Steinway & Sons

Presenters Team 2
Zack Carpenter Brad Dillard Kristin Gillespie Steven Mobley

Anthony Spencer
TABLE OF CONTENTS: Executive Summary..3 History..4 Evolution of the Piano Industry...7 Competition.. S!"# $nalysis...%% Conclusion...%& !or's Cited.....%3

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

&

EXECUTIVE SUMMARY: Statement of the Problem: Stein(ay ) Sons faced a declinin, piano mar'et and increased competition from $sia piano manufacturers. Ba !"ro#n$: In % / t(o investment 0an'ers 0uy le,endary piano manufacturers1 Stein(ay ) Sons for %..

million dollars. Stein(ay ) Sons are the premier piano manufacturers in the (orld dominatin, the hi,h*end mar'et. Shortly 0efore the company chan,ed hands Stein(ay ) Sons 0e,an to mar'et an introductory line of pianos under the 2oston 0rand name. %&' #''&on: #he ne( o(ners of Stein(ay ) Sons (ill face a (orld(ide mar'et that is in decline due to the prevalence of electronic 'ey0oards and other more modern forms of entertainment. Stein(ay ) Sons (ill also have to deal (ith increased competition from 3apanese manufacturers1 especially 4amaha. #he 2oston 0rand pianos (ere manufactured under contract 0y a 3apanese firm and in no (ay reflected hi,h standards associated (ith Stein(ay ) Sons. #he ne( o(nership of Stein(ay ) Sons (ill have to decide (hether to focus on the hi,h*end piano mar'et or continue to try to tap other mar'ets as they have 0e,an to do (ith the 2oston line. Re ommen$at&on: Scrap the 2oston line and start another midline effort that focuses on the 5uality that customers expect from Stein(ay ) Sons

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

In order to counteract 4amaha6s entrance to the hi,h*end mar'et1 0e,in a mar'etin, campai,n focusin, on institutions and private consumers reinforcin, the ideas that a Stein(ay ) Sons ,rand piano is the piano of le,ends.

Intro$# t&on
7or almost a century1 the piano mar'et (as dominated 0y a sin,le family o(ned company. Stein(ay and Sons havin, 0een producin, some of the finest musical e5uipment for over %.. years1 ho(ever1 in recent years they lost their position as leader in the piano mar'et. $fter numerous o(ners and presidents1 the company (as sold in % / for 8%.. million. #he

0i,,est surprise of this story is not the sales price1 0ut (ho 0ou,ht this household name company1 not a competitor1 not a hu,e corporation1 or even people in the music (orld1 it (as 0ou,ht 0y t(o investment 0an'ers in their early 3.s.

(&'tor)
#he Stein(ay and Sons Company (as founded in 9e( 4or' City in %:/3 0y Henry En,elhard Stein(ay1 a ;erman immi,rant. Stein(ay1 a ca0inet ma'er in ;ermany1 0uilt his first piano in his household 'itchen. 2y the time he founded his company he had already 0uilt 4:& pianos. Stein(ay 5uic'ly made a name for his company and thrived from their <technical excellence.= 9ot only (as it 'no(n as one of the 0est pianos around1 the company developed the cross strin,in, techni5ue (ith a cast iron frame for the piano. $ techni5ue that is no( standard on all ,rand pianos. "ver the next forty years1 Stein(ay and six sons developed (hat 0ecame the modern piano. Half of the patents developed 0y the Stein(ay Company (ere created durin, theses first forty years. 9ot only (ere piano ma'ers involved in this process 0ut the <late nineteenth*century inventions (ere 0ased on emer,in, scientific research1 includin, the Stein(ay ) Sons #eam &*Presenters +'t, 44-*.% 4

