The Future of The World Watch Industry by Pierre Hostettler

THE FUTURE OF THE "WORLD WATCH INDUSTRY:"
A COMPARATIVE STUDY USING DELPHI

by
PIERRE HOSTETTLER, Diploma of M.E., M.B.A.
A DISSERTATION
IN
BUSINESS ADMINISTRATION
Submitted to the Graduate Faculty

of Texas Tech University in
Partial Fulfillment of
the Requirements)for
the Degree of
DOCTOR OF BUSINESS ADMINISTRATION
Approved
Accepted
May 1976
)>
T,-.-.,
''/
ACKNOWLEDGMENTS
' /b
I am most greatly indebted to my committee chairman, Dr. Louis

C lO- :^^
D. Ponthieu, as well as the other two members of the supervisory committee, Drs. Robert D. Amason and Robert L. Bonnington, for their most
supportive attitude towards such an involved undertaking as this one
and their helpful criticism and guidance.
Special thanks must also go
to Drs. Norman C. Dalkey of UCLA (formerly with the RAND Corporation)

and Roy C. Amara, President of the Institute of the Future who were
both kind enough to meet with me and discuss some of the problems involved in conducting an applied Delphi study.
Although their ideas
and suggestions could not be completely incorporated in this study,

without their constructive inputs the application of the methodology
to the problems of the watch industry would have been much more difficult for a "Delphi novice."
For financial support I feel most obliged to the Directorate of
the Department of Education of the State of B e m e , Switzerland, whose
fellowship enabled me to bring my doctoral studies to a completion.
Furthermore, it would have been impossible to undertake this kind of
study if it were not for the interest in this investigation by the
Bulova Watch Company, New York, and for their willingness to partially
fund the research without, however, in any way influencing my approach
to and reflection on the problem.
Acknowledgment must also be given to the experts who have made
contributions at one stage or another to the Delphi experiment, in
particular those 43 respondents who have made an input to the third and
11
final round.
I am also indebted to the 45 middle and top level managers
in the "traditional" as well as the "new technology" time piece industry

of the United States and Switzerland with whom I was privileged to discuss some of the most critical aspects of this technological challenge
and its implication for the future of the industry.
Thanks, too, must be extended to the Fedration Horlogere
(F.H.), Bienne, Switzerland, the association of Swiss watch manufacturers, in particular to Dr. Tihomil Radja, Vice-Director and Chief of
the Economics Department.
The permission to have access to their
library and private documents was substantially benefitting my secondary research activity and helped me gain a much deeper insight into
the vast amount of literature on the industry than would have been
possible otherwise.
The services of the statistics consultants of the Texas Tech
University Complex are also greatly appreciated.
Lastly, I would also like to express my gratitude to the numerous people who at one time or another have provided valuable assistance.
A very special recognition goes to my wife Barbara for her
patience, editing work and for typing the final manuscript.
iii
TABLE OF CONTENTS
ACKNOWLEDGEMENTS
ii
LIST OF TABLES
vii
LIST OF FIGURES
I.
ix
INTRODUCTION
Statement of the Problem
Need for Research in this Area
Purpose, Scope and Methodology of Research . . . .

II.
THE WATCH INDUSTRY
12
22
Introduction and Background
22
The Post-World War II Era
26
A Brief Historical Perspective
26
The Size of the Industry
29
Multinationalization Development
31
Structural Changes
38
Technological Developments
43
Market Developments
45
Analysis of the Transitionary Period
47
Definitions and Methodology
47
Origins of the Solid State Watch
49
Advantages and Disadvantages of the Solid

State Watch
53
Analogies to Comparable Events
54
Uniqueness of the Transitionary Period . . . .
65
Multinationalization Aspects During the

Transitionary Period
Structural Developments During the Transitionary Period
67
iv
69
III.
THE DELPHI METHODOLOGY AD EXPERIMENT
73 '
Description of the Delphi Methodology
73
Nature of Forecasting
73
Origin of Delphi and Major Applications . . . .
74
Definition of Delphi and Major Variations . . .
80
Advantages of the Delphi Method
84
Disadvantages of the Delphi Method
87
Validity and Accuracy of Delphi Findings
...
Description of the Delphi Experiment
93^
Organization of the Delphi Experiment
93
Identification and Selection of Experts . . . .
95
Design of Questionnaires
102
Collation of Results
105
Summary
IV.
89
THE RESEARCH FINDINGS
107
110
Method of Analysis
110
Multinationalization Trends
115
American Watch Industry
118
Swiss Watch Industry
121
Japanese Watch Industry
124
Possible General Trends
127
Structural Developments
131
145
General Aspects
162
Market Developments
166
V.
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
204
Summary
204
Conclusions
205
The Delphi Experiment
205
Future Multinationalization Trends
207
Future Structural Developments
209
211
Future Market Developments
212
Recommendations
213
Industry Recommendations
213
Delphi Recommendations
216
BIBLIOGRAPHY
220
APPENDIX
247
A.
Item-By-Item Response to Questions in the Questionnaire.
248
B.
The Delphi Questionnaire
258
VI
LIST OF TABLES
Table
Page
1. Watch Classification Scheme According to Burgat . . . .

2.
27
Output Comparisons Between Watch Industries of

Switzerland, Japan and the United States
30
3.
Comparative Ranking of Major Watch Companies
32
4.
Dominant Japanese Watch Companies and Their Production.
39
5. Advantages and Disadvantages of the Solid State Watch .
55
6.
Major Characteristics of Group Communication Techniques
88
7.
Schedule of Major Delphi Activities
97
8.
Breakdown of Questions by Research Areas and

Delphi Rounds
9.
10.
106
General Schematic of the Collation Process
108
Summary of Expected Major Patterns of Multinational

Involvement
128
11.
Problems of Liquid Crystal Displays
158
12.
Expected Market Introduction of Additional Functions. .
163
13.
Comparison
of Major
Comparison
Watch
Comparison
14.
15.
of Solid State Watch Production Forecasts

Subgroups (Means)
of Market Share Forecasts of Solid State
195
of Price Level Forecasts for Solid State
Watches and Required Cumulative Unit Production . . .

16.
Delphi Rounds I-III:
Participation Summary
17.
Background Distribution of Mail-
ings and Response Rates

18.
19.
Delphi Rounds I-III: Geographic Distribution of

Mailings and Response Rates
*
Traditional Versus New vii
Technology
Mailings
20.
186
Percentage Distribution
203
249
251
253
254
255
21.
22.
23.
Frequency D i s t r i b u t i o n of Non-Response Rates by Major

Questions
256
Delphi Rounds I-III: Summary of Non-Response Rates of

Respondents with Participation in All Three Rounds
(In Percent)
257
Interviewees' Response Rates: Prior to Round II and

Prior to Round III
258
viii
LIST OF FIGURES
Figure
Page
1.
Doctoral Dissertations on the Watch Industry
10
2.
Outline of the Research Plan
20
3.
Framework for Comparative Analysis
21
4.
List of Problems Related to the Solid State Watch
56
5. Effect of Group Size
85
6.
85
Reliability in Relation to Group Size
7. Proportion of Changes in Relation to Deviations from the

Median
8.
9.
10.
Sequence of Steps to be Taken in Applying the Delphi

Technique
90
96
Framework for Identification and Selection of Panelists. . 100

Relationship of Number of Words Used to Describe
Potential Events and Amount of Information About the
Probable Time Occurance of Those Events
104
The Effect of Length on Information Obtained from

Experts and Nonexperts
104
Licensing of Solid State Watch Technology by U.S.

Firms to Non-U.S. Companies
120
Intemational Marketing of American-Made Watches

Analogous to Electronic Calculator Marketing
122
Intensive Marketing of Swiss-Made Solid State Watches

in the U.S
123
Significant Increase of Purchasing of Solid State Watch

Components from the United States by Swiss Watch
Companies
125
16.
Massive Export of Japanese-Made Watches
126
17.
Reduction of Solid State Watches Produced in the United

States
133
Domination of American Watch Industry by Vertically

Integrated Electronics Firms
134
Concentration in the American Watch Industry
136
11.
12.
13.
14.
15.
18.
19.
ix
Figure
20.
Page
Dis&ppearance of Small Single-Line Solid State
Watch Producers in the United States
138
21.
Major American Watch Producers
140
22.
The World's Largest Solid State Watch Producer
142
23.
Entering of Solid State Watch Manufacturing by Japanese

Electronics Companies
144
24.
Swiss Closing Gap for Manufacturing Solid State Watch. .
148
25.
Equivalent Prices
151
26.
Introduction of a New Frequency Standard
152
27.
Market Introduction
153
28.
Market Introduction of Nuclear Batteries
155
29.
Liquid Crystal Dispays
157
30.
Appearance of a New Display Technology
159
31.
Light Emitting Diodes with Continuoxis Time Display . . .
161
32.
Mass Market Penetration of Continuous Display
164
33.
Dominance of World Watch Market by Quartz Crystal

Watches
170
34.
Solid State Watch Versus the Jewel Lever Watch
174
35.
Promotion of Solid State Watches
176
36.
Geographic Distribution of Annual Watch Production . . .
177
37.
Total Annual Production of Mechanical Watches
179
38.
Annual Swiss Production
182
39.
Japanese Watch Production
183
40.
Annual Production of Solid State Watches
185
41.
Total World Production of Solid State Watches
188
42.
43.
Geographic Distribution of Annual Solid State Production

Distribution of Solid State Watches
189
190
....
Figure
44.
Page
Total Solid State Watches by Percentage
192
45. Market Segment of Solid State Watches, Unit Percentage. . .
193
46.
Total World Watch Sales by Percentage Distribution
194
47.
Half of Annual Swiss Watch Production in Units

Will be Solid State
197
48.
Retail Price Projections of Solid State Watches
198
49.
Appearance of an Inexpensive Solid State Watch
199
50.
Appearance of the $50 Solid State Watch
200
51.
Appearance of the $10 Solid State Watch in Japan
202
52.
Participation Summary
249
xi
CHAPTER I
INTRODUCTION
1. Statement of Problem
The watch industry is one of the oldest industries, the production of watches as we know them today going back more than 300 years.
Although Switzerland has achieved a leadership position which she still
holds today, many of the basic inventions and developments on which even
today's traditional watches are based originated in other European
countries or in the United States.
Despite this fact, the Swiss devel-
oped their art of making watches comparatively better than others.
In
Europe, particularly in Switzerland, watchmaking was tantamount to an

individualistic life style, as well as a style of conducting business.
The idiosyncracies of the watchmakers, which may even have been a prerequisite for making good watches, and the local availability of labor
skilled in micro-mechanics kept the industry locked in a few regions
only.
The know-how of manufacturing watches has only slowly moved to
extra-European territories.
Whether watchmaking would take root in
other countries depended primarily (1) on the level of the economic

development of the country, (2) on the size of the domestic market, and
(3) on economic and political policies.
In the case of the American watch industry, national defense
arguments at one time significantly helped to keep domestic watch manufacturing operations alive.
Since it was deemed by some that the skill
inherent in making watches was needed for the production of military

equipment, such as fuses, timing devices for bombs, and the like, the
industry was not allowed to move abroad, despite the fact that it became
less and less competitive on an intemational scale.
Because of isolation and protection, characteristic of the watch
industry, independent and peculiar pattems of behavior and traditions
could develop over the years.
The idiosyncrasies could solidify over
time as practically no organization outside the watch industry could

diversify into watchmaking in an attempt to get a piece of the world
watch market long dominated by the Swiss.
American non-watchmaking
companies in particular have been attracted by diversificational growth

strategies.
But many of those who tried to enter the watch industry
had to leam that making watches was no simple business, since for too
long there was great specialization and a very lopsided dependence on
skilled human resources.
The independence that the watch industry enjoyed over the centuries caused it to be considered a "special case."
Apparently, many
of the conceptions and rules that are valid in other indiistries could
not easily be applied for watchmaking or were simply disregarded as
irrelevant.
The Swiss watch industry in particular has kept the special
status until the mid-1960s, at which time it began to open up.
Under
these special circumstances, the watch industry technologically evolved

along a rather smooth path, for it could keep everything under its own
control.
Since watchmaking centered in the main in Switzerland, but

watches were being bought and used by people around the globe, exporting
was possible as well as necessary.
In the case of the Swiss watch in-
dustry their reliance on exports is very high as about 97 percent of all

watches produced domestically reach foreign markets.
The major charac-
teristics of a watchits small volume, light weight, and its relatively

high unit valueprovided an economic foundation for successful exporting.
Major competition on intemational markets was traditionally
among Swiss manufacturers themselves until the 1960s when the Japanese
began to seriously challenge the world market dominance of the Swiss.
Against this background of watch developments, admittedly illustrated only in a fragmentary way, it will be interesting to contrast
the events that have been occurring since the late 1960s until the presend, and which, as it appears likely, could potentially revolutionize
the watch industry as a whole in the major producing countries.
Since the "breakthrough" of the solid state watch, electronics
companies which hitherto have never had anything to do with a watch,
began to produce wrist watches, offering the consumer a degree of accuracy which was unattained by traditional watch types.
Advances made in
the field of micro-electronics, resulting from miniaturization required

in computer and space applications, and the field of opto-electronics
were mainly responsible for the challenge to the traditional watch industry which was relying almost exclusively on micro-mechanics skills.
The following factors could be thought of as contributing to this
challenge:
- the superiority of the new technology in producing accuracy
- the fact that the new technology is not a part of the traditional watch industry
- the fact that the processes of the new technology are of a
non-proprietory nature and are in general not effectively
protected by patents
- the fact that comparatively larger corporational entities
with much more powerful resources at their disposal stand
behind these new developments
- the fact that the new technology follows different manufacturing laws, as contrasted with the direct and linear relationships in the traditional mechanical sector
- the fact that there exists a great incompatibility of resource availability between the traditional and new technology sector.
Further aggravating the situation was the fact that these technological developments have been occurring almost simultaneously with
de-cartellizing the Swiss watch industry which would give it more flexibility to maneuver while at the same time also exposing it more to any
competitive pressures.
As a result of these developments, the industry
found itself at a unique point in time, at a strategic junction, and

at the threshold of potentially devastating altematives.
It is under-
standable that in a period of turbulence caused by the entry or potential entries of electronics companies into the traditional domain of
the classical watchmakers, an array of unreliable information started
to circulate, creating confusion among industry participants as to what
was true and what was purposefully initiated.
Furthermore, with changes
occurring at an accelerated pace, it is not surprising to find that

many more questions are being raised than can be answered, and that,
therefore, the industry is increasingly faced with uncertainty.
The
developments of this transitionary period, and primarily the potential

impact they might have on the industry as a whole in the future, are
the concem of this study.
Thus, insights into the dynamics of the
current transitionary period as well as answers to questions regarding

the future of the industry are being sought.
The undertaking of such
a task should certainly be a challenge not only to anyone interested

in academics, but it also should be of use to practitioners.
It is
believed that at present no other industry is faced with problems of

similar magnitude and seriousness.
2. Need for Research in this Area

Originally, it was intended to give almost exclusive attention
to a comparative analysis of the strategy developments of the principal
American, Japanese, and Swiss watch companies which could have been
accomplished through the use of "Product-Life-Cycle" and "Industry
Study" methodologies.
However, further investigations have revealed
that presently it would be more appropriate and also more fruitful from
both an academic as well as practical business point of view to focus
the research energy on the futuristic problems rather than on those of
The idea would have been to match life cycles of the principal
watch types with the deployment of strategies of the major watch producing companies. However, since an appropriate methodology for studying an industry would have had to be developed for that purpose, the
original intention was dropped in favor of a futuristic study.
the past.
But because of the futuristic and experimental nature of the
investigation, fewer "hard" facts for the theoretician than for the
business executive are expected to emerge.
should hopefully satisfy both sides.
Nevertheless, the research
There is no doubt that the results
of this study are impatiently awaited by industry people who could

readily use some of the major findings for policy formulation.
Inquir-
ies made prior to undertaking the study with leading watch producers in
the United States, Japan, and Switzerland have shown that a real and
vivid interest exists in this type of research.
Contacts made with industry officials and a thorough literature
research have confirmed that no similar study has been produced as of
2
this date.
Specifically, literature research has revealed these main
facts: (1) Problems of the industry have not been addressed in as objective and comprehensive a manner as this study proposes to.
IMEDE,
the Swiss management institute, and the Harvard Business School have
produced cases and notes on the situation of the "World Watch Industry,"
but both have been taking the traditional and historical case method
approach.
(2) No doctoral dissertations have been produced in this
2
Literature research has been based on a comprehensive examination of all relevant American abstracts plus Swiss abstracts such as
Schweizer Bllcherverzeichnis, Jahresverzeichnis der Schweizerischen Hochschulschriften.
Institut pour l'Etude des Methodes de Direction de l*Entreprise
(IMEDE), "Additional Information on World Markets and Competition in the
Watch Industry" (Lausanne, 1966); Frederick T. Knickerbocker, "Note on
the Watch Industries in Switzerland, Japan and the United States"
(Harvard Business School, Case No. 4-373-090, October 1972).
field in the English language, nor do there exist any significant

published works focusing on the business side of the industry other
than occasional manuals, such as works on "how to repair and service
a watch," and books on the historical aspects of the industry concemed
with antiques and collecting.
(3) Correspondence with Delphi partici-
pants from Japan has revealed that at present nothing similar to what
is proposed in this study has yet been produced in Japan.
(4) Analysis
of the principal publications on the watch industry shows clearly the

nature of the preoccupation writers have had.
First of all, there is a strong tendencynot only in Switzerland, but also in any other producing countryto look back, to rewrite,
and to capsule the past events and to provide some sort of historic
overview of principal developments.
Gonseth's work entitled "The Prob-
lem of Time" provides a methodological and scientific approach to timekeeping research and represents the major exception to these kinds of
works.
Second, practitioners have been interested in producing books
on the technical aspects of the watch, in particular repair and servicing.
In Switzerland, Franz Schmidlin has produced in recent times books
of this kind, while in the United States, Henry Fried appears to be the
outstanding representative of this class of contributors.
Third, only
recently did authors and researchers begin to look at the broader

picture.
Swiss authors were mainly concerned with the Swiss watch in-
dustry and its integration into the large European watch industry.
Two
studies came out almost concurrently in 1971, apparently carried out

independently of each other, since neither one mentions the other publication.
Rieben (etal), influenced by his long association with the
Center for European Research in Lausanne, and known for his stand taken
earlier on the issues of European integration, gave his work a more
dogmatic flavor, since he proposed a continental integration of the
European watch industries in order to be able to meet the international
4
competition.
Stingelin, on the other hand, who at the time of publi-
cation of his book was professor at a Canadian university, has taken a

somewhat more realistic and critical view on the outlook for integration.
Among all the publications on the watch industry there is only
one work, published in 1967 by the Federation Horlogere (F.H.), the
Swiss watch manufacturers' association, which has addressed itself to
the issues of the watch industry of the future.
This booklet contains
the major findings of a series of nine meetings held between February

1963 and September 1966, in which fourteen key personalities of the
Swiss watch industry participated.
Each of the nine meetings dealt
with a different subject area and was introduced by selected speakers,

who were themselves experts in the subject under investigation.
eral
discussion followed these presentations.
A gen-
The focus of this pro-
spective study, however, is the Swiss watch industry only.
No attempt
4.
Henri Rieben, Chantal Lagger, and Martin Nathusius, Pour une
communaute de l'industrie horlogere europeenne (Lausanne: Centre de
Recherches Europennes, 1971), pp. 31-37.
Peter Stingelin, Die Schweizer Uhr und die europMische Integratlon (Zurich: Schulthess, 1971).
Fed^ration Horlogere Suisse, Die Uhrenindustrie von morgen.
Prospektionsstudie llber die schweizerische Uhrenindustrie (Biel: Fd^ration Horlogre Suisse, 1967).
was made at assessing the possible developments of major competitors in

the industry.
A further limitation of the study is that its approach
is not comparative. At the time the study was being undertaken, theoretical solutions of the "electronic watch without moving organs" as
it was called then, were either known or were already in the developmental stage.
The report states that "in this field the future develop-
ment looks promising."

A survey of doctoral dissertations is provided in Figure 1 and
clearly shows areas of academic interest in the watch industry.
An
analysis of this list reveals that the majority of the nineteen doctoral
investigations deal with situations and problems of the Swiss watch industry, two concem themselves with Swiss-American watch trade, one with
watch marketing problems in Peru, and one focuses on the world watch
market structure. As far as could be determined, practically all studies were being undertaken by Swiss who have been mostly associated in
one way or another with the watch industry while conducting their research,
o
either as employees or sons of industrialists.
Furthermore, it has been
found that a considerable number of those who have carried out a doctoral
research on the industry have upon completion continued their association or have joined, if they have not already been associated with, the
^lbid., p. 51.
Q
It should be pointed out that traditionally, doctoral dissertations in Switzerland are written immediately following a master-level
university education without, however, requiring students to pursue
course work, except that some schools require the attendance at seminars
Thus it is not unusual to find dissertations of the applied, business
or economic disciplines being completed while the student is working in
industry or govemment.
10
1948 - "Of the duration of existence of watch enterprises" by Scheidegger
1949 - "Industrial organization in the watch industry" by Thommen
1952 - "The crisis of 1929 and the watch industry" by Comtesse
1952 - "The influence of/ monopolies of the watch industry on the economy
of Switzerland" by Virchaux
1955 - "The new statute of the Swiss watch industry" by Frei
1955 - "The technique of retail price in the watch industry" by Jeanbourquin
1957 - "Watch aspects of American Swiss commercial relations 1929-1950"
by Bolli
1959 - "The Swiss watch industry and its significance for the Swiss
national economy" by Wolf
1959 - "The watch trade and its export function, sales to foreign
tourists in Switzerland" by Miller
1961 - "The hindrance of Swiss watch exports through economic political
measures of foreign countries" by Bulleti
1963 - "The export situation of the Swiss watch manufacturers" by Borer
1964 - "The utilization of trade associations in cases of state intervention based on the 'Watch Statute'" by Lanz
1964 - "The possibilities of development of Swiss jewel lever (Anker)
watch etablisseurs" by Engel
1967 - "Marketing for watches and its application in Peru" by Schild
1968 - "The American market for Swiss watches since 1950" by Waeber
1970 - "Inter-enterprise comparisons: the example of the Swiss watch
industry" by Seydoux
1971 - "Flexible working hours applied in an important watch company"
by Zumsteg
1972 - "A watch enterprise from its family workshop in the 19th century
to the concentrations of the 20th century: Fleurier Watch Co.
S.A." by Jequier
1973 - Structure of the world watch offer and market forms" by Burgat
9
Fig. 1. Doctoral Dissertations on the Watch Industry
watch industry with the majority of them in managerial and top executive
level positions.
The one research which in focus and general approach comes
9
Titles translated by author
11
closest to the study proposed here, is that of Burgat, presently with

SSIH, the largest Swiss watch producer and most vertically integrated
company in the Swiss industry.
His approach differs from all the pre-
vious studies on the watch industry in that it takes a global, rather

than domestic view, and it also includes a discussion of major company
strategies as they relate to the competitive environment.
Although throughout the years many people have shown an interest in studying the problems of the watch industry, the significant
fact to note here is that so far no one in the Swiss industry (nor
anyone anywhere else) has attempted to carry out a futuristic study
focusing predominantly on the impact of the electronics technology on
the traditional sector.
In recent months three industry studies made by private organizations appeared on the market.
All of these documents, however, are
strictly applied in nature and do not make use of a scientific or objective methodology for studying and assessing the industry's problems
of the future.
The proliferation of published materials in the trade
press on the developments and the future of the industry, plus the
rather high costs of these mentioned studies (one selling for $350 per
76 pages, the other for $450 for 91 pages, with the Swiss themselves
having compiled an in-depth technically oriented documentation costing
Global Economic Service, Solid State Digital Watches (Los

Gatos, Cal.: September 17, 1973), 76 pp.; Quantum Science Corporation,
The Electronic Watch . . . Its Time has Come (New York, N.Y., 1973),
91 pp.; Fd^ration Horlogre, Service des Etudes Economiques, La montre
lectronique (Bienne, 1974).
12
more than $800 on the subject of the electronic watch), are in effect
proof that (1) the topic is a "hot" one, i.e., of genuine concern to
anyone in the industry and (2) that there exists a real need for more
and better information.
3. Purpose, Scope and Methodology of Research

It is easy to see that in the current situation of uncertainty,
existing in the watch industry
due to the potential entry of electro-
nics companies, there really is only one overriding question to which

everyone would like to have the answer.
Thus, the primary objective
of this study is to investigate as scientifically as possible the future probable altematives that seem to emerge as a result of the development of the solid state watch.
It is hoped that this research
finds substantive answers to the principal research question: "What

will the future of the industry be, given these new technological developments?"
In order to make predictive statements or assessments about the
alternative futures, it is also necessary to analyze the major events
that occurred during the post-World War II period until the advent of
the electronics age.
Furthermore, the research should highlight the
major developments of the transitionary period.
The secondary objective
can thus be phrased in the following question: "What is the significance,

extent and interpretation of the changes that already have been occurring during this so-called transitionary period, i.e. since the inception of the solid state watch?"
In general, the study attempts (1)
to develop an integrated understanding about the watch industry, (2) to
13
find some explanation for the dynamic situation existing at present,

and (3) to investigate some of the industry's potential future directions.
Due to the complexities involved in the subject matter under
investigation, it was rather difficult to set finite and precise boundaries.
However, for practical purposes the following delimitations
had to be observed: With respect to the time dimension, the study will
be limited to one year full-time research work, unless great problems
would call for an extension of the research.
From a product point of
view, the research study focuses on the wrist watches only.
Clocks^
which could be considered as "stationary watches," will be excluded from

consideration
for the following reasons: (1) the relative smallness of
the clock market compared to the watch market, (2) the fact that technological innovations will affect first the wrist watch, the consumer
timepiece par excellence
before they will have any impact on the manu-
facture or marketing of the clocks, partially because clocks require a

lesser technological sophistication due to their larger size and different operating condition.
In general, the research can be broken down into two parts: the
production end of the industry and the market side of the industry.
On
the manufacturing side of the industry, the study will be limited to

the largest producing nations, Switzerland, Japan and the United States,
and within each one of them to those major companies whose aggregate
productions account for approximately 70 to 90 percent of total domestic
production.
The U.S.S.R., although it is producing about 13 percent of the
14
total annual world watch output, will be considered only as necessary,

depending on the responses obtained through the Delphi process.
Emer-
ging producer nations such as China, Hong Kong, India, Mexico, Brazil,
Indonesia, and others will be dealt with in a similar way.
Time require-
ments and difficulty in obtaining relevant documentation on these countries' watch production make a rigorous discussion impossible.
Exclu-
sion of these producing nations from this study, however, does not affect
the validity of its conclusions, since (1) they produce mostly for domestic consumption, (2) the size of their watch industry is small compared to that of the three top producing nations, and (3) their technology is in many ways considerably less evolved than that of the Swiss,
Japanese, and American watch industries.
With regard to the market aspect, the research study will primarily and almost exclusively focus on the United States, since it represents the largest single market, with an annual consumption of between 45 to 50 million units, or roughly equivalent to 30 percent of
total world production.
But even more important than size is the fact
that new trends (shifts in consumption patterns and application of

company strategies) appear to occur first in the United States, and
only after a certain time-lag will make themselves noticeable in other
industrialized countries.
Explanation for this may lie in the fact that
the Uhited States represent the market with the highest per capita disposable income, an important factor which significantly affects the rate
of introduction of new products, in particular high per unit value and
luxury items.
This is especially true for the electronic watch the battle
of which will undoubtedly be fought on American soil, which in turn would
15
imply that the developments in the United States will be setting the
pace and direction for the rest of the world.
Since most innovations
are likely to appear first in the United States according to the theory
of product life cycle and other countries are apt to close the gap existing between them and the leader (i.e. will be imitating in one way
or another the leader)^ it can be expected that similar occurrences will
happen later in the rest of the world.
Along the functional dimension the study will mainly focus its
attention on the following areas which seem most likely to be affected
by the introduction of the solid state watch: (1) the multinationalization, (2) the structural changes, (3) the technological developments,
(4) changes occurring in market-related variables, such as volume and
price developments, and (5) environmental or other aspects of relevance.
The term multinationalization requires some explanation. International or multinational involvement of companies can manifest itself
in a variety of forms and combinations and with differing degrees of
intensity. Due to such diversity and the lack of precise and reliable
quantitative indicators, it is not possible to use a single and simple
yardstick that would adequately measure the degree of multinational
involvement of a company.
However, rather than to seek quantification
and precision that would be difficult to obtain, the primary focus of
Louis T. Wells, Jr. , "Intemational Trade: The Product Life

Cycle Approach," in The Product Life Cycle and Intemational Trade,
ed. Louis T. Wells, Jr. (Boston: Division of Research, Graduate School
of Business Administration, Harvard University, 1972), pp. 3-33.
16
the analysis will be on (1) the major turning points, (2) the direction
of multinational involvement (geographic as well as in magnitude), and
C3) the underlying reasons for changes in degree of multinational involvement.
Industry analyses have been carried out since the early days of
economics and business administration.
In recent times, the field of
industrial economics has been blooming with a trend toward empirical

verification using sophisticated mathematical models and statistical
techniques, such as econometrics.
Such quantitative approaches attemp-
ted to "explain," verify, prove or disprove certain conjectures, assumptions, and hypotheses about industry or firm behavior.
However, there
is a number of limitations inherent to these approaches: (1) "the

mathematical models that are used are often simple," (2) "data that
could be obtained are sometimes limited in both quantity and quality,"
i.e. information is often not available in the amount and form de12
sired,
and (3) quantitative approaches neglect the "real" variables,
such as human behavior and motives.
Such studies in most cases statis-
tically correlate or approximate observable phenomena with hypotheses

without providing complete answers to questions such as "why" and "how."
A second, non-economic approach falls under the heading of
business policy.
this direction.
The Harvard Business School has been instrumental in

The primary focus is on the totality of the firm.
Traditionally, research has centered on case studies "aimed at achieving
12
Edwin Mansfield, Industrial Research and Technological Innovation; An Econometric Analysis (New York: W.W. Norton & Company, Inc.,
1968), p. 207.
17
a greater depth and understanding of the complexities of the role and

13
functions of top management."
Although researchers in this area have
been aware of the complexities in the real world, they have been reluctant to generalize
"especially about broad trends in the development
of, or managerial guidance of the large, modem enterprise as a 'population.

