Steinway & Sons Current Situation
Steinway & Sons succeed to consistently deliver the finest pianos in high-end market over 160 years. Their grand piano is recognized as the best performing piano in the world. To strengthen the products value, Steinway & Sons also supply the performers Steinway Concert Service. The competitive advantage lies in the innovative R&D and craft manufacture. Typical it takes 2 years to produce a grand piano since the craft manufacture require exquisite techniques from selection of woods to testing the sounds. Steinway & Sons also keep a high innovative spirt striving to extend the piano’s life and refine the sounds. Currently, Steinway & Sons has a simple product mix. It only have one product line carrying two items: grand and vertical pianos. The grand piano can be further divided into Concert D and medium-sized. In 1980, Steinway & Sons obtained a sales of 50% which was 11.79% of market share. Among these, most of profit came from grand piano. Less than 2% of all pianos sold in US were Steinway vertical pianos.
Steinway’s operations can be divided into two parts: furniture making and piano making. Resources and labor force were nearly equally devoted to those two operations. The largest raw material expenses came from holding of lumber which was required to dry at the first stage. The furniture making operation involves cutting piano case and sounding board, building the firm fro grand piano, and fabrication of piano actions. Steinway only rely on their own wood technologist, only the less important operation activities involved in some automation. In the piano making operations, there are four procedures which are belling, stringing, finishing, and polishing. Since the manufacturing process is extremely time consuming, Steinway can only produce a small volume and backlogs were very common.
Steinway’s labor were consisted of 75% workers who were paid on a straight time basis and 25% skilled artisans who were paid piece rates. The average labor cost for vertical pianos was $400 to $500. However, the major issue regarding to labor force is turnover. Although there’s apprenticeship programs, the skilled workers tend to leave and start their own companies. The company established a policy of no lay off, but due to the job shifts made by the first CBS-appointed president, many employees had left the company.
Steinway has to face the increasing competition from domestic and international sides. Some major domestic competitors such as Boldwin and Kinball has already developed a full line of piano ranging from inexpensive vertical pianos to high quality grand pianos. They also realized the vertical integration by employing their own processed wood products in product lines. Moreover, the dealer network was much more extensive than that of Steinway. Global competitors such Yamaha tried to steal the US market share by adopting a high level of automation and competing on prices.
Identify major objectives
Steinway intended to reintroduce the Model K vertical pianos to secure their market share and compete against other manufactures in the low end market. Since the historical performance of Model K was astounding, Steinway wanted to reproduce the model as close as the original one so that they could capture the company’s strength as traditional craftsmanship. Although vertical pianos has less profit margin than the grand piano, the company want to deliver a matchable quality for the vertical grand as well. The measurement of quality involves performance, conformance, durability, accessibility, aesthetics and reliability. Since the customers are subjected to limited education of piano, they couldn’t tell the high quality apart; therefore, durability, conformance, and aesthetics are the most important elements for the vertical pianos. To support the reintroduction of Model K, Steinway made close consultation with Pratt & Read to produce the necessary parts for Model K. The best workers were put into the production as well.