Case of Steinway & Sons
1640 WordsJun 16th, 20127 Pages
Case of Steinway & Sons: Buying a Legend
In the case of Steinway & Sons, two investment bankers, Dana Messina and Kyle Kirkland are faced with the question of how to build on the business. Steinway & Sons was established in 1853 in New York City, by Henry Engelhard Steinway, a German immigrant who became well known for his technical excellence in piano production. It is a 140 year old company, and has been recognized as a leader in the market for high quality grand pianos. The primary problem facing Messina and Kirkland is whether they should continue producing high-end, top quality vertical and grand pianos or pursue a more aggressive plan, including the mid-priced line of Steinway pianos. Does it make sense to sell a mid-priced…show more content…
Firstly, by expanding the Steinway brand on to a mid-line product, you are eliminating the high status linked to the Steinway name. The Steinway name may no longer be considered exclusive and may begin to erode. This will also hurt sales, Steinway products are already more expensive than their competitors because of their brand equity, if it is reduced, consumers may no longer be willing to pay more for an ordinary brand. Another disadvantage is the smaller profit margins associated with the lower priced pianos. In order for Messina and Kirkland to maintain their current profit earnings they will have to sell two mid-priced pianos, for everyone one Steinway piano not sold due to promotion of the Boston line. Finally, the typical buyer for a Boston piano is only 5 to 10 years younger than a Steinway buyer, and is slightly less affluent. There may be an increase in market share; however there is a large portion of the market unaffected bye the promotion of this mid-priced Boston line. These are some of the risks involved in promoting the Boston pianos. The third alternative is that Steinway should maintain their current production lines and introduce a third line of pianos that are fairly inexpensive and more affordable to a wide variety of consumers. With this alternative Messina and Kirkland should continue to produce both the Steinway and Boston pianos and introduce a third entry level piano line for the
It is 1995 and Steinway & Sons has just been purchased by two young entrepreneurs. For 140 years, Steinway has held the reputation for making the finest quality grand pianos in the world. The past 25 years have proven to be a challenge, however. First, the company has changed hands several times and product quality has become a concern. Second, the worldwide market for pianos has been in a steady decline, and competition for high-end grand pianos has increased. Finally in 1992, Steinway took the questionable steps of introducing a mid-priced line of grand pianos under the brand name "Boston." Designed by Steinway, but manufactured by a Japanese piano maker, the Boston line represented a major shift in strategy for the company. Within this context, what do two young entrepreneurs (with little or no experience in the piano industry) hope to accomplish in buying Steinway? In particular, what value do they bring to the company and what decisions should they make?
Keywords: Business Startups; Decisions; Entrepreneurship; Globalization; Crisis Management; Brands and Branding; Marketing Strategy; Quality; Competitive Strategy; Manufacturing Industry; Japan; New York (state, US);