During the 1960s the emphasis shifted, mainly as a result of
the work of Alfred D. Ghandler, to include developmental models of
firms and the study of larger populations of companies.
Under the pro-
ject known as Industrial Development and Public Policy at Harvard, directed by Professor Bruce R. Scott, a coordinated research was undertaken to study the strategy and structure of the top 100 firms in
France, Germany, Italy, and the United Kingdom.
The field of business policy studies the large corporation in
two ways: One approach is based on case studies and focuses on a single
company at a time.
The second approach termed "population studies"
provides an overall analysis of multiple companies in one country, or
13
Foreword by Bruce R. Scott in Dereck F. Channon, The Strategy
and Structure of British Enterprise (Boston: Division of Research,
Graduate School of Business Administration, Harvard University, 1973),
p. V.
Ibid.
Gareth Pooley Dyas, "The Strategy and Structure of French
Industrial Enterprise" (Doctoral dissertation, Harvard University, 1972)
Robert David John Pavan, "The Strategy and Structure of Italian Enterprise" (Doctoral dissertation, Harvard University, 1972); Heinz T.
Thanheiser, "The Strategy and Structure of German Industrial Enterprise"
(Doctoral dissertation, Harvard University, 1972); for the study on the
industrial enterprises in the United Kingdom see Dereck F. Channon,
The Strategy and Structure of British Enterprise.
18
restricts itself to one industry, or explores it in an intemational

context.
"The two are being explicitly related to one another as the
search is being made both for further understanding of reality and for
understanding the implications of the emerging findings."
The approach of the proposed study lies between the industrial
economics and business policy approaches.
However, since this study is
to analyze only the principal organizations of the "World Watch Industry" totalling less than 100 companies which was the size of the population of the Harvard Industrial Development and Public Policy projects,
its approach despite the use of a completely different methodology could
be classified as being between the traditional case method and the newer
population approach.
Making a prospective type study required the selection of an
appropriate research tool.
Although no completely rational, objective
and scientific method exists for selecting the most appropriate research
tool to forecast possible futures of an industry, Delphi has been found,
after careful weighing of the pros and cons, to be one of the more
promising
and useful altematives.
Major reasons for selecting Delphi
over other methodologies were the principal advantages it could offer,

in the main the sequential questioning process, the feedback provision
between the rounds, the anonymity of participants which was a particularly important factor since the study will have to be conducted in a
highly competitive environment, the amount of information that it is
Scott in Channon's The Strategy and Structure of British

Enterprlse, p. vi.
19
capable of generating, and the general consensus that Delphi produces

forecasts of better reliability than available through other ways.
In
addition to making forecasts about principal possibilities of the watch

industry, the Delphi experiment also hopes to provide further insights
into the Delphi process itself, in particular non-response rates.
However, in order to possess a means of verifying and complementing predictions generated through the Delphi process, it was deemed
necessary to conduct interviews with people in the industry.
Although
rather time consuming and certainly not the least costly altemative for
obtaining selective and qualitative information, no other more appropriate method could substitute for interviews.
Given the complexity and
nature of the problem, making use of objective and more traditional

forecasting tools, such as trend extrapolation, seemed to be impossible.
An integrated view of the research plan is provided in Figure 2
which lists research objectives and related methodologies.
Figure 3 re-
presents a framework for comparative analysis which served as basis for

this comparative Delphi study.
20
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21
I. Locus of comparativi~na1ysis
1.
2.
3.
4^
II. Focus of comparative analysis
Spatial - geography
Temporal - h i s t o r y , time
Sectoral - sub-culture
HoliStic - several perspectives
1. Elements
2. P.elationships between elements
3 . Differences and s i m i l a r i t i e s between
elements and relationships
I I I . Construct for
comparative
analysis
1
3. Structures: Actors' relationships:

a ) membership
b) arena
c ) scope
d) hierarchy
1. Actors: Their c h a r a c t e r i s t i c s :
a) physical
b| economic
c) social
d) p o l i t i c a l
e ; psychological
4. Functions: Actors' contributlons:

a ) nature
b) recipients
c ) s i z e , q u a l i t y , and efficiency
2. Processes: Actors' a c t i v i t i e s :
a) a c t i v i t i e s 1) planning and innovaticn
b) interactions 2) control
c) behavior
3) organizing
4) staffing
5) d i r e c t i o n , leadership and
motivation
6) marketing
7) production and procurement
8) research and development
..
9) finance
10) public and external r e l a tions
5. Environments:
a) physical
b) economic
c) p o l i t i c a l or
d) social
e) c u l t u r a l
a)
b)
c)
d)
educational
sociological-cultural
political-legal
economic
V. Specific a s pects for i n vestigation

in co:ôarative
analysis
1.
2.
34.
5.
6.
7.
89.
10.
11.
12.
13.
14.
15.
16.
.ôtives
Patterns
Trends
Oirectioos
Pates of change
Unicjeness
Sinilarities.
Oifferences
Causality
Reactions
Pro-ctions
Res'jUs
Net r e s u l t s
Effects
Events
Correlations
IV.
Continua
of
A V
V v II W 1 llu\4
w 1
comparative
anaiysis
1
1.
Norrativ
pirical
â)
(positive)
/^
2 . Idiographic n o m o t h e t i c /
(case study)
(seeks gene)^lizations,
N^
laws, hypob)
theses)
3 . Non-ecological** ecologicl
homological:
similarities
and d i f f e r e n ces of structures
analogical:
functions and
related v a r i a bles
A t r u e c c r o r a t i v e study is empirical, nomothetic

and ecological
Fig. 3.
Framework for Comparative Analysis*
*Adapted from J. Boddewyn, "A Construct for Comparative Marketing Research," Joumal of Marketing Research, 3 (May, 1966) :149-53;
Richard N. Farmer and Barry M. Richman, "A Model for Research in Comparative Management," California Management Review, 7 (Winter, 1964):
55-68; Fred W. Riggs, "Trends in the Comparative Study of Public Administration," in Comparative Management and Marketing: Text and Readings,
comp. by J. Boddewyn (Glenview, 111.: Scott, Foresman and Company,
1969), pp. 273-83.
CHAPTER II
THE WATCH INDUSTRY
An industry study without the provision of some background information would be incomplete.
The purpose of this chapter is to define
briefly what a watch is, describing its major characteristics and to

fulfill the two minor objectives of the study.
These are (1) an out-
line of the principal developments in the watch industries of the United

States, Japan, and Switzerland during the period from the end of World
War II to the introduction of the solid state watch in 1970, and (2)
an analysis of the significance of the changes during the transitionary
period.
The emphasis will be on unique aspects and on the most impor-
tant characteristics and similarities of these eras.
1. Introduction and Background

Essentially, the watch is an instrument that divides into equal
parts the duration of a day.
It is an instrument for measuring time.
But more than that, it has always been an important luxury item, one
that is capable of satisfying more than the utilitarian needs of knowing
the exact time.
Since its origins, the wrist watch has always had an
aesthetic function, through which jewelry (styling) aspects and psyche
The transitionary period can be defined as that period of instability created by the introduction of the solid state watch in 1970;
one of the research interests is to find out through the Delphi process
when the transition will end.
22
23
of the wearer (social significance) were satisfied.

Over the history of over 300 years of the watch its definition
has most likely changed many times, reflecting the changes in the environment (e.g. life styles and significance of a watch to the wearer),
the product itself, as well as the mental set of the definition makers
2
themselves.
In essence, a general definition contains these following
elements which reveal the principal characteristics.
A watch is a manu-
factured good in contrast to a processed good, which combines intensive

technology (utility) with jewelry and craftsmanship (aesthetics).
Fur-
thermore, it is a durable consumer good, the time keeper par excellence,

that has to operate accurately, reliably, and with a high degree of autonomy under a wide range of environmental conditions. The most recent
study carried out by the Swiss watchmakers' association (F.H.) has out3
lined the profile of the "perfect" watch as follows:
2
Of those who have defined the watch, it is useful to mention
Miller and Schild who both have propounded their ideas in their doctoral
research.
Johannes M. J. Miller, in his dissertation entitled "Der Uhrendetailhandel und seine Exportfunktion: Eine Untersuchung des Einzelhandelsabsatzes von Uhren an auslMndische Konsumenten" (University of Freiburg, 1959), in essence defines the watch as "a good with basically a
technical utility and various additional utilities; a consumer good of
a higher value with a periodic demand.
According to Adolf R. Schild, in his dissertation "Marketing und
seine Anwendung in Peru" (Graduate School of Commercial and Economic
Studies, St. Gallen, 1967), a watch is "a technically complicated consumer good of higher value with weak demand priority and long usage which
satisfies various objective and "idealistic" (ideelle) needs, and which,
depending on the point of view, is more or less a necessity or a luxury
item. It satisfies a differentiated personal need and is often used as
gift item.
Definitions translated by author.
Federation Horlogere, Montre electronique, p. 11/62.
24
1. Price:
About $20
2. Fundamental qualities:
Precision
Robustness
Life span
3. Marketing qualities:
Convenience: - weight
- volume
- form
Aesthetics (personalization)
Readability
Time indication
Operating autonomy
Based on the above characteristics and concepts , various watch

classification systems have been developed parallel to the philosophical orientations in the industry.
Since the early days, watches have
been classified by technical product characteristics (mechanical, electrical, electronic, pin-lever, jewel-lever).
major basis of reporting industry statistics.
This remains today the

Another classification
is based on price, dividing all industry output into low-priced (retailing for less than $30), medium-priced (between $30 and $100) and
high-priced watches (selling for more than $100).
Yankelovitch, under
contract by the Swiss watchmakers' association to study the American

watch market, segmented it into three areas based on values that consumers attribute to the product:
(1) The segment of consumers desiring to pay the lowest possible

price for a watch. This type of consumer is ready to dispose
of their watches once they cease functioning.
(2) The segment of consumers who see in the watch a product of
solid manufacture and long durability. This type of consumer
4
Daniel Yankelovitch, "New Criteria for Segmentation" (1963 ? ) ;
document available at Fedration Horlogre, Bienne; also Daniel Yankelovitch, "New Criteria for Market Segmentation," Harvard Business Review 42 (March-April 1964):83-90.
25
is attached to the intrinsic product values and is thus willing

to pay the necessary price to acquire this value.
(3) The segment of consumers who not only seek the objective utility
of the product but also an emotional quality, a syTnbol often
related to an important event.
Burgat conceived a classification that integrates multiple factors, which evolved from the recognition that a great number of heterogenous factors determine watch types and that the buyer bases his
purchasing decision primarily on price, the brand name, and the influence and advice of the retailer (sales agent) or on a combination of these
three factors.
It became apparent that a marketing rather than a pro-
duction oriented classification system would be most appropriate.

According to the author of this system, the possible strategic "adjustments" vary from a product with very limited "adjustment" possibilities
to a product where the three valuesprice, sales costs , and the product
are subject to a great degree of manipulation.
At one end of this continuum, we have the producer selling a
semi-finished or finished product of an "anonymous" type, i.e. a product at a very low brand recognition stage, to a distributor who in
t u m might sell the product under his own name, in which case the producer can only use the variable price for strategy formulation.
In the other extreme, the producer can sell a product with a
well-established brand name, reflecting a very high brand recognition,
to a distributor which he either controls directly through financial
participation or indirectly by "pre-selling" the product to the final
Franois Burgat, "Structure de l'offre horlogre mondiale et

forme des marches" (Doctoral dissertation, University of Neuchtel,
1973), pp. 41-44.
26
buyer (the pull strategy).
Thus, watches can be classified along the
continuum, as chosen by Burgat, from a semi-finished product with only

price differentiation possibility to a product with a reputable brand
name where the differentiation strategy makes use of three factors:
brand name, price, and product itself.
In schematic form, Burgat's
definitions or classes of watches are shown in Table 1.
2. The Post-World War II Era^

The major objective here is to capsule the most significant
events that have taken place in the watch industries of the United
States, Japan, and Switzerland since the second World War and before.
the appearance of the solid state digital watch in 1970, and to provide background information for the subsequent analysis of the transitionary period and the future.
The comparative presentation of each
of the functional areas is preceded by some general information on the

historic origins of the industry and its size.
a) A Brief Historical Perspective

Although the Swiss cannot be credited for having invented the
wrist watch, they soon developed the necessary skills to produce watches
comparatively better than their competitors.
Today's predominant posi-
Source material for the preparation of this section were essentially trade, industry and business publications, plus the following
documents: Knickerbocker, "Note on Watch Industries;" IMEDE, "Information on World Markets and Competition;" Pierre Hostettler, "The World
Watch Industry," (Termpaper submitted for the course in Intemational
Management, MGT 5311, August 1972, Texas Tech University, Graduate
School of Business Administration).
27
TABLE 1
WATCH CLASSIFICATION SCHEME ACCORDING TO BURGAT
Watch types
Factors
Product types:
semi-finished (e.g. movements)
finished (finished watches)
mechanical
electronic
Price categories:
low (genrally Roskopf type)
middle
middle-high
high
high-very high
X
X
X
X
X
X
X
X
X
X
X
X
X
Degree of control over distribution:

zero
zero or little
can control
Possible differentiation strategies:

price
product
brand name
XX
XX
2 ,3
Degree of brand recognition:

very low (anonymous product)
very high
SOURCE:
X
X
X
X
X
X
X
X
X
XX
X
X
X
X
X
X
JS.
X
X
Franôis Burgat, "Structure de l'offre horlogre mondiale et forme des marches (Doctoral dissertation,
University of Neuchtel, 1973), pp. 41-44.
denotes the preponderant element of differentiation
28
tion of the Swiss watch is the result of a number of factors and circumstances.
First, the migration of French Huguenots to Geneva and to the
Swiss Jura region, in order to escape prosecution, brought the initial

skills to the country.
Second, the fact that the Huguenots and the
indigenous people in the areas they moved to had a strongly individualistic personal character and a puritan philosophy, facilitated greatly
the establishment of a "cottage" industry.
The resultant specializa-
tion that soon emerged gave the Swiss watch industry a manufacturing
advantage, although at a cost of too much decentralization and fractionalization.
Third, on the commercial side, the Swiss were able to
establish commercial networks on a global basis in part through Swiss

mercenaries who have served in foreign armies and stayed abroad, without,
however, loosing touch with their homeland, and in part through those
Swiss who had to emigrate because of economic reasons and who could
establish themselves as merchants abroad willing to promote Swiss products.
The Japanese and Americans started producing watches later than
the Europeans.
During the latter part of the 19th century Japan began
to manufacture quality watches in a process of emulating only the best

of the Westem culture and industry.
The roots of the American watch
industry go back to European settlers, of whom some were Swiss. American industry was forced, earlier than in other countries, due to labor cost increases, to mechanize as well as to move some of their manu-
Lorenz Stucki, The Secret Empire - The Success Story of Switzerland (New York: Herder and Herder, 1971).
29
facturing operations abroad.
b) The Size of the Industry

Total output of all watch producing countries has been 215.6
million units in 1973.
Although such a volimie looks high and impres-
sive in monetary terms and measured on a global scale, the industry is

only small in size.
Table 2 provides output comparisons of the three
major producing countries, the United States, Japan, and Switzerland,

and also illustrates the following principal facts: (1) The Swiss have
been able to hold the leadership position throughout the post-World War
II period; however, their world market share has been declining steadily, (2) of the three top producers, Japan has experienced the strongest
output expansion moving it from sixth place in 1950 to the same output
level as the American watch industry, with the greatest expansion occurring during the 1960s, (3) the American watch industry in contrast
has been loosing its world market share despite absolute gains in
aggregate production, and (4) the world watch production has steadily
increased during this period, with annual growth rates ranging between
7 and 11 percent, more than quadrupling its output between 1950 and
1973.
The eco-political importance of each of the watch industries
varies in direct relation to the contribution they make to the gross
national output in each country, the rank they occupy on the list of
exporting industries, and the size of the labor force.
According to
these criteria, the watch industry of Switzerland is economically and

politically more important than those of Japan and the United States,
30
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Q
with the latter being the least important.

Inferences about the magnitude and power of the principal watch
industries in the world can also be made by comparing the largest producers.
Table 3 provides a ranking of the top players in the world

9
watch market based on sales volume of each company.
According to the
table, in aggregate terms, Timex ranks as the largest company and largest pin-lever manufacturer, with Seiko claiming to be the largest
jewel-lever producer in the world.
ASUAG, the Swiss holding company,
controls the world's largest movement manufacturer, Ebauches S.A.,

Bulova, on the other hand, s the leader in the production of tuning
fork watches, while SSIH (the Omega-Tissot-Lanco group) with respect
to sales, distribution, and servicing is the most global company.
c) Multinationalization Development
A meaningful discussion of the multinational involvement of the
principal watch industries needs to be separated into the marketing
and the manufacturing end.
On the marketing or sales side, the Swiss
have always dominated the intemational markets.
Early specialization
Unfortunately, due to absence of identical statistics on the

industry, accurate quantitative comparisons are not possible; this
probably explains why the Swiss watchmakers' association reports international production in unitary terms only.
9
Comparison of course could be based on other indices, such as
the nimiber of employees and units produced; although most meaningful,
company sizes cannot be compared based on units produced, since most
major companies, except SSIH, do not publish their production figures;
however, aggregate sales figures must be used with caution, since each
company is diversified to a different degree, thus each figure includes
a varying amount of non-watch related activities.
32
TABLE 3
COMPARATIVE RANKING OF MAJOR WATCH COMPANIES
(according to total sales revenue)
1. Timex
2. Seiko (Hattori)
3. ASUAG
4. Bulova
5. SSIH
United States
Japan
Switzerland
United States
Switzerland
which gave the Swiss the productive capacity, the small domestic market
base, and the existence of commercial relationships with expatriate
Swiss made it possible as well as necessary to expand into foreign
markets, which they successfully practiced with an exclusively qualityoriented strategy. American and Japanese watch companies have entered
overseas markets slower, on a relatively smaller scale, and with lesser
intensity than the Swiss. This may be explained by their much larger
domestic markets which made dependence on foreign countries for absorbing productive capacity less critical. During the 1960s, as a result
of saturation of their intemal market and in order to dampen cyclical
developments at home, the Japanese intensified efforts to market their
output intemationally.
In part, their decision to enter foreign markets more aggressively was facilitated by the recognition of a market segment that the
Swiss left relatively neglected, namely that of the automatic jewellever watch.
Rieben, Lagger, Nathusius, Pour une communaute , p.36.
33
With respect to the manufacturing, two American watch companies,

Timex and Bulova, are by far the most multinational, both of these companies having an integrated production system, linking some twenty or
more plants around the world.
Bulova's intemational manufacturing
goes back to 1919 when it set up a large plant in Switzerland.

The following are some of the major factors that help explain
why American watch companies moved abroad faster than their major competitors: (1) Throughout the post-World War II period the American watch
industry was plagued by financial problems caused by declines in profits which were the result of domestic cost increases (namely labor)
and strong foreign competition (namely from the Swiss) in their own
market, and (2) the continued success of the European Economic Community
and European Economic Free Trade Association which provided new market
opportunities.
Motives of American watch companies for setting up foreign manufacturing subsidiaries have almost exclusively been of a defensive nature with companies moving abroad in search of cheaper foreign labor
and in order to prevent the preemption of large regional markets by
their competitors.
12
Timex's manufacturing policy of interchangeability
of parts and constructive simplification of the watch made location of
"Multinational Approach Helps Bulova Beat Competitors Time,"

Industry Week 168 (March 22, 1971):19-20.
12
An exception may be Bulova's takeover of Universal of Switzerland which was primarily motivated by the wish of controlling Universal's worldwide distribution system.
34
geographically decentralized factories much less dependent on the availability of skilled human resources.
The only American watch manufacturing companies remaining today
are Timex and Bulova.
Their success may be accounted for partly by the
effective integration of their production on a multinational basis, and

partly by their corporate size.
Considering the ill-fated experiences
of the smaller and medium-sized watch companies in the United States

(Hamilton would be the classic example), one is led to the conclusion
that multinationalization can only be practiced by the large companies.
Multinationalization by American watch companies has taken many
forms, ranging from technological know-how licensing to varying degrees
of equity participation in foreign subsidiaries.
Timex traditionally
has preferred whole ownership, in order to retain complete control and

prevent any leaks of information to outsiders.
13
Bulova, aside from its
manufacturing involvement in Switzerland, which dates back to 1919, and

some participation in other Swiss companies, has in recent years licensed the tuning fork know-how to Ebauches S.A. of Switzerland and Citizen
of Japan.
The Japanese watch companies have traditionally kept their production at home.
However, mounting labor costs and capacity limitations
necessitated setting up manufacturing plants overseas.
Location prefe-
rence for their manufacturing subsidiaries has been given to the Far
Eastern Region, in particular South East Asia.
Only in recent years
13
This preference might be explained by the fact that Timex is
a closely held private company, principally financed and run by Norwegians.
35
has Japan entered other areas, such as Latin America (Mexico and Brazil),
but has refrained froin establishing operating subsidiaries in Europe.
The hands of the Swiss companies through most of the post-World
War II period were tied because of the cartellization of their industry
which did not permit uncontrolled expansion.
With gradual liberaliza-
tion of the industry between 1966 and 1971, interest in foreign companies
began to grow, aided by the fact that on certain critical components
capacity (e.g. the watch case) was reached and that labor costs began to
rise sharply.
As a result, a few smaller companies began component manu-
facture in cheap labor areas of the Far East (Hong Kong and Singapore
mainly).
Despite increasing reliance on foreign labor in their domestic
factories, the Swiss did not think a mass exodus of their watch production was justified.
General conservatism in the industry and socio-
economic-political reasons may explain why multinational movements did

not intensify, since part of the industry is controlled either directly
(e.g, Ebauches S.A.) or indirectly by the Federal Swiss Government, and
companies may have been afraid of repercussions by the labor unions
>
which could have negatively affected their longstanding labor peace.

Focus of Swiss foreign direct investments was primarily on the United
States the raarket of which absorbs roughly 25 percent of total annual
Swiss output, which consequently had to be treated with particular care.
Swiss companies preferred equity participation for the most part; whole
ownership was rare.
Their most direct motivation was to secure brand
names of their American competitors.
Could it also have been conceivable
that the Swiss were motivated to purchase American companies in order to
36
secure present and future technology from them?
14
Historically, multinational relationships have been triangular,

Europe-North America-Far East with greatest cross-investments taking
place across the Atlantic between Switzerland and the United States,
their intensity reaching a peak during the second part of 1960.
Such
investments have exclusively been practiced by watch companies, with one

exception.
In 1971 Zenith, the American radio and television set pro-
ducer, who has never been involved in the watch industry, acquired a
majority interest in the Swiss watch group Movado-Zenith, Mondia Holding Company.
Furthermore, it is of interest to mention that, trans-
Atlantic investments have generally been received by both industries

with mixed feelings and nationalistic sentiments.
The Zenith takeover
in particular stirred up uneasiness among the Swiss industry and the

1 1 community.
-.16
local
Multinational involvement appears to be heading into a new direction.
Principal watchmakers are increasingly focusing their interest
on selected countries in the "Third World," Mexico, Ecuador, and Brazil

having been the most attractive candidates in the Latin American area.
14
This line of argumentation has not appeared in the press;
therefore, it looks more like an interesting speculation.
The two Zenith names bear no relationship to each other.
For aspects of American-Swiss watch relations during the postWorld War II period until 1966 see Jean-Jacques Bolli, "L'aspect horloger des relations commerciales americano-suisses de 1929-1950" (Doctoral dissertation, University of Neuchtel, 1957) and Bemard Waeber,
"Le march amricain de la montre suisse depuis 1950" (Doctoral dissertation, University of Fribourg, 1968).
37
Nigeria in Africa and India, Malaysia, Indonesia as well as South Corea

in Asla.
A special case in the area of foreign investment in the watch
industry represent the insular possessions of the United States in the
West Indies and the Pacific, the Virgin Islands, Samoa, and Guam.
The
desire by the American govemment to make these possessions economically

self-sufficient led a preferential tax scheme imder which firms located
in these territories could export duty free to the American market, as
long as the content of the manufacturing done in these insular possessions would be at least 50 percent of the total value of the article.
This special feature plus the fact that watch manufacturing is relatively labor intensive, provided enough incentive for watch companies from
the U.S., Japan and Europe to exploit this opportunity.
Shipments to
the U.S. from these islands increased from a little more than 40,000
units of movements in 1960 to over three and a half million units by
1965 or the equivalent of about one fourth of all U.S. imports of jewellever watches.
Because the exploitation of the "loophole" had reached
such magnitude within only a few years, it threatened the existence of

the domestic U.S. watch producers.
The Swiss were threatened too, since
at that time, according to their industry rules, they were not allowed
to export unfinished movements only.
The controversy was finally re-
solved by putting a ceiling on the insular production, thus limiting

the duty free import froin these territories in any year to one-ninth of
the "apparent U.S. consumption" of watches in the preceding year.
For more information on this problem see e.g. F.E. Oxtoby,
38
The problem of the "European Watch Industry" is another important

topic.
The idea of an enlarged watch industry combining the various
production centers and know-hows, which over the years have established
themselves almost in concentric circles around Switzerland, has in more
recent times begun to occupy the minds of several industry people as
well as academicians of the "pro Common Europe cause."
The hypothesis
of those people is that since Switzerland, the leader of the worldwide

industry, is located at the center of the European watch making area,
it should probably also play a "natural" leadership role among a truly
"European Watch Industry."
Professor Rieben by request of the Swiss
watch manufacturers' association has studied the problem, and in essence

strongly proposes that such a union be created for the mutual benefit of
all partners.
Specifically, it is thought that through such a consoli-
dation or tearawork Europe could successfully withstand the intensifying

intemational competitive pressures and advances made in the electronics
.
18
sector.
d) Structural Changes
The watch industry
that has structurally remained practically
unaffected by the developments during the post-World War II period was
"The Role of Political Factors in the Virgin Islands Watch Industry,"

The Geographical Review 60 (October 1970):463-74; "Watch Movements to West Indies," Business Week no. 1866 (June 5, 1965):132-34, 136,
138; Waeber, "March americain."
18
Rieben, Lagger, Nathusius, Pour une communaute; Stingelin,
Schweizer Uhr.
39
that of Japan.
Japan's watch output has been accounted for in recent
history by only four firms the relative importance of which is shown in

Table 4.
In effect, the Japanese watch industry is being dominated by
only two firms which control, almost nine out of every ten watches produced in that country.
Foremost position is held by the K. Hattori (Seiko)
group, a family-type enterprise.
It is this extreme form of concentra-
tion and the resultant size which allowed the Japanese to face their
stiffest competitors and to raake strong inroads on the world markets
during the 1960s through integrated raarketing. Throughout most of the
post-World War II period the relative shares of these four Japanese watch
companies have not changed, indicating structural stability of the Japanese watch industry on one hand or absence of real competition on the
other hand.
TABLE 4
DOMINANT JAPANESE WATCH COMPANIES AND THEIR PRODUCTION
(estiraates only, 1971)
Share of Japanese production

(percent of total production)
K. Hattori & Co.
Citizen Watch
Orient Watch
Ricoh Watch
60
28
9
3
Output of watches
(raillions of units)
14
7
2
0.8
The American watch industry has traditionally been split into

three camps: On one hand there is the group which has never attempted to
manufacture watches domestically, but preferred instead to import complete watches or components and assemble them in the United States for
40
domestic marketing.
The second camp consists of companies which have cho-
sen to produce the whole watch domestically instead of relying on imports.

The third group consists of those few companies, of which Bulova is the
best known, that belong to both camps, which are importing some parts,
while also owning manufacturing centers in the Uhited States.
Because of
generally low tariffs, foreign competition, particularly the Swiss, could

make strong inroads on the American market during the years after the war.
This situation led to congressional hearings.
Proponents of higher
tariffs (the domestic producers) won the case in 1954 with the argumentation that their industry was essential to national defense and consequently needed some protection.
The apparent greater protection from
tariffs had two developments as a result: (1) Swiss-made imports of

cheaper watches continued to soar, and (2) Timex (then U.S. Time Corp.)
was able to carve its niche into the low-priced segraent even deeper.
American watch raanufacturers reacted by (1) moving towards greater diversification in order to broaden their base of business and to
spread their risks; (2) looking for cheaper sources of supply, in particular from abroad; (3) shifting into cheaper lines of watches, even pinlever watches, as compared to the medium to high-priced watches they
have been traditionally producing; (4) seeking raore govemment contracts;
and (5) accelerating their efforts for increased efficiency either
through greater automation or cost reductions made possible by simplifying watch designs.
However, only Bulova's strategies were successful
in adapting to the challenges.
By 1970 the list of genuine watch manu-
facturers had narrowed down to two companies, Bulova and Timex, while
the others became marketing organizations.
41
The Swiss industry has always been characterized by an unusually

high degree of decentralization and fragmentation.
In the early 1920s
the Swiss watch industry found itself in a deep depression.
To rebuild
its foundations, governraent help was needed through which new holding
organizations and industry associations were created, and cartel rules
established.
Cartellization during the post-World War II period carae
increasingly under attack.
Between January 1, 1966 and January 1, 1971
the industry was gradually liberalized, and requirements for manufacturing and export perraits were rescinded, which lead to significant reorganizations and restructuring in the industry.
The industry appeared
to be divided into "progressive" and "fundaraentalist" companies with

the former willing to enter into some joint ventures with other Swiss
watch firms.
The general opinion was that the raajor concentrations have
already been raade, namely the formation of the Ebauches, SSIH, and SGT
groups.
The latter,raostlysmall toraediimisized companies of family
ownership, stubbomly insisted on their traditional rights of "independence" and "freedom," and refrained from cooperative ventures.
Of significance to note is that for the first time in the long
history of the Swiss watch industry vertical concentrations became a
reality.
19
For the most part, however, merger movements were of a hori-
zontal nature.
With respect to product diversification in the principal watch
industries of the world, the following can be summarized: Japanese
19
Traditionally, the industry operated under a so-called twotier system, separating the component producers from the producers of
the whole watch.
42
watch companies, in particular the two largest companies, Seiko and

Citizen, have diversified into non-watch related product areas such as
micro-electronics (electronic calculators, electronic displays, et^
cetera).
In none of the Japanese watch companies has the non-watch pro-
duction reached a significant portion of total business.
The Swiss
watch companies, on the other hand, have until recently not paid very
much attention to exploiting avenues other than watchraaking.
In corapa-
rison to the Japanese and Swiss, the Araerican watch companies are considerably more diversified (in particular government contracts and
micro-electronics product areas).
Most of the watch companies that diversified moved into areas
related to watchmaking, for which micro mechanics or micro-electronics
technology was required.
The raajor American companies, due to the
govemment - business interface (defense contracts) were able to expand

their technological base much more than was possible for the Swiss, or
for that matter the Japanese.
By diversifying into defense production,
a diversification actively sought by many at one tirae, American watch

companies could acquire and develop in-house an advanced know-how in
micro-electronics during the 1960s, which they could have developed
independently only with greatest difficulties and at great costs.
With respect to number of participants and stability in the
industry,the following characterizes the situations in the three principal watch producing countries: Japan's industry structure as well
as that of the United States could best be described as oligopolistic,
since only few companies participate in it.
While the industry in Japan
has experienced great stability throughout the post-World War II period.
43
the American on the other hand could be described as the most unstable,
since many companies have left the industry, making it the least fixed
or most dynamic.
The Swiss watch industry has traditionally been clas-
sified as atomistic due to its hundreds of small to raedium sized companies.
However, this description neglects the recent restructurings
that have brought the majority of the national production under control
of only a handful of large corapanies (in the main SSIH, SGT, GWC, MovadoZenith-Mondia).
e) Technological Developments
The post-World War II period saw the development of the electric
watch by Hamilton of the United States and Lip, France, the tuning fork
watch by Bulova, the analog electronic (quartz crystal) watch by Swiss
and Japanese companies almost siraultaneously, and finally the introduction of the fully electronic (solid state digital) watch by Pulsar
(LED) and by SGT (LCD) .
The only raajor event with a great econoraic
significance was the introduction of the tuning fork watch Accutron by

Bulova in 1960.
This watch has been credited with having raade a tech-
nological breakthrough for the first tirae in the raore than 300 years of
history of the industry.
Accutron's patent position was so strong that
despite efforts made by both the Japanese and Swiss to circumvent these
rights, none of the attempts succeeded.
The developraent of Accutron
was of significance also because for the first tirae electronics knowhow was applied to watchmaking.
In contrast, the electric watch, hailed at the time of introduction as a big breakthrough, failed to become a significant business
44
success because of improveraents realized in mechanical watches, in particular the automatic watch.
In response to Bulova's introduction of the Accutron, the Swiss
set up an electronic research and development center (CEH) in 1962 the
original objective of which was the development of a competitive product
Xhat would avoid Accutron's patent protection.
However, these efforts in
part have failed and the traditionally centralized or collective research

activities of the Swiss watch industry have been shifted to give more
weight to private research.
In contrast, the predominant practice in the
American and Japanese watch industries is to carry out research and development work at the individual corapany level.
20
Recognizing the greater need for electronics coraponents in the

future, the Swiss forraed a joint enterprise in 1966, now called Faselec.
Some of the largest Swiss watch and non-watch companies with a micromechanics and micro-electronics tecdinology orientation, plus Philips of
the Netherlands, participated in this new venture.
In the field of the classical watch the Swiss can be credited
with having developed the first all plastic watch, also called the first
t m e "throw-away" watch.
21
Furthermore, significant progress towards
increased automation was achieved particularly in the sector of the
20
Comparisons of research and development expenditures cannot be
made on an intemational level due to lack of comprehensive data; however,
on a national level it has been shown that the Swiss watch industry spends
less money on research and development than the other major exporting
industries.
21
"La montre en matiere plastique: un tour de force de l'industrie
h o r l o g ^ r e s u i s s e , " La S u i s s e Horlogre no. 40 (October 2 1 , 1971):1365-66.
45
Roskopf industry.
The Japanese have made the greatest advances, particularly in
manufacturing technology.
Mass production of watches became possible as
a result of the following factors: (1) a highly automated and mechanized production technique, (2) standardization and simplification of
models as the basis for all mass production, (3) a high degree of vertical (forward and backward) integration, and (4) a highly disciplined
and skilled labor force.
In the American watch industry, Timex has made pioneering developments toward mass production.
When Tiraex was planning for transi-
tion from war to peace time production right after the second World
War, its president forraulated a production philosophy that proved to
be highly successful, based on (1) rigid standardization, allowing interchangeability of parts; (2) accuracy of standards for jigs and fixtures; (3)raaximuramechanization; (4) centralization of quality control; and (5) effective inventory policy to keep finished goods at
lowest levels possible.
f) Market Developraents
The brief discussion that follows surveys the relevant strate22
gic aspects of the three top watch producing countries.
Throughout
the past, the Swiss have successfully cultivated global markets by

clever salesmanship based on a collective promotional campaign that
stressed the Swiss watch per se, the quality of its craftsmanship
22
For a description of the major market structures see Burgat,
"Structure de l'offre horlogre."
46
without placing great emphasis on individual brand names.
Absence of
an integrated marketing approach was the result of their much fractionalized industry and dominance of the sraall family-owned enterprise
which did not dispose of the financial raeans to effectively pursue a
brand strategy.
In recent years, however, greater promotional stra-
tegies noticeably shifted towards a combination of collective and private means.

A collective approach was the most sensible altemative for the
Swiss under the given circumstances.
Through the cartel, quality was
checked and enforced, which was an absolute necessity for commercial

success.
Without such a control individual small companies would not
have been able to assure uniform product and service quality in their
overseas markets.
Institutional promotion eraphasized availability of
industry service and instruction centers staffed by Swiss technicians.

