Situation Analysis
The future of Steinway has been highly affected by its several rebranding system. Currently, Steinway & Sons is losing market due to its low quality production. The latest acquisition of Steinway has brought this contemporary issue into the light creating a dilemma in decision making among the current managers.
Current Problem
Steinway & Sons Company is facing three major challenges. The company has lost grip of its brand loyalty to its customers. Consequently, since the death of Steinway, the company faces a lot of management challenges. Finally, bringing Steinway to life requires huge funds from its stakeholders.
Background
Steinway birth came in 1853 under, Henry England Steinway. Through Henry, Steinway was built on a strong tradition based on his motto, “build the best piano possible and sell it at the lowest price consistent with quality” Richard (2007, p.4).
Henry insisted on technical excellence and quality that ensured that its products were unique in the market. As a result, the company soared during this period in sales from a 10,0000th piano to the 500,000th in 1988. Steinway targets were the students, concerts players and influential institutions and people through displays of its unique products.
Henry ensured that the pianos were handled by most skilled craftsmen who produced the traditionally crafted pianos with unique tones and tinges. Apart from his concern over the skilled craftsmanship and procedural piano manufacturing, Henry also had an elaborate marketing strategy involving expert pianists at different concert stages. This display became a master marketing plan that resulted into its products sell in large numbers. “We used the concert pianist as a proving ground.
They know it. Part of this association with performing artists is the fact that we say, ‘Look we are trying to make a better piano for you guys, will you try this one?’ There is no real scientific laboratory way that you could take an experimental action, put it in a piano and test it…” Boston Monthly (4 April 2008, p. 4).
Steinway apart from its perfect management practices and quality assurance was deeply engaged on environmental concerns. He was a champion who fought for restoration of hardwoods through planting and creation of preservation measures. He also ensured that his actions created benefit to the community through offering employment opportunities. He also contributed towards community programs. Across his reign, Steinway worked within ethical and legal precepts that further fuelled his legendary industry (Richard 2007, p.9).
Despite its strength in the market, Steinway & Sons transition moments came in 1972. The company was running into financial crisis due to high overhead costs. The cause of this was poor management from the family members. Constraints due to pull and push from family members relentlessly made the Company experience its first turbulent period in the early 1970s.
By 1970, its return on capital was only 5%. A family member did say “We could get as much in a government bond as we can from this” Richard (2007, p.4). When running of the Company was moving beyond their hands, Steinway & Sons was sold to CBS Musical Instrument Division (Robert 2007, p.5).
CBS as well could not effectively manage Steinway & Sons and maintain its quality at the same time. After the retirement of Henry Steinway, the Company was engaged in more management crisis and some financial problem that resulted into deterioration of its product quality and subsequently market. CBS sold Steinway & Sons to John and Robert of Birmingham in 1985 at around $50 million (Robert 2007, p.5).
The Birmingham brothers formed the climax of deviation from the origin Steinway & Sons traditions. In their management, the brothers tried to restructure the company to ensure maximum efficiency. They formalized their manufacturing facilities, marketing channels and employment system. Two major incidents occurred during the time between 1985 and 1995, which sent sparks into Steinway & Sons the piano.
One was the introduction of several product lines with cheaper options such as the Boston Piano. This was thought as a niche penetration strategy against constantly increasing competition, but it never worked. The second was outsourcing manufacturers from the Asian continent called Kawai. The result was a loss of its esteemed trust from the customers. This marked the major drift of the company from Steinway & Sons traditions of quality in piano production.
While in one way the strategy was seen to be successful, apart from a lot of overhead cost and management concerns with the Birmingham brothers, the Company lost its legacy in the market. At the same time, it was suffering from stiff competition from Asian manufacturers such as Yamaha. On the realization of future doom, the brothers sold it to Messina and Kirkland at $100 (Richard 2007, p.9).
SWOT Analysis
The main strengths of the Company currently are:
- Highly valued manufacturing facility that were built during Henry times
- The Company still some considerable market share based on its past.
