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the clock, likeother machines, isbrutal and callouslyefficient in its task. Ittakes raw material,in this case time, andprocesses and refinesit into somethingmore useful to humanbeings. It breaks timedown into abstractconcepts called hours,minutes and seconds,and then doles themout to us, always atthe same maddeningpace.1
349Thunderbird International Business Review, Vol. 42(3) 349372 MayJune 2000Published 2000 John Wiley & Sons, Inc.
Time Marches On: The Worldwide WatchIndustry
M. Edgar Barrett
Copyright 1999 Thunderbird, The American Graduate School of International Management. All rightsreserved. This case was prepared by M. Edgar Barrett, J. Kenneth and Jeannette Seward Chair in GlobalStrategy, and Research Assistants Jennifer L. Barrett and T. Hawk Sunshine for the purpose of classroom dis-cussion only, and not to indicate either effective or ineffective management.
1 From Tyrant of Time, Master of Minutes by JayBookman, Atlanta Journal and Constitution, Jan.3, 1995.
ts hard to imagine functioningin todays world without awatch. The modern businessperson may depend on the time-piece in order to catch a train,remember an important meet-ing, or download information.Watches serve as status symbolsand fashion accessories. Theykeep near-perfect time in wildlyerratic climates from Siberia toSudan, from thousands of milesin the air to hundreds of feetbelow the surface of the oceaneven on trips to the moon.Prices range from affordable tooutrageous, making timepiecesavailable, if not essential, toalmost everyone in the world.
But while the watchs main func-tiontelling timehas notchanged over the past 500 years,the worldwide watch industryhas. The center has shiftedamong three different conti-nents, and while Switzerland,Japan, Hong Kong, and theUnited States are the industryleaders today, there is no guaran-tee that any of them will remainon top tomorrow.
This case describes the evolutionof the worldwide watch industryfrom its inception in the earlysixteenth century to the mid-1990s.
THE EARLY EUROPEANINDUSTRY
The worlds oldest knownwatches were made around1500 in Germany. They consist-ed of plated movements mount-ed in egg-shaped cases. Earlywatches made in Nuremberg,the German city widely regard-ed as one of the first centers ofwatchmaking, contained a sin-gle stubby steel arm that spunaround a 12-hour dial. Knobsat each hour allowed the watch-wearer to feel the hour in thedark. The watches never ran formore than 15 to 16 hours at atime, and had to be woundtwice a day.2
The first watches were spring-powered mechanical models,sharing smaller versions of thesame components found inclocks. Though the face was sim-ple, many were enclosed in elabo-rate casings that were painted andsometimes engraved. When thewatch was wound, the motionwas transferred through a series ofgears. These gears, in turn,moved the hands of the watch.Decorative, and often very expen-sive, the watch was kept in thepocket and treated like a finepiece of jewelryeven passeddown as a family heirloom.
The watch was farfrom accurate, but itwas pretty, so it wasworn more as jewel-ry than for time-keeping,
wrote one watch expert, afterstudying the early timepieces.3
Though the watch was inventedin Germany, the craft skillsquickly spread into the neigh-boring countries of France andSwitzerland. By the late 1500s,the French were leading theEuropean watchmakers in designand innovation. Over the nextcentury, however, many Frenchand German (Protestant)Huguenots, fleeing religious per-secution, moved to England orSwitzerland, taking their watch-making expertise with them.
M. Edgar Barrett
350 Thunderbird International Business Review MayJune 2000
2 Jaquet, Eugene, Technique and History of the SwissWatch: From its Beginnings to the Present Day, OttoWalter Ltd. (Olten, Switzerland, 1953), p. 21.
3 Bruton, Eric, The History of Clocks and Watches,Crescent Books (New York, 1979), pp. 109110.
Geneva proved especially appeal-ing to the religious refugees asthe Swiss Protestants hadstormed its cathedral and drivenout Catholic religious authoritiesin August of 1535. After theProtestant Revolt, Jean Calvin(founder of the Presbyteriancreed) took charge. In 1541, heintroduced the Sumptuary Laws,moral legislation designed to putan end to the hedonistic lifestylethen enjoyed by the Swiss livingin Geneva. The laws forbade cit-izens from dancing or wearingjewelry and extravagant clothing.In 1566, Calvin went a step fur-ther and prohibited the fabrica-tion of most jewelry.4
Many of the foreign watchmak-ers who had sought refuge inGeneva soon teamed up withSwiss jewelers, whose livelihoodfaced extinction as a result of therigid legislation. Workingtogether, they produced highlyornate, yet functional, watchesthat were among the few accept-able accessories under Calvinsstrict edicts.