The Japanese, in contrast to the Swiss, have focused their
efforts raainly on the jewel-lever watch, thus greatly eraphasizing the
medium-priced class of watches.
Rather than basing their image on
quality craftsmanship as the Swiss did, the Japanese attempted to exploit the feature of technological leadership.
Characteristic of American watch marketing are the large sums
spent on advertising, unparallelled anywhere else, as well as their
greater promotional aggressiveness.
The two largest companies, Timex
and Bulova, pursue a full-fledged marketing approach based on private

brand strategies.
While Bulova has been stressing a complete product
line ranging from the low to the high priced watches, Timex has concentrated its efforts almost exclusively on the cheap end of the market.
47
Today, according to estimates, every second watch sold in the United

States is made by Timex.
3. Analysis of the Transitionary Period
a) Definitions and Methodology

The pace of developraents in the principal watch producing
countries has considerably accelerated since the introduction of the
solid state watch.
The most recent and most severe technological
challenge has had a major impact on the traditional industry.
One of
the objectives of the research, therefore, was to analyze the significance

of the instabilities during the transitionary period which started with
the advent of the solid state watch.
While those belonging to the new
technology industry overstated reality by calling these occurrences

a "revolution," the traditional sector, in the main the Swiss, on the
other hand understated the facts and even denied that there was a socalled transition in the industry.
23
Whether the introduction of the solid state watch could be

called a revolution depends on the point of view one takes: (1) technologically it must be considered an evolution only since all of the
critical components of the watch have been developed earlier and which
essentially only needed to be made smaller to fit the size of the
watch, (2) from an industry point of view, the interpretation differs
depending on whether one takes the side of the electronics companies,
in which case it could hardly be called a breakthrough or revolution,
or the side of the traditional watchraakers, in which case the appearance of a fully electronic watch could be taken as a revolution,
since its technical solution is totally different, and (3) from a market point of view, the solid state watch could be termed a revolution
only because of its accuracy as compared to attainable accuracies in
other traditional watches; in summary, to call it a revolution, a word
often misused and abused for purposes of public relations and promotion,
is an overstatement.
48
The fact, however, is that non-watchmaking companies have entered the industry and are now competing against the traditional classical watch companies.
To differentiate the two major industry partici-
pants, the following terms are being used: Corapanies which have been in
the watchraaking business prior to the solid state watch introduction
and which still are predominantly mechanical-analog oriented, are
called "traditional" (technology) companies.
On the other hand, com-
panies that never before were in the watch business but due to their
raicro-electronics technology capability have decided to enter the production of timing devices are called "new technology" companies.
24
The primary methodology selected for obtaining the necessary

information was personal interviews.
Although tirae-consuraing and ex-
pensive, it was evaluated that the interview method would provide a

better coverage of the research interests in terms of timeliness as
well as amount of information than other possible research techniques.
A total of 45 personal interviews were conducted with industry executives and experts of both the traditional and new technology sector, of
which 30 interviews were held in the United States during Fall 1973,
and 15 in Switzerland during Spring 1974.
Because of financial and time
limitations, it was not possible to interview Japanese industry leaders

in Japan.
Interviews were loosely structured, but the line of question-
ing followed a written outline.
The length of the interviews varied
from between half an hour to more than two hours with the mean duration
24
The differentiation between traditional and new technology
oriented companies does not imply that one is inferior to the other,
nor does it reflect the true technology orientation of the companies.
49
being around one hour.
b) Origins of the Solid State Watch

The technical feasibility of an "electronic watch without
moving organs" has already been envisioned by the group of industrialists that contributed to the prospective study carried out between
1963 and 1965 under the auspices of the Federation Horlogre, the Swiss
watch manufacturers' association.
25
Certainly the theoretical possi-
bility raust have been known before that tirae.
The development of the
fully electronic watch without mechanically moving parts was a wellkept secret since no reference to it appeared in the trade press before
the presentation of the prototypes.
Considering that research and de-
velopment efforts on fundamentally new watch types take several years

(in the case of the Accutron, it took Bulova eight years), it raust have
been that serious efforts had already been under way at the time of the
publication of this study in 1967.
The question of whether the study
has been a catalyst for the development of the solid state watch cannot
be answered clearly.
However, neither interviews nor secondary sources
indicated that watch companies began to accelerate their research efforts as a result of the predictions made.
The Time Computer Company which evolved from the bankrupt Hamilton was set up on the premise of developing a new watch type which became a reality in 1970 under the brand name Pulsar and was promoted as
the "world's first wrist computer."
With the Pulsar, the first solid
Federation Horlogre. Uhrenindustrie von morgen. p. 51.
TEXAS TECH LIBRARY
50
state digital watch was b o m .
It used a time display system requiring
the wearer to push a button (LED display).
The development of such a
totally new watch type represented an attractive goal for the young
company, for it needed a market breakthrough to assure its survival.
The realization of an electronic digital watch with a continuous time display, for which the Swiss company Socit des Garde-Temps
(SGT) took the pioneering credit, followed in 1972.
The introduction
of the LCD solid state watch appears to have been planned to coincide
with public offerings the company was to make, for which it required
some favorable publicity.
Whatever the content of the in-house research efforts of these
two pioneering companies must have been, a fully electronic watch could
not have been realized without advances made in the American electronics
industry.
Nevertheless, the initial credit for the development of a
solid state watch goes to the watchmakers and not the electronics corapanies.
Without a symbiosis between the two sectors,raarketintroduction
of the watch would have been delayed by years, since neither the electronics nor the traditional watchmakers could have accomplished the job
alone.
The former, traditionally preoccupied with military contracts,
certainly would have assessed the potential differently and due to internal priorities would not have entered cooperative ventures with watch
companies.
Since they also lacked the manufacturing know-how and capa-
city to produce auxiliary components, such as the watch case, they would
not have been in a position to build the complete watch.
Had they taken
the initiative first, it would have been most doubtful whether the traditional watch component manufacturers, of which a good many are Swiss,
51
would have sold critical components to a foreign customer, giving him

the potential to undermine the domestic industry.
The traditional com-
panies, for the most part, lacked the electronics capacity.

With an increasing recognition that the solid state watch could
represent a most attractive business potential, and after the first
watches were successfully brought to the raarket and easily sold, the
s^rmbiosis which originally was necessary for the developraent of the
watch
quickly changed into an outright corapetition.
Cutbacks in govern-
ment contracts, resulting from the phasing-out of the war in South Vietnam and reductions in space research, have contributed to a relative
strong interest on the part of the American electronics corapanies to
enter the watch business.
What did really motivate electronics companies to produce solid
state watches and why did they think that a digital-faced and batterydriven watch would find wide enough consuraer acceptance to justify
total efforts?
The first part of the question is easier to answer, although no
specific quantitative breakdown of reasons can be raade, such as frequency of motives or ranking.
The major strategy pursued by the few
pioneering companies was differentiation, i.e. the exploitation of a

unique situation with the purpose of creating a unique result such as
a new company image in the hope that financial rewards would ensue.
This analysis about motives for entering holds true for both the traditional and new technology oriented watch companies as well as for the
pioneers and the followers.
But followers may also have entered the
industry for defensive reasons: to avoid preemption of markets.
Also,
52
companies may have been attracted by the existence of a large raarket,

implying that a better than average profit could be achieved.
Entering into a new field, however, had its difficulties.
Com-
panies, in particular the smaller ones, experienced problems in developing the watch, and as a result were forced to postpone their planned
market introduction date or to completely cancel their program.
Only
the large and mature companies could raeet their own developraent schedule.
There also existed the risk for traditional watchmakers to be
"lured" into the solid state sector because of competitive reasons and
to abandon their original field of expertise (i.e. the production of
mechanical watches) in exchange of the more exotic and apparently more
lucrative solid state business.
As a consequence of such change-overs,
valuable resources were wasted on too much experimentation with the new
technology.
To answer the second question, why they thought the digital time
display would be the successful solution, is more difficult.
It appears
that the industry was forced into a digital solution for the solid
state watch because of circumstances in the technological environment
during the development stages of the watch.
Absence of an analog dis-
play system that would have harmonized with the goal of a fully electronic watch, made it necessary to take the second best altemative, i.e.
the LED and LCD time indicating techniques.
Interviews, however, have
revealed that no company investigated this aspect of why consumers would

go for the digital face of the watch.
Three reasons raight explain why
companies may not have carried out such a study: (1) companies may not
have launched a large scale investigation out of fear that their secret
53
development plans could have become publicly known, (2) pressures to be

the first on the market with a solid state watch may have left companies
without enough time for large-scale preliminary market testing, and
(3) the existence and success of other digital-faced timing devices, such
as the clock and the mechanical watch, may have been sufficient evidence
that a digital wrist watch would find sufficient public acceptance.
c) Advantages and Disadvantages of

the Solid State Watch
Two of the objectives of the interviews were to find out what
the favorable and unfavorable aspects of the solid state watch were, and
to isolate those variables that were of greatest significance for business strategy formulation.
No attempt, therefore, was made at looking
into the technical details, because scientists and engineers have

already provided answers.
It has been said by one Swiss expert interviewed that the fundamental disadvantage of the solid state watch is its digital face.
The
digital nature of the solid state watch does not correspond to the analog, human nature.
The expert contends that man's lifeits physiolo-
gical processes and behavioris essentially analog in nature.
There-
fore, it would be difficult for man to effectively relate to the "cold"

solid state watch.
In order to meaningfully judge what is an advantage and what is
not, it is necessary to make use of some guideline, which was found in
the profile of the perfect watch prepared by the Swiss watch manufac-
54
turers' association.
26
Using this framework, an integration of positive
and negative factors of the solid state watch was made, which is represented in Table 5.
The presentation clearly indicates that at the pre-
sent, on a numerical basis, the solid state watch has more disadvantages
than advantages.
This,of course, does not tell anything about the rela-
tive importance of each of these factors and whether in qualitative

terms advantages outweigh the disadvantages.
The recognition of the existence of such problems has led to
the formulation of appropriate questions to which answers need to be
found if the solid state watch is going to have a long term potential.
Figure 4 presents in summary form the principal questions that companies
are currently investigating.
d) Analogies to Comparable Events

Policy makers need a frame of reference or a model to which
they can relate new problem situations in order to facilitate decision
making.
One of the purposes of the interviews was to construct such a
frame of reference by exposing major relevant events that are most analogous to the present problemthe introduction of the solid state
watchand to isolate the unique aspects involved in the transitionary
period.
Analogies with the solid state watch can be classified into two
categories: A comparison to events or products outside the watch industry and a comparison to events within the watch industry.
26/
Federation Horlogere, Montre electronique.
55
TABLE 5
ADVANTAGES AND DISADVANTAGES OF THE SOLID STATE WATCH
Criteria:
Advantage;
1. Price;
Disadvantage;
high price, however
good prospects for
rapid and significant price declines
2. Fundamental
qualities:
Precision
very high precision
Robustness
susceptible to shock
and temperature
Life span
short to medium
3. Marketing
qualities ;
Convenience
- weight
no noticeable positive or negative effects
- volume
thick
- form
bulky
Aesthetics
many lack good styles
Readability
LED: read-out is
active
LCD: limited viewing

angle may be difficult
to read in bright
daylight
digital time display
requires wearer to
interpret the reading
of time differently
Time indication
LCD: different colors

are possible
LED: discontinuous,
requires action by
wearer
requires battery changes every 12-24 months
Operating autonomy
4. Other aspects:
LCD: some operating

problems
Reliability
Multifunctions
Servicing
requirements
can offer several

multiple functions in
addition to indication
of tirae
practically does not
need servicing
Image
ncw digital face provides novelty
Distribution
possible to use unorthodox channels
shortage of properly
trained service personnel
56
A. Problems relating to marketing:

1. Dstribution;
a) What are the probabilities of future distribution systems of
battery driven watches?
2. Pricing;
a) To what degree is the solid state watch a complement or a substitute to the analog watch?
b) What graduated price decreases should be made?
3. Prosotion:
a) What are the major unique features that can effectively be
exploited in a promotional message?
4. Product;
a) How can style and fashion aspects be incorporated successfully
into the digital watch with its different physical limitations?
b) What is the importance and potential of complementary functions (alarm, chronometer, calendar, etc)?
5. Market:
a) W'nat is the total world market potential, and in particular
vhat is the most likely market share each major country and
conpany might be able to capture?
B. Problers relating to technical aspects:
1. Displays:
a) Vnat are the probabilities of consuraer acceptance of the basic
display alternatives?
- analog vs. nuraeric (digital) displays
- passive vs. active displays (LCD vs. LED)
b) Vr.at is the significance of specific tine indication configuraticns?
- nu-ber of digits read-out (4, 6 or 8)
- type of tirae fractions read-out (hour, minute, second and
date) 12 or 24 hours, a.m./p.m.)
- frequency of time display; read-out on demand, or continuous
(counting of seconds , ju;?.p every minute, etc.)
- readability characteristics: ircpact of extreme environmental
lighting conditions on readability and iraportance of reading
ability under such conditions
- aesthetics aspects; color and form of figures, background
conditions, angle of vision
2. Batter>-:
a) Hov i-portant are battery sealing characeristics?
- equivalency to normal horological waterproof standards
b) How inportant is battery life span?
- tecinical feasibility and expected occurrence of increased
life spans
- existence of an optimum life span fro;; a consuraer acceptance
point of view
c) What is the environraental significrnce of recycling batteries?
Fig. 4. List of Problems Related to the Solid State Watch*

*The information presented is based on a list of problems prepared by
Ebauches S.A.
57
As comparable events outside the watch industry, interviewees

mentioned the electronic hand-held calculator, cameras, shavers, ball
point pens, transistor radio, the portable television, and the gas
lighter.
Analyzing the case of the electronic hand-held calculator, it
can be seen that such a calculator offered some distinct advantages
over its predecessor, the mechanical or electro-mechanical calculator.
The size, weight and price (although not of the first models) could be
reduced, due to achievements inraicro-electronics,so significantly that
it became possible to open up a new market segment, namely that for
personal use.
In addition, the new calculator type also offered such
advantages as greater operating speed, accuracy, a noiseless functioning,

higher reliability, and ease and convenience in handling.
Comparing this event with the introduction of the solid state
watch, the following principal differences come to raind: (1) The solid
state watch could not offer a price advantage over the preceding product at the time of introduction, as could the electronic calculator;
(2) there is sorae doubt about whether prices will decline in the same
rapid cascading manner as those of the calculator because the watch has
a greater complexity of circuits due to more stringent space limitations;
(3) even if prices could go down as they did in the case of electronic
calculators, the solid state watch essentially would not open up a new
market segment as the calculator did, but would enter a segment already
occupied by a competitive product.
Other introductions in the field of consumer markets that could
be studied in this context in order to learn more about the nature of
58
the acceptance of the solid state watch are the following: (1) the
technological and price challenge to the German caraera industry by the
Japanese camera makers resulting in great structural displaceraents among
the German industry, (2) the introduction of the electric shaver displacing
the traditional razor blade, (3) the development of the ball point pen
competing head-on with the traditional writing utensils such as pencils
and fountain pens, (4) the introduction of the small portable radio
which became a possibility after the development of the transistor, (5)
the developraent of the portable TV sets, and (6) the introduction of the
gas lighter.
Although each of these examples has its own special characteristics, common features do exist among them, raaking thus a general comparison possible.
The following major differences do appear: (1) all these
examples show a much lower degree of product sophistication, technical

complexity, andrainiaturizationthan the solid state watch which raanifests itself in the rauch lower price per unit of weight, (2) with the
exception of probably the camera, none of the above examples is a precision-manufacturing itera, and none is to operate with precision, (3)
none of these iteras has as large an operating autonoray as the watch,
(4) none of these applications has to produce constant and continuous
consumer satisfaction under as extreme environmental and physical
conditions as the watch, (5) with none of these products does the
consumer identify as much as with a watch which is a very personal good
(high-priced watches becoming part of the personal jewelry whereas lowpriced watches forming part of the personal fashion), (6) none of these
introductions, with the exception of the transistor radio and TV, was a
59
result of a sophisticated and non-proprietory technology, and finally,

C7) the situation of the solid state watch is different because in this
case the raajor challenge has come from companies outside the watch industry that are larger than the traditional watch companies, whereas the
major challenge for most of the inventions mentioned came from within
the existing industry and from sraaller corapanies.
Commonalities existing between all these products and the solid
state watch are (1) the high introduction price, (2) the fact that all
of these goods are classifiable under discretionary durable consuraer
goods with relatively similar sales cycles, and (3) the use of the same
basic technology (solid state) in the case of the portable radio and TV.
Major intra-watch industry examples that could be of assistance
in developing strategies for the solid state watch are: (1) the transition frora the pocket to the wrist watch, (2) the introduction of the
automatic watch, (3) the development of the electric watch, (4) the
re-introduction of the mechanical digital watch, (5) the successful
application of quartz crystal technology and digital displays to clocks,
(6) the breakthrough of the tuning fork watch, as well as (7) the realization of the quartz crystal watch.
It is of interest to note, however,
that practically none of the interviewees raade any references to such

possible analogies within the industry.
A discussion of the relevant
comparable factors of each of these developments follows below.

The transition from the pocket to the wrist watch, occurring
around the early 1900s came as a result of, or was facilitated by technological progress made in miniaturization,
The demands emerged during
World War I for a wrist watch which would improve fighting conditions.
60
the greater industrialization resulting in an increased time consciousness, and growing deraands for convenience as well as the fashion changes (e.g. men using fewer waistcoats).
27
The raajor advantage of the
wrist watch over the pocket watch was the greater ease with which the
user could read the time.
In comparison the solid state watch priraarily
offered the advantage of rauch higher accuracy.
However, in the case of
the LED type solid state watch, the convenience of reading the tirae was
lost due to the necessity of pressing a button for time release.
More frequently, reference was made to the automatic watch which
was re-introduced to the market in the 1920s.
Those who have mentioned
this comparison made reference to the fact that despite its more than
50 years of existence the automatic watch has still not become the predominant watch type.
28
This comment, however, neglects the fact that
the Japanese could make strong inroads on international markets particularly during the 1960s by aggressively promoting the autoraatic watch.
Essentially, the only advantage the automatic watch could offer over
the other watch types was an increase in operating autonomy due to the
automatic rewinding mechanism, which itself meant greater convenience.
The solid state watch in coraparison reduces this convenience because of
the necessity for periodic battery changes,raakingit thus dependent on
27
Intemational production statistics of automatic watches are
not available.
28
For more information on the introduction of the pocket watch
see also Fred.-E. Pfister, "Le regne de la montre de poche et l'avenement de la montre-bracelet," La Suisse Horlogere et Revue Intemationale de l'Horlogerie 80 (December 1965):19-22.
61
some extemal battery supply source. 29
The analogy with the introduction of the electric watch during
the 1950s by Hamilton and Lip comes closest to the introduction of the
solid state watch, since both types are battery-operated watches.
The
electric watch, however, did not offer any significant advantages to

the consumer.
In addition to being a much more accurate time piece, the
solid state watch introduced a totally different face, the digital look,
which immediately and alraost autoraatically gave it a completely new
image.
In contrast, the electric watch failed to establish such a new
image.
A most significant analogy is the re-introduction of the digital
mechanical watch which indicated time by rotating dials instead of rotating hands.
One could ask whether the revitalization of the raechanical
digital time indication during the 1960s was a planned prelude to the
succeeding solid state digital watch or whether those mecdianical digital
watch producers were merely exploiting another rebirth of the digital
fashion cycle.
Upon closer investigation of this problem it was concluded
that the latter possibility was closest to the truth, as supported by

the following reasoning: (1) mechanical digital watches are produced by
Roskopf manufacturers, whereas solid state watches are produced by
30
jewel-lever companies.
Since little communication exists between these
29
See also "The Development of the Automatic Watch," La Suisse
Horlogere et Revue Internationale de l'Horlogerie 87 CDecember 1972) :
59-60.
30
One must understand that since the 1920s the Swiss watch industry organizationally or structurally is divided into two separate camps,
t h e Roskopf producers (the cheap watches) and the j e w e l - l e v e r producers
62
two groups and only very few companies belong to both industry groupings,
it seemed unlikely that one group could have built effectively on the
success of the other and that, therefore, the solid state watch evolved
independently.
But then, for Roskopf manufacturers to go into solid
state would have been most difficult, if not impossible, since Roskopf
(pin-lever) is generally associated with a cheap watch.
(2) The fact
that none of the interviewees raade any comparisons between the mechanical and the electronic digital watch could be significant, or it may
have been due only to statistical problems, since public or industry
statistics which would break down output into digital and analog watch
volumes do not exist.
(3) Roskopf producers are characteristically more
fashion-adaptive and sensitive, as a result of their low-priced product, than the jewel-lever producers, which reveals that they would not
have had the desire nor the resources to pursue longer term objectives
necessary for developing the solid state watch.
Another important application of the digital idea is the digital
clock the electronic (quartz crystal) version of which has gained a particularly wide acceptance in the market.
A similar reasoning, as men-
tioned above, could be used to show that the solid state watch has emerged
independently of the digital clock developments.
This can be simply pro-
ven by the fact that no major clock producer is also producing solid
Cthe expensive and supposedly more accurate watches), represented by

the Federation Horlogre Suisse; this artificial division based primarily on technical features of the watch must be considered today as an
anachronism.
63
state watches.
31
The comparison of the solid state watch with the tuning fork
watch, developed by Bulova over a period of eight years and introduced
in 1960 under the name Accutron (accuracy _through electronics), is similar to that of the electric watch.
The principal exception is that in
the case of the tuning fork watch, accuracy could be increased to about
one minute per month due to the substitution of the spring balance
type mechanism as the time base by the tuning fork which operates at
a higher frequency.
This new technology, which was claimed to be the
first real technical innovation in the watch industry in 300 years, provided the basis for a commercial success. Although the tuning fork
watches have not gained a significant market share on a worldwide basis,
they nevertheless brought considerable financial gains to the Bulova
Watch company which would have otherwise been in a difficult situation.
32
Both the solid state watch and the tuning fork watch use batteries, but
different time display systems: the former digital whereas the latter
analog ones.
The principal question remains whether the solid state
watch will be able to continue to exploit accuracy further.
31
The only significant exception would be the GE-SSS joint venture through which GE is transferring mainly some of its know-how gained
in the manufacture of digital electronic clocks to the manufacture of
the solid state watch; however, this joint venture does not belong to
the pioneers.
"^^See "Watch that Saved Bulova," Forbes 94 (November 15, 1964):
42-44. The world market share of the tuning fork watch really could not
expand more due to the fact that during almost the first ten years of its
existence only one company was producing that watch.
64
The main similarities between the tuning fork and solid state
watch are the high degree of accuracy, the new look of the watch, and
the electronic image.
Initially, the accutron watch had an unorthodox
face, an open or see-through dial which exposed the inside with its
electronic components.
The most significant difference is that in the
case of the tuning fork watch only one company controlled the new technology.
In none of the other examples, and certainly not in the case of
the solid state watch, was one single company similarly privileged as
Bulova with its Accutron invention.
The most recent possibility for coraparison is offered by the
introduction of the quartz crystal watches which appeared on the raarket
33
during the latter part of the 1960s.
The innovation of this watch
consisted in the introduction of a new tiraing base, naraely the quartz

crystal which, due to its higher frequency, made a more accurate watch
possible.
The fact that every major watch producing company in the
world is manufacturing the quartz watch is sufficient evidence of its

success.
34
From a technological, as well as from a marketing point of
view, however, this quartz crystal watch with an analog display raust be
considered an interraediate solution only, although it probably represents the ultimate stage in the development of the classical analog
watch.
33
For a brief history of quartz crystal watches see "Petit historique de la montre a quartz," FH-Informations 12 (1969):30-32.
34
As in the case of the tuning fork watch, there are no output statistics available which would reveal the degree of acceptance
of these watch types.
65
e) Uniqueness of the Transitionary Period

With the introduction of the tuning fork watch, a new era of
symbiosis in watchmaking between micro-electronics and micro-raechanics
began.
Within a period of about ten years (1960-1970) during which
three basic watch types were being developed and introduced to the market, the locus of developmental and research efforts has moved steadily
from the traditional to the electronics companies.
Whereas the Accutron
(and also the electric watch) could be developed in-house by the classical watchmakers without outside assistance, it became increasingly necessary to rely on the electronics industry for the supply of critical
parts that the classical industry was not capable of producing at all or
in insufficient quantities only.
It is in this dependence that the prin-
cipal uniqueness of the current situation lies, because during its long
history the traditional watch industry has never had to rely to such a
degree on outsiders for technology.
Those belonging to the classical industry sector have every
interest in refuting the idea that such a challenge or new dependency
exists.
According to traditional industry leaders, the new technology
watch will never be able to gain a significant share of the market

because of the mechanical watch.
Of great importance is the fact that the threat is not only technological, but also organizational.
The principal owners of the new tech-
nology are for the most part large, independent electronics companies
the size of which, in terms of annual sales, is considerably larger than
66
35
that of the traditional watchmakers.
But size is not the only threat.
More significant and dangerous to the traditional industry sector,

however, is the difference in company behavior, top executive philosophy,
thinking and acting.
There definitely exists a difference in the stock
of managerial know-how between the classical and older watchmaking companies, and the electronics companies, which at the raost date back only
to the seraiconductor invention in the 1940s.
Most significant is the fact that the new watchmaking know-how
is non-proprietory in nature, and, therefore, accessible to practically
any company interested in entering the watch business.
The resultant
risk involved to the classical watchmakers is increased by the fact

that companies outside the traditional industry boundaries possess the
capacity to apply this know-how most effectively, and that these companies actually are exploiting the situation.
This is in clear con-
trast to the moriopoly position which Bulova could occupy alone.

In the past, mechanical watchmaking know-how, although in principle available to anyone, was never challenged by outsiders, since the
degree of specialization and experience obtained in producing watches
offered an effective barrier to entry.
Another significant and unique
aspect in this situation is the geographic dislocation of the techno-
35
The largest electronics companies participating in the solid
state watch are about ten times larger than the biggest traditional
watch corapanies; absolute size comparisons may not be realistic, since
watch manufacturing activities of these electronics companies are only
a small fraction of their total activity; nevertheless, their size provides them with a market and technology force that is non-existent among
even the largest traditional watch companies.
67
logical lead.
Historically, watchmaking has always been the foreraost
domain of the Swiss.
Not only has the new technology opened up the
traditional boundaries of the industry, but it has also originated from

a different country.
This aspect, of course, is particularly important
for the Swiss, because the potential displacement effects will be greatest
among thera.
In none of the leading watch producint countries is the
watch industry of such importance as in Switzerland where the industry

occupies about one tenth of the total labor force.
Consequently, in
addition to being an economic problem, the technological shift to the

United States could easily also become a political headache.
f) Multinationalization Aspects During

the Transitionary Period
What has been the raajor irapact of the solid state watch on the
degree of multinational involveraent?
Since the impact is felt diffe-
rently by the traditional and the new technology sector of the industry,
the analysis will be separated accordingly.
Large electronics companies already possess a considerable number of foreign establishments and are, therefore, raore accustoraed to
operate overseas than raost of the traditional watch companies.
The general pattern of these electronics corapanies has been to
produce only components in their foreign subsidiaries, rather than the
whole of the solid state watch.
A geographically decentralized compo-
nent manufacturing on a large scale has not yet taken place.
Only the
larger companies, namely Texas Instruments, Motorola, and Intersil, have

been involved in international solid state watch component production.
Their efforts have so far concentrated on Europe.
American electronics
68
companies which did pioneering work cooperated with the traditional

sector of the American, Japanese, and Swiss watch industries (e.g.
Texas Instruments with Ebauches S.A. of Switzerland).
However, these
relationships were contractual and, therefore, of a temporary nature only.

Largely, decision to move some of the semiconductor production abroad
has been based on economic grounds to produce wherever costs would be
lower and/or where capacity was sufficiently available.
The cost ad-
vantages to be gained could be of a direct or indirect nature, i.e.

lower wages abroad and closeness to new markets.
To most electronics
companies, watchmaking came as a natural extension of their regular

activities and coincided with their need to diversify into consumer end
markets in order to maintain that high profitability.
Traditional companies, on the other hand, were trying to acquire
electronics know-how needed for the production of the solid state
watch.
The analysis needs to be divided into American and non-American
companies, since strategies have been different.
The only remaining
traditional watch manufacturers in the United States, Bulova and Timex,

could acquire some considerable degree of that needed know-how in the
past as a result of their diversified production programs, which included military and space contracts.
This probably explains in part
why neither of these two industry leaders have made acquisitions of

electronics companies, and have instead preferred to enter contractual
agreements with component manufacturers.
Swiss and Japanese companies, on the other hand, have chosen to
invest in American solid state watch companies, in particular circuit
and display producers.
Only the largest traditional watch companies
69
could afford such foreign direct investments, with the Japanese preferring whole ownership and the Swiss majority and minority participation.
Other smaller corapanies interested in the production and sale
of the solid state watch but with lesser financial resources have all
attempted to secure their components for local asserably, casing and
labeling on a contractual basis.
Their efforts were very selective
because of their liraited financial resources.
g) Structural Developraents During

the Transitionary Period
Historically, watchraaking has been confined to the watch companies.
Due to the application of solid state technology to the pro-
duction of time pieces, the boundaries of the classical industry

opened up to include electronics companies.
Consequently, the .
definition of watch company has become blurred.
The watch content of
the largest electronics companies may be relatively insignificant, but

for the traditional watch industry their output raay be of iraportance.
Until the present the industry has been called "watch industry," but
electronics companies have preferred to call the watch a "time piece."
This suggests that the boundaries of the industry and the narae of its
product be redefined to reflect the new reality.
The analysis of the structural developraents during the transitionary period needs to be divided into changes in the American industry and changes in the other two major producing nations.
In the United
States new entries by electronics manufacturers have significantly expanded the total industry structure.
not been unaffected.
The traditional sector so far has
The proliferation that is taking place in the
70
electronics sector resembles the developments that have occurred during

the formative years of the Swiss watch industry.
Due to the non-pro-
prietory nature of the technology, barriers to entering the expanding

industry have been very low.
The traditional sector has only slowly
structurally decentralized during its early days.
This is in clear
contrast to what is happening in the solid state sector which has mushroomed in a matter of only a few years.
This period of dynaraic struc-
tural changes caused by the steady entries into and exits out of the
time piece industry has been non-existent in the traditional sector.
The situation in Japan is soraewhat sirailar to that in the United States, except that no great proliferation of electronics companies
into watchmaking has yet occurred.
Switzerland is structurally least
affected during the current period of transition due to the absence of

a large domestic electronics industry.
However, its vulnerability to
great structural changes will be highest of all the three principal producing nations, if the solid state watch can make rapid and substantial
advances into world markets.
An observation and analysis of the restructuring possibilities
of the transitionary period leads to these principal formulations:
National watch industries are most likely to reorganize as a function
of the technology gap existing between them and the leader, the size
of the domestic electronics industry, the prevailing business codes in
the country as well as prevailing management attitudes and philosophies.
The larger the technology gap between the traditional and electronics
sector, the stronger will be the pressures for a structural reorganization.
The size of a domestic electronics base will determine whether
71
a restructuring will be mainly at the national level or across national

borders.
The business environment also affects structural changes.
Laws regulating business will determine the type of possible joint solutions between the traditional and new technology sector in a country,
whether they will coexist in a symbiosis or whether the two sectors
will remain competitors.
Finally, management philosophies have a bea-
ring on how fast industries reorganize.
A traditional manageraent would
generally resist making fast changes and would prefer the status quo,
while modern managers would be more inclined to enter cooperative
arrangements.
Cross-sector investments have so far only been one-way.
Whereas
traditional companies have invested in new technology companies, reciprocal raovements have not yet happened.
While electronics companies
are diversifying into watchmaking, traditional watch companies have a

unique chance to acquire part of the new technology and thereby change
their historic status of a mono-product firra to a diversified raicromechanics and micro-electronics consumer company . However, movements
into the direction of product diversification and micro-electronics are
slow.
Geographically, the electronics sector of the time piece industry is concentrated in only a few regions in the United States,
mainly in the San Francisco bay area, Southem California, the DallasFort Worth metropolitan area, and the East coast megalopolis.
The Zenith investraent raay be an exception, but then the company is not a real solid state watch manufacturer, although it has
all the potential for it.
72
Are there similarities between the geographic concentrations in

the traditional industry in Switzerland and the new sector of the industry in the United States?
Probably the most significant factor why
industries tend to group close together, in particular technology-intensive industries, is the requirement to be near the mainstream of
technology and to be where required human skills are available in relative abundance.
The same reasoning also explains why the larger
non-American traditional watchmakers have engaged themselves in American electronics or display companies.
Considering the high change
rates in the electronics industry, they had but one alternative.
Even
though know-how can move quickly across national borders, there is

actually no substitute for being right where the action is.
Certainly,
a Swiss subsidiary located in the famous "Silicon Valley" near San

Francisco would be much better off in terms of adaptability to technological changes than a factory or research center located somewhere in
the secluded Jura mountains in Switzerland.
CHAPTER III
THE DELPHI METHODOLOGY AND EXPERIMENT
Proponents of future research raay view forecasting in its

broader sense as a "science," while opponents may still be regarding it
as nothing more than "star gazing."
In order to clarify some of the
myths connected with this new discipline, a description of the forecasting method used for this research is needed.
Forecasts are not only
as good as their methods, but they must also be credible.
This chapter
will, therefore, familiarize the reader with the Delphi methodology
and
will describe the organization of the experiment itself.
1. Description of the Delphi Methodology
a) Nature of Forecasting
Research about possible futures is defined as "any activity
that improves understanding about the future consequences of present
developraents and choices."
It requires the examination of what can
be, which implies a choice or possibility, rather than a deterministic

prediction.
Forecasting essentially plays a practical role since, in
general, forecasts measure, project and serve as a major input for
Roy C. Amara and Gerald R. Salancik, "Forecasting: From Conjectural Art Toward Science," Technological Forecasting and Social
Change 3 C1972):415.
73
74
decision-making and policy formulation.
Forecasting in terms of its outputthe forecasthas been

defined, in progressively more precise language, as:
-
a statement about the future

a probabilistic stateraent about the future
a probabilistic, reasonably definite stateraent about the future
a probabilistic, reasonably definite statement about the future,
based upon an evaluation of alternative possibilities
In the period following the second World War, the "science of
forecasting" has increasingly become raore systeraatic, professional, and

academic.
The discipline of forecasting, both as an art as well as an
emerging sciencesorae referring to it as an "art/science raore akin to

engineering or medicine than to a scientific discipline"is recognized
today as a separate body of knowledge with its proper methods.
Forecasting, however, is limited because of the lack of precise

explanations and the existence of uncontrollable variables, as well as
the haphazard nature of technique developraent.
b) Origin of Delphi and Major

Applications
Of the more than 100 distinguishable versions of, elements of.
2
Fritz R.S. Dressler, "Subjective Methodology in Forecasting,"
Technological Forecasting and Social Change, 3 (1972):427.
Amara and Salancik, "Forecasting," p. 3.
Dressler, "Subjective Methodology," p. 427 and Harvey Brooks
as cited in N. Dalkey, "An Experimental Study of Group Opinion. The
Delphi Method," Futures 1 (September 1969):410.
Robert Moore Campbell, "A Methodological Study of the Utilization of Experts in Business Forecasting," (Doctoral dissertation,
University of California at Los Angeles, 1966), p. 9.
75
and formal attitudes toward forecasting techniques, Jantsch developed
four broad areas of basic forecasting alternatives:
(1) Exploratory
forecasting which is opportunity or capability-oriented and described

as "exploring" into the future with intuitive or formal projections,
using data (measurements) as a point of departure.
(2) Norraative
forecasting which is mission-oriented, taking inputs as given goals

for establishing a basis for resource allocation.
Normative forecas-
ting identifies goals, needs, or desires and determines what capabio
lities exist or could be developed to raeet the needs.
(3) Intuitive
forecasting relies heavily on the experience, training, and judgraent

9
of the forecaster or a group of forecasters.
(4) Feedback forecas-
ting in essence is an interaction of exploratory and norraative approaches, joined in an iterative cycle, through which the full potential of forecasting is realized.
Amara views forecasting as falling into three generic classes:
(a) extrapolative or projective approaches that do not deal with causeeffect relationships; (b) modeling or analog methods which attempt to
Erich Jantsch, Technological Forecasting in Perspective,

(Paris: Organization for Economic Cooperation and Development, 1967).
Dressler, "Subjective Methodology," pp. 427-28.
Q
John Duer Ludlow, "The Delphi Method: A Systems Approach to

the Utilization of Experts in Technological and Environmental Forecasting" (Doctoral dissertation, University of Michigan, 1971), p. 20.
9
James Earl Morrow, "A Delphi Approach to the Future of
Management" (Doctoral dissertation, Georgia State University, 1972),
p. 16.
"'^Ludlow, "Delphi Method," p. 21.
76
describe underlying relationships; and (c) judgmental approaches,

which rely heavily on subjective inputs and are implicit in their
nature.
But regardless of the classification used, forecasting in
general is an "amalgara" of various basic methods, of a variety of

forms, based on individuals or groups which are either interactive
or non-interactive, manual or computer-assisted.
X Delphi is an intuitive or subjectiveraethodologywhich has
^^
eraerged frora a concern for improving and systematizing forecasting

techniques.
In 1953, Dalkey and Helmer introduced a new feature to
the forecasting process, namely iteration with a controlled feedback.