acoustical theories of the reno(ned physicist Hermann von Helmholt> ?(((.stein(ay.com@.= 7rom then on1 Stein(ay pianos (on numerous a(ards and commendations for their excellent in manufacturin, and en,ineerin,. In %:-7 they (on the ,old medal a(ard at the Paris exhi0ition1 the <;rand ;old +edal of Honor1= it (as the first $merican company ever to (in this presti,ious a(ard. 7rom then on Stein(ay 0ecame the piano of choice1 from royalty to the (orld6s top pianist. Ho(ever1 in % 7& the Stein(ay ) Sons Company (as sold to the C2S +usical Instruments Aivision. It (as hard option 0ut it (as finally decided that the company that had 0een family o(ned for %&. years could no lon,er 0e a family o(ned 0usiness. 7inancial factors lead to the sale1 company o(ners (ere spread throu,hout the (hole family1 many (ho not intimately involved in the company. #hey (ere only concerned a0out profits and (ere un(illin, to reinvest in their o(n company. $fter poor return on capital ?only a0out /B@ it (as decided the 0est move for the o(ners (ould 0e to sell the company. C2S (as (illin, to invest the money needed to 0rin, the company 0ac' to ,reatness. Stein(ay (as sold to C2S for 8&% million in C2S stoc'. $nd Henry Stein(ay (as 'ept as president for / years to ease the move from a family company to corporate o(ned 0usiness and to ensure the Stein(ay 5uality (ould remain. Ho(ever1 C2S (as una0le to turn the company around. Profits did not increase as much as hoped and criticism came re,ardin, the drop in 5uality of the Stein(ay piano. C2S decided to sell the company to t(o 0rothers from 2oston1 3ohn and Co0ert 2irmin,ham1 in % :/ for 8/. million. #hese t(o 0rothers (ere not o0vious 0uyersD neither had any experience in the music 0usiness or even could play the piano. #he ne( o(nership (as not (ell received1 employee morale dropped and dealers do not (ant to do 0usiness (ith company (ith t(o ne( o(ners (ho

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

had no idea (hat they (ere doin,. Ho(ever1 the 0rothers did 0rin, a ne( mana,er in1 2ruce Stevens1 (ho actually (ent to the dealers to hear there concerns and fi,ure out ho( to repair their 0ro'en reputation. He pu0lished ho( they manufactured their pianos1 so the dealers could see for themselves the immense care and 5uality that (ent into a Stein(ay. He developed a <Partnership Pro,ram= (ith their remainin, dealers to increase their support1 startin, thin,s sales trainin, pro,rams1 technical support1 and promotional events in stores. #hey created Stein(ay Sho(rooms in the store to increase sales not only for themselves 0ut for the retailers. Ho(ever1 a hu,e 0lo( to their reputation came (hen $ndre !atts choose a 4amaha ,rand piano for his &/th anniversary (ith the 9e( 4or' Philharmonic1 even thou,h he (as a Stein(ay artist. It (as reported that he (as tired of the poor 5uality of piano1 poor service from Stein(ay dealers1 and overall lac' of attention to his re5uest. $ num0er of prominent artist 0e,an movin, too 4amaha as their sponsor1 moves that hurt Stein(ay sales. Even Stevens6 positive chan,es could not 0rin, financial success 0ac' the Stein(ay Company. #he 2irmin,ham 0rothers decided to sell the company for (hat they stated as <personal pro0lems= in late % 4. #(o investment 0an'ers 0ecame interested in 0uyin, the

companyD they issued a 0id of 87/ million to the 2irmin,ham 0rothers and made it to the second round of 0ids1 and finally (on the 0iddin, (ar (ith a final 0id of 8%.. million. #his (as not the hi,hest 0id offered 0ut the 0rothers had a ,ood reputation after purchasin, the Selmer Company a fe( years prior they (ere vie(ed as the 0est 0uyer. So then the only 5uestion (as could these t(o youn, investment 0an'ers ,et this once ,reat company 0ac' in tuneE

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

E*ol#t&on of the P&ano In$#'tr): $s told in the case1 the piano industry initially contained t(o types of pianos. #he first type1 the ,rand piano1 had hori>ontally mounted strin,s. #he second type1 the vertical piano1 had vertically mounted strin,s. #he ,rand piano (as a lar,er1 more expensive piano than the vertical piano. #he ,rand piano ,enerally also produced a <louder and more resonant tone= ?;ourville %/&@. !orld(ide sales in % 4 (ere approximately /4.1... vertical and -.1... ,rand pianos.

