Harvard Case Analysis

1. Steinway & Sons:
Buying a Legend
Harvard Business School Case

2. Steinway & Sons
♪Producer of the highest quality grand pianos in the
world
♪Pre-eminent brand name in the music business

3. The Steinway Purchase
Purchased by The Selmer Company for
$100 Million on April 18, 1995
Selmer- manufacturer of band and orchestral
instruments owned by Messina and Kirkland

4. Kirkland- Chairman of the Board
Messina- CEO

5. The Selmer Company
Birmingham Brothers 1985 - 1995
CBS 1972 - 1985
Henry Steinway-1853

6. Was the purchase worth $100 Million?
Did Messina and Kirkland get themselves
into problems?

7. Steinway & Sons
Horizontal Vertical
Grand Pianos Boston Piano
Situation

8. Situation
Unit sale of Steinway grand pianos had slipped even
though it had $100 Mil sales

9. Industry TRENDS during the purchase -Threat
Sustained downturn
☹40% drop in global sales since 1980
Increase in..
➟ Electronic keyboards
➟ Computers

10. Vertical and Grand Piano sales in the United States – 1980 to 1995

11. Situation - Threat
➦Yamaha- Strong competitor
➦ Emulated Steinway
➦Continued to challenge
Steinway as the maker of the
world’s finest concert grand piano

12. Industry TRENDS during the purchase- Threat
Emergence of Asian manufacturers
Asian imports achieved
➲35% unit share of the vertical pianos market
➲ 80% unit share of the grand piano market

13. TRENDS during the purchase-Opportunity
Opening of new and potentially large markets- Asian Markets
Economic conditions were improving in the U.S. and Europe, Steinway’s
two largest markets

14. Industry TRENDS during the purchase
Consolidation of the
piano manufacturing
industries
Just eight piano
makers left by 1992

15. Situation
Boston Piano in 1992
➔ Mid-priced piano designed by Steinway and
manufactured under contract by a Japanese competitor,
Kawai
➔ An idea that had been previously rejected continually
because Steinway wanted to sell only a top-of-the-line
prestige piano
➔ Significant departure from the handcrafted pianos that
made Steinway famous

16. Should Steinway continue its
high-end, niche strategy? Should Steinway be bolder and
more aggressive in its plan?
How can Steinway enhance
its revenues?
What to do with the recentlyintroduced mid-priced line ofBoston Pianos?

17. What role should Messina and
Kirkland play in the running of
Steinway?
It is one thing to own the
company; it is something else
to run it effectively...

18. Boston Piano sales compared with Grand
and Vertical pianos in 1994

19. Steinway grands-$26,400 to over $70,000
Steinway verticals-$11,900 to over $17,000
Boston pianos-$6,395 to over $30,000

20. Intentions Behind the Boston piano
➪Sell the line exclusively through Steinway dealers
➪Provide dealers with a high-margin product in
the mid-market price range
➪Increase market share and cut down competition
➪Allow Steinway to capture sales that might
otherwise have gone to Yamaha.

21. COMPETITORS
➢ Baldwin
➢ Yamaha
➢ Kawai
➢ Bösendorfer and Fazioli

22. STRENGTHS
★ Popular among musicians
★ Manufactured by craft
method
★ Legendary sound and
durability
★ Well-run and sustained
company

23. WEAKNESS
▼Small volumes
▼Long manufacturing-
2 years
▼Changes in management

24. THREATS
Used Steinway-threat
to the sale of a new
Steinway

25. STRATEGY- Dealer Network
✔Good relations with dealers
➢ Independent dealers sold 85% of all
Steinway and Boston pianos
✔Maintain quality among dealers
➢ Sales volumes and profits increase
with dealers but product quality
will be questioned.

26. STRATEGY- Marketing
✔Outlet and factory locations help gain
public acquaintance
✔Attract performing artists
➢ Steinway’s Concert and Artist Program
➢ Grants for exclusive use of an artist’s
names for publicity purposes in return
for master piano technicians provisions

27. STRATEGY-Product line
Expansion of product offerings
♪Limited Edition Collection
♪Crown Jewel Collection
provide variety and
receive premium prices

28. Created by: Deepthi Meduri,
BITS Pilani, Hyderabad
during an internship by Prof. Sameer Mathur,
IIM Lucknow.
www.IIMInternship.com