Steinway & Sons, a prestigious piano manufacturer, was acquired by Selmer Company through investment bankers Dana Messina and Kyle Kirkland. Selmer formed Steinway Musical Instruments Inc. Steinway introduced mid-priced Boston pianos to expand its market reach. The summary discusses assigning Messina as President to oversee daily operations, while Kirkland serves as CEO/Vice President as the public face, and continuing both the traditional grand pianos and the Boston line to leverage the Steinway brand and enhance revenues.

1. Steinway & Sons
Buying a Legend (A)
Harvard Business School Case
Atul Anand
Sophomore Undergraduate
IIT (BHU) Varanasi

2. 1. What are Steinway & Sons?
2. What are Selmer Company?
3. Who are Dana Messina and
Kyle Kirkland?

3. Steinway & Sons
A New York based American and
German piano manufacturers famous
for their Grand Pianos running from
over 140 years.

4. Selmer Company
Leading manufacturer of band and
orchestral instruments in the United
States of America.

5. Players
Dana Messina & Kyle Kirkland
Investment Bankers from Selmer Company
who began their careers at Drexel
Burnham Lambert.
HBS’87 Stanford’88

6. Present
Situation.

7. Present Situation(1/5)
Steinway & Sons have initiated a mid
priced product by the name of
Boston Pianos apart from their
traditional Grand Pianos.

8. Present Situation(2/5)
Selmer had highly regarded brand
names associated with them like Bach
trumpets, Ludwig snare drums and
they thought Steinway pianos will be
prove to be a good association for
their company.

9. Present Situation(3/5)
Making Steinway pianos is capital
intensive and there always remained
$75 million in inventory at any given
moment and even an expenditure of
$200,000 required negotiations with
the banks.

10. Present Situation(4/5)
Birminghams decided to sell the
company and after being made
aware of that, Kyle Kirkland and
Dana Messina arranged capital
to buy the company.

11. Present Situation(5/5)
Steinway & Sons
have been taken
over by Selmer for $101.5
million leading to the birth of
Steinway Musical Instruments Inc. on
April 18, 1995.

12. Objectives

13. Objectives(1/2)
Discuss whether Steinway should
continue its niche strategy of
being world’s pre-eminent maker
of high quality vertical and grand
pianos.

14. Objectives(1/2)
Decide the futureof recently
introduced line of
Boston Pianos.

15. Objectives(1/2)
Does it made sense for
Steinwayto sell a
mid-pricedline?

16. Objectives(1/2)
Are there any other ways to
leveragethe brand
name to further enhance
revenues?

17. Objectives(2/2)
Assign suitable roles to Messina
and Kirkland to play in the running
of Steinway.
It was one thing to own the company;
it was something else to run it effectively.

18. The making
of Steinway
Grand.

19. Time for making (1/3)
Takes twoyears;
one year to dry the lumber
and another for
actual manufacturing.

20. Parts involved (2/3)
More than 12,000
individual parts are involved in a
Steinway Grand.

21. Process (3/3)
Reduction of moisture content in
wood from over 50% to
about 6% by heating at a
temperature of 160F for about
an year.

22. Process (3/3)
Individual parts are
hand-crafted in next
six months.

23. Process (3/3)
Bellying followed by stringing,
tone regulating and final
rubbing and polishing
required another six months.

24. Company
Background

25. Background (1/3)
Established in New York City in 1853 by
Henry Engelhard
Steinway.

26. Background (1/3)
A new and larger factory was
constructed just after
seven years.

27. Background (1/3)
This was followed by opening of
Steinway Hall in 1866
which served as New York City’s
major concert facility.

28. Background (1/3)
100,000th Steinway was presented to
the White House in 1903.
300,000th Steinway was presented to
the White House in 1938.
Several other milestones were achieved.
500,000th Steinway was produced in 1988.

29. Tradition (2/3)
Over 90% of all classical
musical concerts featuring a piano
soloist are performed on a
Steinway concert grand.

30. Tradition (2/3)
All Steinwayare still
assembledusing
hand crafttechniques.

31. Tradition (2/3)
No two Steinway
sounds the same.

32. Tradition (2/3)
Steinway’s
Concert and Artist Program
has a bank of pianos for use by about
850 Steinway Artists.

33. Tradition (2/3)
Performers develop a
long relationships
with Specific pianos due to
subtle differences
in tone and feel.

34. Timeline (3/3)
Steinway & Sons stepped into corporate
world in 1972 when it was sold to the
CBS Musical Instruments Division
for $21 millionin CBS Stock.

