Swiss fine watchmakers: The consideration of business risks and challenges in strategic management

By Nicola Lorch*

Swiss made fine watches have a certain mystical reputation: the cream of the crop in the market. The watch industry is an important power in the Swiss economy being 3rd in terms of export value. Being one of the top 3 producer countries in volume and leading in value, Switzerland is also an important power worldwide.

The Swiss fine watch industry is currently facing an ambiguous, fast-pace environment marked by legislative changes, economic turbulences in its target markets making 95% of the industry’s sales, dominations in the supplier market, FX rate issues and an immense pressure for innovation in a market where skilled workforce is rare. These evolutions lead to a variety of business risks and challenges for the Swiss fine watchmakers and rising importance of efficient strategic management. No publications are yet available evaluating the situation in one comprehensive detailed as well as focused way presenting what risks and challenges are currently important and how these are considered in the fine watchmakers’ strategic management. Therefore Nicola Lorch’s thesis aims to assess how fine watchmakers consider current business risks and challenges in their strategic management.

Combining the literature review’s results with the expert insights from practice acquired in interviews with industry insiders allowed assessing the principal business challenges and risks for the Swiss fine watchmakers using the PESTLE-matrix: From a political point of view the Swissness discussion as well as bilateral relations and evolutions play a role, while the economic aspect is dominated by market insecurity and the strong Swiss franc. The social aspects comprise customer preferences, smart watches in particular and from a technological point of view skilled workforce, supplier dependency and raw materials are major issues. The legal framework and aspects linked to Corporate Social Responsibility add to the previously identified business challenges and risks. With regards to strategic management, the thesis’ results have shown growing importance of effective and efficient strategic business risk management. Especially the high degree of variability, ambiguity, complexity and the close interdependencies of some challenges and risks contribute to this. ERM-like approaches are particularly suitable and advantageous in such situations as the literature review showed. Nevertheless, the approaches adopted in the Swiss fine watchmaking industry vary. A good part of the fine watchmaking groups seems to have adopted ERM approaches or such close to ERM, while some remain with more traditional approaches of risk management and consequently with some potential for improvement.

*Upon the successful completion of the MSc International Financial Management, Nicola Lorch now works in the audit division of a big four company and currently prepares the Swiss Certified Public Accoutant.

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MSc International Financial Management – Managing performance in a global economy