
o 100-year old Corporation
o $1.0 billion in piano sales
o 35% share of the world market
o 50% share of the Japanese market
Unit Sales of piano producers in 1994
o Baldwin- 20,000 pianos
o Yamaha- 175,000 pianos
o Kawai-100,000 pianos
o Bosendorfer-400 grand pianos
o Fazioli-60 grand pianos
Analysis-1/3
Strengths:
o Brand name
o Highest Quality
o Traditional handcraft production techniques
Analysis-2/3
Weakness
o too much cost is consuming( half of Lumber is being discarded)
o The dealer network is reduced during Birmingham
o Lack of diversity
Analysis-3/3
Financial capabilities
o Owners has changed many times
o Running in loss for two consecutive years 1992 & 1993
o Seasonal downturn in demand
Suggestions
o Continue making High Quality pianos
o Market more aggressively
Suggestions
o Continue Boston piano by maintaining its brand name
o Expand into new Markets like Asia
o Bring new products into the market like Steinway Limited Editions, The Crown Jewel Collection etc……..
Disclaimer
"These slides were created by Suneel Anumolu as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com)"
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