Although the foundations of Delphi can be traced back to the early
)Â/y-'
1950s, the name "Delphi," a somewhat misleading appelation, since

there is little that is oracular about the method, appeared only in
12
the late 1950s.
meaning.
The name was taken over from its original Greek
The Greeks preferred the counseling of a deity through
oracles, of which Apollo's oracle at Delphi is the most prestigious

and best known today.
13
Specifically, the Delphi raethod has been developed for obtai- '
ning consensus on subject matters that do not lend themselves easily
to quantification and where such difficulties made the application
of more common methodologies irapossible.
As such, it does not give *
^'"Roy Amara, "The Institute for the Future: Its Evolving Role,"
The Futurist 7 (June 1973):123-26.
12Dressler, "Subjective Methodology," p. 430.
13,
^Ludlow, "Delphi Method," p. 34.
77
precise insights about problems, but rather yields significant knowledge

about the nature of crucial information.
The use of this method is
particularly appropriate in the following cases:

(a) to weigh relative values of a set of interrelated variables *
(b) to indicate which variables are critically important for ^
future events
Cc) to identify the major contingencies upon which future deve-
lopments will dependl^
Throughout its "childhood," Delphi has mainly been used privately
for military purposes by the Rand Corporation at which Dalkey and
Helmer, the two credited as being the developers of the method, were
working.
Due to its versatility and usefulness, which quickly began to
be recognized by others, other applications, first by govemment agencies and then later by large private corporations as well as by the academic community soon followed.
Probably the foremost user of the
method, aside from the Rand Corporation, is the Institute for the Future at Menlo Park, Califomia the mission of which is to investigate
futures for private industry or the govemment.
Dalkey estimated that
by 1969 Delphi has been used in well over a hundred cases.

The first major Delphi application appeared in 1964 when Gordon
V
and Helmer, two pioneers of the technique, carried out a long-range

forecasting study.
The study concemed itself with the following areas
of interest, and, among other things, was credited with forecasting
Richard Farmer and Barry M. Richman, Comparative Management

and Economic Progress CHomewood, 111.: Richard D. Irwin, I n c , 1965),
p. 329.
N. Dalkey, "An Experimental Study of Group Opinion: The Delphi
Method," Futures 1 CSeptember 1969):414; more recent estimates of the
use of Delphi are not available.
78
a manned lunar landing by 1970:

Ca) scientific breakthroughs in physical and biological technologies
(b) world population growth
(c) innovations in automation
(d) progress in space
(e) new weapon systems
.. ^
(f) causes and prevention of wars
The private sector has increasingly made use of the Delphi
methodology in recent years.
Corapanies, such as Du Pont, Scott Paper,
Lever Bros. and Monsanto, are sponsoring "Project Aware" which is being
conducted by the Institute for the Future over a period of three years
in an attempt to project long-range changes in the social, econoraic,
and technological environraents, and in order to isolate trends and
describe influences that may shape them.
The Delphi methodology has also enjoyed increasing acceptance
and interest by educators who have used it in three main areas:
(1) educational goals and objectives
- generalized
- area and state-wide
- university and college-wide
(2) curriculum and campus planning
(3) development of evaluation criteria
- rating scales
,g
- effectiveness and cost/benefit raeasures
The first doctoral dissertation on the Delphi methodology
T. J. Gordon and Olaf Helmer, Report on Long-range Forecastlng Study (Santa Monica, Cal.: The Rand Corporation, September 1964),
Paper P-2982.
"A Think Tank that Helps Companies Plan," Business Week,
(August 25, 1973):70-71.
1Q
Robert C. Judd, "Use of Delphi Methods in Higher Education,"

Technological Forecasting and Social Change 4 (1972):180.
79 '
19
appeared in 1966.
Since then a total of 23 dissertations have been
written, which either have focused on some theoretical aspects of the

methodology itself or have used it as their major research tool.
Inte-
rest in Delphi has only in 1971 picked up among doctoral students, but
from then on its popularity as a research tool and object for study
has been growing steadily.
The future will see a more efficient and sophisticated Delphi,
one in which the original weaknesses will be reduced and partially or
totally elirainated.
In general, the development approaches center on
making Delphi more efficient in terms of time used, as well as in terms

of the degree of interaction between the panelists and the adrainistrator and the interaction among the panelists themselves.
In particular,
work has been done in establishing a data file of experts and to apply
the computer technology to the process to make it a "Delphi Confe- ^
rence,"
or "Computer-Assisted Expert Interrogation."
Other re-
search efforts concentrated on the development of more effective

methods of preraodeling which is necessary in order to identify key
variables and key events prior to carrying out a more detailed study,
since "many of the futures studies start at a point at which the gene-
'^Campbell, "A Methodological Study."

20
Murray Turoff, "Delphi Conferencing: Coraputer-based Conferencing with Anonymity," Technological Forecasting and Social Change
3 (1972):159-89.
21
Andrew J. Lipinski, Hubert M. Lipinski, and Robert H.
Randolph, "Computer-Assisted Expert Interrogation: A Report on Current
Methods Developraent," Technological Forecasting and Social CJhange 5
(1973):3-18.
80
ral area for focus is yet to be selected."
\\^\ '
22
"^^ potential advantages of using a computerized system are the
following: (1) it allows respondents to give full consideration to one

question at a time, (2) respondents may ask for background information
or any other type of information they need at any time, and (3) it
offers a great degree of flexibility in the types of information to
be exchanged.
23
More specifically, the Institute for the Future, one of the

principal users as well as developers of the Delphi methodology, is concentrating its research efforts of group assessment raethods on the
following areas:
(1) the definition and selection of "experts"
(2) the calibration of experts in terms of their substantive and
assessing ability after selection
(3) rating by peers versus rating by the experts theraselves
(4) the explicit use of uncertainty in opinion solicitation
(5) the amount and nature of information feedback and sharing
(6) hierarchical structuring of group interaction
(7) the weighing of expert responses
(8) the aggregation of responses
^,
(9) the uses of computer-aided techniques
c) Definition of Delphi and Major

Variations
\o'
Delphi is a method of eliciting and refining group judgraents
and attempts to optimize the constructive aspects of face-to-face

group behavior without inhibiting the unconventional approach which
22
Amara, "Institute for the Future," p. 125.
23
Lipinski, Lipinski, and Randolph, "Computer-Assisted Expert
Interrogation," p. 13.
24
Amara, "Institute for the Future," p. 126.
81 '
often leads to creativity.
25
The beneficial aspects of face-to-face
interaction include: (1) immediate data feedback, (2) sense of group

"presence" and competition, (3) non-verbal coramunication, and (4) clarification of misunderstandings.
26
The so-called "basic" Delphi, by sorae also termed "classic"*

27
or "pure" Delphi,
has three major characteristics, clearly differen- *
tiating it frora more traditional approaches: (1) Anonymity of responses
Ip
which results frora the fact that participants throughout the process of .
questioning remain anonymous to each other, (2) iteration and controlled *
feedback, meaning that the question-answer process is repeated and that
selective information is fed back to participants between or before
subsequent rounds, and (3) statistical group response which in essence
is an aggregation of individual opinions designed to reduce "the bia- ^
sing effects of dominant individuals, of irrelevant coramunication, and
of group pressures towards conformity.
28
Delphi can be a method to study the process of thinking about .

the future or a pedagogical tool forcing people to think about the
future in a more complex way than they ordinarily would.
But it can
^^Dressler, "Subjective Methodology," p. 429-30.

26
"Creativity and Conformity," Report of a 1958 meeting sponsored by the Foundation for Research on Human Behavior, March 1965,
Ann Arbor, Michigan, quoted in D.L. Schraidt, Creativity in Industrial
Engineering, Paper P-4601 (Santa Monica, Cal.: The Rand Corporation,
March 1971).
27
Joseph P. Martino, Technological Forecasting for DecisionMaking (New York: American Elsevier Publishing Company, Inc., 1972),
p. 21.
OQ
Dalkey, "Experimental Study," p. 408.
82
also be a planning tool which may aid in probing priorities held by

members and constituencies of an organization.
Delphi is carried out by interrogating a group of experts through ^

30
/c^>^'
^
29
the raeans of questionnaires.
Each sequence of questioning is called
a "round." /The term "questionnaire" really is a misnoraer, since it not ^

only asks questions , but also supplies information back to the respondents ^
on subsequent rounds.
The participants are referred to as a group of ,
experts, a term borrowed from the field of psychology.
However, it is ^
more usual to call the collectivity of these experts "panel."

The person in charge of a Delphi study, also called exercise or
experiraent, depending on the actual objective pursued, is generally
called either "director" or "administrator."
He carries out the prepa-
ratory work before undertaking the study as well as all work that ensues as a result of the conduct of the experiment, in particular the
collection of responses and the preparation and design of the questionnaires.
Before the process can go through its regular motions, the
administrator needs to identify panel members who are experts in the

field of study and solicit cooperation from them.
Responses obtained from the panelists and filtered by the administrator's screening and editing not only provide the listing of the
questions for re-submission on the following round, but also help to
formulate substantive feedback, needed for the refinement of the study.
OQ
W. Timothy Weaver, "The Delphi Forecasting Method," Phi Delta

Kappan 52 (January 1971):271.
30
The following description is based on Martino, Technological
Forecasting
83
Experts are fed back major findings of the prior round plus some additional internal information as needed, such as individual expert's
deviation from a pre-established acceptable range (e.g. interquartile
range) with the request to justify or reconsider their prior "deviant"
position in light of the group means (or whatever statistics was
chosen).
But experts also raay receive additional external information
which the administrator considers important and/or necessary for the

continuation of the project.
, \
The Delphi methodology can be used with a variety of raodifi-
cations to the "basic" version.
"It is iraportant to realize that
Delphi is not a singular nor unchanging approach to problera-solving

31
about the future."
The fact of the matter is that practically every "
Delphi one comes across is different from the other.
While this ver^
satility is welcome from a practical point of view, such variations *

of the method make it difficult to verify its theoretical validity. Martino has surveyed the principal Delphi variations and classified
them into characteristics-retaining and characteristics-modifying
oo
variations.
The most iraportant variations of the forraer are (1)
beginning the questioning process with a blank sheet instead of a for-

mal questionnaire, (2) introducing the experts at the start of the
experiment to a context stating underlying assumptions, (3) changes in
the number of rounds (varying usually between two and four), (4) re- ,
31Judd, "Use of Delphi Methods," p. 175.
Martino, Technological Forecasting , pp. 26-35.
84
quiring respondents to state their forecasts in probabilistic terms i

(multiple dates instead of one only), (5) to make use of self-ratings
of the experts reflecting their degree of familiarity with the subject.
Characteristics-modifying variations are those which modify one or
more of the three principal features (anonymity, iteration with feedback, and statistical response).
There may be elimination of anonyraity
in the case of the "embedded Delphi" which would require some oral argumentation after group consensus has been reached.
Feedback may also
be eliminated either partially or totally.
d) Advantages of the Delphi Method

^
^^ "^
The basic advantage is derived frora the fact that Delphi is
essentially a group approach.
Experiraents have shown that groups per-
form better than individuals, particularly if a problem requires a

variety of skills for adequate solution, and provided that group motivation and disagreement among participants exist.
It has also been
shown that the accuracy of group forecasts is dependent on the size

of the group and that with increasing group size average errors decrease, as shown in Figure 5.
Furthermore, accuracy or reliability of
group forecasts also depend on the size of the group.
Figure 6 illus-
trates that "there is a definite and monotonic increase in the reliability of the group responses with increasing group size.
33
Specifically, Delphi has been shown to have these advantages:

According to Martino, Delphi permits an effective interaction between
^^Dalkey, "Experimental Study," p. 413.
85
13
17
S'
7.
9
Number in g.'oup-
21
Number in group
Fig. 6.
11
13
Reliability in Relation
to Group Size
Fig. 5.
Effect of Group Size
SOURCE:
N. Dalkey, "An Experimental Study of Group Opinion: The

Delphi Method," Futures 1 (September 1969):413.
members of a panel of experts, despite the fact that such interaction

is highly filtered through the screening process executed by the study
administrator.
34
Dalkey states that many practitioners are more
inclined to accept the results of a Delphi exercise than consensuses

arrived at by more direct forms of interaction.
35
It offers these
additional advantages: (1) it is a rapid and relatively efficient way

to cream the top of a group of knowledgeable people, (2) it is also
considered that by responding to a well-designed questionnaire, a time
34Martino, Technological Forecasting, p. 61.

35Dalkey, "Experimental Study," p. 415.
86
saving would result over other altemative methods, (3) it can be a
"highly motivating experience" for the participants, if properly raanaged, (4) given a mutually self-respecting group of panelists, the feedback, it is said, can be novel and interesting to all; (5) the use of
a systematic procedure assures an air of objectivity; (6) the corabination of anonymity and group responses allows a sharing of responsibilities "that is refreshing and that releases from the respondents
inhibitions,"
(7) objective and critical evaluation of input data
make the process more conducive to independent thought and allows a

gradual formulation of a considered opinion,
37
^^
\(8) it elirainates the
bias produced by "personal antipathy to or excessive respect for the

opinions of a particular individual."
38
The procedure for information gathering through the use of a

carefully designed program of sequential interrogations offers the
following unique merits:
<r Ca) it maintains attention directly on the issue
^ Cb) it provides a framework within which individuals with diverse
J
backgrounds or in remote locations can work together on the
^'^
same problem
)(c) it tends to minimize the tendency to follow the leader and
^
other psychological barriers to communication
(d) it tends to minimize specious persuasion
(e) it provides equal opportunity for all to be heard as indiV
viduals
og
Norman C. Dalkey, The Delphi Method: An Experimental Study

of Group Opinions, Report RM-5888 (Santa Monica, Cal.: The Rand Corporation, June 1969):16-17.
^^Campbell, "A Methodological Study," p. 23.
38
Robert I. Mehr and Seev Neumann, "Delphi Forecasting Project,"
The J o u m a l of Risk and Insurance 37 (June 1970) :244.
87
(f) it produces precise documented records
e) Disadvantages of the Delphi Method

Although Delphi eliminates the common problems associated with
face-to-face group techniques, such as undue influence of the dominant
individuals, semantic noise, and group pressures toward conformity,
the method nevertheless has some shortcomings.
Specifically, it
suffers from the following weaknesses: (1) it is relatively time-consuming, as one round can easily take one month or longer, (2) the in- ^
teraction between the expert and the Delphi administrator occurs through
questionnaires only and infrequently, (3) the interaction is not as
stimulating as in face-to-face conferences, (4) the interaction between .

experts is infrequent and occurs only in the form of information feedback, making it difficult for a panel to frame a fully agreed-upon model, (5) complete anonymity does not necessarily inspire credibility
41
araong experts,
(6) the method can submerge a correct, but way-out
42
forecast and may not be able to point out the key discoveries,
and
(7) there is rarely any provision made for ranking the experts by either
their knowledge or their ability to predict, so that "if the real
39
Interrogation," p. 12.
Dalkey, "Experimental Study," p. 415
Interrogation, p. 12.
42
"New Products: Setting a Timetable," Business Week (May 27,
1967) :56.
88
expert is outnumbered, the Delphi may force a consensus that is not

supported by the evidence."
43
Table 6 shows the principal characteristics, advantages and

disadvantages of the Delphi methodology in comparison with other principal group communication techniques.
TABLE 6
MAJOR CHARACTERISTICS OF GROUP COMMUNICATION TECHNIQUES
Conferencc
Telcphone
Call
fcFfECnVE
CROUP SIZE
Smali
OCCURRtNCE
oe iNTt AcnoN
BY INDIVIDUAL
irSGTH OF
INTERACTION
NLMBER OF
l.MtRACTlONS
Coincident
wiih group
.SORMAL MODE
RANCE
Equality to
chairman
control
(flexible)
PKINCIPAL
COSTS
Comniunications
Short
Muitiple, as
required by
group
Time Urgent
OTMER
CHARACTERISriCS Considerations
Formal
Confercnce or
Seminar
Dclphi
Exercise
Dclphi
Conference
Smali to
iarge
Smali to
large
Smali to
iarge
Coincidcnt
with group
Random
Random
Long
Short to
nicdium
Muitiple,
necessary
time dela>s
lietvsecn
Short
Equality to
monitor
control
(.structurcd)
Equalit\ t
monitor controi
or group controi
and no monitor
(structurevl)
Tra\el
Travel
IiidiNdual's IndNdujPs
time
time
Fees
Monitor
litne
Clcrical
Sccretarial
Communications
Computer usage
Forced
Delays
Forccd
Dcla>s
Time llrgent
Considerations
Commiitec
Meeting
Small to
mcdium
Coincident
with group
Mcdium
to iong
Multiple,
necessary
time delays
between
Equality to
chairman
control
(rtexible)
Equal flow of information to

and from all
Can maximize p ychoiogical
efTects
Singie
Prebcntation
(directed)
Etricient t1ow
of information
from few to
many
Multiplc, as
required by
individuai
Equal llow of information to

and from ail
Can minimizc psychoiogicai
clTccts
Can minimi/e tinie demanded

of rcspondents or conferces
SOURCE:
Murray Turoff, "Delphi Conferencing: Computer-based

Conferencing with Anonymity," Technological Forecasting and Social Change 3 (1972), p. 161.
43
A Think Tank," p. 71
89
f) Validity and Accuracy of

Delphi Findings
Evidence to prove or substantiate the theoretical superiority
of the method over other methods
is unfortunately not available, but
immediate verification of predictions to test accuracies of forecasting

methodologies is not possible because of their usually long time horizons.
In order to gain some insights into the underlying theories of
the Delphi process, researchers began to simulate its performance by

carrying out controlled experiments using "alraanach-type" questions
rather than real questions.
44
The Rand Corporation conducted extensive experiments to obtain

some raeasure of the value of the Delphi procedure.
The investigations
concluded in the main, that:

(1) On the initial round, a wide spread of individual answers
typically ensued
(2) With iteration and feedback, the distribution of individual
responses progressively narrowed (convergence)
(3) More often than not the group response (defined as the median
of the final individual responses) became more accurate which
is the most significant result because convergence would be
less than desirable if it involved movement away from the
correct answer^^
With respect to the validity of feeding back supplementary extemal informationj Dalkey came to the conclusion that providing "soft"
information would cause rapidly declining returns because of piling
An Almanach-type question is a question taken out of an

Almanach, its answer is therefore known.
Dalkey, "Experimental Study," p. 416.
90
opinion on opinion.
46
However, to include the median (or mean) results
of the previous round as feedback on the succeeding round provides an

efficient mechanism of improvement.
Studies have shown that the ten-
dency to change predictions on subsequent rounds is a function of the

distance a respondent's answer had frora the first raedian (or raean), as
Figure 7 clearly deraonstrates.
08
= 06
.-^
SOURCE:
\ ^
V
'
'
Fig. 7.
. /
S"
( 0 :
ri
|04
^.-v.-
'
'
1
(
1
2
Deviation 'roTi median
Proportion of Changes in Relation

to Deviations frora the Median
N. Dalkey, "An Experimental Study of Group Opinion;

The Delphi Method," Futures 1 (September 1969):422.
Part of the difficulty in verifying the theoretical validity of

the process not only is due to the inherent problems associated with
the structure of the process, but also stems from the fact that respondents might find correct interpretation of the questions or statements
difficult due to "definitional imprecision."
Different respondents
will, therefore, most likely offer conflicting interpretations as to
N. Dalkey, "Analysis from a Group Opinion Study," Futures 1

(1969):544-45.
91
which event already has occurred.
Many of the long-range forecasts,
due to the nature of the forecasting difficulties, can never be phrased

in very precise and exact language but have to be stated more often
in rather broad terms, such as e.g. "economically useful de-salination
of sea water . . . "
How can someone at a later date verify the accu-
racy of the forecasts without a clear-cut definition of "economical?"

One may feel that it has already occurred while someone else may disagree.
47
Although it is said that Delphi eliminates the effect of the
dominant individual, it has been found that respondents change their

prior estimates only when the arguraents of the fellow panelists appear
to be convincing.
If that is not the case, panelists tend to hold
on to their opinion expressed on the previous round.

Furthermore, experiential evidence has shown that experts
would be strongly inclined to agree with the majority view if they
feel that the questionnaire was an imposition on them, or if they feel
that they are being rushed to discuss the reasons of their "deviant"
position,
Experiments have also shown that there exists a clear inverse
relationship between the group self-rating on familiarity and group
error.
This finding in essence only reiterates the general assumption
that a group of more knowledgeable people selected on the basis of
Robert H. Ament, "Comparison of Delphi Forecasting Studies

in 1964 and 1969," Futures 2 (March 1970):37.
48
Martino, Technological Forecasting, p. 23.
92
their self-ratings would on the average be raore accurate than other

49
groups.
Dalkey found that the corabination of group self-rating and
the standard deviation provide a "relatively sensitive measure of the

average accuracy of the group response," therefore offering a practical measure of the "solidity" of the output of a Delphi exercise.
Several researchers have attempted to test whether the selfrating could be reliably used as a raeans of picking the best heads
among the participating panelists, which in turn would positively influence the results of a Delphi study.
Campbell found that those who
rated themselves higher, tended to raake more accurate forecasts than

did the group as a whole, but concluded that his findings were statistically inconclusive.
51
Dalkey looked at the same problem with alma-
nach type questions, but was unsuccessful in locating a subgroup of experts that provided forecasts of significantly higher accuracy than
those of the entire group.
52
The accuracy of Delphi forecasts has been investigated by

Ament who compared forecasts generated in 1964 and 1969, and concluded
that in general the two forecasts were very similar, and that the different panels displayed a remarkably similar forecasting behavior.
53
49Dalkey, "Analysis from Group Opinion Study," p. 547.

^^lbid., p. 548.
^"'"Campbell, "A Methodological Study," pn. 102-18.
52
N.C. Dalkey, Experiraent in Group Prediction, Paper P-3820
(Santa Monica, Cal.: The Rand Corporation, March 1968):5-8.
53
Ament, "Comparison of Delphi Forecasting," p. 37.
93
2. Description of the Delphi Experiment
This section contains a description of the actual research

steps carried out by the Delphi administrator.
It highlights the major
organizational aspects involved in conducting a Delphi study.
a) Organization of the Delphi

Experiment
Each experiment must be properly designed to assure reasonable
chances for a successful corapletion.
Before starting the actual Delphi
process, i.e. mailing the questionnaires, it is custoraary to solicit

cooperation from experts by mail to inform them of the research intent.
But more importantly, such contacts are raade to determine whether the
size of the panel is sufficiently large in relation to the type of
forecasts that experts are going to make or whether additional experts
would need to be identified and selected.
In the case of this research, the first questionnaire was mailed
to prospective participants together with a letter of solicitation for
their cooperation.
Corabining these usually separate steps into one
was justified on the following grounds: Because of the corapetitive

environraent it was anticipated that industry experts would have been
most reluctant to participate, for reasons of time and confidentiality.
In order to alleviate this problem, prospective panelists were supplied
with a complete package, the introductory letter, a description of the
Delphi methodology and the questionnaire.
Another decision that had
to be taken prior to starting the experiment was the determination of

number of rounds that the process should go through.
Due to the nature
94
of the forecasts to be made and the geographic scope of the investigation, it was necessary to keep the nuraber of rounds as low as possible.
Delphi studies have shown that an extension beyond three rounds is
neither necessary nor desirable, since no significant increase of substantive information will result frora additional iterations.
Of course,
there is nothing that prescribes a priori what the exact number of

rounds needs to be for a specific experiraent and that the adrainistrator
has the prerogative to stop it any tirae he feels confident the desired
results in terms of quantity and quality have been obtained.
The mailing packages included a letter of introduction, soliciting participation in the Delphi experiment, a brief summary of the
major developraents in the "World Watch Industry" during the post-World
War II period, a description of the Delphi methodology and its use
in the study, as well as a personal data sheet.
Summaries of inter-
views were also included for those who had been interviewed and who
also participated in the Delphi experiment.
For convenience, a self-
addressed return envelope was also enclosed.
Because of the interna-
tional scope of the investigation, it was decided not to provide

postage for the return mail.
For overseas retum mail it would have
meant enclosing an international postal reply coupon which was considered a too expensive altemative.
On the second and third round re-
t u m postage was provided to all participants except the Japanese,

since mailing of the questionnaires was administered simultaneously
from Switzerland and from the United States.
A step-by-step outline of activities required for conducting
95
a Delphi study is provided in Figure 8.
The schedule of the Delphi re-
search on the future of the watch industry is sumraarized in Table 7.
b) Identification and Selection

of Experts
The single most confounding factor in a Delphi study when identifying and selecting the panel is deciding who an expert is.
Helraer and Rescher, two influential Delphi developers, have stated the
expert's roles as follows:
Although we have held that the primary functions of expert advisors to decision makers is to serve as 'predictor,' we by no
means intend to suggest that they act as fortune tellers, trying
to foresee specific occurrences for which the limited intellectual
vision of the non-expert is insufficient. For the decision-supporting uses of predictive expertise, there is in general no
necessity for an anticipation of particular future occurrences.
It suffices that the expert be able to sketch out adequately the
general directions of future developments, to anticipate . . .
some of the major critical junctures ('branch points') on which
the course of these developments will hinge, and to make contingency predictions with regard to the altematives associated with
them.55
Some of the best known classic applications of the Delphi raethod
have relied on a handful of highly regarded experts, who in some cases
may even have been corapensated for their participation.
Other more
"mundane" Delphi applications are less fortunate in this respect, and

identification and selection remain a problem.
Ideally, experts to serve on the Delphi experiments should be
selected on the basis of their past record of accuracy and reliability
^^Judd, "Use of Delphi Methods," p. 180.

Olaf Helmer, and Nicholas Rescher, "On the Epistemology of the
Inexact Sciences," Management Science 6 (October 1959) :44.
96
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98
of their predictions.
Furthermore, the administrator would of course
like to include only those experts that know most about the subject,
since the particular knowledge in the field of study is the most significant parameter.
In reality, however, both of these criteria are
seldom fulfilled.
The first criterion does not apply in this case,
since the watch industry^s attitudes are generally short-term in nature,

and that it is therefore not possible to identify experts based on
their past forecasting record.
Supposing that people at higher levels
of the organizational hierarchy knew more about problems of a longer

term implication, this assumption was taken as a proxy for knowledge
about the industry and its future.
It has been shown, however, by expe-
riments at the Rand Corporation that the Delphi results do not suffer
a great loss if less knowledgeable individuals are included, since there
is more likelihood for them to improve by each iteration than for the
more, or more accurately informed participants.
In case there are nc other easily available criteria by which
to select an expert, it is suggested that experts be chosen from
different backgrounds, age groups, institutions, and from diverse
geographic locations, in an effort to eliminate the common or cultural
bias that panel members may share.
58
Those that could be identified as forecasters of the watch

industry numbered only about five to ten of which only very few would
have had the opportunity to participate because of their professional
commitments.
^^Dalkey, "The Delphi Method," p. 76.
^^bid., p. 43.
99
As a result of this lack of clear and simple yardsticks for

identifying possible experts, it was decided to compose the panel of
experts of as different areas as possible, and also to have its size
as large as possible.
For information on the backgrounds of the pane-
lists see Figure 9.

Because of the administrator's independence of the watch industry, this identification process was most time-consuming, as almost
exclusive reliance had to be placed on industry directories and other
leads that could be obtained from researching the trade literature.
As the research continued and interviews were held with industry
leaders, identification of additional experts became easier.
On the
second and third round more electronics time piece experts were added
to the panel.
A number of reasons justified this shift in the composi-
tion of the panel from the first to the second round: (1) Participation
by the classical watchmakers has been unsatisfactory, and it was not
expected that they might show much greater interest in participating on
the subsequent round, particularly if one considers that their viewpoints have already been made public.
(2) Since the challenge comes
from the electronics companies and new and dramatic developments are
expected to originate from that group first, it was felt that they themselves know best what might be going on in the sector of solid state
watches.
Electronics experts have also made public their views on the
future of the watch, but their predictions have been widely conflicting,
unreliable, and even emotional.
This required a reassessment of their
position in a more objective manner.

For methodological reasons all those contacted for a possible
CRITERIA FOR CLASSIFYING PARTICIPANTS ACCORDING

TO DEGREE OF RELATEDNESS TO WATCH INDUSTRY
!
Direct Association to the Watch Industry:

t'eople or organizations whose relationsnip to the end
product "watch" and/or the consumer is closest.
Examples: Manufacturers, assemblers, and/or marketers
of mechanical and/or electronic watches.
11
Indirect Association to the Watch Industry:

feople or orRanizations subcontracting or delivering
parts and components to the final watch making companies (manufacturers, assemblers), or institutes which
are in support of the watch industry, organized and/or
financed by it.
Examples: Component manufacturers for mechanical and/or
electronic watches, industry associations, etc.
111
Independent (no direct or indirect association):

All other individuals, organizations , or institutes
either working within the domain of the watch industry (mechanical and electronic) or more likely from
without, either in some supporting or tertiary activity or more frequently with only limited industry
relationship and whose existence is not contingent
upon any formal industry relationship.
Examples: Editors of journals, financial analysts,
independent micro-technology institutes, universities,
etc.
MAJOR GROUPS Ot PARTICIPAMTS ACCORDING TO BACKGROUND

AND DEGREE OF RELATEDNESS TO THE INDUSTRY
A. pirect and/or indirect relationship to watch industry
I. Watch Industry; (mechanical and electronic watches)
1. Watch industry (manufacturers') association
2. Watch industry marketing association i institutet
3. Traditional watch companies
U. Electronic watch and component manufacturers
5. Mechanical component manufacturers
6. Potential industry entrants
B. Independent from watch industry
II. Independent Experts;
1. Independent experts - traditional technology
2. Independent experts - new technology
3. Financial experts
1*. Watchmaking schools
5. Other independent experts
III. Journals and Newspapers;
1. Economic and business journals and newspapers
2. General journals and newspapers
3. Horological and jewelry journals
U. Patent journals
5. Technical and electronic journals and newspapers
IV. Other Institutions;
1. Banks
2. Department stores
3. Government agencies and representatives and
chambers of commerce
U. Electronic and micro technology research centers
5. Institutes of future studies and ccnsulting
organizations
6. Labor unions
7. Marketing research organizations
8. Related industry and professional associations

Fig. 9.
Framework for Identification and

Selection of Panelists
^^^
101
contribution to the Delphi study were classified according to their degree of relationship to the watch industry
(see Figure 9), allowing to
make meaningful comparisons of their participation and response rates.