35. Timeline (3/3)
The CBS Years (1972-1985)
Investments of several millions
went in first few years but the Steinway
family had never invested more than
$150,000 per year.

36. Timeline (3/3)
The CBS Years (1972-1985)
Huge investments lead to increase in sales
volumes but also increase in critics on quality.
The impact on consumer perceptions was clear.

37. Timeline (3/3)
In November 1984, Steinway was
again taken private for $49 million
borrowed from several commercial banks.

38. Timeline (3/3)
The Birmingham Years (1985-1995)
After the non deserving purchase,
Birminghams appointed Bruce
Stevens as the CEOand
Presidentof Steinway & Sons.

39. Timeline (3/3)
Inventorywas cleaned
after the pianos were re-tunedand
re-voiced.

40. Timeline (3/3)
Bruce went out to meetthe dealers
personallyto build a sense of
responsivenessfrom
management team.

41. Timeline (3/3)
Dealernetwork was reduced
to give the feel that the qualityof
pianos was increasing.

42. Timeline (3/3)
Andre Watts used a Yamaha
piano for his performance to commemorate
the 25th anniversaryof his debut
with the New York Philharmonic
in early 1988

43. Timeline (3/3)
These all critics and
downturn forced Steinway to
launch new product lines.

44. Timeline (3/3)
Boston pianos were
introduced as a mid-priced
product of Steinway to increase
their market share in 1992.

45. Timeline (3/3)
Steinway Limited Editions
was sold out within hours of
purchase in both
1993 and 1995.

46. Timeline (3/3)
The Crown Jewel Collection
was another line which captured the
market and 1995 it has 30% of
Steinway unit sales.

47. The purchase
by Messina
and Kirkland

48. Reason (1/3)
Birminghams can’t run the
company in Summers because
of Seasonal downturn in
demand.

49. Bid (2/3)
64 groups bid for Steinway
with first round closing at $75m
and 10 groups.

50. Bid (2/3)
10 groups were reduced to 4
and further to only Selmerwith
bid increasing from $75m to
$90m and then to $100m.

51. Purchase (3/3)
Messina and Kirkland
bought Steinway for
$101.5m.

52. The
Piano
Industry

53. Classes (1/3)
Pianos comes in two types
Grand and Vertical
Strings mounted
Horizontally
Strings mounted
Vertically
540,000 60,000
Sales in 1994

54. Trends (2/3)
A little less than 500 concert grand
pianos were sold in 1994 with
Steinway leading at 350.

55. Trends (2/3)
1. People are switching from pianos to
electronic substitutes
as those are available at
cheaper prices.

56. Trends (2/3)
2. There is a reductionof
piano makers in the market by
several folds.

57. Trends (2/3)
3. Emergence of Asian
manufacturers and they have captured
about 35%unit share of Verticals
and 80% unit share of Grands.

58. Trends (2/3)
4. Opening of new and potentially
large market in countries such as
Japan, South
Korea and China.

59. Competition (3/3)
New piano manufacturers although a
handful of them were real threat.
Baldwin, Yamaha, Kawai,
Bösendorfer and Fazioli.

60. Competition (3/3)
The Used Piano Market
40 million pianos exists around the
world and each new piano sold in
US is followed by 10 used pianos
exchanging hands.

61. Future
Planning

62. Strategy (1/2)
Company’s aim is to increase
the numberof Steinway pianos
in the market.

63. Strategy (1/2)
Market reach of Steinway Grands have
enhancedsince Stevens introduced
Boston pianos and will definitely can
capture the market in coming years.

64. Strategy (1/2)
Steinway needs to make it’s
brand name flexible and easily
available to the market.

65. Strategy (1/2)
The line of Boston pianos can proveto
be worthy for enhancing the
revenueof the company.

66. Strategy (1/2)
High-end product is sold only to the
elite class of population and
because of the used piano market,
selling only high-end pianos can
subsequently take the company away
from market.

67. Strategy (1/2)
Revenue and brand name of
Boston pianos will contribute
positively to Steinway pianos.

68. Strategy (2/2)
Two roles are generally served by
the main buyers:
President and CEO

69. Strategy (2/2)
Face of the company is the CEO
and Kyle Kirklandhaving
acquaintedwith pianos will
serve that role better than anybody.

70. Strategy (2/2)
Dana Messina can serve as the
Presidentof the
Steinway Musical Instruments Inc.

71. Conclusion

72. Conclusions (1/2)
Boston Pianos will continue along
with the traditional crafting of the
Steinway Pianos.

73. Conclusions (2/2)
Roles in Steinway Musical Instruments Inc.
Dana Messina : President.
Kyle Kirkland : CEO/Vice-President.