steinway & sons - buying a legend
TRANSCRIPT
: published by :
Harvard Business
School
Analyzed By
PRIYANJIT BISWASJADAVPUR UNIVERSITY
Steinway &
SonsPresent Scenario
April 19, 1995
Steinway &
SonsPresent Scenario
April 19, 1995
Steinway & Sons is sold for $100 million to the
Selmer Company
Steinway &
SonsPresent Scenario
April 19, 1995
Steinway & Sons is sold for $100 million to the
Selmer Company
People familiar with Steinway and the piano industry’s problems, are amazed at
the price of $100 million
Steinway &
SonsPresent Scenario
April 19, 1995
Steinway & Sons is sold for $100 million to the
Selmer Company
People familiar with Steinway and the piano industry’s problems, are amazed at
the price of $100 million
Critics claim that the $100 million price, ‘is an extraordinary number and does not
seem rational’
Steinway &
SonsPresent Scenario
April 19, 1995
Steinway & Sons is sold for $100 million to the
Selmer Company
People familiar with Steinway and the piano industry’s problems, are amazed at
the price of $100 million
Critics claim that the $100 million price, ‘is an extraordinary number and does not
seem rational’
Dana Messina & Kyle Kirkland, current owners of Selmer,
wonder about the prospects of the purchase
Steinway &
SonsImmediate Problems faced
by the Owners
Steinway &
SonsImmediate Problems faced
by the Owners
No extant synergy between Steinway & Sons and the Selmer Company
Steinway &
SonsImmediate Problems faced
by the Owners
No extant synergy between Steinway & Sons and the Selmer Company
Unit sales of Steinway grand pianos had slipped from
3,576 in 1990 to 2,698 in 1994
Steinway &
SonsImmediate Problems faced
by the Owners
No extant synergy between Steinway & Sons and the Selmer Company
Unit sales of Steinway grand pianos had slipped from
3,576 in 1990 to 2,698 in 1994
Yamaha, a Japanese contender, continued to challenge Steinway as the maker of the
finest concert grand pianos
Steinway &
SonsImmediate Problems faced
by the Owners
No extant synergy between Steinway & Sons and the Selmer Company
Unit sales of Steinway grand pianos had slipped from
3,576 in 1990 to 2,698 in 1994
Yamaha, a Japanese contender, continued to challenge Steinway as the maker of the
finest concert grand pianos
Steinway’s recent introduction of a mid-priced line of pianos (Boston Pianos), was
a questionable strategy
Steinway &
SonsFuture Prospects and
Exciting Possibilities
Steinway was a pre-eminent brand name in the music industry and a producer of
the finest quality grand pianos
Steinway &
SonsFuture Prospects and
Exciting Possibilities
Steinway was a pre-eminent brand name in the music industry and a producer of
the finest quality grand pianos
Economic conditions were improving in the U.S. and Europe, Steinway’s two
largest markets
Steinway &
SonsFuture Prospects and
Exciting Possibilities
Steinway was a pre-eminent brand name in the music industry and a producer of
the finest quality grand pianos
Economic conditions were improving in the U.S. and Europe, Steinway’s two
largest markets
Steinway had yet to take full advantage of a promising and growing Asian market
Steinway &
SonsFuture Prospects and
Exciting Possibilities
Steinway was a pre-eminent brand name in the music industry and a producer of
the finest quality grand pianos
Economic conditions were improving in the U.S. and Europe, Steinway’s two
largest markets
Steinway had yet to take full advantage of a promising and growing Asian market
Finally, being one of the greatest names in all of music, Steinway was a name that
would be fun to own
Steinway &
SonsFuture Prospects and
Exciting Possibilities
ObjectiveTo study and analyze the current global piano
industry and eventually undertake necessary measures,
imperative for the sustenance of the brand name, ‘Steinway &
Sons’
Selmer Company Records
Selmer Company Records
Steinway Company Records
SteinwayCompany Records
SteinwayCompany Records
SteinwayCompany Records
SteinwayCompany Records
Steinway Musical
Instruments Inc.