The great variety of groups from which it was hoped interested and
capable persons could be drawn for participation in this study is presented in Figure 9.
(See also Appendix A.)
Once a group of panelists has been determined, its composition

normally remains the same, since no new experts are added to substitute
for those who might have dropped out.
The following reasons explain why a different approach was
necessary: (1) Since it was expected that during the course of the research, in particular through interviews, new experts could be identified, it would have been unfortunate to disregard them simply because
of adherence to a traditional and "unwritten" rule, and (2) an initially
low participation rate made it necessary to also include newly identified industry specialists, if results had to maintain some validity.
Uhfortunately, at this stage of development of the Delphi methodology it is not possible to determine what the theoretical implications
of such a "flexible" group of experts might be, e.g. how it might affect
the validity of the findings.
However, no reference has been found which would have explained
the effect of the reduction on the validity of the results, and it was
therefore concluded that no negative impact should occur as a result
of adding selectively new experts on subsequent rounds.
102
c) Design of Questionnaires
Designing a simple, yet comprehensive questionnaire that integrates all the significant information in an optimal way, is no easy
task.
Basically, there is nothing scientific about developing a ques-
tionnaire; it is more like an art, something that gets better as experience increases.
It was hypothesized that the format of a question-
naire itself is a variable determining or affecting the quality and

amount of answers that will result.
The contention, therefore, is that
there exists an optimal questionnaire from which more as well as better

results would be obtained than from a poorly constructed questionnaire.
However, to the extent of the research undertaken on the Delphi
method, no substantive findings were found to exist that would indicate
in what degree questionnaire design and format influence participation
and quality of the responses.
Research has only concentrated on the
linguistic aspects of Delphi event formulations.
The problem of how the
events are formulated and how this might affect the participation, i.e.
the reaching of a consensus, has been investigated by Salancik, Wenger,
and Helfer who stated that the following relationships exist: Consensus
about the occurrence of future events depends upon the complexity of
the events' description, with complexity defined as the number of words
used to describe each event.
Events with which the respondents are fami-
liar need fewer words to describe; adding more words to their description results in less information obtained.
59
^^J. R. Salancik, William Wenger, and Ellen Helfer, "The Construction of Delphi Event Statements," Technological Forecasting and Social
Change, 3 (1971):66-72.
103
The major relationships as found by their research are shown
graphically in Figures 10 and 11 from which the following specific
conclusions emerged: (1) Adding more than twenty-five words to an event
description resulted in a decrease of information generated; (2) as
the length of the description increased, the nonexperts came to agree
more and more; and (3) initially, experts would be more in agreement
û
60
than non-experts.
Another significant factor is the length of the questionnaire,
the determination of which is primarily the responsibility of the administrator.
In the so-called "NCHEMS Delphi" project, as described
by Judd, this particular phenomenon was more closely scrutinized and

it was found that even with 118 statements, requiring two answers each,
there was little evidence that would tend to indicate that fatigue
would affect the generation of information.
But "if longer Delphi
instruments are to be more common, further examination of a fatigue

factor is called for."
Of the two basic questionnaire types it was decided to select \
I
the open end altemative for the first round and to structure and focus on the more relevant issues on subsequent rounds.
A structured
'
first round would only have been possible if the most important problems already had been identified, otherwise a risk of restricting respondents' answers could have been incurred on the first round.
^^lbid., pp. 69, 72.

^'Judd, "Use of Delphi Methods," p. 184.
104
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105
The questionnaires were broken down in functional areas, focusing on the four areas of interestmultinationalization, structure,
technology, and market.
Table 8 provides an overview of the questions
broken down by areas and by rounds.
A combination of simple graphs
and statistics was used to present new questions and results of prior
rounds.
(The final round questionnaire is shown in Appendix A.)
d) Collation of Results
Collation is the act of critically comparing the results (text
and data) of a Delphi round in order to consolidate them and prepare
the next round.
This phase of the Delphi experiment requires an enor-
mous amount of time, since literally hundreds of qualitative judgments

have to be made by the administrator.
A suramary of the major steps
required to complete the collation process for a Delphi experiment

carried out over three stages is presented in Table 9.
Specifically,
collation requires the administrator to reduce the number of events to a

manageable number of key issues and to reformulate the questions in
an increasingly structured form.
To eliminate questions, the following
criteria were used: (1) relevancy of answers to the study, (2) the time
frame of answers given, and (3) the respondents' familiarity with the
issue.
Restructuring the questionnaire is necessary for the following
reasons: (1) to improve the focus of the study, and (2) to assure that
panelists continue their participation on subsequent rounds.
The transition from the first to the second round required the
screening of over 600 statements which were reduced to 181 statements
presented to the panelists on the second round.
From the second to the
106
TABLE 8
BREAKDOWN OF QUESTIONS BY RESEARCH AREAS
AND DELPHI ROUNDS
Research areas
Number of questions
Round I
Round II
Round III
10
8
7
8
0
3
2
2
0
1
33
11
13
10
5
8
1
1
0
39
10
1
1
1
1
4
4
1
2
4
1
2
0
0
0
0
0
0
0
0
0
4
6
0
0
0
0
0
4
0
0
2
1
1
3
2
4
25
20
Multinationalization
American watch industry
Swiss watch industry
Japanese watch industry
Other major producing countries
General
1
1
1
1
0
Total
II.
Industry Structure
1
1
1
1
Total
III.
Technology & Manufacturing

Mechanical & electro-mechanical
watches
Electronic watches & displays
Frequency standard
Energy source
Electronic circuitry
Time display
Multifunctions
General
Total
107
TABLE 8-Continued
Research areas
Number of questions
Round I Round II Round III
IV. Market & Marketing

Promotion
Distribution
Price
Product
Volume - mechanical watches
Volume - electronic watches
Quartz crystal watches
Mechanical watches
Solid state watches
Tuning fork watches
Volume - solid state watches
Volume - quartz crystal watches
Volume - total
Price - solid state watches
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
V.
1
1
1
1
51
25
8
6
6
2
0
1
0
0
22
Total
ndustry Environment
General
Total
VII.
1
2
2
0
0
0
0
0
0
0
1
1
2
1
7
1
2
5
Factor Inputs
VI.
4
4
9
0
1
6
7
2
3
15
0
0
0
0
0
0
0
0
General
Overall Total
1
1
1
1
0
2
1
1
0
7
0
0
0
0
0
11
24
181
65
108
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109
third round the 181 statements were reduced to 65.
Table 7 shows
clearly that the collation process is by far the most time-consuming

part of a Delphi experiment.
3. Summary
The Delphi methodology has been described as one of the intuitive, subjective approaches to forecasting based on group predictions.
It grew out of efforts to eliminate the negative aspects of group forecasting.
Researchers at the Rand Corporation have been identified as
the key developers of the methodology.
Since its first introduction
during the early 1950s it has gained increasingly in popularity.
Con-
currently with its ever widening applicationswhich originally covered

only military fields, but presently have found use in private industry
as well as academic circlesits degree of complexity has evolved from
the so-called "basic Delphi" to literally hundreds of individual variations that fit each special type of study.
Theoretical research has shown in laboratory conditions as well as
for applied investigations that the method shows some superior results
over more common forecasting techniques, although some of its fundamental
premises are not fully accepted by its critics.
The foregoing chapter also presented a description of the Delphi
experiment on the future of the "World Watch Industry."
Particular empha-
sis has been given to a discussion of the most crucial phase of the experiment, the identification and selection of experts, the design of the
questionnaires as well as the collation of the results.
CHAPTER IV
THE RESEARCH FINDINGS

This section of the investigation on the possible futures of
the intemational watch industry represents the heart of the research.
The information contained herein is of a primary character, for most
of the findings have never before been presented,
A description of
how the survey findings were analyzed is given in the following section.
1. Method of Analysis
Because of the complex nature of the investigation, due in part
to the magnitude of questions submitted to the final group of panelists,
it is not possible to bring all responses down to one simple "common
denominator."
If this were feasible, it would certainly simplify the
process of analyzing and integrating the literally hundreds of pieces of

information.
Since such an ideal process or method of analysis is not
available, recourse had to be made to the second best alternative which,

unfortunately, is more cumbersome, but should nevertheless make a clear
presentation of the findings possible.
Only in the case of volume and price forecasts do previous

informal and private studies exist, all of which have not been conducted on a systematic basis as far as could be determined and without
disclosing the method.
110
111
A systematic analysis of the Round III results proceeded as

outlined below.
The general line of approach consisted of three parts:
First, each individual question (there was a total of 65 questions

on the final questionnaire) was analyzed and discussed.
Second, the
results of each question were summarized and, third, a synthesis of

the major results of each of the four functional areas of concentration (multinationalization, structural developments, technology, and
market) was prepared.
To improve the understanding of the results
and to condense the wealth of material into a manageable size, actual

presentation of the findings was limited to the major areas only,
with the provision of simimary discussion.
Each question was analyzed in a systematic and structured
manner to ensure an analogous treatment.
the major forecast
The analysis proceeded from
the first part of the question (usually a year
forecast and, in some cases, scaled answers in the form of "agree/

disagree" or a ranking)
to the qualifying part of the question.
Each question could have been also analyzed against the eleven
possible discriminating variables broken down into three main groups:
(1) the background or degree of relatedness of the experts to the
watch industry (with a total of four separate sub-categories); (2) the
nationality of the participants (there was a total of six different
geographic groupings which were ultimately condensed to four in order
to preserve the identity and confidentiality of the respondents and
their answers); and (3) the technology orientation continuum (of which
112
there were three types).
However, a complete discussion of the re-
sults vs. the eleven independent variables was not made since it
would not have added significantly to the understanding of the results.
On the contrary, too many details in an otherwise already quite extesive study would have made it difficult to distinguish the important
from the less-important issues and results.
The analysis of the find-
ings deviates from this rule in the following two areas: (1) where
one or more of the eleven groups show a markedly different result from
the total mean; and/or (2) where such a further breakdown of the analysis would provide more valid information on the events to be forecas ted.
However, it is difficult to express "markedly different" in
exact quantifiable and explicit terms.
cation of the
More important than the appli-
criteria was the considered judgment of the significance
of the deviations and their relation to the importance of the issues

under concern.
In some instances a more powerful analysis could be
made if the views of those groups which appeared to have the greatest
interest, specialized knowledge, or stake in the issue were presented.
To illustrate this, if, i.e., the question was investigating some aspects of a potential multinationalization of the Swiss industry in the
United States, it would be most appropriate to contrast the answers of
both the Swiss and the American respondents.
Certainly, the answers
of the other groups would be less signifficant as well as less reliable

and less indicative of a possible real trend. As a guide for the se-
113
lection of subgroups for purposes of comparison, which would add to

the significance and reliability of the results, the number of respondents, the individual group's response rates, and their degree of familiarity were used.
As a result, only the overall statistics for the 10, 50, and
90 percent level of probability of occurence are shown in graphical
2
form as is normally the case for Delphi studies.
The graphs also in-
dicate the change of major statistics of the results over the length
of the experiment, i.e. the number of rounds, to demonstrate to what
extent consensus of panelists' answers could be achieved towards the
end of the questioning process, i.e. whether answers converged or
diverged.
The deviation from the customary practice, which shows the
changes of the median and the interquartile ranges, is that in this
case the minimum and maximum
of the forecasted values, in addition
to the mean of the forecasts, are shown instead.
The following
reasons explain why such a change is justified, if not necessary.
2
For the same reasons as stated above, the presentation of the
findings were limited to the 90 percent probability level; the 90 percent level was chosen because it reflects a "virtually certain" date.
The graphical presentation of the results typically shows the changes
of the mean of the year forecasts (the middle line), as well as the
minimum and maximura values of the forecasts (the lower and upper line
respectively), for the 90 percent probability forecast level and the
three rounds.
114
Because of unsatisfactory participation on the second round, probably

due in part to the length of the questionnaire, the number of responses
to each question was in general low and, as a consequence, it was felt
that using interquartile ranges would not be appropriate and too meaningful and that, therefore, the lower and upper limits of the forecasts
as well as the mean should be reported back to the round three participants.
In addition to these statistics, the graphs also provide the
histogram of the answers to the final round.
In some cases where no
statistics could be compiled on the second round due to insufficient

responses, the results of the final round are not presented in graphical form because no trend line can be shown.
Similarly, of course, re-
sults of questions which were added to the third questionnaire and

were, therefore, new questions, are not shown in graphical form either.
Response rates reflecting the degree of participation are also given.
Other results, such as e.g. the projections of the volume developments of the solid state watch over the years and possible price
declines of this type of watches have also been presented in graphical
form to better illustrate the dynamics involved in these particular
situations which are gradually evolving events rather than single points
in time, as is usually the case.
In cases where no statistics could be compiled on the second
round due to insufficient responses, the results of the final round are
not represented in graphical form.
Also results of questions
115
which were added to the third questionnaire are not shown in graphical
format either.
Results for questions requiring respondents to rank
their answers are given in table format.

A final comment is necessary regarding the Delphi statements or
expressions such as "significantly increased" and "intensively
marketed" or "experted" and the like.
The use of such language would
seem to make an accurate and unambiguous analysis and response

impossible.
However, a more explicit and specific terminology treat-
ment was not possible for the following two reasons:
(1) the areas
dealt with in this study do not lend themselves easily to quantification and hence to measurement; thus, by making use of apparently
precisely formulated questions one would still not be able to give
a precise answer in quantifiable terms; and (2) for most of the areas
quantification would be possible in theory but not in practice due to
the absence of relevant and reliable statistics.
Because of the nature
of the Delphi methodology, it was felt that the reader of the results
of this study would, through their experience, be able to interpret
such terms in a relative sense and therefore give meaning to the magnitude
of the data presented.
2.
Multinationalization Trends
The analysis of possible future trends of multinationalization

has to be viewed in relation to the following three principal research
aspects.
First, what forces would push the Swiss, the worlds largest
watch producer, into new geographic territories for manufacturing purposes after more than 40 years of cartel rules, which among other things
116
tightly controlled or prohibited expansion and thus foreign establishments?
The general expectation is that some of the Swiss producers,
especially the large ones, would be tempted to take advantage of this new
freedom, in particular because of (1) capacity limitations at home, in the
3
main due to a labor shortage; (2) rising costs as a result of a generally
inflationary domestic economic environment during the late 1960s; and
(3) recent technological shifts from micro-mechanics to micro-electronics,
apparently also shifting the locus of research and development and manufacturing from the traditional watchmaking centers to the United States.
It is of particular interest to investigate if and to what extent movements or forces exist which would tend to indicate that the Swiss would
for defensive reasons multinationalize, in order to maintain and safeguard their historic leadership position.
Second, the problem of the Japanese watchmakers is rather similar to that of the Swiss, for they too have been suffering in recent
years under domestic capacity limitations, as well as inflationary
pressures which pushed up their costs.
But in contrast to the Swiss
who have to defend the number one spot in the international watch industry, the Japanese have nothing to lose (except their second place)
but all to win (namely the first place).
Hence, the new technological
developments offer them a unique opportunity to seize the leadership

position, and improve their image, a chance which they most likely will
One of the most important factors constraining capacity expansion is the small and thus limited capital base of many of the Swiss
watch companies, a result of their predominantly family ownership
pattem; large concerns, however, have recently made strong movements
in the direction of going public in order to remedy this drawback and
to obtain the needed capital for expansion.
117
not pass up.
In that sense, the research question could be put as
follows: To what extent will the traditional Japanese producers, due to

technological shifts develop more aggressive strategies?
Since Japan possesses a well established electronics industry,
which to a large extent is non-existing in Switzerland, an additional
question arises: What tendencies will exist for those Japanese electronics companies to seize the opportunity and increase their multinational
involvement due to the watch application?
With respect to the Americans, the third power in the watch
industry of the Western world, the principal questions relating to
multinationalization must be differentiated between the traditional and
new technology watch manufacturers.
In the case of the predominantly
mechanical watchmakers , the situation in essence is analogous to that of

the Swiss and Japanese, except for the fact that the only viable survivors in this camp are giants in the industry (Bulova and Timex), and
that both already possess a significantly integrated intemational network of watchmaking operations spread over several continents.
The
question here would be: "To what extent might their intemational manufacturing system change due to the new technology watch?"
For the
electronics producers in the U.S., of which a few pioneered the new

technology watch (some of which also being of a much larger corporate
size than the traditional watch industry "giants"), the question could
be asked as follows: What impact will the initial technological lead in
the production of the solid state watch and large
size of the United
States electronics companies have on multinationalization?

It is clear that not all of the questions relating to possible
118
multinationalization trends among the principal watch producers can
be dealt with.
However, it is hoped that the following analysis and
discussion will provide some significant answers to the major issues.

Since multinationalization, as described in chapter one, cannot be
rigorously and universally defined, no absolute results can be obtained,
4
nor will it be possible to quantify much of the results.
Other possible multinationalization trends which might emerge
as a result of factors, other than the new technological developments,
will not be considered here, such as , e.g. , the planned expansion of
Swiss watch companies into Ecuador, in order to penetrate the AndeanPact countries. Neither is special emphasis given to the particular
situations of Hong Kong, Singapore and other emerging areas for microtechnological manufacturing (Taiwan, South Korea, Malaysia, and Indonesia), where all the three principal watch producing nations have
already set up plants for mechanical watch or component production.
This type of expansion is primarily motivated by non-technological factors such as cost (primarily labor cost) differentials. Nor will the
focus of this analysis be on expansion into the countries with preferential or favorable tax considerations, as , e.g., the United States
insular possessions.
a) American Watch Industry (Questions number 1, 2 and 3)
The general expectation is that American electronics companies,
due to technological superiority and financial ability, will attempt to
4
See Chapter I, pp. 15-16.
119
exploit their present privileged position by intemationalization of
their operations. One such possibility is licensing.
The following can be summarized: About the probable occurrence of
significant licensing increases by American to non-American companies
(1) it can be expected that the American superiority in manufacturing
the solid state watch will most probably continue to be present until
the end of this decade (see Figure 12) ; (2) licensing for transferring
this technology will not be the predominant form (according to one respondent "it will generally occur only as a method for extending manufacturing capability, and not otherwise . . . " ) ; (3) that most likely
joint ventures will be the preferred vehicle for transferring this knowhow; and (4) experts think that a reversal of the electronics technology
flow is not likely to happen, certainly not within the next five to six
years,
Intemationalization of marketing of watches produced in the
United States will most likely follow the pattem of the electronic
calculator marketing between the years 1976-1979.
Such marketing simi-
larities will exist, despite unique aspects inherent in the nature of

the new watch.
Results also show that the existence of established
marketing networks for the electronic calculator will not necessarily

have a strong impact on intemational marketing strategy decisions.
To summarize the responses to the question on possible manufac-
This technological "gap" between the U.S. and the Swiss and
Japanese applies only to the manufacturing side; the general feeling
among the experts contacted in person is that on a theoretical basis
all the major watch producers possess the up-to-date knowledge.
120
Question number 1
Degree of familiarity = 2.2
Years
12
27.9%
199H
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
n = 12
(
^ ; ^
RR = 27.9 %
1
1
II
III
Rounds
Years
18
41.9%
1994
1992
1990
1988
1986
198H
1982
1980
1978
1976
1974
0
100%
Frequency
50% Probability
Forecasts
n = 18
RR = 41.9 %
=
II
III
Rounds
0
100%
Frequency
Years
90% Probability
Forecasts
n = 12
12
27.9%
RR = 27.9 %
II
III
Rounds
F i g . 12.
0
100%
Frequency
L i c e n s i n g of S o l i d S t a t e Watch Technology
by U.S. Firms t o Non-U.S. Companies
121
turing developments on an intemational scale similar to those in the

electronic calculator sector, it can be said that (1) similar international manufacturing operations will emerge during 1976-1979 (see
Figure 13); (2) present electronics companies will take advantage of
their foreign production system in producing the solid state watch or
parts of it; (3) such intemational manufacturing will occur predominantly through the electronics companies because their propensity to go
multinational is greater than that of the traditional watch producers;
and (4) relative labor intensive parts operations will move increasingly
to the South East Asian area with the Japanese probably making most use
of it, while American companies are more expected to substitute overseas shifts by increased rationalization of manufacturing processes.
b) Swiss Watch Industry (Questions number 4 and 5)

The Swiss are expected to market intensively a Swiss-made solid
state watch between 1976 and 1980 (see Figure 14), depending on the
speed or timing of their U.S. market penetration and the quality of
their product as the two most critical variables.
Due to present and
short-term future dependency of the Swiss on American solid state knowhow, the Swiss* competitive position in this market remains related
to the ability to conclude successful licensing or sourcing agreements
with American electronics firms.
Without the existence of a well-
established solid state manufacturing base in Switzerland, it appears

inconceivable that the Swiss could successfully penetrate the American
market in the long run, but the tendency exists that the Swiss might
penetrate other lucrative markets first, without, however, neglecting
122
Question number 2
Degree of f a m i l i a r i t y = 2.1
Years
16
37.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
n = 16
RR 37.2 %
II
III
Rounds
Years
21
48.8%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
50% Probability
Forecasts
11
25.6%
n = 21
RR = 48.8 %
>
1
II
III
Rounds
Years
0
100%
Frequency
0
100%
Frequency
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
90% Probability
Forecasts
n = 11
RR = 25.6 %
I
Fig. 13.
II
III
Rounds
0
100%
Frequency
I n t e r n a t i o n a l Marketing of American-Made Watches

Analogous to E l e c t r o n i c C a l c u l a t o r Marketing
123
Question number 4
Years
14
32.6%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
n = 14
^
II
III
Rounds
Years
24
55.8%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
II
III
Rounds
Years
17
39.5%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
0
100%
Frequency
50% Probability
Forecasts
n = 24
RR = 55.8 %
0
100%
Frequency
m.
II
III
Rounds
Fig. 14.
RR = 32.6 %
>
90% Probability
Forecasts
n = 17
RR
39.5 %
I0Frequency
I 100%
Intensive Marketing of Swiss-Made Solid S t a t e

Watches in the U.S.
124
the American market.
The Swiss watch companies will significantly increase their
purchases of solid state watch components from the United States. The
general expectation is that such increases in purchases will occur between 1975 and 1977 (see Figure 15), since altemative sourcing possibilities over the short-run will not exist for the Swiss, but in the longer
run, European and Japanese sourcing possibilities may emerge.
There is
a reasonably good chance for the Swiss to establish their own electronics manufacturing capability by 1980,
c) Japanese Watch Industry (Questions number 6 and 7)
The general expectation is that the Japanese will begin to export in high volume Japanese-made solid state watches between 1976 and
1979 (see Figure 16), primarily stimulated to establish a foothold in
the lucrative .American market. High export volume will mainly be the
result of their mass production capability.
Results furthermore have indicated that there is an unanimous
agreement that the Japanese will be more aggressive in the electronic
watch sector (by quite a considerable margin) than the Swiss and that
they are likely to exhibit greater force between 1975 and 1980, as a
result of the following factors (in order of importance): (1) their
better electronics base, and (2) their greater eraphasis on technology
strategies.
Many of these existing European electronics firras, apart from

the European giant Phillips, are wholly or partly in the hands of the
large American electronics firms.
125
Question number 5
Years
12
27.9%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
10% Probability
Forecasts
n = 12
II
III
Rounds
Years
19
44.2%
18
41.9%
RR = 27.9 %
0
100%
Frequency
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
50% Probability
Forecasts
n = 19
RR = 44.2 %
II
III
Rounds
Years
>
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
0
100%
Frequency
II
III
Rounds
90% Probability
Forecasts
n = 18
RR = 41.9 %
0
100%
Frequency
Fig. 15. Significant Increase of Purchasing of Solid

State Watch Components from the United States
by Swiss Watch Companies
126
Question number 6
Years
15
34.9%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
10% Probability
Forecasts
n = 15
RR 34.9 %
II
III
Rounds
Years
21
48.8%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
50% Probability
Forecasts
n = 21
RR = 48.8 %
II
III
Rounds
Years
19
44.2%
0
100%
Frequency
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
I
Fig. 16.
II
III
Rounds
0
100%
Frequency
90% Probability
Forecasts
n = 19
RR = 44.2 %
0
100%
Frequency
Massive Export of Japanese-Made

Solid State Watches
127
d) Possible General Trends (Question number 8)

To obtain an overall idea about the major expected pattems of
multinational involvement between the principal watch producing countries and/or areas, respondents were asked to estimate the probable
periods during which they thought either know-how and/or direct investment flows for both the mechanical and electronic watch would be
changing markedly.
This required respondents to make an estimate of
the probable beginning and end of such periods of changes, as well as

of the direction of change.
For the purpose of this survey know-how transfers mean such transfers as e.g. licensing manageraent contracts, et cetera, whereas foreign
direct investments include establishment of foreign manufacturing subsidiaries, joint ventures, et cetera.
Essentially this separation
differentiates between the establishment of physical assets abroad and

lesser tangible forms of international involvement.
Mthough contribution to this question was demanding due to
the complexity, the results obtained are satisfactory and suitable for
a meaningful interpretation.
Table 10 summarizes the major results,
which allow making the following major conclusions: (1) for the next
half decade at least, the U.S. will maintain its leadership position in
the manufacture of electronics watches, deemphasizing, however, the production of mechanical watches; (2) the Japanese are likely to export
first their electronics capability to South East Asia and then to other
Certainly, in a strict sense foreign direct investments are

also a form of know-how transfer; both types are major altematives
of technology transfer, which is a wider concept.
128
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130
non-specified areas, whereas the Swiss appear to be concentrating on

Europe; (3) with regards to mechanical watches, Switzerland will continue to be the leader as it will be the only major country during the
next half decade involved in exporting the mechanical watchraaking knowhow or in setting up production plants forraechanicalwatcJies; (4) by
1980 or after the South East Asian area will have gained the reputation
of an electronically corapetent area, capable of know-how export to and
establishraent of foreign direct investraents in other, non-specified
areas.
Other, non-specified areas will increasingly become important
for the present major producing nations as target forraechanicaland

electronic raanufacturing operations, as well as know-how transfers.
This last point tends to indicate that the watch industry will becorae
more mature in an intemational sense, as it will decentralize geographically in order to take advantage of fully integrated global manufacturing networks which will permit a better utilization of world resources.
The information contained in the table summarizes possible
multinationalization tendencies without providing any indication about
the imderlying reasons for such movements.
It appears likely in the
future that with increasingly nationalistic tendencies in the world,

which are bound to emerge as a result of the developing world's growing
self-awareness and the development of regional economic groupings, watch
companies will have to adapt to these movements and consider countries
for manufacturing purposes which only a few years ago would not even
have been thought of as likely candidates.
131
3. Structural Developraents
The principal research interest regarding the structure of the

industry is to obtain answers about the possible irapact the new solid
state technology raight have on the industry relationship in the future.
The Delphi Round III questionnaire included ten questions (Questions 9
through 18) which focused on that problem area.
It was hypothesized that due to the rather sudden development of
the new technology, accentuated by the fact that it originated largely
outside the boundaries of the classical industry, industry organizations
in the principal producing countries might undergo "forced" changes.
What in particular will be the nature, magnitude and importance of the
probable changes in the American, Swiss and Japanese watch industries?
The following analysis will provide sorae answers to these and related
questions.
a) American Watch Industry (Questions number 9 to 14, 16, and 17)

Since electronics companies have already in large nimiber entered
the time piece manufacturing, the discussion will be divided into separate discussions of the electronic and traditional sectors and discussion
of both sectors combined.
Principal questions that need to be answered
for the case of the electronics producers is whether more of them will
enter, when the industry will have structurally stabilized, and what
concentrations can be expected.
The investigation about probable future concentration in the
sector of electronic watch producers in the United States has provided
the following results: The possibility for a concentration in the solid
132
state sector to less than ten companies can be summarized as follows:

(1) It is expected that a "weeding out" process will happen during the
remainder of this decade and that by 1980 the electronics industry sector should have matured and stabilized at less than ten important companies (see Figure 17); (2) special module assemblers are expected to
continue to thrive along with the large companies for at least five
years after the product enters raass production due to the forraer's
ability to respond to differentiated market "niches;" and (3) it is
likely that by 1978, 70 percent of the solid state watch market in units
will be controlled by three to four solid state watch producers.
An investigation into the probable future role of vertically
integrated electronics firms has concluded with the following results:
Cl) It is expected that by about 1980 the vertically integrated electronics firms in the U.S. might dominate the watch industry as a result
of their superior technology (see Figure 18); (2) the current leaders
of the traditional industry will see their present position eroding due
to these newcomers; (3) a few large electronics companies will continue
to control the new technology and thus be stimulated to take up the
leadership of the whole industry; and (4) the present electronic "giants,"
in the main Texas Instruments, Rockwell Intemational, Motorola and
Hughes Aircraft, will most likely occupy these critical and controlling
positions.
The following ranking shows the principal factors
that will contribute to a leadership position in the industry.
These
results indicate that electronics firms will be dominant within the

industry primarily because of their superior technology.
133
Question number 9
Degree of farailiarity = 2.4
Years
199^
1992
1990
1988
1986
198^
1982
1980
1978
1976
197U
14
32.6%
10% Probability
Forecasts
n = 14
RR = 32.6 %
II
III
Rounds
0
100%
Frequency
Years
16
37.2%
50% Probability
Forecasts
n = 16
RR = 37.2 %
II
III
Rounds
Years
18
41.9%
199^
1992
1990
1988
1986
198H
1982
1980
1978
1976
197U
m.
II
Rounds
Fig. 17.
0
100%
Frequency
III
90% P r o b a b i l i t y
Forecasts
n = 18
RR = 41.9 %
0
100%
Frequency
Reduction of Solid State Watch Producer in the

United States
134
Question number 10
Years
9
20.9%
10% Probability
Forecasts
n =9
RR = 20.9 %
0
100%
Frequency
Years
11
25.6%
1994
1992
1990
1988
1986
198H
1982
1960
1978
1976
197i*
50% Probability
Forecasts
n = 11
II I
II
III
Rounds
RR = 25.6 %
0
100%
Frequency
Years
11
25.6%
Forecasts
n = 11
RR = 25.6 %
I
Fig. 18.
II
III
Rounds
0
100%
Frequency
Domination of American Watch I n d u s t r y by V e r t i c a l l y

I n t e g r a t e d E l e c t r o n i c s Firms
135
Rank
1
2
3
4
5
Factor determining dominance

Know-how (technology base)
Financial resources
Managerial skill
Quality of manpower
Other factors: R & D
Participants were also asked to rank the potential candidates

for such a leadership position. The most likely leaders of the future
American watch industry, listed in order of importance, are the following:
Rank
1
2
3
4
5
6
7
8
9
Most likely candidates for leadership

Texas Instruraents
Rockwell Intemational
Motorola
Hughes Mrcraft
Other corapanies; mentioned were:*
- Intel
- Solid State Scientific
- Litronix
- National Seraiconductor
Fairchild
RCA
Bowmar
American Micro Systems
*Listed by frequency of being mentioned

To what extent will concentrations between the traditional and
new technology sector be possible in the American watch industry and
when could such concentrations occur?
The inquiry into inter-sectoral concentration tendencies lead
to the following conclusions: (1) Concentrations will most likely occur
between 1976 and 1979 (see Figure 19); (2) of significance in this
future structural configuration will be the role of the consumer electronics marketers; (3) cross-fertilizations will take place wherever and
136
Question number 11
Years
10
23.3%
198U
1983
1982
1981
1980
1979
1978
1977
1976
1975
10% Probability
Forecasts
n = 10
RR = 23.3 %
1
I
Years
17
39 5%
198H
1983
1982
1981
1980
1979
1978
1977
1976
1975
197U
10
23.3%
n = 17
RR = 39.5 %
1
10 0%
II
III D
Rounds
]rrequenc y
198H
1983
1982
1981
1980
1979
1978
1977
1976
1975
197H
90% Probability
Forecasts
n = 10
RR = 23.3 %
1
]:
1]C
Ro\m d s
Fig. 19.
50% Probability
Forecasts
]C
Years
II
III 0
100%
Rounds
]Frequency
1]CI
D
10 0%
]Prequenc y
Significant Concentrations in the American

