: published by :

Harvard Business

School

Analyzed By

PRIYANJIT BISWASJADAVPUR UNIVERSITY

Steinway &

SonsPresent Scenario

April 19, 1995

Steinway &

SonsPresent Scenario

April 19, 1995

Steinway & Sons is sold for $100 million to the

Selmer Company

Steinway &

SonsPresent Scenario

April 19, 1995

Steinway & Sons is sold for $100 million to the

Selmer Company

People familiar with Steinway and the piano industry’s problems, are amazed at

the price of $100 million

Steinway &

SonsPresent Scenario

April 19, 1995

Steinway & Sons is sold for $100 million to the

Selmer Company

People familiar with Steinway and the piano industry’s problems, are amazed at

the price of $100 million

Critics claim that the $100 million price, ‘is an extraordinary number and does not

seem rational’

Steinway &

SonsPresent Scenario

April 19, 1995

Steinway & Sons is sold for $100 million to the

Selmer Company

People familiar with Steinway and the piano industry’s problems, are amazed at

the price of $100 million

Critics claim that the $100 million price, ‘is an extraordinary number and does not

seem rational’

Dana Messina & Kyle Kirkland, current owners of Selmer,

wonder about the prospects of the purchase

Steinway &

SonsImmediate Problems faced

by the Owners

Steinway &

SonsImmediate Problems faced

by the Owners

No extant synergy between Steinway & Sons and the Selmer Company

Steinway &

SonsImmediate Problems faced

by the Owners

No extant synergy between Steinway & Sons and the Selmer Company

Unit sales of Steinway grand pianos had slipped from

3,576 in 1990 to 2,698 in 1994

Steinway &

SonsImmediate Problems faced

by the Owners

No extant synergy between Steinway & Sons and the Selmer Company

Unit sales of Steinway grand pianos had slipped from

3,576 in 1990 to 2,698 in 1994

Yamaha, a Japanese contender, continued to challenge Steinway as the maker of the

finest concert grand pianos

Steinway &

SonsImmediate Problems faced

by the Owners

No extant synergy between Steinway & Sons and the Selmer Company

Unit sales of Steinway grand pianos had slipped from

3,576 in 1990 to 2,698 in 1994

Yamaha, a Japanese contender, continued to challenge Steinway as the maker of the

finest concert grand pianos

Steinway’s recent introduction of a mid-priced line of pianos (Boston Pianos), was

a questionable strategy

Steinway &

SonsFuture Prospects and

Exciting Possibilities

Steinway was a pre-eminent brand name in the music industry and a producer of

the finest quality grand pianos

Steinway &

SonsFuture Prospects and

Exciting Possibilities

Steinway was a pre-eminent brand name in the music industry and a producer of

the finest quality grand pianos

Economic conditions were improving in the U.S. and Europe, Steinway’s two

largest markets

Steinway &

SonsFuture Prospects and

Exciting Possibilities

Steinway was a pre-eminent brand name in the music industry and a producer of

the finest quality grand pianos

Economic conditions were improving in the U.S. and Europe, Steinway’s two

largest markets

Steinway had yet to take full advantage of a promising and growing Asian market

Steinway &

SonsFuture Prospects and

Exciting Possibilities

Steinway was a pre-eminent brand name in the music industry and a producer of

the finest quality grand pianos

Economic conditions were improving in the U.S. and Europe, Steinway’s two

largest markets

Steinway had yet to take full advantage of a promising and growing Asian market

Finally, being one of the greatest names in all of music, Steinway was a name that

would be fun to own

Steinway &

SonsFuture Prospects and

Exciting Possibilities

ObjectiveTo study and analyze the current global piano

industry and eventually undertake necessary measures,

imperative for the sustenance of the brand name, ‘Steinway &

Sons’

Selmer Company Records

Selmer Company Records

Steinway Company Records

SteinwayCompany Records

SteinwayCompany Records

SteinwayCompany Records

SteinwayCompany Records

Steinway Musical

Instruments Inc.

Dana MessinaChief Executive

Officer

Post-Acquisition

Kyle KirklandChairman

SteinwayCompany Records

THE

PIANO INDUSTRY

Two types of Pianos :

Vertical

Piano

Two types of Pianos :

GrandPiano

90%

10%

Vertical Piano Market

Home/Private MarketInstitutional Market

Vertical Piano Market, 1994

5,40,000 Vertical Pianos sold worldwide in 1994

80%

20%

Vertical Piano Market

Home/Private MarketInstitutional Market

Grand Piano Market, 1994

60,000 Grand Pianos sold worldwide in 1994

IndustryTrends

Four Major

Trends

Four Major

Trends

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

1

1

Four Major

Trends Consolidation of the Piano manufacturing industries

in the U.S. and Europe

2

In the U.S., where there were several hundred piano makers initially, there were

only 8 Piano makers by 1992

Four 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

75%

25%

Global Sales

Asian manu-facturersNon-Asian manu-facturers

35%

65%

Vertical Piano market - U.S.

Asian manufacturersNon-Asian manufacturers

80%

20%

Grand Piano market - U.S.

Asian manufacturersNon-Asian manufacturers

Global Sales

Vertical Piano Market - U.S. Grand Piano Market - U.S.

