The creation of Swatch is a prime example of creating something out of necessity due to the changing landscape around them. The Swiss were forced to comply in order to avoid an economic downturn and it led to creating the world’s largest watchmaking firm, covering over 10 brands with various price points and demographics.
If you name a watch brand, chances are the brand itself is owned by The Swatch Group, or the watch internals are produced and supplied by them through ETA. The Swatch Group has a great economic presence in the wristwatch market today, but they did not start that well-off.
Before we go into the history of The Swatch Group, however, we must be well-informed of the watchmaking economy in general. We must be knowledgeable of what started it all and how a collective decision can affect the global market for years to come, forcing a reactive decision rather than a proactive one.
So, let’s dive in and see what chain of events led to a Lebanese businessman named Nicolas Hayek to create the biggest watch conglomerate in the world.
An ethnic group of French Protestants called the Huguenots migrated from northern France, who were Catholics, to Switzerland (Geneva, specifically) in the early-to-mid 1500’s to avoid persecution.
Under the guidance of their leader, John Calvin, the Huguenots reformed the city of Geneva to reflect the Protestant way of life. That meant to focus on faith and scripture only. So in 1541, John Calvin banned the wearing of jewellery and displaying ostentatious items such as diamonds and gold. The problem was that the Huguenots were part of the nobility and their skills included jewellery making. Out of necessity, the skilled jewellers turned to watchmaking, which was declared by Calvin as a ‘necessary tool’, so a new industry was born.
Watchmaking became a Swiss institution and a vital industry for the nation and became part of Swiss identity. In 1601, Geneva formed The Watch Makers Guild of Geneva, who pride themselves on providing quality products and created distinguished brands such as Patek Philippe, Rolex, to name a few. “Swiss Made” became a government-regulated statement as certain manufacturers could not stamp this phrase without approval from higher powers.
The Swiss took watchmaking seriously and did not focus on anything else, such as allegiance to wars. Swiss foreign policy dictates that the country should not and will not be involved in any armed conflict between states. It was established by the Treaty of Paris in 1815 and remained neutral since. Being known as a neutral country also led to a critical part in watchmaking history.
Through Swiss neutrality, the Swiss matchmaking economy indirectly created a monopoly as other economic powers focused on military actions rather than watchmaking. The Swiss watchmakers didn’t really have any real competitors in the global market and didn’t really see the need exploring new technologies.
Why would you when you have no adversaries?
The 1950s saw the rise of American watchmaking firms such as Elgin, Hamilton, and Bulova through electromechanical technology.
This new concept forced electricity to power a wristwatch rather than a spring and mechanical forces. Meanwhile, Seiko was recovering from the war and was also embracing electric watch technology and to develop quartz as a regulator.
Neutrality Into Complacency
The tides were slowly changing and the Swiss never batted an eye. When Seiko unveiled the Astron on Christmas Day 1969, it was a reflection of things to come as the world’s first quartz watch was now available.
Dubbed as the ‘Quartz Crisis’ by everyone thoroughly involved with watches, the lack of market reaction by the Swiss led to other nations embracing this new technology, increasing marketing supply, and in turn, lowering demand overall. The new quartz watches provided a constant energy source, which made it more reliable and accurate than mechanical watches. The manufacturing process costs less with fewer parts, which reflected in lowering market value for watches overall.
In one fell swoop, it turned a prominent Swiss market into insolvency.
Created Out of Necessity
Swatch was created in 1983 to counter the quartz crisis effect in Switzerland, by creating a more affordable Swiss-made watch. It gained popularity due to the low costs and brilliant packaging with bright colours and outlandish designs. Nicolas Hayek took over Swatch in 1985 and used the Swatch brand popularity to their advantage to fuel their quest for domination.
Through a series of mergers and acquisitions around the 1990’s, Hayek was able to grow Swatch into The Swatch Group, owning brands in all market segments, which is a whos-who of watchmaking brands: Breguet, Harry Winston, Blancpain, Glashütte Original, Jaquet Droz, Léon Hatot, Omega, Longines, Rado, Union Glashütte, Tissot, Balmain, Certina, Mido, Hamilton, Calvin Klein watches + jewelry, Swatch, Flik Flak.
Today, The Swatch Group is focusing on staying on top of the watch market by modularization which minimizes costs by producing the same internals but changing the aesthetics to satisfy their watch brand demographics. The Group is also continuing to do research and development, such as producing the Sistem51 for Swatch, which uses 51 mechanical parts attached to an automatic wind.