Watch Industry between Traditional Watch
Companies and Electronics Companies
137
whenever it will be of benefit to both parties to resolve problems

jointly rather than to compensate for organizational deficiencies through
independent intemal adjustments; (4) the general opinion of experts is
that cooperative arrangements between the traditional and electronic
sector are more probable than each group going its own way; and (5) the
smaller and less specialized enterprises of both sectors will find such
cooperative solutions a necessary requirement for their own survival.
The electronics sector is dominated by a few large firms; what,
then are the survival chances for the small single-line solid state
watch producers?
Results have shown that their disappearance is most
likely to occur between 1978 and 1984 (see Figure 20).
This is not to
mean that by 1984 there will be absolutely no small single-line producers

around.
Rather this should mean that by that time only an insignificant
number will remain, that no new entries will occur, and that the most
important exits will already have happened, causing this sector to
have structurally stabilized.
There will always be room for small and specialized firms to
operate successfully side by side with the industry giants.
Large and
diversified markets justify the existence of such small enterprises

while their lower overhead cost raakes it economically feasible.
But
the relationship between the large and the sraall corapanies is rautual.
What is good for the goose, the sraall electronics firms, is also good
for the gander, the watch manufacturers, like Bulova and Tiraex.
One of the most crucial points regarding restructuring in the
American watch industry is the degree of forward integration the electronics companies seek.
The general opinion of experts is that major
138
Question number 12
Years
11
25.6%
199U
1992
1990
1988
1986
1984
1982
1980
1978
1976
197H
II
II
III
Rounds
10% Probability
Forecasts
n = 11
RR = 25.6 %
0
100%
Frequency
Years
16
37.2%
50% Probability
Forecasts
n = 16
RR = 37.2 %
II
III
Rounds
Years
16
37.2%
1994
1992
1990
1988
1986
198U
1982
1980
1978
1976
197U
90% Probability
Forecasts
n = 16
~~~z
II
III
Rounds
Fig. 20.
0
100%
Frequency
RR = 37.2 %
0
100%
Frequency
Disappearance of Small Single-Line Solid State

Watch Producers in the TJnited States
139
manufacturers of critical solid state watch components will likely move

into marketing of their components or complete watches between 1976 and
1979, distributing either to traditional watch producers for sale under
private label, selling under their own label or a combination of the two.
These corapanies will be attracted in the main to integrate forward by
the size of the market and the existence of own channels for other electronic consuraer products (e.g. the calculator) which could readily be
used for electronic watches also.
Marketing cost criteria will not
deter large American electronics companies from entering retail raarket.

A factor which will aid electronics companies to integrate forward
their solid state watch business is the fact that distribution for
watches will be increasingly more direct.
It is likely that the Araerican watch industry will be controlled
by 1982 by both the traditional leaders (Bulova and Tiraex) and two to
three electronics corapanies.
However, there is doubt as to whether
present leaders will still be the top producers by 1980 and that therefore, considerable policy changes would need to be raade by Bulova and
Timex in particular to meet the new technology challenge (see Figure 21)
Competition is another important aspect regarding the structure
of an industry.
Will competition be raore intensive among the solid
state watch producers or between the "old" and "new" watch companies?
Results showed that the American watch industry will be characterized
by greater competitive intensity between the new entrants rather than
between the established companies and new entrants in the short to intermediate future.
This implies that the position of the traditional com-
panies will not be seriously endangered for some time to come.
140
Question number 14
Degree of familiarity = 2 . 1
Years
9
0.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
n =9
w=I
>
"
II
III
Rounds
Years
13
30.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
18
41.9%
0
100%
Frequency
n = 13
>
RR = 30.2 %
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
II
III
Rounds
0
100%
Frequenc
'
/
/
/
90% Probability
Forecasts
n = 18
Fig. 21.
50% Probability
Forecasts
Years
RR = 20.9 %
I II
i:l
Ro\inds
0
100%
Frequenc y
Major American Watch Producers
RR = 41.9 %
i^
141
At present the United States rank as solid state watch producer,

although this fact is little known to the buying public.
When will
the American leadership in solid state become a fact widely known by

consimiers around the world?
It can be seen frora Figure 22 that with a
probability of 90 percent such a widely known leadership position should

be attainable by 1980.
The major factors contributing to such a world leadership position are in order of importance:
Rank
1
2
3
4
5
6
7
Factors contributing to U.S. leadership

Technological lead in raicro-electronics
Multinational manufacturing base of major
U.S. electronics corapanies
Leaming curve price lead
Superior production techniques
Further liberalization of intemational
trade
Increase of national incoraes in developing
countries
Other factors;raentionedwas the "potent"
industry structure
There is an alraost 100 percent agreement by all respondents that

the technological lead in micro-electronics would be the most determining
factor.
In general, the most important factors that would determine an
intemationally recognized superiority in solid state watches are all
indigenous to the electronics firm, i.e. subject to their own control.
Exogenous forces are secondary only.
This fact precisely characterizes
the type of risk to the established companies in the industry.
Because
of the difference in managerial philosophy, it is difficult to predict

strategic decisions made by electronics companies.
In such a situation
142
Years
11
25.6%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
Forecasts
^ ^ ^ ^
"^
(>
II
III
Rounds
Years
16
37.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
^l
0
100%
Frequency
Forecasts
1
" ^
II
III
Rounds
r:
0
100%
Frequency
Years
17
39.5%
Forecasts
II
III
Rounds
Fig. 22.
0
100%
Frequency
The United States Becoming the World's Largest

Solid State Watch Producer, a Leadership Position
Widely Recognized by the I n t e m a t i o n a l Consumer
143
of uncertainty the best strategy for the traditional industry would be

to reduce the risk and to prepare for technological as well as organizational changes.
b) Swiss Watch Industry (Question number 18)

Investigation about structural effects in the Swiss industry
has focused only on potential labor displacements.
.Analysis of the
results led to the following conclusions: (1) The Swiss would not have
the capacity and flexibility to adapt soon enough should the transition
to solid state occur too rapidly and would thus experience serious eraployment problems; (2) the Swiss do not possess any effective means to
manipulate (slow down) the technological evolution; and (3) direct
capital investraents in the U.S. electronics industry would be significantly increased should it come to a serious situation.
c) Japanese Watch Industr^^ (Question number 15)

The main findings regarding the possible entrance of Japanese
electronics firms into the watch industry can be summarized as follows:
Most likely entry dates vary between 1975 and 1978/79 (see Figure 23).
An arbitrary "cut-off" point of 1977-78 for entering in order to avoid
preemption in this market has not been supported by the experts.
Prin-
cipal factors and motivations affecting or inducing such an entry decision in order of overall agreeraent scores are: diversification pressures,
state of the art of IC and display technologies, analogy to electronic
calculator and availability of its distribution system.
The Japanese
experts themselves believe that a future entry of Japanese electronics

companies will be contingent more on technological factors than on
144
Degree of Familiarity =2.2

Years
13
30.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
z>1
II
III
Rounds
Years
18
41.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
0
100%
Frequency
50% Probability
Forecasts
^ ^ : >
II
III
Rounds
0
100%
Frequency
Years
14
32.6%
Forecasts
I
Fig. 23.
II
III
Rounds
0
100%
Frequency
E n t e r i n g of S o l i d S t a t e Watch Manufacturing by
Japanese E l e c t r o n i c s Companies
145
desires to diversify or on the distribution network.

Most likely candidates for entering this industry have been
ranked by their potential for entering watch production.
The result of
the weighted rankings is as follows:
Rank
1
2
3
4
5
6
7
Most likely candidates for entering

industry
Matsushita/Panasonic
Other companies;raentionedwere:
- Hitachi
- Sharp
Sanyo
Sony
Toshiba
Mitsubishi
Nippon Electric
4. Technological Developments
The development of the solid state digital-faced watch has been

described as evolutionary rather than revolutionary.
Both frora the
technical as well as marketing point of view, the watch is still in its

infancy, and it will, therefore, be of greatest interest to leam what
experts have to say about its future probable developments.
Although
the technical problems are generally known to the expert, quanttative

answers are lacking.
void.
It is hoped that the Delphi results will fill this
The forecasts deal only with raajor technological developraents
that are of greatest significance to the future of the solid state watch.
In one sense, forecasting technological events and innovations
should be easier than predicting changes in the degree of multinational
involvement or industry structures, because technological changes occur
146
in a more predictable pattern except, of course, for breakthroughts which

are almost impossible to predict. Consequently, it could be expected that
technological forecasts are more reliable and more comprehensive.
Important is not the technological fact per se, or the accuracy
of its prediction, but the relevance and meaning new developments could
have on the industry as a whole and on its major producing nations. The
research interest, therefore, could best be summarized in the following
phrase: What are the business ramifications of future technological
changes for the industry and their impact on multinationalization, structure and marketing.
The final round questionnaire includes twenty questions relating

to technological developments for which a detailed discussion and analysis is given below.
a) Technology Leadership and Technology Gap (Questions number 19 to 23)

Principal questions focused on the probability of the leader to
maintain or even improve his competitive technology position and on
whether those in second and third positions might have a chance to close
the technology gap.
Expert opinion indicates that American technological leadership
in the watch industry should continue during the next five years.
Fac-
tors which would aid in maintaining this position are (1) the "free"
structure of the semiconductor industry perraitting on the one hand technological competition and on the other hand mobility of technical innovators; and (2) the existence of a market sufficiently large to "support"
the initially high priced solid state watch. The most likely candidate
147
for and challenger to this leadership position are the Japanese watchmakers.
In general, experts also believe that the United States' leadership is "comfortable;" and that their lead can only be seriously affected
through poor managerial performance and legislation of American multinational companies.
The following investigates the possibilities for the Swiss and
Japanese to close the technology gap.
Mass production of integrated
circuits (raore than one raillion units per month) should be attainable
in Switzerland by 1982 (see Figure 24). The Swiss will mainly be raotivated by the seriousness of the situation they are in.
The general
opinion is that straight purchases from American electronics corapanies

of the needed technology would not be an optimal altemative for closing
the gap.
A more appropriate way for obtaining the technology would be
through sorae sharing arrangeraents (joint ventures, et cetera).
Experts
have not been able to agree on whether there is a cut-off point which
the Swiss would have to meet in order to remain competitive.
Which companies would possess the greatest potential for closing
the solid state technology gap?
Participants were asked to rank four
of the major Swiss companies presently involved in the solid state watch
production as to their expected potential for closing the gap and to
list and rank other companies that they felt would also be important
candidates.
The results of these rankings are shown below.
Three sub-
groups have ranked Faselec as the corapany with the highest potential for
closing the technology gap, whereas two other groups thought that SSIH
would have a higher potential.
The Swiss experts' choice for the number
148
Degree of f a m i l i a r i t y
Years
11
25.6%
=2.2
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
Forecasts
II
III
Rounds
0
100%
Frequency
Years
Forecasts
17
39.5%
II
III
Rounds
Years
12
27.9%
0
100%
Frequency
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
Forecasts
II
III
Rounds
F i g . 24.
0
100%
Frequency
Swiss Close Technology Gap f o r Manufacturing

S o l i d S t a t e Watch
149
one spot is Ebauches S.A. for reducing the solid state technology gap,
Rank
Companies capable of closing electronics technology gap
1
2
3
Ebauches S.A.
SSIH
Faselec
SGT
Other companies;raentionedwas:
- Eurosil (company with Swiss
participation)
What is the possibility of the Japanese watch industry bridging

the technology gap through licensing agreements with American electronics
companies?
Overall results show that the Japanese should easily over-
come the manufacturing gap through such arrangement.

American electronics experts commenting on this point have made
these remarks: According to one, Japan's leverage may have suffered due
to sorae deterioration in certain consumer product raarkets. Another feels
that the raatter for the Japanese raay not be that easy, since catching
up to a given state of mass production would require two years. The
new economic regulations with respect to foreign investments which make
entry into the Japanese market more feasible, could rule out the licensing altemative as the most attractive strategy for the licensor, the
United States electronics company. Yet another was of the opinion that
the Japanese will be able to bridge the gap through their own efforts
based on past technology transfers.
The Japanese are generally known for their capability to massproduce goods.
Will they be capable of mastering IC technology at price
levels competitive to those of the world leader?
The overall impression
150
is that Japan will be in a position to meet competitive price levels by

about 1978 (see Figure 25).
b) Technological Developraents of Major Coraponents

Standard of frequency (Questions nuraber 24 and 33): In the past, the
spring balance escaperaent raechanism provided the classical frequency
standard.
Bulova successfully introduced the tuning fork standard
that was soon superseded by the quartz oscillating frequency standard,

which appeared first in the form of a quartz rod and later as a
quartz
wafer, developed by SSIH. Figure 26 shows that experts think that a

new and unspecified frequency standard might be developed as early
as 1977 and as late as 1995.
However, it is more likely for such a
breakthrough to happen between 1978 and 1983.

While a watch with a broadcast frequency standard has already
been developed today in principle, its market introduction would have
to wait until the second half of the 1980s.
The postponement of a mar-
ket introduction is due to problems connected with functional reliability

that need to be resolved
(see Figure 27).
Energy source (Question number 25): It is estimated that a reliable and

safe nuclear battery will be available between 1980 and 1987, but a considerable number of experts believe that the public will not accept such
a battery.
Experts also are of the opinion that nuclear batteries from
a cost point of view really do not offer any advantages, since average
life expectancies of the future watch make a development of such an
energy source redundant, and that a greater probability exists for the
development of alternative sources which could provide more energy for
151
Degree of f a m i l i a r i t y = 2 . 2
Years
10
23.3%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
10% Probability
Forecasts
<
II
III
Rounds
0
100%
Frequency
Years
17
39.5%
50% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Years
18
41.
90% Probability
Forecasts
I
Fig. 25.
II
III
Rounds
0
100%
Frequency
Japan Produces Integrated Circuits at Prices

Equivalent to Those of TJ.S. Manufacturers
152
Years
10
23.3%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
Forecasts
r^
(>
1
II
III
Rounds
Years
16
37.2%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
50% Probability
Forecasts
II
III
Rounds
Years
16
37.2%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
I I
0
100%
Frequency
Forecasts
=5"
II
III
Rounds
Fig. 26.
0
100%
Frequency
I
0
100%
Frequency
Introduction of a New Frequency Standard
153
Degree of familiarity =1.7

Years
7
16.3%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
II
III
Rounds
Years
5
11.6%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
9
20.
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
50% Probability
Forecasts
0
100%
Frequency
Forecasts
(>
II
III
Rounds
F i g . 27.
0
100%
Frequency
lii)
II
III
Rounds
Years
10% Probability
Forecasts
0
100%
Frequency
Market I n t r o d u c t i o n of E l e c t r o n i c Watch
w i t h Broadcast Frequency Standard
154
a longer period of time than today's batteries at less cost and which
would require less space (see Figure 28).
Electronic circuitry (Question number 26): Round III of the Delphi experiment has provided the following major comraents about possible future
trends in electronic watch circuit developments.
One expert has refrained from making any predictions, because
in his opinion the state-of-the-art is raoving too rapidly to forecast
reliably.
In general, it appears that the major efforts during the
remainder of this decade will be concentrated on the reduction of

the power consumption (improving yields), the miniaturization of the
circuits, in order to improve the aesthetics of the watch and to allow
multiple functions to be carried out, as well as to achieve improved
physical characteristics (resistance against shocks, etc.) which should
improve consumer acceptance.
Efforts will also continue to be concen-
trated towards a more accurate watch through higher frequencies.
Appa-
rently much of the problems existing today are connected with the need
for a coraplex assembly of support components, which reduces the reliability and resistance of the electronic circuitry and of the watch.
According to one expert, it will be possible to produce significantly smaller watches around 1976.
Others have predicted that it
will be feasible to have the display and the circuits on a coramon substrate and batch fabricated. Anothet one refers to the cost/reliability
improvements to be expected in 1975-76.
It is expected that, in general,
the developments of the circuitry will follow the trends in the computer
industry.
The SOS (Silicon-on-Sapphire) circuits will emerge between
1977 and 1980, as well as the l^L logic which will be succeeded by mole-
155
Degree of farailiarity = 1.7
Years
12
27.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
i=>
II
III
Rounds
Years
13
30.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
11
25.6%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
0
100%
Frequency
Forecasts
II
> - /
II
III
Rounds
Years
10% Probability
Forecasts
0
100%
Frequency
4.
Forecasts
1
II
III
Rounds
0
100%
Frequency
Fig. 28. Market Introduction of Reliable and Safe

Nuclear B a t t e r i e s
156
cular memory logic.
In contrast, another American expert thinks that
nothing fundamentally new will happen or be developed during the next

five years at least, while still another refrains from raaking any predictions in this field because, in his ipinion, the state-of-the-art is
moving too rapidly to make reliable forecasts.
Time display (Questions number 27 to 29 and 37): At present, the liquid
crystal display (LCD) type is the prevalent method for time display in
a solid state watch.
What are its survival chances?
Results indicate
that this indication system will be the predorainant one for the remainder of this decade, but that there still exists a series of problem
areas which need to be satisfactorily rectified.
its life span is about three to five years.
Experts believe that
Most likely other more
advanced display technologies will become available around 1979/1980,

of which the electro-chromic display (ECD) will be an attractive alternative.
For presentation of the raajor statistics see Figure 29.

Whatever the technical solution raight be, one can say that a
successful display will have to have the best possible corabination of

these major positive features:
1) low power consumption

2) high technical reliability
3) satisfactory read-out characteristics (preference for
continuous and active tirae indication)
4) low space requireraents
5) low cost manufacturing possibilities
The LCD still has some inherent disadvantages which need to be
overcome.
Factors in order of iraportance as raeasured by the mean score
of agreement/disagreeraent together with the expected dates when those

problems will be satisfactorily solved, are shown in Table 11.
157

Years
11
25.6%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
10% Probability
Forecasts
/
1
II
III
Rounds
Years
16
37.2%
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
0
100%
Frequency
Forecasts
^^\
II
III
Rounds
I
0
100%
Frequency
Years
13
30.3%
Forecasts
II
III
Rounds
F i g . 29.
0
100%
Frequency
Liquid C r y s t a l D i s p l a y s Becoming t h e
Predominant Type of Display
158
TABLE 11
PROBLEMS OF LIQUID CRYSTAL DISPLAYS
Factors/problems
Mean agreement disagreement

scores
Aging
Readability
Susceptibility to temperature
Other probleras
(+1.6)
(+0.9)
(+0.5)
(+0.2)
-fading out of segments

- complex drive techniques needed
ed
Low contrast ratio
(+0.1)
(-0.2)
Susceptibility to shocks
Dates when problems

raost likely will be
solved
Probability levels
10 %
50 %
90 %
1975
1975
1974
1976
1976
1976
1977
1977
1977
1975
1974
1976
1975
1976
1976
The table reveals that although a few problems still exist with
the LCD type, satisfactory solutions will be found in the short run.
It can also be seen that all of these difficulties should be overcorae
at approximately the same time. This indicates that determined integrated research and development efforts are under way to assure a speedy
and coordinated solution, which is necessary to the solid state watch expanding at rates predicted by electronics experts.
Since LCD is considered to be only an intermediate time display
method, it would be of interest to know when a substitute technique may
appear.
The general expectation is that before the end of this decade
a new time display technology will be introduced to the market which is

believed to be the ECD.
The new improved technology will offer sub-
stantial advantages primarily in the area of time read-out characteristics and aesthetics, rather than strict technical improvements as such.
(See Figure 30).
159
Years
12
27.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
10% Probability
Forecasts
II
III
Rounds
Years
18
41.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
0
100%
Frequency
50% Probability
Forecasts
II
III 0
100%
Rounds
Frequency
Years
16
37.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
90% Probability
Forecasts
II
III 0
100%
Rounds
Frequency
Fig. 30. Appearance of a New Display Technology
160
Ideally, concurrent iraprovement of all factors is needed to

satisfy the wearer of the watch.
However, in reality each major area
develops to a large measure on its own.
What is needed is a ranking of
the factors as to their importance or magnitude of iraprovement they

offer over the old technology.
Rank/Importance
1
2
3
4
5
Advantages obtainable over previous

technology
Readability
Appearance/aesthetics of display
Power consumption
Reliability
Other factors; mentioned were:
- cost
- complexity of operation
These results deraonstrate that the most important factors are

those that are conspicuous and thus have a bearing on the consumer's
purchasing decision and use of the watch.
The most significant improve-
ment a new development brings, will primarily be in the quality of the

time indication itself, and in the styling of the extemal parts of
the display.
The Swiss as well as the Japanese feel that a new display technology needs to offer primarily advantages in reliability.
The possibility for a continuous light eraitting diode (LED)
time indication can be summarized as follows (see also Figure 31):
Theoretical chances for such realization exist, but practical solutions
lie only in the remote future.
It is the opinion of the experts that
a two battery watch will not offer the solution to the problem, and that
the continuous time indication will be preferred over the discontinuous
161
Years
14
32.6%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
10% Probability
Forecasts
Ê>
II
III
Rounds
Years
17
39.5%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
0
100%
Frequency
Forecasts
II
III
Rounds
I
0
100%
Frequency
Years
13
30.2%
Forecasts
Fig. 3 1 .
II
III
Rounds
0
100%
Frequency
Light Emitting Diodes with Continuous Time

Display Become Possible
162
type.
c) Multiple Functions (Questions number 34 and 35): Multifunctional

watches which can provide the user with more than the traditional time
telling functions of hours, minutes, seconds, and date, are certainly
going to be introduced to the market within the next ten years.
This
achievement will be possible because of the degree of rainiaturization

which is a direct result of efforts in the field of raicro-electronics.
Neither cost aspects, technological problems such as power consumption,
nor consumer acceptance will impair the chances for the introduction of
functional diversification in the watch.
About the appearance of specific additional functions, in general it can be said that the watch will perform three principal types of
additional functions:raeasureraent,calculation and comraunication.
Func-
tions presently carried out by mechanical watches (e.g. alarm function)

will be adopted and integrated first, before more complex functions will
be introduced, although such raore sophisticated and coraplex functions
might be much raore appealing to the buyer.
Table 12 summarizes when specific additional functions are
expected to be introduced to the market.
d) General Aspects (Questions number 30, 31, and 38):

Experts' opinion indicates that research and development efforts
in the American watch industry over the next ten years will concentrate
on the quartz crystal watch in general and the solid state watch in particular.
This direction is primarily determined by the virtual absence
of mechanical watch manufactoirers in the United States (except Timex and
163
TABLE 12
EXPECTED MARKET INTRODUCTION OF ADDITIONAL FUNCTIONS
Function
Expected dates of raarket

introduction
Probability levels
90 %
10 %
50 %
Calculator function
Temperature measurement
Humidity measureraent
Communications function
Alarm function
Memory function
Other functions; mentioned were
- stop function
1977
1977
1978
1978
1976
1977
1979
1979
1980
1980
1977
1979
1981
1982
1985
1984
1978
1981
no dates specified
Bulova which, however, are devoting an increasing share of their total

efforts to electronic watciies) and the growing importance of the electronics companies.
Since the solid state watch has not yet fully matured as certain minor and major problems still exist, it would be of significance
to know when it will have been perfected to the extent that it could satisfy the raass market equally well as the mechanical low and middle-priced
watches are satisfying today's buyers.
The result shows that American
watch manufacturers are expected to deliver such a product at the latest

by 1990, but that it appears more likely that between 1976 and 1979 such
a perfected solid state watch will be available. (See Figure 32).
It has been suggested on Round I that a "revolutionary" time indicating systera based on biochemistry, which would make people aware of
time through brain waves, raight becorae a reality.
Results, however, show
that experts consider this only an "interesting" but speculative idea
164
Years
16
37.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
=2.5
10% Probability
Forecasts
\
II
III
Rounds
0
100%
Frequency
Years
>
:ii
22
51.2%
50% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Years
Forecasts
25
58.1%
I
Fig. 32.
II
III
Rounds
0
100%
Frequency
American Watch Manufacturers Producing a Solid S t a t e Watch

w i t h Continuous Display Capable of S a t i s f y i n g the Mass Mark e t as w e l l as Mechanical Low- and Middle-Priced Watches
165
which will not offer enough advantages to lead to a practical realization

before the end of this century.
From a macro point of view it would be of interest to know in
which of the presently most iraportant watch producing countries raajor
technological innovations (or breakthroughs) with a great business
potential and short run application possibilities raight first occur.
The analysis was divided into two tirae periods, the period of
the next five years (1974-1978) and the period within the next ten years
(1974-1983).
The results of the ranking which experts were asked to
make, are summarized below.

Rank
1
2
3
4
Within the next 5 years

(1974-1978)
United States
Japan
Switzerland
Other countries
Within the next 10 years

(1974-1983)
United States
Japan
Switzerland
Other countries
Of interest to note is the fact that results of all the subgroup

rankings coincide with the overall result, i.e. all groups believe the
United States to be the technological leader over the next ten years.
For the shorter run, the Japanese experts are of the opinion that other
countries (although they do not specify which ones) would occupy the second rank.
For the longer run, the ten year span, three subgroups rank
the Swiss as number two.
According to some respondents, the principal
changes have already happened and no new breakthroughs are expected to

occur.
In their opinion major improvements in the future will be in the
area of cost reductions and not in further technological innovations.

About the technological potential, the following principal con-
166
clusions have emerged: (1) The United States are expected to maintain
their technological leadership throughout the next ten years, i.e. until
1983, with Japan and Switzerland occupying the second and third place;
(2) great fragmentation of the Swiss watch industry and a historic concentration on the mechanical watches will raake it unlikely for them to
stage a breakthrough, especially within a period of five years; and (3)
experts' opinion is divided according to their technology orientation
on whether solid state watch developments will have an accelerating
effect on the rate of research on mechanical watches.
5. Market Developments
Much of what has been discussed in the previous sections on the

probable developments of multinationalization, structure and technology
is largely dependent on how prices of the solid state watch can be
decreased over the next five to ten years, and how volume will grow,
either as a direct result of such price reductions, technological progress, or raarket growth.
Technology and marketing are those sectors
which are most strongly interdependent.

Basic to the understanding of the following discussion of the
Delphi findings on price reductions and volimie expansion is that cost
and price determination in the semiconductor industry are fundaraentally
different from the classical-mechanical watch industry.
Production pro-
cesses for the raanufacture of semiconductors are largely subject to

leaming curve behavior, i.e. as cumulative production and, therefore,
experience increases, considerable productivity gains will result.
Cost
decreases as a result of learning, in combination with the behavior of
167
the competition, lead to cascading price declines which are characteristic of the electronics industry and different frora pricing in the mechanical watch industry.
The following analysis is a response to a need for a more objective and independent assessment of the probable price and volurae
developraents of the solid state watch.
Those who have been involved in
pioneering this watch have made mostly optimistic projections, while

those of the me<Jianical watch industry on the whole tended to make more
pessimistic forecasts; neither one, however, stated his assumptions ex'plicitely.
flected
Projections were consequently highly subjective, and re-
the degree of optimisra or pessimism of the forecasters as well
as their motives for making the forecast. Lack of any scientific approach raakes these forecasts nothing raore than guesses.
The purpose of this quantitative assessment of the probable market developments is not to arrive at precise price and volume data, but
to test in general whether the optiraistic or pessiraistic hypotheses of
prior forecasts will be closer to the probable future reality.
The
major concern will be to formulate the boundaries of least and most

likely events, i.e. to arrive at a most probable range of possibilities.
The difficulty in making forecasts of this nature is corapounded by the
fact that two completely independent sets of forecasters express their
opinions which are based largely on different assumptions.
In general, the expectation is that actual values of forecasted
events would be lower than the average value forecasted by the traditional watchmakers from Switzerland and the American solid state watch producers (given same nimiber and equal quality of forecasts in each group).
168
The following reasoning would support this contention: (1) The Swiss
have had more experience in forecasting watch voluraes and prices than
the American electronics producers, although their long run forecasting
has been about ten to twenty percent below actual results; (2) their
assessraent of the future is founded on a thorough knowledge of the
market; (3) they seem to evaluate the chances of a battery-operated
watch more realistically than the electronics manufacturers; (4) their
viewpoint is more global than that of the Americans making; therefore,
their forecasts
are more representative of world-wide trends rather than
only of trends of the American market; and (5) American electronics producers and other "promoters" of the solid state watch have for the
most part purposefully biased their estimates upwards to such a degree
that many regard them as unreliable wild guesses.
a) Mechanical Watches
Certain developers of the solid state watch have predicted that
theraechanicalwatch will soon see the end of its days.
To what extent
will the new watch substitute, i.e. displace the classical watch?
Results have shown that theraechanicalwatch will continue to
be a success even ten years from now and that in the less than $30
price range its position will be a dominant one.
According to new
technology oriented experts, however, its major market segraent should

be in the less than $10 retail price range.
Classical technology orien-
ted experts on the other hand believe that its dorainance will primarily
be in the over $100 price range even if low-priced solid state watches
should exist.
169
b) Tuning Fork Watches (Question number 43)
The tuning fork watch, according to sorae, is the raost endangered
type of electronic watches; in fact, this has been confirmed by Delphi
results.
It is estimated that by 1978 the tuning fork will probably
have lost its dominant position among the electronic watches, due to
the competition frora the solid state watch.
The quartz-based version
of the tuning fork watches may be able to extend its life span into the
future without, however, iraproving its raarket share.
c) Quartz Crystal Watches (Question nimiber 39)

Quartz crystal watch is the generic term for two basic watch
types, the analog and the digital type, both of which use a quartz crystal as frequency standard.
One question attempted to find out when it
could be expected that such watches mdght dominate the world market.
Overall results are shown in Figure 33 from which these following principal observations can be made: (1) the raean results of the three probability forecast levels varied between 1980 to 1985, and (2) by 1986
a dorainance of the quartz crystal watch will have been established with
a 90 percent probability.
It will dorainate first the high and raedium price segraents of
the raarket. This result, however, does not give us a breakdown in percentage of the analog and digital watches in 1986.
d) Solid State Watches (Questions numljer 36, 41, 42 and 51)

What are the factors determining or liraiting the rate of growth
(public acceptance and development) of the solid state watch?
Experts
were asked to rank a list of factors in order of their importance rela-
170

Years
20
46.5%
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
II
III
Rounds
Years
21
48.8%
21
48.8%
0
100%
Frequency
>'
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
:fii
l'!
50% Probability
Forecasts
I
II
III
Rounds
Years
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
0
100%
Frequency
i
'
/
/
/
/
Forecasts
/
^
JI^
1
I
F i g . 33.
10% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Dominance of World Watch Market by

Quartz Crystal Watches
171
tive to the growth of the watch.
Factors had to be ranked for the short,
medium, and long term, as it was believed that the importance of each
factor might change over time.
For the short run, which was specified to be between one and
three years, i.e. the years 1974-76, the following overall ranking was
obtained:
Rank/Importance
1
2
3
4
5
6
7
8
Factors
Production capacity
Supply shortage of major components
Price
Technological limits
Consuraer acceptance of digital face
Dealer acceptance
Developraents of other ICs markets
"cosraetic" factors such as watch
size, thickness, legibility of tirae,
and reliability
These results make clear that in the first place factors not
inherent to the watch itself and which in the short run cannot be
changed by the producers are those which primarily limit its growth
between 1974-76. The variable price has been ranked as nimiber three
only, contradicting the general assertion that the current prices of
solid state watches are too high and could limit its market developraent.
What are the factors thatraightmost strongly affect the development of the solid state watch during its medium term future, i.e.
between 1976-78?
The following is a summary of the major results:
Rank/Importance
1
2
3
4
Factors
Production capacity
Price *
- Dealer acceptance
Consumer acceptance of digital face
172
Rank/Importance
Factors
5
6
7
Technological limits
Supply shortage of raajor components
Development of other IC markets
Other factors
Apparently, in the mediura terra future, the principal constraining factor will still be the limited capacity available to the electronics producers for the manufacture of solid state watch coraponents. As
could be expected, once the novelty and some of the uniqueness has worn
off, and corapetition has grown, the ability to lower the prices would
become more important.
Manufacturers find theraselves in the situation of
corapeting on a more real basis (i.e. real features), and consequently are
no longer able to capture the raarket through strategies based alraost
exclusively on novelty.
The following ranking shows the factors which will affect the
growth of the solid state watch in the long run: five or more years
from the date of the inquiry (i.e. beyond 1978).
Rank/Iraportance
1
2
3
4
5
6
7
8
Factors
Price
Technological liraits
Production capacity
Dealer acceptance
Developments of other IC markets
Other factors
Price, or the ability to compete at low prices, will be the

most important variable determining or limiting the future growth of
the solid state watch beyond 1978.
Since the watch essentially will
be a mass produced article by then, capable of satisfying the needs of

the price-conscious masses of the world, it should not surprise that
173
the capability of lowering prices will indeed be the most iraportant

factor.
The interpretation of the second rank for technological limits
takes two sides: First, technological progress is needed in order to

be able to lower costs and consequently prices, and second, technological
developments are needed to produce new products in order to remain competitive in the raarket with a new, different, and better product.
The principal factors, those ranked first, second, and third
place, which might have an impact on the solid state watch's future
development and acceptance, are suramarized below.
Rank
1
2
3
Short-term
Medium-terra
Long-term
Production capacity
Shortage of major
coraponents
Price
Production capacity
Price
Price
Technological
liraits
Production
capacity
Dealer acceptance
Assumptions about growth rate of the solid state watch vary

considerably depending on the technology orientation of the experts.
In the eyes of the new technology experts its growth rate over the next
three years (1974-76) is considered to be high.
Traditional experts
on the other hand think that it will develop only slowly over that same
period.
But regardless of the growth rate, it is expected that aggres-
sive companies belonging to both technology camps will enter the raarket
at an early stage.
Its growth rate will be primarily affected by re-
liability which tends to have a negative irapact.

With a 90 percent probability of being true, the solid state
watch will take the place of the autaraatic raechanical (j ewel-lever)
watch by 1979, given the sarae price level (see Figure 34). Its capability for outselling the classical watch type will not be limited to the
174
Years
13
30.2%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
=2.2
10% Probability
Forecasts
III
II
Rounds
0
100%
Frequency
Kl
'ir
Years
18
41.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
s=>
II
III
Rounds
50% Probability
Forecasts
0
100%
Frequency
Years
90% Probability
Forecasts
20
46.5%
1976
1974
II
III
Rounds
0
100%
Frequency
Fig. 34. Solid State Watch Taking the Place of the

Automatic Jewel Lever Watch, Given the
same Price Level
175
same price levels, but will also include the lower priced segraents.
In
the opinion of the experts, the greater accuracy of solid state watch
will be the principal feature contributing to this development.
Will the solid state watch even become a throw-away itera?
Delphi results show that on the average chances are that between 1980
and 1983 a disposable watch with a solid state technology base will be
marketed.
The possibility for introducing such a watch will be greatly
enhanced by the ability to raanufacture low-priced, but reliable solid

state watches.
However, the general belief is that disposability would
primarily apply to those coraponents which have the shortest life. (See
Figure 35).
e) Volurae Projections
Overall projections (Question nxmiber 61): Experts were requested to raake
forecasts about the expected geographic distribution of total annual
world watch production, expressed in percent of total production in
units.
The principal results are represented in Figure 36 which shows
the minima and maxima percent shares (thin lines), the mean results of
the Swiss and American subgroups (thick heavy lines), representing the
pessimistic and optimistic orientation (bounding the black area), the
overall means (dotted lines), as well as the frequency diagram of the
answers.
Percentage results of share forecasts raay not add up to 100
percent due to inconsistencies of some of the responses obtained.

However, more important than "exact" figures which in any case cannot
be obtained, are trend lines.
The jnajor conclusions that can be drawn
from the graphs are the following: (1) The American watch industry will
176
Years
14
32.6%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
II
III
Rounds
10% Probability
Forecasts
-1
0
100%
Frequency
iii|
Years
13
30.2%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
w;
50% Probability
Forecasts
I
II
III
Rounds
0
100%
Frequency
Years
Forecasts
19
44.2%
I
J i g . 35.
II
III
Rounds
0
100%
Frequency
Promotion of Solid State Watches as Non-Durable

Consumer Goods (Throw-away Watch)
Cf-^
177
<e
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178
be increasing its world share, from about 12 percent today to more

than 30 percent by 1990, essentially at the expenses of the Swiss and
those industries from other producing countries; (2) it is generally expected that the Swiss' dominant position will futher erode over the years
from more than 40 percent in 1973 to less than 30 percent by 1990; (3)
the Japanese watch industry, according to the forecasts, would only grow
rather slowly, whereas the other raajor producing countries will experience first a decline and then will retain at a constant world share;
(4) it appears that by 1990 the Swiss would have lost their leadership
position to the American watch industry; and finally, (5) it can be "
seen that major changes in world shares are likely to occur during the
period from the present to 1980,raostlikely due to the competition of
the solid state watch.
Mechanical watches (Question number 60): Experts were requested to
make forecasts of total world production of mechanical watches for three
years, 1980, 1985, and 1990. The results are summarized in Figure 37
which provides the number of estimates raade for each year, the overall
mean results together with the histogram of the estimates, a comparison
of the estimates made by the Swiss and American experts
as well as the
major trend lines (the raeans, therainiraaand maxima estimates).

Regarding mechanical watch production projections, the following
principal results appear significant for further discussion; (1) taking
the estiraates of all respondents, it can be seen that on the average
(dotted line)raechanicalwatch production should rise only to 227 by
1980 frora a level of about 220 raillion units in 1973 (or an increase
179
co
d)
xu
ucd
&
M
Ct
O
M
fl
cO
4:
0

M
2
0
M
TS
(U
S
II
C^J
H m
0
U4
0 co
C
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0
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0
H
M
M
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s
11
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{lllli
180
of about three percent, and to 237 in 1985 (or an increase of about

twelve percent from 1973), and to 254 million units in 1990 (or an increase of about fifteen percent from 1973); (2) the extreme values,
minima and maxima, of the forecasts (the thin lines) lie between 80 and
330 million units for 1980, 20 and 450 million units for 1985 and 10
and 650 million units for 1990; (3) the comparison between the forecasts
made by American and Swiss expertsthose who would be most diametrically opposedindicates that the mean (heavy thick lines) of the Swiss
shows a 77 raillion increase by 1980 over 1973, whereas the Araerican experts' mean indicates a 35 million unit decrease compared to 1973; for
1985 the Swiss estimate that volume will increase another 60 million
since 1980, while Americans feel that it will further decrease by 9
million units; by 1990, according to the Swiss group raean, mechanical
watch production should still grow another 53 million units, while the
Americans believe that it will decrease another 5 million; (4) taken
the Swiss and the Americans as the most optiraistic and the pessiraistic
forecast limits, it appears, therefore, that raost optiraistically the
mechanical watch will have grown to a voliome of 420 million units by
1990, representing an improvement of 90 % in 18 years, while on the
pessimistic side its volume could decrease by 39 million units by 1990
or by about 17 percent compared to 1973; (5) the differences of the
means between the Swiss and the American forecasts are 112 million units
for 1980, 171 million units for 1985, and 239 million units for 1990;
(6) estimates are considerably and increasingly dispersed the farther
into the future they go; (7) the nxnnber of forecasts made decreases as
forecasting time increases, and (8) at the 1980 forecast level there are
181
two modes, one around 297 million units (the Swiss forecasting) and one
around 185 (the American forecasting), whereas for other years the distributions of the estimates are flatter without any significant modular
peaks.
Electronic watches (Question nuraber 48 and 49): Electronic watches, according to the definition given on Round III, include tuning fork, quartz
analog and solid state watches. It is estiraated that 25 percent of the
total annual Swiss watch production will be electronic by 1978, with a
10 percent probability, or by 1984, with a 90 percent probability (Figure 38). Experts believe that the Swiss have sorae chance to corapete
in the solid state field despite the rudimentary size of their present
IC industry.
The general opinion is also that the speed at which the
Swiss will mke their transition to solid state will not materially
affect their long-run chances or corapetitive position.
The Japanese, it is estimated, will have reached an output of
5 million electronic watches per year by 1977, with a probability of
10 % or by 1980 with a probability of 90 % (see Figure 39).
The main industry characteristics that will enable them to
reach this output level ranked according to their importance are shown
below:
Rank
1
2
3
4
5
6
Factors contributing to electronic watch output level

Dynamisra of Japanese watch industry
Aggressive risk-taking
Responsiveness of organizational structure to change
in market place
New entries of electronics companies
Marketing know-how
- strong financial support from government via banks
and administrative help from MITI
182
Years
11
20.6%
200!
2001
1998
1995
1992
1989
1986
1983
1980
1977
197U
10% Probability
Forecasts
II
III
Rounds
Years
18
41.9%
200H
2001
1998
1995
1992
1989
1986
1983
1980
1977
197^
'iil*
50% Probability
Forecasts
^^^*^^
>
1
II
III
Rounds
Years
15
34.9%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
197U
0
100%
Frequency
m
"ZIZIZ
II
III
Rounds
Fig. 38.
0
100%
Frequency
Forecasts
0
100%
Frequency
25. % of T o t a l Annual Swiss Production

( i n U n i t s ) w i l l be E l e c t r o n i c
183
Years
13
30.2%
199U
1992
1990
1988
1986
1984
1982
1980
1978
1976
197H
10% Probability
Forecasts
i n i
'^
II
III
Rounds
Years
16
37.2%
0
100%
Frequency
199H
1992
1990
1988
1986
198H
1982
1980
1978
1976
1974
50% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Years
Forecasts
17
39.5%
0
100%
Frequency
F i g . 39.
Japanese Electronic Watch Production

5 Million Units per Year
184
The listing suggests that the Japanese watch industry will be

able to move with vigour into the direction of electronic watches,
in the first place because of the industry's dynamic, aggressive and
flexible nature, and in the second place because electronics corapanies
might enter the production also.
Solid state watches (Questions number 44, 47, 52, 60, and 62): An
identical volume projection as made for mechanical watches (see pp.
for purposes of comparison) was also requested from the experts
for solid state watches.
Projections for solid state watches are shown in Figure 40 from
which these following major observations can be raade: (1) the overall
mean (dotted line) indicates that by 1980 the solid state production
volurae should have reached 41 raillion units, by 1985 95 raillion units
and by 1990 159 million imits; (2) the miniraa and maxiraa values (the
thin lines) of the estiraates are 1 and 100 raillion units at 1980, 2 and
250 raillion units at 1985, and 10 and 600 raillion units at 1990; (3)
the comparison of the means of the raajor subgroup results (the heavy
thick lines) is presented in Table 13.
(4) The Swiss results have a
strong upward bias because of one expert who raade the raost optimistic
forecasts.
After elimination of these extreme values the revised means
are only around 10 million units for 1980, 18 million for 1985 and 62
million for 1990.
The Swiss results inay also lack the necessary repre-
sentativeness, since only between four to six experts have contributed

to the forecasts.
If one takes the forecast of the new technology orien-
ted experts as optimistic and pessimistic forecast limits, it can be

seen that solid state watch volumes will most likely vary between 10
185
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(U
o
.u
cti
o
9>
:s
(U
4->
cO
U
co
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14-1
(U
flO
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4->
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3
O
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186
TABLE 13
COMPARISON OF SOLID STATE WATCH PRODUCTION
FORECASTS OF MAJOR SUBGROUPS (MEANS)
Subgroups/Participants
Solid state watch production

1980
1985
1990
(in millions of units)
Traditional-to-new technology
oriented (TNT)
Swiss (CH)
American (US)
New technology oriented (NT)
13
22
52
62
36
76
105
140
75
196
155
232
and 62 million units at 1980, between 36 and 140raillionunits at 1985,

and between 75 and 232raillionunits at 1990; (5) the differences of
the means between these two extreme forecastsbetween these two groups
are thus 52 million units at 1980, 104raillionunits at 1985 and 158
million units at 1990; (6) the dispersion of estiraates increases the
farther away forecasts are to be made; (7) according to the frequency
distribution there appears one peak at the 1980 forecast level around
41 million units, one around 150 million units for 1985 and one around
200 million units for the 1990 forecast.
Comparing the volume developraents of the mechanical and solid
state watch, the following principal observations can be made: (1) estimates show a considerable range of variation between the major subgroups; (2) the range of volurae projections increases the further in the
future the forecasts lie; (3) over the next 15 years mechanical watches
could possibly grow almost 100 percent or in the worst case decrease
by almost 20 percent cojnpared to the 1973 production volume; (4) the
solid state watch will most likely grow in volume between 75 and 232
million units by 1990; (5) whereas the mechanical watch might loose in
187
importance, trends indicate that the solid state will only continue to
grow in the future.
Annual production volume of ten million solid state watches
should be reached with a 90 percent probability by 1980 (see Figure 41),
but with certainty within the next ten years as a result of market conditions and strategies of the semiconductor producers.
This result is
in general agreeraent with projections shown in Figure 40.

Furtherraore, participants were also asked to project the share
of solid state watches in relation to the total annual world watch
production in units.
Figure 42 shows that the U.S. will capture the
lion*s share of the solid state raarket, and that the Japanese will grow
faster into the direction of solid state watches than the Swiss.
It
must be cautioned that the percentages do not necessarily correspond

to statistics obtained on earlier questions, e.g. according to the figure by 1990 the solid state market share would be 58 percent of total
annual world watch production which would compare to 42 percent as
measured by the raeans of Figure 40.
The results show only major trend
lines but should not be considered representative due to the sraall

number of responses.
More specifically, participants were also asked to raake individual market share predictions for the solid state watch for 15, 25,
50 and 90 percent in units of total world watch market.
The results for
the 15 percent market share are shown in Figure 43. The raean forecasts
range from 1975 to 1980 for the three probability levels.
Average esti-
mates by Swiss experts are seven years above the overall mean for the 50
percent probability level and four years above the 90 percent level.
188

Years
17
39.5%
199H
1992
1990
1988
1986
198U
1982
1980
1978
1976
197H
10% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
.111
Years
20
46.5%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
<
50% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Years
22
51.2%
Forecasts
I
Pig. 41.
II
III
Rounds
0
100%
Frequency
T o t a l World Production of Solid S t a t e Watches =

10 M i l l i o n U n i t s p e r Year
189
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190

Years
14
32.6%
199H
1992
1990
1988
1986
198H
1982
1980
1978
1976
197H
g>
II
III
Rounds
10% Probability
Forecasts
0
100%
Frequency
1
Years
<
22
41.2%
50% Probability
Forecasts
II
III
Rounds
Years
19
44.2%
199^
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
i>
-,
L
II
III
Rounds
Fig. 43.
0
100%
Frequency
Forecasts
0
100%
Frequency
15 % of T o t a l World Watch Marked (in

U n i t s ) Will be Solid S t a t e Watches
191
A 25 percent share of the total world market for solid state
watches can be expected to occur with a 90 percent probability by 1983
(see Figure 44).
Traditional technology oriented experts are in their
average estimates about three years higher than the overall mean, whereas electronics experts* mean is approximately two years earlier.
Solid state watches will attain a 50 percent market share in
the more than $100 price range with a 90 percent probability by 1982
(see Figure 45).
This forecast is to be modified by -2 years according
to the new technology experts or by +6 years according to the traditional technology oriented experts. However, in the opinion of two Swiss
experts such a volume sharing in the upper price class will not happen
because of (1) the styling limitations of the solid state watch, and (2)
inflation which will drive prices for the mechanical watches up to more
than $100.
The solid state watch should have reached a total world market
share of 90 percent with a 90 percent probability by 1990 according to
forecasts made (see Figure 46).
However, in light of information ob-
tained on previous questions, the result would have to be revised upward.
Some expressed strong reservations that its share could even go
as high as 75 percent, since it is believed that the key target market

of the solid state watch would be in the above $30 price range.
In con-
trast to the average results, new technology oriented experts have considerably more optimistic estimates about potential market shares and
lower price limits for the key market segments.
A summary of the principal statistics of market share fcrecasts
for the solid state watch is shown in Table 14.
192
2004
2001
1998
1995
1992
1989
19 86
1983
1980
1977
197U
Years
14
32.6%
<>
Forecasts
(>
1
>
1
II
III
Rounds
0
100%
Frequency
Years
tm
3'3l
24
55.
Forecasts
II
III
Rounds
0
100%
Frequency
Years
Forecasts
21
48.8%
P i g . 44.
II
III
Rounds
0
100%
Frequency
25 % of Total World Watch Market Cin

Units) Will be Solid State Watches
193
Years
14
32.6%
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
y
/
/
I^^^^^^J f_
II
III
Rounds
Years
21
48.8%
17
39.5%
0
100%
Frequency
\
\m
50% Probability
Forecasts
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
0
100%
Frequency
Forecasts
~~~~1
II
III
Rounds
P i g . 45.
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
II
III
Rounds
Years
Forecasts
\
0
100%
Frequency
50 % (in Units) of World Harket Seginent of Expensive