Four Major

Trends Emergence of new and potentially large markets

with promising prospects

4

Countries like Japan, South Korea and China now represented huge opportunities

for the piano makers

4

Major Competitors

Major

CompetitorsHigh Volume Producers of both,

Vertical and Grand Pianos

Low Volume Producers of primarilyhigh-end Grand Pianos

Types

Major

CompetitorsHigh Volume

Producers Yamaha

Kawai

Baldwin1

Major

CompetitorsLow Volume

Producers Bosendorfer

Fazioli

2

PriceCompariso

n

The Used Piano

Market

Used Piano

Market

With many brands of pianos lasting over 40 years,

over 40 million pianos existed around the world

Used Piano

Market

With many brands of pianos lasting over 40 years,

over 40 million pianos existed around the world

For every new piano sold in the U.S., 10 used pianos also changed hands

Used Piano

Market

With many brands of pianos lasting over 40 years,

over 40 million pianos existed around the world

For every new piano sold in the U.S., 10 used pianos also changed hands

In 1994, domestic dealers of new pianos, sold about

25,000 used pianos that they had obtained as trade-ins

Used Piano

Market

With many brands of pianos lasting over 40 years,

over 40 million pianos existed around the world

For every new piano sold in the U.S., 10 used pianos also changed hands

In 1994, domestic dealers of new pianos, sold about

25,000 used pianos that they had obtained as trade-ins

Another 50,000 used pianos were sold by second-hand dealers, in 1994

A used Steinway

posed a serious

threat to the sale

of a new Steinway

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

1853

Established in New York City by Henry Engelhard

Steinway

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

1853

Established in New York City by Henry Engelhard

Steinway

1853-1972

Globalexpansion

Owned by theSteinway Family

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

1853

Established in New York City by Henry Engelhard

Steinway

1853-1972

Globalexpansion

1972-1985

Production increased

Quality questioned

Owned by theSteinway Family

Sold to CBS

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

1853

Established in New York City by Henry Engelhard

Steinway

1853-1972

Globalexpansion

1972-1985

Production increased

Quality questioned

1985-1995

Sold to the Birmingham

Brothers

Owned by theSteinway Family

Sold to CBS

Dealer network rebuilt

Product line increased

Steinway & Sons Timeline

A history of more than 140 years- Build the best piano possible and sell it at the lowest price possible

consistent with quality -

1853

Established in New York City by Henry Engelhard

Steinway

1853-1972

Globalexpansion

1972-1985

Production increased

Quality questioned

1985-1995

Sold to the Birmingham

Brothers

Owned by theSteinway Family

Sold to CBS

Dealer network rebuilt

Product line increased

1995

Sold to Selmer

ConcernWhat should the new owners,

Dana Messina & Kyle Kirkland do with Steinway next?

Boston Pianosintroduced in 1992

New Market Segment

Gain in Market Share

Increase in Profits

Can affect Steinway’s

‘top-of-the-line’ brand image

Boston Pianosintroduced in 1992

New Market Segment

Gain in Market Share

Increase in Profits

Can affect Steinway’s

‘top-of-the-line’ brand imageWhat To

Do ?

Boston Pianosintroduced in 1992

New Market Segment

Gain in Market Share

Increase in Profits

Can affect Steinway’s

‘top-of-the-line’ brand imageWhat To

Do ?Expand and maintain the

Boston piano line

Boston Pianosintroduced in 1992

New Market Segment

Gain in Market Share

Increase in Profits

Can affect Steinway’s

‘top-of-the-line’ brand imageWhat To

Do ?Expand and maintain the

Boston piano lineGain Market shares in the

mid-priced piano market

Boston Pianosintroduced in 1992

New Market Segment

Gain in Market Share

Increase in Profits

Can affect Steinway’s

‘top-of-the-line’ brand imageWhat To

Do ?Expand and maintain the

Boston piano lineGain Market shares in the

mid-priced piano market

Increase Sales by competing with

the Asian powerhouses

Limited Editions

Limited Editions

What To Do ?

Limited Editions

What To Do ?

Introduce Limited Edition

Pianos every couple of

years

Limited Editions

What To Do ?

Introduce Limited Edition

Pianos every couple of

years Increase sales and maintain a

prestigiousbrand image

Limited Editions

What To Do ?

Introduce Limited Edition

Pianos every couple of

years Increase sales and maintain a

prestigiousbrand image

Ensure a steady and exclusive

demand

High Quality

High Quality

What To Do ?

High Quality

Deliver High-Quality Products

What To Do ?

High Quality

Invest in R&D Reduce manufacturing

costsIncrease production

Deliver High-Quality Products

What To Do ?

Celebrity Endorsements

Celebrity Endorsements

Build a global reputation throughcelebrity

endorsements

Celebrity Endorsements

Build a global reputation throughcelebrity

endorsements

Focus on an exclusive

‘Concert & Artist Program’

Celebrity Endorsements

Build a global reputation throughcelebrity

endorsements

Focus on an exclusive

‘Concert & Artist Program’

Maintain a positive

relationship with the celebrities

Dealer Network

Dealer Network

What To Do ?

Dealer Network

What To Do ?Maintain a high-quality and

focussed dealer network

Dealer Network

What To Do ?Maintain a high-quality and

focussed dealer network

Develop ‘Partnership Programs’

and extend support to the dealers

Used Piano Market

Used Piano Market

Introduce Exchange Offers in order to replace the used pianos

Used Piano Market

Introduce Exchange Offers in order to replace the used pianos

Produce high-quality contemporary designs so that replacement becomes a necessity

Used Piano Market

Introduce Exchange Offers in order to replace the used pianos

Produce high-quality contemporary designs so that replacement becomes a necessity

Used piano trade-ins can be rebuilt into modern designs at lower costs

THANK YOU