Dana MessinaChief Executive
Officer
Post-Acquisition
Kyle KirklandChairman
SteinwayCompany Records
THE
PIANO INDUSTRY
Two types of Pianos :
Vertical
Piano
Two types of Pianos :
GrandPiano
90%
10%
Vertical Piano Market
Home/Private MarketInstitutional Market
Vertical Piano Market, 1994
5,40,000 Vertical Pianos sold worldwide in 1994
80%
20%
Vertical Piano Market
Home/Private MarketInstitutional Market
Grand Piano Market, 1994
60,000 Grand Pianos sold worldwide in 1994
IndustryTrends
Four Major
Trends
Four Major
Trends
Downturn in the Piano industry, with global sales
dropping by 40% since 1980
In the U.S., sales plummeted, from 2,33,000 units in 1980 to less than
1,00,000 units in 1994
Affected by the growing popularity of computers and increasingly sophisticated,
low-priced electronic keyboards
Affected terribly by the global recession of the early 1990s
1
1
Four Major
Trends Consolidation of the Piano manufacturing industries
in the U.S. and Europe
2
In the U.S., where there were several hundred piano makers initially, there were
only 8 Piano makers by 1992
Four Major
Trends
3
Emergence of several strong Asian manufacturers such as
Yamaha, Kawai, Young Chang and Samick
The 4 Asian piano powerhouses combined for
75% of global sales by the 1990s
From a near zero share in 1950, Asian imports achieved a 35% unit share of the
U.S. vertical piano market by 1994
From a near zero share in 1950, Asian imports achieved a 80% unit share of the
U.S. grand piano market by 1994
75%
25%
Global Sales
Asian manu-facturersNon-Asian manu-facturers
35%
65%
Vertical Piano market - U.S.
Asian manufacturersNon-Asian manufacturers
80%
20%
Grand Piano market - U.S.
Asian manufacturersNon-Asian manufacturers
Global Sales
Vertical Piano Market - U.S. Grand Piano Market - U.S.
Four Major
Trends Emergence of new and potentially large markets
with promising prospects
4
Countries like Japan, South Korea and China now represented huge opportunities
for the piano makers
4
Major Competitors
Major
CompetitorsHigh Volume Producers of both,
Vertical and Grand Pianos
Low Volume Producers of primarilyhigh-end Grand Pianos
Types
Major
CompetitorsHigh Volume
Producers Yamaha
Kawai
Baldwin1
Major
CompetitorsLow Volume
Producers Bosendorfer
Fazioli
2
PriceCompariso
n
The Used Piano
Market
Used Piano
Market
With many brands of pianos lasting over 40 years,
over 40 million pianos existed around the world
Used Piano
Market
With many brands of pianos lasting over 40 years,
over 40 million pianos existed around the world
For every new piano sold in the U.S., 10 used pianos also changed hands
Used Piano
Market
With many brands of pianos lasting over 40 years,
over 40 million pianos existed around the world
For every new piano sold in the U.S., 10 used pianos also changed hands
In 1994, domestic dealers of new pianos, sold about
25,000 used pianos that they had obtained as trade-ins
Used Piano
Market
With many brands of pianos lasting over 40 years,
over 40 million pianos existed around the world
For every new piano sold in the U.S., 10 used pianos also changed hands
In 1994, domestic dealers of new pianos, sold about
25,000 used pianos that they had obtained as trade-ins
Another 50,000 used pianos were sold by second-hand dealers, in 1994
A used Steinway
posed a serious
threat to the sale
of a new Steinway
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
1853
Established in New York City by Henry Engelhard
Steinway
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
1853
Established in New York City by Henry Engelhard
Steinway
1853-1972
Globalexpansion
Owned by theSteinway Family
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
1853
Established in New York City by Henry Engelhard
Steinway
1853-1972
Globalexpansion
1972-1985
Production increased
Quality questioned
Owned by theSteinway Family
Sold to CBS
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
1853
Established in New York City by Henry Engelhard
Steinway
1853-1972
Globalexpansion
1972-1985
Production increased
Quality questioned
1985-1995
Sold to the Birmingham
Brothers
Owned by theSteinway Family
Sold to CBS
Dealer network rebuilt
Product line increased
Steinway & Sons Timeline
A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible
consistent with quality -
1853
Established in New York City by Henry Engelhard
Steinway
1853-1972
Globalexpansion
1972-1985
Production increased
Quality questioned
1985-1995
Sold to the Birmingham
Brothers
Owned by theSteinway Family
Sold to CBS
Dealer network rebuilt
Product line increased
1995
Sold to Selmer
ConcernWhat should the new owners,
Dana Messina & Kyle Kirkland do with Steinway next?