Watches Will be Solid State Watches
194
Years
14
32.6%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
ii
II
III
Rounds
10% Probability
Forecasts
0
100%
Frequency
'i
Years
11
25.6%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1
<t
rai
4
50% Probability
Forecasts
n
^ÎZ
III
II
Rounds
-^
I
0
100%
Frequency
Years
14
32.6%
Forecasts
II
III
Rounds
P i g . 46.
0
100%
Frequency
90 % of Total World Watch Sales (in Units)

Will be Solid State Watches
195
TABLE 14
COMPARISON OF MARKET SHARE FORECASTS
OF SOLID STATE WATCH
Probability year
forecast levels
Statistics
Solid state market share as % of

total world market
15 %
25 %
50 %*
90 %
50 %
Minimum
Mean
Maximum
1977
1979
1987
1977
1982
1990
1975
1980
2000
1981
1987
1995
90 %
Minimum
Mean
Maximum
1978
1980
1990
1979
1984
1999
1976
1982
2010
1985
1990
2000
*The 50 % market share is referred to the above $100 price

range only and not to total world watch market
This table makes clear that the 90 percent market share forecasts appear to be unrealistic in relation to the 25 percent market
share prediction.
Certainly, solid state watches cannot increase their
market share from 25 to 90 percent of total world market in a matter

of five to six years. On the other hand, an increase in the watch
market share from 15 to 25 percent within a period of three to four
years seems to be realistic.
Another volume-related question attempted to find out when half
of the Swiss watch production might be solid state. According to the
17 experts making year forecasts half of the Swiss' annual production
will be solid state around 1986 with a probability of 90 percent;
however, experts remain somewhat in doubt as to whether the Swiss indeed
have the technological and organizational know-how to handle such a
transformation.
Therefore, opinions are divided on whether the Swiss
can coii5)ete successfully in this field.
Opinions about whether the
196
Swiss will always produce more mechanical than electronic watches are
divided.
However, the Swiss experts themselves believe that Switzerland
will always produce more mechanical watches. (See Figure 47).
f) Price Projections
Solid state watches (Questions number 56 to 59 and 63): The respondents
were asked to outline on a graph with volume/price axes their estimates
of future price developments.
Sufficient responses (n=17) have been received regarding future
price developments to establish major trend lines. Figure 48 represents
the envelope curve of all the price curves drawn, and therefore shows
the upper and lower limits of the price projections made by experts.
Q
Accordingly, prices started out at $120
per unit and more in 1974.
By 1980 most optimistically, prices of solid state watches could go as

low as $14 per unit, but certainly should reach a level of $45. At
1985, experts believe that the minimum price level should lie between
$10 and $26 per unit.
By 1990, the solid state watch should almost
certainly be sold at $20 or less.
Of interest to note is that the most
optimistic forecast starts to flatten out around 1981, which really

means that beyond that date no further significant price reductions
appear to be possible, or are expected.
Furthermore, Figure 48 also
reveals that the principal price declines should occur between now and
1980 in the most optimistic case, or most pessimistically between now
^Prices shown are lowest prices, i.e. the graph represents the
possible movement of the price frontier and not average sales prices CASP)
197
Years
12
27.9%
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
m
II
III
Rounds
10% Probability
Forecasts
0
100%
Frequency
i
I
Years
12
27.9%
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
l
1
II
III
Rounds
Years
17
39.5%
2114
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
0
100%
Frequency
;
/
/
/
Forecasts
1
II
III
Rounds
Fig. 47.
Forecasts
0
100%
Frequency
Half of Annual Swiss Watch Production in

Units Will be Solid State
198
Fig. 48. Retail Price Projections of

Solid State Watches
(in U. S. $ per watch)
Question no. 63
and about 1985.

A separate question focused on the appearance of a solid state
watch in the $25-35 price range. Results are shown in Figure 49 which
reveals that a solid state watch in this price range might become a
reality with a 90 percent chance of occurance by 1982. There are no
significant differences among the subgroup means. This indicates that
the overall estimate is of a high degree of reliability.
Respondents were also asked to make forecasts about when they
thought a solid state watch at less than $50 might appear on the market.
The major results are shown in Figure 50. It can be seen that
with a 90 percent probability of being true such a price level might

be reached by 1980.
For certain mechanical watch types Japan has been the price
199
Years
12
27.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
:=F>
II
III
Rounds
Years
18
41.9%
10% Probability
Forecasts
0
100%
Frequency
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
31
"
:ii
50% Probability
Forecasts
II
III
Rounds
0
100%
Frequency
Years
18
41.9%
Forecasts
II
III
Rounds
J i g . 49.
0
100%
Frequency
Appearance of the $25-35 Solid State Watch
v:
200
Years
16
37.2%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
/
/
II
III
Rounds
Years
21
48.2%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
24
55.8%
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
0
100%
Frequency
||
't
50% Probability
Forecasts
=E^
0
100%
Frequency
II
III
Rounds
-~~~
Fig. 50.
II
III
Rounds
Years
Forecasts
Forecasts
0
100%
Frequency
Appearance of the $50 Solid State Watch
201
setter in recent years.

solid state watches.
Some expect a similar price leadership for
To test this contention, experts were asked to
predict when they expect the Japanese producers to introduce a $10 solid state watch.
Results have shown that Japan may with a probability
of 90 percent produce a solid state watch at $10 retail price between

1980 and 1987.
It is further estimated that the cumulative unit pro-
duction required to bring prices down to this level would have to be

somewhere between 200 and 400 million units.
Experts, however, believe on the average that the United States
will be the price leader in this sector and not Japan.
There also
exists a general doubt, considering the hign inflation rates in Japan

in particular and also in the other major producing countries, whether
the realization of a $10 solid state watch is even possible. (See Figure
51).
A summary of the principal results as obtained on the previous
three questions which focused on the decreasing of the prices for solid
state watches is given in Table 15.
An analysis of this comparative table shows that a 30 to 50
percent reduction from a $50 base price can be achieved within an average period of only about two years.
202
Degree of familiarity = 2 . 0
Years
8
18.6%
10% Probability
Forecasts
II
III
Rounds
Years
8
18.6%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
<i
'H
=^^=T7
II
III
Rounds
Years
20.9%
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
50% Probability
Forecasts
0
100%
Frequency
^^3
II
III
Rounds
Fig. 51.
0
100%
Frequency
Forecasts
0
100%
Frequency
Appearance of t h e $10 Solid S t a t e Watch i n Japan
203
TABLE 15
COMPARISON OF PRICE LEVEL FORECASTS FOR
SOLID STATE WATCHES AND REQUIRED
CUMULATIVE UNIT PRODUCTION
Probability year
forecast levels
Statistics
Solid state price levels and

required cumulative unit production
$10*
$25-35
$50
50 %
Minimum
Mean
Maximum
1977
1980
1982
1975
1978
1988
90 %
Minimum
Mean
Maximum
1979
1982
1986
1976
1980
1998
50 %
Minimum
Mean
Maximum
1981
1983
1985
90 %
Minimum
Mean
Maximum
1985
1987
1990
$25
Curve
Fig. 48
Minimum
Mean
Maximum
Cumulative unit production

required to reach the price
level
$35
1977 1978
1980 1981
1983 1985
12-25 millian
*Appearance of a $10 solid state watch in Japan.
1977
1978
1980
30-60 millian
CHAPTER V
SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS
1. Summary
The foregoing study attempted to make a thorough and unbiased

investigation of the situation in the "World Watch Industry" during the
post- World War II era and in particular during the transitionary
period which began as a result of the introduction of the solid state
watch. However, it focused primarily on the future alternatives that
might ensue from these technological developments.
Geographically, the
study limited itself to the principal producing countries, in the main

the United States, Japan, and Switzerland and attempted to find answers
on how the introduction of the solid state watch might affect the degree of multinational involvement, the structure of the industry, the
technological aspects as well'as the market-related factors.
The study first defined the watch, described its major characteristics and then summarized the most important events that have
occurred during the post-World War II period in the "World Watch Industry."
Second, it analyzed in detail the impact of the electronics tech-
nology on the traditional mechanical industry during the so-called transitionary period.
In Chapter II the focus of the study shifted .to an
analytical description of the principal research methodology, the Delphi

technique and also provided information on the conduct of the Delphi
204
205
experiment.
The primary findings of the Delphi experiment are reported
in Chapter IV.
The study did not pretend to provide all the answers to the
problems, but it built the necessary ba<kground to- ask appropriate
questions.
events.
Its purpose was not to determine in an accurate way future
More important than trying to achieve an artificial degree
of accuracy which will in any case become invalidated by subsequent

events, was to outline the major problems and their possible future altematives.
It must be kept in mind that the forecasts were made
under given environmental conditions existing in 1973 and 1974.
Most
certainly, the energy crisis, its impact on the world economy and the
watch industry cannot be denied. Economic slowdowns, e.g., have resulted in lay-offs and in reduced working hours in the Swiss watch
industry. Nevertheless, despite these environmental changes, forecasts obtained through the Delphi method were not invalidated.
2. Conclusions
a) The Delphi Experiment

Concerning the Delphi experiment on the future of the "World
Watch Industry" the following can be said by way of summary.
One of
the most difficult phases of the Delphi method proved to be the selection of experts. The difficulty was made worse by the competitive
environment in which this study was carried out.
The major problem
in this regard was to be able to establish a rapport with the panelists and to induce them to collaborate.
However, any collabora-
tion is not obtainable with ease, and particularly not a collabora-
206
tion in matters that many might be considering confidential in nature.
Since only one panel was used because of time and financial reasons, some
predictions might have been somewhat compromised.
The type of problems forecasted, the quality of the panels, and/
or the type of industry thinking may have accounted for the fact that
most of the forecasts were medium-term only. Another reason could be
that the major impact of the solid state watch will be felt before 1980,
thus making any longer terms assessment unnecessary.
The experiment steadily improved its performance over the three
rounds, as can be measured by the response rate which increased from
3.62 to 28.29 percent. Such a higher participation rate was the result of
a more selective screening of potetial participants and the maintaining
of interest of those who had contributed on prior rounds and/or were visited personally, and with whom a personal rapport could be established.
In addition, higher response rates were attained through better questionnaire design, a better focus of the questions on the principal problems
and improved structure and lay-out.
experts participated.
On the first round a total of 24
This number increased to 43 on the last round.
Of
these, a total of 11 experts remained participants troughout all three

rounds.
perts.
The average response rat was highest for the new technology exFurthermore, the participation analysis shows that of those in-
terviewed in the United States, and who later received a Delphi questionnaire, 25 percent responded and that this group maintained its participation.
Even higher results were obtained from those interviewed in Swit-
zerland.
This indicates that personal contacts significantly added to the
207
effectiveness of the methodology used in a competitive environment.
In-
vestigation also shows that the non-response rates for the quantitative
forecasts were lower than for the qualitative evaluations, which indicates that experts avoided raaking year forecasts, but preferred to take
issue with a comment.
On the average, however, those who participatad
in all the three rounds answered approximately 55 percent of all questions.
Regarding the divergence/convergence of the answers obtained,
most Round III results tended to diverge on the average from the previous
round results.
This does not mean that the results of the final round
are less reliable.
On the contrary, since Round III participation was
almost twice as big as on Round II, it would have to be concluded that

the quality of the Round II results was inferior to that of Round III.
The Delphi survey shows that the opinions were divided along the
technology orientation.
On most of the issues analyzed, the opinions
of the group of new technology oriented experts strongly differed from

those of the classical technology.
Both of these groups made forecasts
starting from two diametrically opposed premises.
On one hand, the opti-
mistic estimates of the electronics experts show that the solid state
watch will have an accelerating growth rate, and will soon displace the
mechanical watch.
The classical watchmakers, on the other hand, continue
to be strongly convinced that the mechanical watch is here to stay and

that, in fact, it will continue to be successful.
b) Fiitiire Multinationalization Trends

Analysis of the Delphi findings on the probable multinational
208
developments in the future of the watch industry can be summarized by the
following principal conclusions:
(1) Licensing will not be the predominant form for transferring
solid state technology from American electronics companies to traditional
watch companies, due to the generally non-proprietory nature of the knowhow content.
(2) The preferred vehicle for carrying out electronics technology
transfers will be joint ventures.
(3) Multinational marketing and manufacturing of solid state
watches is expected to become similar between 1976 and 1979 to multinational marketing and manufacturing of electronic calculators.
(4) The Swiss watchmakers are believed to be in a position between 1976 and 1980 to intensively market a Swiss-made solid state watch
in the United States, supplied with American electronics components,
however.
(5) The Swiss' success with solid state watches will depend primarily on the licensing or sourcing agreements they are able to arrange
with the owners of the electronic technology, the American semiconductor
firms.
(6) It is expected that between 1975 and 1977 the Swiss will
significantly increase their purchases of electronic components from
I
their American suppliers.

C7) The American superiority in the sector of solid state technology will continue at least until 1980, dictating the direction of
intemational know-how transfers, and in effect ruling out the possibility for a reversal of the technology flow.
209
(8) The Japanese are expected to enter large volume exports of

solid state watches between 1976 and 1979.
(9) The general opinion is that the Japanese watch industry
will be more aggressive in the sector of solid state watches than the
Swiss watchmakers.
(10) The major multinationalization trends relating to the developments of the solid state watch will be between the United States
and Japan on one hand and the United States and Switzerland on the
other hand.
(11) The South East Asian area will develop its electronics
technology to an internationally respectable level by around 1980.
(12) There will be a growing tendency that other countries will
become manufacturing bases for components production for the mechanical
as well as the solid state watch, as a result of greater nationalism
among emerging countries and the domestic capacity limitations of both
the traditional and electronics companies.
(13) As long as the solid state watch has not fully matured,
extensive foreign direct investments cannot be expected, and will not
be attractive , since, as one expert commented, "technologies will become
obsolete as fast as transfers can occur."
(14) Geographic decentralization to so-called "low-cost" countries will only happen when the retail price of the watch has fallen to
a considerably low price level.
c) Future Structural Developments
The major impact of the solid state technology on the structure
210
of the industry can be summarized in the following conclusions:

(1) The solid state watch sector in the United States is expected to stabilize by 1980, by which time no significant new entries
will occur and the industry will include only ten major companies.
(2) By 1980, it is expected that electronics companies will
occupy a dominant role in the American watch industry.
Most likely
new leaders are Texas Instruments, Rockwell International, and Motorola

which will be able to move into that position due to their technology
base, financial resources, and managerial skills.
(3) Cross-sectoral cooperation between the traditional and the
new technology sectors of the watch industry are more probable than independent problem-solving.
Such linkings may even become a necessary
condition for survival of the small companies.

(4) Small single-line electronics companies will be disappearing
most likely between 1978 and 1984.
(5) Forward integration of major manufacturers of solid state
watch components into marketing of components and watches will most likely happen between 1976 and 1979.
(6) There is considerable doubt whether the present leadership
in the Americap watch industry will continue through 1980 and beyond.
(7) Competition is expected to be greater among the new industry
entrants themselves than among thera and the traditional watch companies.
(8) The American leadership position in solid state technology
is based on their advanced position in inicro-electronics technology,
their multinational approach to manufacturing, and their leaming curve
pricing behavior, which are all under company control.
211
C9) If the solid state watch were to grow very rapidly, the
Swiss would suffer greatest structural repercussions, and, in order to
maintain their position, would accelerate their direct investments in
American companies.
ClO) In Japan, electronics companies, of which the most iraportant ones appear to be Matsushita, Hitachi, Sharp and Sanyo, are expected
to enter solid state watch production between 1975 and 1979.
d) Technological Developments
The principal conclusions arrived at through the Delphi study
were found to be the following:
(1) Technological leadership of the American watch industry is
expected to continue during the next five years.
(2) The Swiss should be in a position of mass producing integrated circuits through joint ventures by 1982.
The highest confidence
was placed in Ebauches S.A. for closing the technology gap.

(3) It is very likely that between 1978 and 1983 a new frequency standard will be developed.
(4) Nuclear batteries, although technically feasible, appear
not to find consumer acceptance, and from an economic point of view
offer few advantages over alternate sources.
(5) Major developments efforts on circuits will concentrate on
the reduction of power consumption and on miniaturization of the cicuits
which helps improve the aesthetics of the watch and its physical characteristics.
(6) Time displays of the liquid crystal type will be superseded
212
by the end of this decade, at which time it is expected that a new
electrochromic display system, which will offer the following principal
advantages over preceding systems, will have benn developed and introduced: low power consumption, high technical reliability, and satisfactory readout characteristics.
(7) Problems associated with the liquid crystal watch will be
resolved in a matter of two to three years.
(8) A new display technology is to offer improvements in the
following specific areas: readability, appearance, power consumption,
reliability, and cost.
(9) Multiple functions will be introduced in the short run;
essentially, they will provide three basic functions: measurement, calculation, and communication.
(10) Major technological innovations with a great business
potential are expected to occur first in the United States over the
short as well as the medium term.
e) Future Market Developments

Principal market developments of the future are summarized
below:
(1) The classical mechanical watch will continue as a successful product for at least ten years after introduction of the solid state
watch.
(2) Tuning fork watches will probably have lost significance by
1978, unless more sophisticated quartz based versions become available.
(3) The rate of growth of the solid state watch is determined
213
in the short run by production capacity, supply shortages of major components, and price.
In the long run, price will be the most important
factor, followed by technological Itmitations and production capacity.

(4) World market shares will change between the present and
1990, with American watch producers gaining from 12 percent to more than
30 percent, with the Swiss and those industries from other countries
being the losers.
(5) The mechanical world watch volume could increase to about
420 million units annually by 1990, according to the Swiss; however,
according to the new technology oriented experts, its volume would decline by 39 million units during the same period.
(6) Volume of solid state watches is projected to be expanding,
reaching a level of 232 million annually by 1990, according to the new
technology oriented experts, whereas, according to the Swiss, it would
only get about 62 million units.
(7) Solid state watches are expected to reach a 25 percent
share of the world market by 1980 with a 50 percent probability, or by
1982 with a 90 percent probability.
(8) Prices are shown to decline significantly over the short
term; beyond 1980, however, decreases will be much slower.
(9) A $10 solid state watch might become a reality around 19831987.
3. Recommendations
a) Industry Recommendations
From an analysis of the Delphi findings, the following industry
214
recommendations emerge.
Due to the completely different situation bet-
ween the traditional watchmaking companies and those challenging them,

the electronics companies, it is necessary to separate the outline of
the recommendations accordingly.
To the electronics companies attempting to enter solid state
time piece manufecturing, or those companies which have already participated in it, the following recommendations might be of value:
(1) Electronics companies should acquire a better knowledge of
the principal world watch markets in order to be able to penetrate
foreign markets before Swiss-made (with American supplied components)
watches can reach these markets.
(2) The implications of the digital face and the buyer's insistence on higher accuracy are to be studied in more depth.
(3) Electronics time piece manufacturers should also improve
their overall marketing package to the final consumer; in particular,
they need to stress their technological lead and the ultra-accuracy,
which is a result of this technology.
(4) In the case of the traditional watch companies, electronics
firms should be careful not to precipitate into the market with a poor
product and an inadequate market strategy.
(5) A talk about future sales prospects should be based more on
facts and reliable data rather than estimation; this means that more
market research is needed.
It is suggested that the traditional watch companies, in particular the Swiss, follow these recoramendations:
(1) They should be careful about not moving too fast and prema-
215
turely into the solid state watch market and at the risk of abandoning
in the haste their old expertise.
It is better for them to wait a little
longer and to do it right rather than to hurry, even despite the effects
of the learning curve on production cost.
(2) Traditional watch companies should attempt to recruit their
expatriate nationals who have acquired either raanagerial or technical
skills in the United States.
(3) Part of the problera could be solved through a series of economic policy changes which would help soften the impact of the solid
state watch or which would offer protection.
(4) Traditional watch companies need to rethink their fundaraental
objectives, since the industry has corae to a strategic branching point
which might require a re-orientation.
(5) In general, traditional companies should intensify their marketing efforts in areas with greatest growth potential for mechanical
watches.
(6) Traditional watch companies have in the past neglected to
enter international arrangeraents viaraanageraentcontracts.
It is sug-
gested that they increasingly look into this direction.

(7) Multinationalization can offer certain distinct advantages
to companies as the Bulova and Timex examples have shown.
Therefore,
the recommendation is to intensify their foreign operations and to diversify both production and research in an attempt to become a truly multinational company.
(8) Smaller companies, which might be exposed to the technological challenge, should seek partners within the watch industry or outside
216
of it in order to pool resources and interests and to present a stronger

force.
b) Dlphi Recomraendations
With respect to the Delphi experiraent on the watch industry and
the methodology itself, the following recomraendations are possible:
Cl) For similar applications of the Delphi raethod, i.e. for an
intemational panel, the administration of such an experiraent should be
geographically decentralized, which, in t u m , means that questionnaires
would have to be translated into the local languages.
Added adrainistra-
tive efforts seem to be justified since turn-around times can be reduced

an communication between panelists improved.
C2) The study should originate from prestigious, reliable and
trustworthy professional or academic circles which should not in any way
be affiliated with industry or commerce.
(3) It is also suggested that for similar industry studies, a
pre-Delphi is started with the objective to compile the group of panelists through an elaborate identification process.
(4) The size of the group of panelists should be kept to a
minimum rather than a maximura.
More efforts should go into the search
of better qualified experts rather than into a higher number of experts.

