Steinway & Sons is a legendary piano manufacturer known for producing the highest quality grand pianos. Founded in 1853, it had a long history of family ownership until being sold to CBS in 1972 and then to the Birmingham brothers in 1985. By 1995, unit sales were declining and Yamaha was becoming a strong competitor. The new owners, Dana and Kirkland, faced issues of brand dilution from Steinway's new lower-priced Boston line and challenges in the growing used piano market. Potential strategies discussed were continuing Boston sales to target new customers, innovating piano designs, focusing on the Asian market, and improving dealer relationships.

1. Buying a Legend(A)
Harvard Business School Case
:

2. COMPANY BACKGROUND

3. Since its
introduction,
STEINWAY was
the PAINO of
choice for the
world’s
GREATEST
ARTISTS
“Build the best Piano possible
and sell it at the lowest price
consistent with quality”
- Henry Steinway
“Make no compromise in
quality”

6. Steinway Grand Piano took
2 years to manufacture

7. As a Result
STEINWAY’s Pianos had :-
Great sound
Durability
Even voicing
Uniqueness (as no two Steinway Grand Piano sounded
same)

8. Steinway & Sons - Proudly Handmade Since
1853

9. HISTORY
- Established in 1853 in New York City by Henry Steinway
- Became the producer of highest quality grand pianos in the world
- Sold to CBS Musical Instrument Division in 1972
- CBS sold it to Birmingham brothers in 1985
- Birmingham brothers sold it to Messina & Kirkland for $100 million
in 1995
HENRY STEINWAY
CBS ROBERT BIRMINGHAM

10. After 120 years of family control,
it was decided that Steinway could
no longer survive as a closely held
family operation
The company was sold to
CBS Musical Instruments Division
in 1972 for $21 million
The factors leading to sale of
Steinway in 1972 were
primarily financial

11. CBS took steps to increase revenues
and decrease manufacturing costs
It reduced the manufacturing time and
increased the number of dealers
Critics and buyers began to challenge
the quality of Steinway’s Pianos
As a result, CBS announced sale of
Steinway & Sons for $50 million
to Birmingham brothers in 1985

12. Under Birmingham Brothers :-
The number of dealers were reduced to ensure better
service
Mid priced pianos under the name of Boston was
introduced which Steinway & Sons had resisted
throughout the history
Steinway Limited Edition and the Crown Jewel
collection were also introduced

13. Inspite of positive changes, the running of Steinway
was constrained by limited financial resources . AS A

16. Portfolios under Steinway & Sons
STEINWAY STEINWAY
CROWN
JEWEL
COLLECTION
STEINWAY
LIMITED
EDITION
BOSTON

17. Prices of Pianos of the Major Manufacturers in
1995

18. Dana and Kirkland are facing

19. 1. The unit sale of Steinway grand pianos had slipped from
3576 in 1990 to 2698 in 1994

20. Yamaha, a Japanese piano powerhouse, continued its
efforts to challenge Steinway as maker of the world’s
finest concert grand piano
2.
$1 billion in piano sales
35% share of the world market
50% share of Japanese
market

21. 3. Steinway’s introduction of Boston represented a
significant
departure from the handcrafted pianos that made
Steinway famous

22. For every new piano sold, 10 old pianos exchange
hands in US
In 1994, about 75000 second hand pianos were sold
in the US
A well maintained 20 years old Steinway Grand could
be expected to sell for 75% of the price of a new
Grand of same type
4. The Used Piano Market

23. DILEMMA
Did it make sense for
Steinway to sell a mid-
priced line of vertical and
grand pianos

24. Only thing that is against Boston is the fact that
Steinway
might result into Brand Dilution and Brand
Cannibalisation, but this is not true as Boston is
manufactured in Japan by Kawai. This means that
Steinway pianos are manufactured separately without
compromising with the quality and also Boston targets
STEINWAY MUSICAL INSTRUMENTS should continue
with sales of Boston in order to target those people
who desired Steinway’s piano but didn’t afford one.
Also by 1994, Boston piano revenues had grown to
$16.9 million on the sale of 2,300 units, up from $2.7
million on the sale of 600 units in 1992.
Strategies

25. Focus on Asian Market
To focus on
Asian market
and in order to
compete with
Yamaha,
Steinway should
introduce new
lower priced
piano and also
improve
marketing
strategy for
Boston

26. Steinway should keep
innovating in the design
and technology of its
pianos
This will keep customers
interested in new Steinway
product in order to tackle
problem of used piano
market
A new product should offer
features and advantages
that make it preferable to a
40 year old used piano

27. Effective
Mass
Communication
Advertisements Sales
&
Promotions
Events
&
Experiences
PR
&
Publicity
Steinway’s Concert
and Artist Program
Partnership
Program

28. Role of Dana & Kyle
To improve relations with its dealers, it can follow “Partnership
Program” similar to that by Birmingham brothers
Must look upon growing Asian market
Can go for Brand extension to enter into other instruments like
Guitar, Violin etc.
To carry on the legacy of Steinway & Sons

29. Recap
- Company Background
- Why is Steinway a legend?
- History
- Portfolios
- Problems
- Dilemma
- Strategies
- Role of Dana & Kyle

30. Created by Aditya Todi, DTU, during a marketing
internship by Prof. Sameer Mathur, IIM Lucknow.
(See www.IIMInternship.com)
DISCLAIMER