#he piano industry had t(o main mar'ets. #he first mar'et (as the home ?private@ mar'et and made up around .B of vertical piano sales and :.B of ,rand piano sales. #he second mar'et (as the institutional mar'et (hich included sales to <universities1 music institutes1 hotels1 and performance halls= ?;ourville %/4@. #his mar'et accounted for the rest of the sales of each type of piano. #he concert ,rand piano (as the main product that satisfied the demand in the institutional mar'et. #he concert ,rand piano1 as stated in the case1 <measured feet in len,th1

costin, over 8/.1... and F(asG reserved almost exclusively for performin, artists of the hi,hest cali0er.= In % 41 out of fe(er than /.. concert ,rand pianos that (ere manufactured

(orld(ide1 Stein(ay (as at the head of the production accountin, for 3/. concert ,rand pianos that (ere sold. In the piano industry1 there (ere four distinct trends. ;ourville noted that the first trend involved a sustained do(nturn in the piano industry. Since % :.1 there (as a 4.B decrease in sales (orld(ide. $lso1 in the Hnited States1 the amount of pianos that (ere sold in % :.1 (hich (as &331... pianos1 dropped to less than %..1... pianos in % 4. +any people feel that this

decline (as caused due to the ,ro(in, popularity of another product1 the electronic 'ey0oard. Iey0oards had ,ro(n increasin,ly sophisticated and (ere very lo(*priced. 2y the mid*% :.s1 the case study sho(s that many more 'ey0oards (ere 0ein, sold than conventional pianos. #he

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

second trend that ;ourville points out (as the consolidation of the piano manufacturin, industries in the Hnited States and in Europe. 2y % &1 the num0er of piano manufacturers in

the Hnited States had dropped from several hundred at the turn of the century do(n to only ei,ht piano manufacturers. #he third maJor trend (as the emer,ence of several $sian manufacturers (ho1 0y the % .s com0ined for 7/B of ,lo0al sales ?;ourville %/4@. #hese companies (ill 0e

loo'ed at further in the competition section. #he fourth trend that ;ourville tells us a0out (as the openin, of ne( and potentially lar,e mar'ets. #raditionally1 the Hnited States and !estern Europe (ere the main mar'ets in the piano industry. 2y the % .s1 ne(er mar'ets (ere openin,

up in countries such as <3apan1 South Iorea1 and China= ?;ourville %//@. South Iorea topped sales in % 4 (ith %4&1/.. total vertical and ,rand pianos. 3apan came in 0ehind them (ith sales

for vertical and ,rand pianos totalin, .13.. and China accounted for :.1... in sales of vertical pianos ?;ourville %//@. #hese ne( mar'ets accounted for much of the top units sold in % 4.

