Buying a Legend : Steinway & Sons

Sanket Badhe INDIAN INSTITUTE OF TECHNOLGYROORKEEB.Tech Student

Company Background

Steinway & Sons, producer of the highest quality pianos in the world that has been a NewYork institution since its founding byHeinrich E. Steinway in 1853.

“build the best piano possible and sell it at the lowest price consistent with quality.”

Technical excellence continued to be emphasized, with the firm taking out over 120 patents in piano making over the years.

Major music schools such as Juilliard, Oberlin and Indiana University each owning in excess of 100 Steinway.

Why is Steinway legend? What made it so a great master?

All Steinways are still assembled by craft methods, with limited use of assembly-line techniques.

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Skilled labour was employed throughout the production process.

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Steinway used the highest grade ofWood.

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selling them through its own sumptuous outlets and through a network of dealers, and gaining exposure by encouraging premier performing artists to use the pianos.

This attention to detail contributed to the legendary sound and durability of a Steinway.

Timeline of Steinway & Sons

After 120-years of family control, it was decided that Steinway could no longer survive as a closely-held family operation. The factors leading up to the sale of Steinway in 1972 were primarily financial.

Steinway & Sons :1853-1972

The CBS Years :1972 - 1985

Company was sold to the CBS Musical Instruments Divisionin 1972 for about $21 million in CBS stock.

On the positive side, CBS did invest in Steinway’s aging Long Island City and Hamburg facilities. CBS took steps to increase piano production, CBS also grew the Steinway dealer network result of this sales volumes and profits increased relative to the early 1970s.

The CBS Years :1972 - 1985

On the Negative side, increase in piano production and in grew the Steinway dealer network were not well received by traditionalists. appointment series of presidents, each ofwhom ran into problems of one sort or another.

result of this critics began to question the quality of the Steinway pianos

The CBS Years :1972 - 1985

CBS’s management of Steinway came to a close in 1985. In November 1984, despite beingmoderately profitable, CBS announced plans to sell its Musical Instruments companies and to focusits efforts on broadcasting

The Birmingham Years : 1985 - 1995

Company was sold to the Birmingham Brothers in 1985 for about $50 million.

One of the first tasks Birmingham Brother's did was assuring Steinway’semployees, dealers, and customers that the new owners were committed to quality.

The Birmingham Years : 1985 – 1995

Product line:The Boston Piano :Steinway’s first new product introduction was a mid-priced piano under the brand name “Boston.”

Birmingham's did something that Steinway & Sons had resisted throughout its history. They introduced a mid-priced piano.

Steinway Limited Editions

The Crown Jewel Collection

The Birmingham Years : 1985 – 1995

Product line:

In spite of the positive changes made by Stevens and his management team, by the mid-1990s, the running of Steinway was constrained by limited financial resources. Finally, in late-1994, for personal reasons, the Birmingham's decided to sell the company.

The Birmingham Years : 1985 - 1995

The company was again sold on April 18, 1995 to Dana Messina and Kyle .Kirkland,

Messina & Kirkland : April 18, 1995

Background of Messina & Kirkland

purchased controlling interest in Selmer (in 1993), a meat processing company (in 1992), and a paper company (in 1993). the purchase of Steinway & Sons, Kirkland and Messina formed Steinway Musical Instruments, Inc., with Steinway & Sons and Selmer as wholly-owned subsidiaries.

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Problem and issue:

Many question faced by Messina & Kirkland after they bought Steinway & Sons.

Problem and issue:

they needed to decide whether Steinwaywould continue its high-end, niche strategy of being the world’s pre-eminent maker of high qualityvertical and grand pianos?

Might it make more sense to forego this long-standing strategy to pursue some bolder, more aggressive plan?

Problem and issue Regarding Boston:

did it make sense for Steinway to sell a mid-priced line of vertical and grand pianos?

if it did make sense, might there be other ways to leverage the Steinway brand name to further enhance revenues?

Analysis

1 Market behaviour 

• Steinway had yet to take full advantage of a growing Asian market.

•Sustaining downturn in the piano industry (global sales dropping by 40% since 1980).

•Selmer revenues had dropped from $86 million to $80 million between 1989 and 1990.

1 Market behaviour 

•The impact by an active market for used pianos is considerable Because of the extremely long life, duration of piano threat to the piano industry seriously.

Sales had decrease

2 Competitor behaviour 

Baldwin: sole remaining large-scaleproducer of vertical and grand pianos in the United States. More importantly to Steinway, it was the only other American manufacturer of high-quality grand pianos.

2 Competitor behaviour 

Yamaha: The 100-year old Yamaha Corporation, was the largest producer of pianos in the world. Yamaha also produced a limited number of concert grand pianos using traditional craft methods. The goal of this effort was to produce the best grand piano in the world.

2 Competitor behaviour 

Kawai: Manufactured on highly automated assembly lines. Produced good quality verticals and small grand piano. Manufactured Boston piano on behalf of Steinway.

2 Competitor behaviour 

Bösendorfer and Fazioli : In contrast to the high-volume strategies of the Asian manufacturers, Bösendorfer of Austria and Fazioli of Italy had taken a different approach. Both focused almost exclusively on very small volumes of top-quality grand pianos.

2 Competitor behaviour 

VS.

Yamaha has a far greater share of the overall piano market than Steinway and even has more diversity of grand piano price. Steinway, to broaden its market share, should diversify own product because brand choice is driven by product quality, prompt delivery and competitive price.  Steinway needs to reinforce marketing activities into Asian market, so more competitive priced product is material to it. 

3 Consumerbehaviour 

Consumer behaviour Brand choice is driven by product quality, prompt delivery and competitive pricing.

Evaluation for alternatives or

solutions

Focus on Asian market

Market more aggressively Economic conditions is improving and more focus on growing Asian market will cause higher profits .The piano industry is going downturn and the impact of the used piano market is strong.

To reinforce marketing activities into Asian market, Steinway should introduce new lower-priced piano to Asian market as a flanker to compete against low-price competitors. 

Focus on Asian market

Brand strategy 

Nowadays, one of company’s valuable assets is their brand. Otherwise, how many brands does Steinway have? We suppose that the shortage of brands is a main cause of Steinways sales reduction.

Brand strategy 

This is the time Steinway should implement brand extension strategy. Steinway has strong power of brand itself, so with a brand extension, consumers can make inferences and form expectation as to the performance of a new product based on what they already know about the parent brand itself.

Brand strategy 

Brand extension :Steinway Musical Instruments, Inc. With piano they also start to manufacturing Of other musical instrument with salmon.

Brand portfolios

Different brands may be designed and marketed to appeal to different market segments, So the important point to design a brand portfolio is to maximize market coverage.

Brand portfolios

Boston: Steinway should maintain its high quality niche market for reputation of great master and keep going mid-priced Boston line.

Role of Messina & Kirkland

As both Messina and Kirkland lack experience in the piano industry, they should hire a professional team from the piano industry and they itself have gain lot of experience from financial sector from salmon so they handle financial activities.  

Thank you

“Created by Sanket Badhe, IIT Roorkee, during an internship with Prof. Sameer Mathur, IIMLucknow, www.IIMInternship.com ”