Swiss watches initially kept timethrough an oscillating bar, withknobs at each end, called thedumbbell balance. In 1675, thespiral hairspring was inventedwhich tremendously improvedthe accuracy of the watch when itwas applied to the balance.5
The Worldwide Watch Industry
351Thunderbird International Business Review MayJune 2000
By this time, there were so manywatchmakers in Geneva that theyformed their own guild andbegan adopting statutes settingstandards and regulating theactivities of local watchmakers.In 1701, new decrees forbadeforeigners from working in thetrade.
In addition, only Swiss citizensand residents of Geneva couldbecome master watchmakers inthat city. Applicants wererequired to submit an alarmwatch (traditional jeweled-leverwatches were considered tooornamental) to a jury of guildmasters. If the watch wasapproved, its maker would beawarded the prestigious title. In1746, there were 550 master-watchmakers in Geneva. By1760, the number had grown tomore than 800 and as many as6,000 Geneva citizens wereinvolved in some branch of theindustry.6
Despite efforts by the Genevagovernment and the local guildto restrict the manufacturing ofwatches to that city, the industrysoon spread into nearby villagesand then into other regions allacross the country, including theJura Mountains in northwestSwitzerland. The Jura farmingfamilies quickly picked up thewatchmaking craft from theirnew neighbors and began mak-
6 Jacquet, E., op. cit., pp. 3738.
4 Encyclopedia Britannica, 1983, Volume 4, p. 747. 5 Bruton, E., op. cit., p. 118.
ing watches to supplement theirincome from farming.
As they relied increasingly ontheir new craft, Jura farm familiesbanded together to form com-munity schools aimed at trainingyoung apprentices in variousaspects of the watchmakingprocess. Specialized workshopsquickly developed in differentlocales for various stages of themanufacturing process. Often,separate families specialized inparticular parts of the process.Many sold individual movementsto watchmakers in Geneva, whothen assembled the watches. TheJura watchmakers were alsoquick to take advantage of thenew tools and techniques beingdeveloped in England, as well asto design their own.7
No large factories existed inGeneva in the 18th century inwhich a complete watch could beproduced from start to finish.Most Genevan watchmakersrelied on the watchmakers fromnearby districts or the family-runworkshops in the Jura Mountainvillages for the watch compo-nents. As a result, by the end ofthat century more than 30 differ-ent categories of workers wereemployed in the Swiss watch-making industry. The division oflabor resulted in the productionof watches that varied in qualityas well as design.8
M. Edgar Barrett
352 Thunderbird International Business Review MayJune 2000
Though Swiss watches sold well,9
the English were widely consid-ered the top watchmakers inEurope and led the world inwatch production until 1840.Zedler observed in the UniversalLexicon of 1746: The Englishwatches are considered best ofall. The Geneva watches arethought little of, because theyare to be had so cheaply; they aremade in such quantities that onebuys them in lots.10
Based near industrial areas inLondon, Liverpool, andCoventry, the watchmakingindustry in England developedunder a unique system of labordivision. Watchmakers assem-bled parts made by specialistseach responsible for only onewatch component. Despite thetedious nature of the produc-tion process, English watch-makers continued the methodfor centuries, giving othercountries the chance to catchup and eventually surpass themin watch production.
The Swiss established their firstfull-fledged, mechanized watchfactory in 1839, and the processquickly allowed Swiss watchmak-ers to overtake their Englishcounterparts. By mid-century,Swiss exports were estimated at
9 By the early 1800s, Swiss watch exports numberedabout 50,000 units annually. Bruton, E., op.cit., p.124. 10 Bruton, E. cp. cit., p. 123.
7 Ibid., p. 87. 8 Jacquet, E., op. cit., p. 87.
about half a million watches ayear. Meanwhile, English watch-makers were producing about150,000 watches annually andemploying 10,470.11
Ironically, many of the high-pre-cision machine tools the Swissused to cut and form the tinyparts they designed were actuallybuilt in England. The Englishwatchmakers, worried that thenew tools would threaten theirlivelihood, persuaded Parliamentto pass a law barring their use inEnglands watch industry. Inaddition, they insisted on theinclusion of some particular partsin their manufacturing processthat made the English watchesslightly more accurate but drovethe price up as well, allowing theSwiss and other competitors toundersell them.
A turning point in the Swisswatchmakers productionprocessand reputationcamewith a little help from a newcompetitor: the Unit