steinway-buying a legend

STEINWAY & SONS

BUYING

A

LEGEND

Founded by Henry Engelhard

Steinway in 1853

Purchased by CBS and owned from 1972-

1985

Owned by Birmingham brothers from

1985-1995

Bought by Selmer company in

1995

In April 1995 STEINWAY&SONS

was brought

By

DAN MESSINA and KYLE

KIRKLAND

For

$100MILLION!!

How was this purchase for $100million justified???....

TYPES OF PIANOS

VERTICAL PIANO GRAND PIANO

90%

10%

Vertical Piano Market

Home/Private Market

Institutional Market

80%

20%

Grand Piano Market

Home/Private Market

Institutional Market

5,40,000 were sold in 1994

60,000 were sold in 1994

4 major trends

1 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

4 major trends

2

Consolidation of the Piano manufacturing industries in the U.S. and Europe In the U.S., where there were

several hundred piano makers initially, there were

only 8 Piano makers by 1992

4 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

4 major trends 4

Emergence of new and potentially

large markets with promising

prospects

Countries like Japan, South Korea and China now represented huge

opportunities for the piano makers

COMPETITORS

YAMAHA, BALDWIN KAWAI ,FAZIOLI

USED TRADITIONAL CRAFT METHOD

KEPT A CLOSE WATCH OF STEINWAY AND COPIES SOME OF ITS POLICIES

Baldwin was the only other manufacturer of high-quality grand pianos in USA.

was manufactured in highly

automated production facilities

Were very well respected by trained

musicians and official piano of many organisations

Kawai were manufactured on highly automated assembly lines

has a nice, resonant base, and the instrument sounds fine at low volumes

Fazioli produced very small volumes of top-quality grand pianos.

It seems Italian piano industry has finally been able to produce a concert instrument with its own

individual personality and worldwide marketability.

Used piano markets

For every 1 piano sold 10 pianos changed hands

A USED STEINWAY posed a serious threat to a

NEW STEINWAY

a well maintained 20-year old Steinway grand

could be expected to sell for 75% of the price of a

new Steinway grand of the same type

•EXPAND AND MAINTAIN THE BOSTON PIANO LINE

•TARGET THE ASIAN MARKETS

•GAIN MARKET SHARES IN MID-PRICED PIANO MARKET

WHAT TO DO ??

DEALER NETWORK

MAINTAIN A HIGH QUALITY AND FOCUSSED DEALER NETWORK

FREQUENT VISITS TO DEALERS ENSURES SENSE

OF RESPONSIVENESS TOWARDS THEM

CHOOSE DEALERS WHOSE PRIME PRODUCT LINE WOULD BE STEINWAY

DEVELOP PARTNERSHIP PROGRAMMES

WHAT TO DO??

•DELIVER HIGH QUALITY

PRODUCTS

•INVEST IN R&D DECREASE

COST OF MANUFACTURE AND

INCREASE QUALITY

THE POLICY OF INTRODUCING EVERY

TWO YEARS WORKED WELL

WHICH SHOULD BE CONTINUED

THE NAMES OF THE IMMORTAL

ARTISTS WERE ENGRAVED WHICH

WERE SOLD WITHIN HOURS

NOW IT ALL DEPENDS ON THE

TWO OWNERS TO CARRY FORWARD THE

COMPANY TAKING INTO COUNT

THE PAST EXPERIENCES AND

APPLYING THE RIGHT

STRATEGIES

THANK YOU

DISCLAIMER Created by E. Sai Charan, SVNIT

Surat , during a marketing

internship by Prof. Sameer Mathur,

IIM Lucknow.