Boston Pianosintroduced in 1992
New Market Segment
Gain in Market Share
Increase in Profits
Can affect Steinway’s
‘top-of-the-line’ brand image
Boston Pianosintroduced in 1992
New Market Segment
Gain in Market Share
Increase in Profits
Can affect Steinway’s
‘top-of-the-line’ brand imageWhat To
Do ?
Boston Pianosintroduced in 1992
New Market Segment
Gain in Market Share
Increase in Profits
Can affect Steinway’s
‘top-of-the-line’ brand imageWhat To
Do ?Expand and maintain the
Boston piano line
Boston Pianosintroduced in 1992
New Market Segment
Gain in Market Share
Increase in Profits
Can affect Steinway’s
‘top-of-the-line’ brand imageWhat To
Do ?Expand and maintain the
Boston piano lineGain Market shares in the
mid-priced piano market
Boston Pianosintroduced in 1992
New Market Segment
Gain in Market Share
Increase in Profits
Can affect Steinway’s
‘top-of-the-line’ brand imageWhat To
Do ?Expand and maintain the
Boston piano lineGain Market shares in the
mid-priced piano market
Increase Sales by competing with
the Asian powerhouses
Limited Editions
Limited Editions
What To Do ?
Limited Editions
What To Do ?
Introduce Limited Edition
Pianos every couple of
years
Limited Editions
What To Do ?
Introduce Limited Edition
Pianos every couple of
years Increase sales and maintain a
prestigiousbrand image
Limited Editions
What To Do ?
Introduce Limited Edition
Pianos every couple of
years Increase sales and maintain a
prestigiousbrand image
Ensure a steady and exclusive
demand
High Quality
High Quality
What To Do ?
High Quality
Deliver High-Quality Products
What To Do ?
High Quality
Invest in R&D Reduce manufacturing
costsIncrease production
Deliver High-Quality Products
What To Do ?
Celebrity Endorsements
Celebrity Endorsements
Build a global reputation throughcelebrity
endorsements
Celebrity Endorsements
Build a global reputation throughcelebrity
endorsements
Focus on an exclusive
‘Concert & Artist Program’
Celebrity Endorsements
Build a global reputation throughcelebrity
endorsements
Focus on an exclusive
‘Concert & Artist Program’
Maintain a positive
relationship with the celebrities
Dealer Network
Dealer Network
What To Do ?
Dealer Network
What To Do ?Maintain a high-quality and
focussed dealer network
Dealer Network
What To Do ?Maintain a high-quality and
focussed dealer network
Develop ‘Partnership Programs’
and extend support to the dealers
Used Piano Market
Used Piano Market
Introduce Exchange Offers in order to replace the used pianos
Used Piano Market
Introduce Exchange Offers in order to replace the used pianos
Produce high-quality contemporary designs so that replacement becomes a necessity
Used Piano Market
Introduce Exchange Offers in order to replace the used pianos
Produce high-quality contemporary designs so that replacement becomes a necessity
Used piano trade-ins can be rebuilt into modern designs at lower costs
THANK YOU
Created By
Priyanjit Biswas,Jadavpur University
during an internship under
Prof. Sameer Mathur,IIM Lucknow
www.IIMInternship.com