BUYING A LEGEND

HARVARD BUSINESS SCHOOL : CASE STUDY

:

EXECUTIVE SUMMARY

PROBLEM STATEMENT:- Find a way to uphold

historical brand reputation- Gain market share world

wide

BACKGROUND:On April 18, 1995 Kyle Kirkland and Dana Messina purchased the piano

manufacturer for an incredible $100 million!

HISTORY: (1/4)Established in New York

City in 1853 by Henry Engelhard

Steinway, an immigrant from Germany.

HISTORY: (2/4)For 140 years, Steinway had the reputation of building best pianos in the world.

BUTlast 25 years have been

tumultuous

HISTORY: (3/4)Sold to the CBS Musical Instruments Division in 1972 for

$21 million

Sold to John and Robert Birmingham for $ 50 million

Sold on April 18, 1995 to Dana Messina and Kyle Kirkland for $100 million

HISTORY: (4/4)Steinway was the leading producer

of :GRAND PIANOS

VERTICAL PIANOS

INDUSTRY TRENDS: (1/6)A domestic share of 34% in student band instruments

in 1994

A domestic share of 45% in

professional band instruments in

1994

Sold @ $500 per

piece

75% of unit sales

Sold @ $1500

per piece

50% of revenue

25% of unit sales

50% of revenue

INDUSTRY TRENDS: (2/6)

25% DECREASE in sale of pianos in 1994 relative to

1990.

INDUSTRY TRENDS: (3/6)85% of the piano sales

were in the United States

INDUSTRY TRENDS: (4/6)4 Asian companies:

YAMAHA, KAWAI, YOUNG CHANG &

SAMICK accounted for 75% of global sales in

1990’s.

Asian imports achieved 35% unit share of Vertical

pianos&

80% unit share of grand piano market.

INDUSTRY TRENDS: (5/6)South Korea, Japan & China

represented a very large portion of the market.The United States and

Western Europe were no longer the industry leader in

sales.

INDUSTRY TRENDS: (6/6)$ 11,900 - $ 17,000

(Year 1995)$ 26,000 - $ 70,000

(Year 1995)

Only a small percentage of people can afford a

product of Steinway and Sons.

ULTIMATELY LEADING TO LIMITED PIANO SALES !

MARKET COMPETITION: (1/2)HIGH-VOLUME MANUFACTURING

YAMAHA KAWIA

BALDWIN

LOW-VOLUME MANUFACTURING

BOSENDORFER FAZIOLI

MARKET COMPETITION: (2/2)YAMAHA

$1 billion in sales in 1994 with 35% world market share and 50% Japanese market share

KAWAI

Produced 90,000 vertical pianos and 10,000 small grand pianos a

year

MARKET COMPETITION: (2/2)BALDWIN

$122 million in sales in 1994 by selling 20,000 pianos worldwide

OTHERS

Bösendorfer from Austria produced 400 grand pianos in

1994 to Fazioli’s 40

TARGET MARKET STRATEGIES: (1/2)how to tap into the Asian market ?

Introducing the Boston piano to rival that of the Yamaha and Kawai that are produced in Japan.

Enable Asian people to purchase a Steinway without going broke!

TARGET MARKET STRATEGIES: (2/2)how to cope up with new advancements ?

Focus on expanding into electronic

keyboards becoming popular with the

younger generations.

Reach younger people & make them aware of

Steinway!

S.W.O.T ANALYSIS

Established brand reputation of quality and durability

Around 850 artists who choose the Steinway and Sons piano

Differentiation and customization of the product

Stores in North and South America, Europe, Asia and Africa

Average customer is over 45 years old and earns in excess

of $100,000/year

Replaced by keyboards and other computer technology

Saturated Market

Establish a larger customer base in Asia to increase market share.

Using innovative technology, they can introduce low to mid priced pianos to cater to middle class.

Have new famous music personalities represent Steinway & Sons.

Declining demand for pianos

Ever-increasing technology in the music industry eg. Electric

Piano

Level of inexperience of the current owners.

CONCLUSION (1/4)

STEP FORWARDusing technology to enhance

their products while maintaining their traditional

brand reputation.

CONCLUSION (2/4)

Eliminate the Boston line pianos all together

ORUse it to your advantage!

CONCLUSION (3/4)

Reach new customers all over the world by

introducing low to mid range

pianos.

CONCLUSION (4/4)

Use this declination of the piano industry to

their advantage.

DISCLAIMERCreated By Harsh Raj Chauhan, Delhi

Technological University, during a marketing internship by

Prof. Sameer Mathur, IIM Lucknow