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

Com+et&t&on #here are only a couple companies that can compete (ith Stein(ay ) Sons in the piano industry. #hese companies includeK 4amaha1 Ia(ai1 2ald(in1 2osendorfer1 and 7a>ioli. 4amaha is a 3apanese manufacturer. #hey not only produce piano6s they also produce 0oats1 motorcycles1 and est. 4amaha had 8% 0illion dollars in piano sales (hich is 3/B share of the (orld6s piano mar'etD this ma'es them the lar,est producer of pianos in the (orld. In the past they have tend to put their focus on the vertical pianos alon, (ith some smaller ,rand pianos. #hey had never really 0een 'no(n for their 5uality 0ut instead for their mass production1 0ut in % -7 they came out (ith their piano called the 4amaha Conservatory C7 Concert ;rand. #heir sole purpose of creatin, this piano (as to try to compete (ith Stein(ay6s (ell 'no(n ,rand pianos. #hey mar'eted it as the <(orld6s finest concert ,rand piano=. #hey used 0enchmar'in, to try to compete (ith Stein(ay. #hey purchased Stein(ay pianos in order to allo( their en,ineers to ta'e apart and reassem0le their pianos to try to copy their reno(ned 5uality. #hey also used 0etter materials in the production process of the C7 Concert ;rand. 4amaha stated that they used the same materials that (ere found in the Stein(ay. $nother strate,y they used to try to compete (ith Stein(ay (as to start an artist pro,ram li'e the one that Stein(ay incorporates. #hey offered their pianos to some (ell 'no( artists to use in performances around the (orld. 4amaha are ma'in, leaps and 0ounds in catchin, up to Stein(ay in the hi,h*end piano mar'et. $nother 3apanese company that offers us competition is Ia(ai. #hey produce a0out half as many pianos as 4amaha 0ut still offer Stein(ay competition. #hey are 'no(n for producin, ,ood 5uality vertical and small ,rand pianos. Ia(ai attempted to do the same thin, 4amaha did

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

and enter the concert ,rand piano mar'et1 0ut people critici>ed the 5uality of their product. #hey said it had a ,ood 0ase 0ut lac'ed depth. 2ald(in Piano and "r,an Company is the only lar,e scale producer of vertical and ,rand pianos in the Hnited States. #hey (ere founded in %:-& and are also the only company that produces of hi,h 5uality ,rand pianos in $merica. 2ald(in is a full*line producer of pianos and sold &.1... in % 4.

#he last t(o competitors are Italian 0ased companies that put a focus on hi,h 5uality ,rand pianos. Instead of mass producin, li'e the $sian competitors 2osendorfer and 7a>ioli1 much li'e Stein(ay1 ma'e their pianos handcrafted and hi,h 5uality. #o,ether they sold less than /.. hundred ,rand pianos in % 4. #his focus has (or'ed extremely (ell for 2osendorfer

and 7a>ioli they are 'no(n as the hi,hest 5uality pianos on the mar'et.

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

S,OT Anal)'&' Stren"th' #he 0rand name has 0een reco,ni>a0le (ith music for %.. years Aifferent model pianos for different 'inds of people and places Hi,hest 5uality in the piano mar'et Stores in 9orth and South $merica1 Europe1 $sia and $frica

,ea!ne''e' Saturated mar'et +aJor Competitor is their o(n used pianos "ther stron, music names movin, in on declinin, mar'et share

O++ort#n&t&e' Hse name to push other music products Lo(er prices and cut in on competitors Have ne( famous composers represent Stein(ay

Threat' 3apanese made pianos #echnolo,y1 rise of the electric piano Aecline in demand

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

Con l#'&on In conclusion Stein(ay ) Sons is the 0est 'no(n name in hi,h*end pianos. Stein(ay ) Sons Just need to ta'e another loo' at their mar'etin, campai,n. #hey need to ta'e advanta,e of the fact that fine artists such as Au'e Ellin,ton1 Mladimir Horo(it>1 Cole Porter1 $rthur Cu0instein and many more use their products. !hen you connect a superior product (ith a (ell 'no(n name the product is ,oin, to sell. $s for the 2oston line Stein(ay ) Son should eliminate the product all to,ether. #hey need to ,et their team to,ether and start from scratch to develop the hi,hest 5uality product (ith their most limited resources. If they do not cut any corners and really develop the product to last they can 0e,in a medium 0ud,eted piano line.

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%

,OR-S CITE%:

;ourville1 3ohn #. Lassiter1 3oseph 2. <Stein(ay ) SonsK 2uyin, a Le,end ?$@.= Ceprint in +elvin C. +attsonK +ar'etin, +ana,ement Case $nalysis 0y #eams. 2ostonK +c;ra( Hill1 &../. %47*%--.

Stein(ay ) Sons

#eam &*Presenters

+'t, 44-*.%