- Advantages due to its unique products
- Ability to acquire highly skilled employees
There are three main weaknesses affecting this Company. These include;
- Poor management system
- Lose of its original taste in the market
- Financial constraints
Currently Steinway & Sons is facing threats in the following area
- Competition in the market
- Ability to get most skilled employees as they live for other potential firms
- The dynamic nature of the industry
Despite all these, the Company still has opportunities to restore its position in the market. This can be through,
- Laying proper management system
- Building upon its history
- Using its big facilities
Current Situation
After acquiring the company, Messina and Kirkland are in the crossroad of building Steinway and Kirkland. While building this company, several contentious issues stand out. The first issue is whether the company should proceed with niche penetration strategy by continuous building over its current brands.
Alternatively, the Company can work through building its Steinway traditional quality image based on high quality grand and vertical pianos. At the same time restructuring the Company raises questions over how the current product line will be incorporated of rejected. The third question is based on management and marketing strategies of the company to regain its legacy and competitive advantage (Robert 2007, p.5).
The Company has been depicted as worthless currently, while at the same time its needs a lot of capital for restructuring. The stakeholders as a result, need a lot of funding to make this happen. The image of the company has also been destroyed, that it will need aggressive support mechanism to make competitive again. Building image needs a lot of rational decisions regarding the product as while as its outside environment.
Management Crisis
The only successfully period of Steinway & Sons was during Henry Steinway. After the period, several management systems have failed to steer the company. These are majorly based on poor decision making resulting from poor understanding of the industry by the managers.
Most of the people acquiring this company have limited knowledge of the piano industry, and it is supporting pillars such as its long standing legacy on quality products. As a result, the building blocks of the company have been eroded. The company hence has lost taste in the market. Management based on clear hierarchal system and effective communications need to be applied.
Managers need more focus on outputs as well, apart from their structural adjustments. Satisfactions of customers are not only based on prices and nature of the product but also the image of an organization through its social responsibility. After Henry, most people who have managed the company have done very little regarding environmental concerns and community responsiveness. New management team requires active responsibility in ensuring that people feels these positive impacts of Steinway.
Stiff Competition
Steinway & Sons was started when there was limited competition in American, Asian, Europe and African market; as a result, the company had an astounding success based on customers’ loyalty. However, this has dramatically changed with European and Asian manufactures flooding the market with their products.
Financial Backups
Currently, huge finances are required to manage and market Steinway & Sons. Most people acquiring the company are suffers financials problems to enable them execute all their strategies successfully. Managers need a lot of finds to re-establish this company to profitable entity.
Companies like Yamaha Kawai and Baldwin are making aggressive campaigns in the market that makes tough entry into the market very difficult. Marketing strategies by Steinway & Sons not only needs on pricing and quality but also on aspects such as provision of after sale services, product follow ups and aggressive advertisements.
For Steinway to survive presently in the market, it needs adjustment on mission and vision statements. It focuses and presentation needs to be more aggressive and promising to customers. However, these will incur extra overhead costs. To fit in the competitive market, the company needs a lot of researches and studies over its market to ensure its survival and competitive advantage.
Solutions
Since Steinway & Sons did hold the market based on its quality product, Messina and Kirkland can re-establish the Company through the following methods:
- Redrawing their vision and mission based on unique and quality products as did Steinway. The mission and vision statement should be promising to potential customers for greater value against their spending.
- Develop a comprehensive management plan that is focused on objectives and well communicated across the lines. The process, structure and outcomes management system, and policies need to be restructured to ensure efficiency and effectiveness in production.
- A strategic and sustainable marketing system for the product should be created by market encircling and advancement. Steinway & Sons Marketing should be focused on convincing and persuading customers Customer retention mechanisms as well need to be developed.
- Destroy all outsourced companies and rather seek best skilled craftsmen even from the past generations. Outsourcing especially from upcoming companies does very little to the benefit of Steinway apart from lowering its image. This can be reversed by the company growing robustly independently to capture its market.
- The Company needs a lot of funding to survive. The company stakeholders’ needs to get other sources of funding to enable them sail in their current turbulence.
References
Conversation with John Steinway 1980, the Boston Monthly, 1980, p. 8. Web.
Richard, K. 1995, Lieberman, Steinway & Sons, Yale University Press, London.
Robert, P. 1994, Encyclopedia of Piano, Garland Publishing, New York.