(5) Another pre-Delphi should also be started to determine what
areas the major Delphi is to investigate more closely.
(6) Industry Delphi should with preference be carried out by a
group of professionals rather than one researcher alone.
(7) The Delphi questionnaires need to be thoroughly tested be-
217
fore mailing them out, particularly if panelists are grouped from different backgrounds.
(7) Attempts should be made at setting up the questionnaire
in such a way that collation is f acilitated and reduced to a minimum.
The more unstructured subjective decisions the administrator has to
make, the greater the source for errors.
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1953.
APPENDIX A
vO
Q
T>
C <
3
0
>
sl
^ o
0rf
IL
>>
1 *
S-r'
o .
ch Ir
Ider
Dircctor; Watch narkcting inatltuta

Vicc-dircctor, Engineering; M ^ E watch comi>on*nt nfgr.
Projects Managcr (QAW.SSW); MÊ watch nfgr.
Sccrctary; Forcnan society
Secretary; Association of nachinc tool nfgr*.
Director; E watch research center
Director; M.E watch mfgr.
Director; Investment holdlng cofflj>any
fonde de pouvoir, rorecasting; M ^ E watch com(>oncnt nfgr.
Director; IC nfgr.
Director; M watch conponent nfgr.
Director, Marketin(; M^SSW nfgr.
Director; M ^ E watch component nfgr.
Director of economic research; Univcraity
President; MÊ watch mfgr.
Marketin? coordinator; M.E watch nfgr.
Director; f^QAW nfgr.
Research enîneer; LCO nfgr.
Teacher; W a t c h m a k l n g school
Manaf er; Institute for cconomlc forecaat^
Director; Watch industry association
Econoric research institutc
A s s i s t a n t to manayer; Corjôratc research diviaion, bank
Professor of precision machinery; University
Mana((er, Corporate planning; M ^ E watch nfgr.
Planner; MÊ watch nfgr.
Anonymous
Anonymous
President; SSW nfgr.
Division manager; LED.IC nfgr.
Electronics industry analyst; Brokcragc
fim
, Vice-President, Corporate development; SSW [ E componcnts siffr.
Harket development manager; LED nfgr.
Prcsident
Technology editor; Buaincc^ joumal
Sales Manager; LED nfgr.
Consultant to SSW conpanica
Professor of business adninistration; Univ.ralty
Consultant to SSW companiea
Director, Business development; SSW con(>onent afgr.
Director, Market development; SSW^LED nfgr.
Director, Optoelectronic technology; SSW conponent afgr.
President; Academic rcsearch in tinc kceping accuracy
President; IC nfgr.
Teacher; Watchmaking school
Professor of electrical engineering; Univcralty
Professor emeritus; University; Elcctronicc concultants
Presidcnt; M component nfgr.
Professor of computer scicncc; Univcrcity
Connodity industry analyst
Associate division nanager; SSW 1 E conponanta nfgr.
Editor; Horological journal
Profcaalonal Titlc and Coapany

or Inttitutional Affiliation
Backgr
of Re
icipa
n Rou
249
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TABLE 23
INTERVIEWEES' RESPONSE RATES:
P r i o r t o Round I I
ML
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19
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APPENDIX B
260
NOTES AND INSTRUCTIONS TO DELPHI ROUND III QUESTIONNAIRE

1. Gancni InfomMtion
1) DEAOLINE:
2)
3)
4)
5)
6)
7)
Please mail the complete(J quettlonnaire In the enclose(J return envelooe io that it rMchee the addreM as ihown on the
ef>velope NO LATER THAN OURING THE WEEK OF MAY 2 7 - 3 1 , 1974.
LANGUAGE:
It would ba preferred to have your answea written in Englith, but Gerrr>an, Frer>ch < Japeneaa ara alao accaptabte.
TYPEORPRINT Pleaae either type or print your answeri to erMble easier final interpretation.
TIME HORIZON: In maklng your conr>ments and glving your answers, on the quastions on th futura of the watch Industry, pleasa <Jo not
go beyond a time horizon of 25 years, preferrably corMntrate on the r>ext 10 years lon nnost quastions).
OATA SHEET; Pleese f III out the data sheet at the end of the queationr>eire which wiJI be uaed for statistlcal reesont only.
FINAL PANEL MEMBERSHIP: Please indicate on that same shaet at the end of the quastionnaire whethar, and n what form, you would
like to have your r>ame listed in the dissertation as a participating membar. (Cartainly your r>arr>a will rot oa associatad In
any way with your aruwers anywhere.)
SUMMARY REPORT: Pleesa also indicata on that sanr>e last sheet if you desire to receiva a copy of tha major fIndingi of tha Oalphr axparlrr>ent which should be ready for mailing around the end of Juna or eerly July.
2. Dvfinitiora of bMic Mrminology u*d

In th Interest of both, as concise a questionnalra as possible and a cloar interpretatlon of tha queatlont on tha part of tha ra^Mnding partlclpantt,
faw clorlfying romments arxj definitions are given t>elow
1 ELECTRONICWATCHCATEGORIES:
a) "Electronlc watch"
- Tuning fork watch (TFW) quani analog wotch (QAW) lolid state watch (SSWl
2nd * 3rd * 4th generatlons of olectromc waichos
b) "Quartt cryttal watch"
c) "Solld ttata vvatch"
- Quart2 analog watch (QAW) * lolid state watch (SSW)

Fully electronic wetch without machanical movlng partt, at praaent with digital tlma ditplay of ttta LCO
or LED type
* 2 ) OLD/NEWWATCHINDUSTRY:
a) " Watch Induttry"
- traditional watch industry + electronic time plece induttry
b) " Tradltio>al (-clottical -machanical -old -old technology) yatch induttry" compod of eithar and/or:
- companies which are producing mechanical watchos only
- companies whosa oredominant present activity is in the mechanical (clattical -tradltional) watch, bot
WMch iwav presently also be engaged in solid state wiste'h menufacturing
- cgni(jBiitw wtth a predominant mechaniâl technology identitV
c) "Elactronlct (-new -new technology -solid state) tima pieca induttry"*
- companies which v ere nev^ prior to development and manufacturing of solid stata time piecet engaged In
traditional watch making
Nota: In relatlon to the new technology it appears more comnwn to use the term "tlma pieea" rathar than "watch"
3) INTERNATIONALIZATION (MULTINATIONALIZATION) OF WATCH INDUSTRY.
Etsentially tha degree of internetional involvement of a company. with a primary focus of tha invattigation on tha menufacturing otpacts.
Intarnatlonalization can take in the n>ain the following forms:
- Export;import
\ markoting
_
)
- Intarnational
International lourclna
sourclng
- Know-how transfer (licanting, etcJ
1
- Foreign direct Invwtmenti
J procuctlon
4) STRUCTUREOFTHEWATCHINOUSTRY:
Under itroctural atpects are to ba undentood
- reorganizatlont, luch as mergoa. ooncantratlont
- antriet into an industry and axiti
- degree of conopetiton
1
Tbl of c o n t w m of quwtiom ilcttd

I
li
H
IV.
V.
Future multlnational devalopmenti in the watch induttry

Fotura itructural dovelopments in tha watch industry
Foture technologieal. manufecturing and product d(fvelopmentt
a) leedership position end technology gapt
b) probabledevelopmentsoftollditatewatchcomponentt
c) R * D, major Innovatlont
Futuran^rketdevelopmantt(voluma,prlcaandmarkatthara)
Othar Itsuat
Quettlon No.
1 - 8
9-18
19-38
,5 5
~ q
24-29
M
39 - M
Paga No.
1 - 2
2 - 4
4 - 8
1
g
A
6-
O t^
^-13
261
(0

*<
T t
<?5
o,
e
t>
w
3
O
>
55
>5
j l o = b _
c|r?
S S E c )
^ >
W^
44.
5
8
- < 8 > i 3
52
^-ci!
43
M 0) n s
= ?$c or
E
~ |.c
c 38"
IfHcS
* S56 E 5
262
Plarrt Hottettlor. P.O.Box 6934, Lubbock, Taxat 79417 / USA
FINAL ROUNO THREE OF OELPHI EXPERIMENT ON THE FUTURE OF THE WATCH INOUSTRY
Pleese reta inttructiont before answering and ni>ail completed quettionnaire

between May 27 - 3 1 , 1974
U.S. licansing of tolid ttatc wratch tschnoiogy to

non-U.S. watch companie* will incrMsa tignificantly
,1^3,
1 0 % Year
50 % Fore90 % cpiX
COMMENTS:
e. Doubtful that there will be much licensing becausa technology transfer on a fee basis is of little advantage to U S
producers since techniques are in practice elsewhere or are eesly copied
b. Joint ventures are more likely
c. But Swiss companies licensing their electronic vâtch technology to U.S, f irms will also occur
1 1 1
1 1
T
T
T
T
b.
c.
0
-JI-IUIUJUT
78
Intamationairzation of marketing of watches proio%

T4.
7T
duced in the U.S. will follow the pattem of elec50%
,.
- 8 0
tronic calculator marketng
(IA8)
90%
eo
COMMENTS:
a. Similar, but different becauia of fashion aspect'
b. Bacauta of using established marketing networks of electronic calculator manufacturers and assemblers
c. Because the solid state wetch will be the pace-serter
1 0 % Year
50 % Fore9 0 % casf
a.
b.
c.
-3-2 -1 H *2 +3
Oie^ r
l^rct
Intemationalization of manufacturng of the solid

state watch will follow the pattern of ejectronic
calculator manufacturing
()
10%
50%
90%
COMMENTS:
a. Because solid state watch p/oducers will take a(jvantage of ther foreign manufacturir>g subsidiarie*
b. Because the propensity to manufacture overseas among the electronic watch producers is greater than amor>g
the traditior>al wetch pr(}ducers
C Retativa labor intensive parts manufacturing will shift increasngly to the South East Asian area
Year
Forecast
_2.
3_
4
a.
b.
_1_
3I-21-1-I-1+2T+3
Oisaqree/ Aoreo
Swiss made solid state watches will be marketed

intensively in the U.S.
(1B1)
10%
50%
90%
M.
10%
50%
90l4
,0
COMMENTS:
a. Critical for Swiss to esteblish fast presence In the nevy market with a good product
b. Depending on the licensing agreements they arrange with U.S. electronics manufacturers
c. Will not ba competitlve in the U.S. because: - they do not have solid state capability
- of U.S. tariff walls
d. SwiQerland wlll penetrate other markets f irst because of the leading position U.S. companies Uka in tha U.S.
Vear
Foracast
2_
3
b.
c.
3 -2 -1 + 1 +2 3
0> 9 ree / >
e
Swiss watch companies will signif icantly increase

the purchase of solid stata watch componenu
from the U.S.
(1B2)
^75
10%
50%
90%
2J6 Vear
5 0 % Fore9 0 % cast
COMMENTS:
a. Improbable because of closar cooperation with European electronict producers (e.g. SierT>ent, Interrrâtall)
bu Mutt buy until at leest 1976 to get some presence in the U.S. nwrket with Swiss brand name
c. No, wlll taper off as Japanese and W. German semlconductor suppliers tool up
d. Becausa of patant potition of U.S. electronics firms
0. In tha long run (bayond 1980) thay will hava daveloped thair own alectronict capability
0.
b.
c.
d.
a.
.
,3
'l
iapenese made solid state watches will be exported

in high velume
HCD
COMMENTS:
T o ettablith foothold in tha Amerlcan markat
b. Bacauta ttWy wlll tia compatltiva dua to nr>ast productlon
10%
50%
90%
W^
-2 -1 1 2 3
ree / >^gr
7S
10%
50%
90%
n.
T*^
0.
b.
Year
Forec?st
m TMTt
DiSBgêe / Agree
263
2 -
The Japanase will be more aggrestive and sucAgraa

1%
cassful than the Swiss in the electronic watch
Disagraa
sector
(4C3)
COMMENTS:
a. Because Japanese companies have always competed on the basis of style and technology, rather than tradition
b. Because they have a better electronics technology base than the Swiss
c. But future capabilties of any industrialized country should not be undarestimated
d. But competitive bottle will ba won in R & 0 departments
10% Year
50% Forecast
^n
a.
b.
c
d.
1-2 -1 )
Dit9re /
& Expectad m a j o r p a t t e r n s
tL
of multinatonal inyolvement:
know-how transfer
foreign direct inv.
F
j_
2
T
T
If possible pleese also indicate whether international involvarT>ant is

nwinly in mechanical or electronic technology by tha letter M or E.
Would meen that expected mechanical know-how.transfer from the

U to Switzerland will increase nnarkedlv between the year 76-80
COMMENTS:
T
T
T
2 3
t
Plona ndicate tha probable periods during which either know-how and/or direct investetnents flows are m a r k e d I y changing comoared
to the pariod pnor to the change. Show the beginning yeer when you expect the change to start and the year when the changa ii expacted to
eaesa, plut the direction, i.e, whether it it an increase or a decreese over the prior period. (by a corresponding arrow)
Types of multinational involvafT>ent
a. know-how transfer (licensing, management contracts. etc.)
b. foreign direct investments (foreign manufacturing lubsidiariat, ioint vanturet, atc)
abbraviationt of countriat
U.S.
United states
EU
- Europe
JPN
Japan
SEA - South East Asia
CH
Switzerlar>d
OT
- Other areas
Exampla
F fom
IJ.S.
"l
Would mean that expected foreign direct investenr>ent (in electronlc

wetch makingl flow between the U.S. and Swuerland during tha
yaars 77-82 will rrârkedly decrease
(Thisquestion in essar e sumn>arizes questiont 1A5, 1A7, 1A9, 1B5, 1B6, 1B7, 1C6, 102
103, & 1D8of round II)
PLEASE FEEL FREE TO MAKE ADDITIONAL COMMENTS ON FUTURE INTERNATIGNALIZATION DEVELOPMCNT OF THE
PRINCIPAL NATIQNAL WATCH INDUSTRIES;
n^JL
10%
Tha number of solid state watch producers in the
-50%
U.8. will be reduced to leu than 10
I2A2)
IPrcxlucamT xJule atsembler, mfgr, of complete modulat, 9 0 %
..
bot axcluding mfgrv of componentt only)
COMMENTS:
s; Thara will ba modula aiiembleri for at leeit 5 yaari aftar tha product anteri nr>au prodoctlon In 74
b. Bot thare wlll ba dozeni o( "high ttyle" producari
C By 1978 thara wlll ba 3 4 lolld itata watch producert controlUng 70 % of Iha lolld itate vateh morkat
15 < VeT"
50 % Fore90 % catt
TT
0_
1
T
T
4
a.
b.
&
3 -2 1 *\\*2 3
laerea / Agr ta
264
- 3 The U.S. watch industry will be dominated by

the vertically integrated electronics firms
(2A4, 5A8)
ia
10 %
50 %
90 %
77
1.
.ftk
COMMENTS
s. Ho, Timax and Bulovs will be dominant
b. It it more likely to be predominant than dominant: traditional vatch companet aren't going to roll over ond die
c Bacause technological ability provides leadership opportunity
d. Dominanca will be basad on control of critical components
(ICs, displayt, quartz retonetort. barteriet
snd micro elactronic asaamblies) and not on management
a. Because of thair much greater
10 % Year
50 % F Dfe90 % cas!
74
d) nr>anagarial skill
a) othar factort
a) fir>ancial resources
b) q<jality of nr>anpowar
c) know-how
"
1
T
T
s.
b.
c
d.
-3 -2 -1 1 W +3
01 tagr*^* / Arw
Rank factori accordlng to their
degrea of contribution to laa(jerihip
Most Jikaly candidates for tuch a new laadarship potition ara:

s)
b)
c)
d)
a)
11.
f)
g)
h)
i)
Texas. Inttrumantt
Fairchild
Motorola
Bowmar
Hughat
Amarican Micro Syttemt

Rockwell International
RCA
othar
7
10%
TV
Significant concentrations in the U.S.
77
7.
5
0
%
watch industry between traditional watch
9
0
%
companies ai>d clectronics companies will
(2A6)
occur
COMMENTS:
s. Consumar elactronics marketert will become major forca
b. Concantration will be only in areas of marketing and component production
c Overall trend will ba for electronics firnr>s and traditional watch companies to go thair separate wayt
d. Such a concantrstion it naceaMry for survival of traditional watch companiat
Rank companies according to

their lee<tership potential
10 % Year
50 % Fore90 % cast
b.
c
d.
-3 -2 -1 ^l 1*2 +3
Oisaoree / Aoree
12.
10 %.
60 %
90 %
Small slngle-line solld state wetch producert

in U.S. will dlsappear
(2A8)
0.
COMMENTS
.
a. Because of competltlve pressures of the large and diversified electronics compenies
b. No. Ihere will be room for privale label watch module manufacturers
C Becaose they have rushed delective products to the market with resultant high re-iect rates
iK
d. They will not disappear because small firms have more flex.bil.ty
, ; ; ^ . . oa^,
i-v-i
e. It will not be profitable for large electronic producers to compete on the finishad product levei
13.
Large U.S. electronics companies will not market

solid state watches but remain suppliers of '*'
cal componeno only
(2A10I
Two or three will try it, but only one or two ^ f / ^ ^

Whan are they expacted to enter fu.l-icala market.ng of solid stata *vatchet?
u.
d.
p,oductt will alto ute it for lolid . t . w t c h a t
10 H
50%
90 1(
2
3
S.
h.
J
S r . ' i S r S c w r '
rc^rwi;; ' : : X . ^ : Z Z . r Z ^ .
S:.ssiv. s a l e . ^ 1
r ^gh
^
outlets requiring minimum h-nd.ing to r c h a widar customer base
PMaior U.S. watch produceo will be Timex. Bulova

n d 2 or 3 electronics firms
'2A3I
-3 -2 -1 + 1 +2 1+3
01saoree / /Vgreo
F
1 1 1 1 1 1 1TT
. i . , _^
There will ba . mixtur. of '>''''''''^Z'^^^'^'l'^^^^^^^^
a.
b.
c
d.
0.
40%
60%
Agree
Dlsagrae
COMMENTS:
a. Bacause of othar profitable diversificatlons
, ^ .
^
i ^ u ?4îtiona^ watch firmt are already good customer, of the.r componentt
Bacause of marketing costs
10 % Yeor
'JO %_Foro'K) %'rnst
'4.
7.
1*%.
l7!!^xKitr
that Bulov. or Timax wlll nacat..rl.y ba top producart in 1980
2: Boo^^ny Int ' i smong tha top producan un.at. it changa. .tt pol :
nd wlH therafor. .al.
rtate^tchet?
t.
f.
"^
3 -2 -1 1 *2 *3
Oi'Sg itt / >\n'i M
T5%
_5 0_%_ Fore90 % cast
<k.
0.
t.
4
-3 -2 -1 1 2 3
>*t 1 / âr ee
Dl
265
16. Japanese electronics companies will enter solid

ttate watch manufacturing
1208. 2C10)
10%
50%
90 %
74^
"
K
TT
76.
-.0
,79
COMMENTS:
a. Depar>ding on developments of Japanese IC technology
b. Depending on developments of the display technology
c Bacause they see the solid state watch as a successor to
10 % Year
50 % Fore90 % cas
.-*
the calculator and will be able to make use of its distribution system
d Unless large alectronics companies enter the market by 1977-78 in a big way, they sre likely to be preempted
a. Bacaute large companies are eager to diversify their production
rtn
7_
2
Lil
a.
b.
c
d.
e.
21-1
+ 1 ^2 1+3
Oiag'ee / A j ' t a
Most likely candidatas for entry
a)
b)
c)
d)
into watch production are:

Matsushits
Panasonic
Sony
Nippon Electric
16. Competition in the U.S. watch industry will be
more intensve among the manufacturers of

solid state watches than betwaen the tradtional
and new tochnology watch companes
I2A11)
COMMENTS
17 The U.S. wiil become the world's largest solid

stata watch producer, a leadershlp position
which will be widely recognized by the intern a t i o n a l consumar
COMMENTS:
0. Becausa of
e)
f)
g)
h)
Toshiba
Mitsubishi
Sanyo
other
Rank companies a<xcrdirig to

their expected potential for
entering watch production
69%
31 %
Agree
Disagree
3 -2 ! *y *2 *3
Olsagree / Agrea
10 %
50%
90%
7S,
74^
JL^
J^
(2A9I
further liberalization of international trade
if rease of national incomes in developing countries
technol(}gi(l lead in micro-electronics
learning curve price lead
superior production techniques
multinational manufacturing base of major U.S. e.ectronics compania
other
18. The impact of the Swiss watch industry of a too
rapid transition to the solid state watch (e.g. 100

million unts by 1980) would be very significant
(a.g. SO'OOO unemployed)
(2Bi)
COMMENTS:
Agree
Disagree
10 % Year
5 0 % Fore90 % cast
'_
_1_
2
m
4
Rank factors according to their
magnitude of contribution they
make l o U.S. leadershlp posltlon In
solid state watch production
ni
85%
15%
a. Doubtful that the Swiss wiH be able to dictate the speed at which the transition will take piace
If transition too fast. capital investments m the U.S. would result
The Swiss are in serious trouble no rrwtter what they do
Write-off of present production machinery would be very substantiaj
But employees would be able to fmd work in other industries
. . . . .
^
^ .
But transition will not be rapid because consumers worldwide can't become electronics sophisticate, overnight
2.
3_
a.
b.
c,
d.
e.
f.
" T "
-31-2- -1
on ptychological grounds
ree
+1 2 3
/ '\gr e
PLEASE FEEL FREE TO M A K E A D D I T I O N A L COMMENTS ON F U T U R E STRUCTURAL OEVELOPMENTS IN T H E PRINCIPAL N A T . O N A L

WATCH .NDUSTR.ES:
19.
T h a U . S w a t c h industry w i l l c o n t i n u e technological leadership d u r i n g t h e n e x t 5 yeart

(3A3)
Agree
Disagrae
1 1 1 1 I
83 %
13%
S^'u'
b r o a d market e x i i t , for it. high prica products in the introduction phasa
h. Becauta of mobility of technical innovators among competlng firms
C Bacaute of continued heavy eompetition m thii market
d. Japan ihou.d not ba ovar.ooked
1 1
f
0
1
2
_3_
/.
d.
-3 2 -1 +1 2 3
0 ie 1 / A9' M
266
6 -
20 The comfortaMe lead of the U.S. in the field of

Agree
tolid state watches could be adversely affected
Disagra
only by a gross miscalculation on the part of
management
(5A7)
COMMENTS:
a. Or a miscalcu.ation on the pan of the U.S. governrT>ant
b. is tha laad really comfortable
U2
66%
33%
F
_1_
1
3
m
-3 -2 -1 *y +2 +3
0 uigree / Ag'ee
21
74.
The Swiss will dose the technology gap for
,
10%
^*
manufacturing solid state watches, in particu>
50%
iJ.
lar the mau production of ICs ( > 1 mllon
90%
unHs/month)
(2B9. 3B2. 3B3, 563)
COMMENTS
0. Because of tha leriouiness of the situation
agree 75 ^
disagrea 25 %
Through purchase of technology from U.S. electronict manufacturers at t cost of S 30-50 million
Thro<jgh sharing of know-how with U.S. electronict companiet at a cost of 8 10-20 million for 3-4 years
But Coting tf>e gap wou.d r>ot save an industry but raplace the traditional by an electronics industry
If the .ag ii not eaught up by 1978, situation will ba hopelew for tha Switt, nnca w.tcha. will ba told on
tachnologica. faatures, not cr.ftsmanship
Switt c.nr>ot ba competitlve becauie
- they lack baia Induttry
- it takei too long to "eatch up"
Unl.kaly. bacaute of coit d.iadvantaga and graat riik Involvad
SGT
othar
h. ThnMigh affortt by
10 % Yaar
50 % Fore90 % cast
.M
T
b.
c
d.
.
3 -2 -1 *\ *2 3
0 tirea / A ) r
iRank companiat 8ccordir>oto expacted

ipotantial for closing thit tachno.ogy gap
n:
22. The Japanese watch industry will easily overconte
Agree
86 %
the manufacturing gap of solid ttate watches
Oisagree
14 %
through lcensing agreements with U.S. electronics
companies
(5C4)
COMMENTS
a. Oepending on M.TI guidance and other members of the individual zaibatsus involved
b. To the dismay of the Americans, U.S. industries are too quick to give the "store" avay
ZD
1
b.
1
-3 ^ - l | + 1 2I+3
0 sagree / Ao'ee
10 % Year
50 % Fore90 % cast
10%
50%
prices competitive with those ICs produced by
90%
U.S. manufacturers
(3Cn
'u JL-Ti
COMMENTS:
s. Tachnology gap of 2 years behind the U.S. wil. ranr>ain
b. Japenete wil. not ba competitive - U.S. buildt approximataly 8 mil.ion ICt/dayl
23. The Japanese will master IC technology at unit
a.
b.
-3 -2 -1 +1 +21+3
01S80 re / /Kg'ce
24. Fraquancy standard

will be introduced
A new standard of frequency

(3E4)
10 %
50 %
90 %
gi.
10 % Yaar"
50 % ForeQ O . SiSL.
Jii
COMMENTS:
,, ,
.
a. Maga hart2 nuartz crytta. osciHators ara going to rep.aca the currant .ow fraqoancy quarti by 1978/79 bacauta ot a.
k>w cost (at>out S 3.- due to extensive developnr>ant for TV indottry)
b. No, qtjartz ii the tima base of the futura wrist watch
^^
c Thara will t>a noclear time base
^
d. Specify yoor typa of frequency standard yoo had in mind whan raviting abova yaar forocattt
d.
-3
-1 +1 2 *3
/ /\ar%
21Sirae
0_
J_
2,
4
267
26.
7S
Energy source: Market introduction of nuclear
io %
'7^
-*>
82
batteries to be used raliably and safely in wrist
50 %
80L.
watches
(3G1)
90%
.9'
Wi
COMMENTS:
a. Will not ba a<xapted by the pub.ic
b. Not required, due to higher cost
e. Chamica. batteries should dominate (e.g. lithium bromine) will dominate because they offer more promite
than nuclaar batteries and should latt 10 yeers aquals tha lifa of the watch
10 % Year
M % Fore90 % cast
a.
b.
c
-3 -2 -1 +1 2 3
0 saqree / Aoree
26.
Electronic circuitry: Possble major trands in electronic watch circuits devalopments
(***)
Pleeae commant braifly and maka your corrasponding yaar forecattt.
27.
Tinw display: Liquid crystal displayt will become

th pradominant type of display
(3F3)
10%
50%
90%
COMMENTS
s. If the fol.owing problemt can ba overcoma .
a) oging
alraady tolvad
b) raaddbility
c) low contratt ratio
d) tusceptibility to shocks
al susceptibility to temparatura
f) othar
b. LCO it a tochno.ogy with a 3-5 year lifa tpan
c. LCD will ba tuperseded by electro rhromlc displayt (ECD)
d. LCD problemt are alraady so.vad
,,..,-"0
.7'
10%
50%
nology
(3F4)
10%
90%
First ir>dicate wheter such pro

blems exist by marking your degree of agreement/disagreerT>ent.
Second, given tnat certain roblems
exist, pleasa make yaar forcast when
you expect those problems to tM
satisfactorlly solved.
a)
b)
c)
d)
a)
f)
3 -2 -1 + 1 2 +3
Oi iiii) reo / >
a
28. Time display: Appearance of a new display tech-
1 0 % Year
50 % Foreg o U ' cast
JO
'..
75
7S^
50 %
90%
10 % Y<uir
\0 % Fcjre90 % c,ist
-'
COMMENTS
s. Not bafore 1985
b. It will ba electro-chromic (slready in the laboratory) but still needs further tetting and prica raductioni,
thara ara alto problamt with driving and manufacturing them
Ailvantagat of tha new tachnology over the praviout ona:_
a) lass powar consumption
b) better raadability
c) greatar raliabi.ity
29. Tlme dlsplay: Light emitting dodes (LEOs) with

oontinuous tim display will be possible
(3F2)
10%
50%
90%
d) better appearance (cotrT>atic appaa.)

a) other a<jyantages
^4^
JS_JT
2.
a.
b.
3 2 -1 + l | + 2 +3
0 jan 'e1 / A v * 4
JO
COMMENTS:
a. Roquiring 2 batteriet
b. Never.can ba thown to ba impoibla
c Continuout tima dltplay wil. displaca tinrta display on damand bacauta eontumari prafer to be abla to raad
tima continoootly
Rank 8<]vantages a<xording to

magnitu(Je of irr>provement they
offar ovar the old technology
.**
10 % Ycar
60 % Fore90 % cast
a.
b.
c
'
-3 -2 1 +1 2 ^3
etf / Agr ea
0
268
- 7 30.
R & D e f f o r t s in t h e U.S. w a t c h n d u t t r y w i l l
Agree
66 %
cortcentrate o n q u a r t z c r y t t a l w a t c h developDisagree
34 %
ments d u r i n g t h e n e x t 1 0 years
(3A1)
COMMENTS:
s. Because of limited number of mechanic^. watch manufacturart and tl>e dranr>atic erT>argar>ca of alactronict
watch firms
b. Oevelopments will center around the solid state watch, not nacatsarily quartz cryital, iince othar fraquancy
references are available and can be. perfected
: t.
CL
b.
3!-2 - l l + l +2
OisaQree/Aoree
74^
3 1 4 U.S. w a t c h m a n u f a c t u r e r s w i l l have p e r f e c t a d
10 %
.T
H,
t h e solid state digital w a t c h w i t h c o n t i n u o u s
50 %
t m e display w h i c h w i l l satisfay t h e mast
90 %
75^
m a r k e t e q u a l l y w e l l as mechanical low- and
m i d d l e - p r i c e d watches are satsfying t o d a y ' s
buyers
(3A2)
COMMENTS
a. Solid state watch is acceptable to the contunr>ar r>ow. althoogh not parfactad yat
10 % Vear
50 % Fore90 % cast
-3|-2|.1 H +2|-t-3
Diworee / Aoree
32.
R a a l i z a t i o n o f a r e v o l u t i o n a r y t i m e indicating
34%
/Vqrea
t y s t a m based o n b o c h e m i s t r y , m a k i n g people
Oisagraa 6 6 %
aware o f t i m a t h r o u g h b r a i n waves
(3G2)
COMMENTS
a. Not occeptable sinca it would requira lots of dltcipllna on tha part of tha '
b. Ir>taresting speculation
c It will be possible to train "automatic" nervout system via bio-feedback
d. At tha rate we are going we nnay not ba contcioos of tima by than
e. Whst it tha advantage?
10%
60%
90%
10 % Year
50_%_ Fore90 % cait
tpoo
0.
b.
c
d.
0.
-3 -2 - l | * 1 2 *3
Diworea / Anrce
31
l ^ k t i n t r o d u c t i o n of an electronlc w a t c h w i t h
a broadcatt frequency ttandard
(3G4)
10 %
50%
90 %
'
10 % Yodr
bO %. ForoUO % ca'.t
COMMENTS
. . . . . . .
. 1
a. A S 10 throw-away watch with modest accuracy and fonctlonal rellabHity is a better tachnological and bosln
target
b. Who fvally needs that accuracy?
113
rTTT
31-2-1 1
k
4
[21+3
Olsagfee / Agê
34
65%
Market introduction of multifunctonal (with
Agree
35%
mora than traditional time-telling function Oisagraa
hrs. m i n . soc. & date} watches w i l l occur w i t h n 1 0 years
<3G3)
COMMENTS:
s. Thanki to electronict, miniaturization wil. make multifunctionalization pottibla
b. Not a technical, but a locio-psychological prob.em
c Cott foctor will inhibit greet multifunctionalization
d. Will be of linle use to consumer since it wil. provida onty .imlted additiona. functiont
a. Graatar power consumption for additlona. functiont wi.l maka multifunctionalization difactly dapandant on
development of long life batteriet
' ' ' '
'
'
'
L.
o_
1
I
3_
4
t.
b.
c
d.
0.
- 3 -2 1 + 1 +2 3
Aqr M
0 sao re
269
- 8 Year Forecast
36. Expected market introduction of tpecific additional functions (<

a.
b.
e.
d.
a.
f.
g.
Calculator functions
Temperatura measurement
Humidity meaturement
Communicatlont device (a.g. radio, two-way radiq etc.)
Alarm (unction
Memory functon
other
36. The most critical factors determining (limiting)

the rate of growth (acceptance and davelopment)
of solid state w^tch are:
(3F6)

Oealer acceptance
Production capacty
Technologcal limits
Price
Developments of other IC markets (a.g. automobiles, etc.)
h. other f actors
50 %
90 %
Consider each factor over the short-. medium. and long run separately.
Within each time period rank all factors according to their relative importance. (highest importance 1)
short-therm
(1-3yr$)
a.
b.
c.
d.
e.
f.
g.
10%
medlum-term
( 3 - 5 yrs)
long-term
( 5 yrs)
_1_
2
3.
a.
b.
e.
d.
e.
f.
9-
COMMENTS:
s. Oittributor's ro.e in this markat is declining rapidly (as in calculator businast) becausa of more direct
tel.ir>g meth(xJs
37 Reversal from digital time display to traditional analog (with hands) time display
(4J13)
Agree
Ditsgree
-2
+ 1 2 *3
Olsaoree / /*)re9
0%
100 %
10 % year
50 % Fore90 % cajt
COMMENTS
38
Major technological innovations (breakthroughs)

with a great business potential and short run
applicatioapossibility will occur.
I3S1. 3E1I
Within the next 5 years:
c) Switzerland
a> U.S.
d) other
b) Japan
Within the next 10 years:
a) U.S.
r n
c) Switzerland
b) Japan
LlJ
d) other
B
B
P_
B
B
COMMENTS:
a. Disp.ay breakrhroughs are likely to occur first in the U.S.
b. General sensational inventions wil. cxxur first in Europe
c Switzerland appiears un.ikely to stage a breakthrough since they are too f ragmented and hypnotized by
mechanical movements
d. If proportiona. to efforts, U.S. should be number 1
e. Competition from electronic watch may accelerate R & 0 efforts in the nr>echanical viratch sector
f. No major innovations in Switzerland within the next 5 years
Ae 60 %
Disagree 40 %
g. No major innovations in Switzerland within the next 10 years
Agree 55 %
Oisagree 45 %
0_
_1_
2
4
Rank innovations tccord'xng to
- \ order of expected first <x:currenca
b.
c
d.
a.
f.
0.
-3 -2 -1 + 1 2 f3
01saoree / Agr fe
PLE/Ê FEEL FHEE TO MAKE ADOITIONAL COMMENTS ON FUTURE TECHNOLOGICAL AND MANLtFACTUR.NG OEVELOPMENTS
OF THE PRINC.PAL NATIONAL WATCH INOUSTRIES.
270
39
Quartz crystal watches will dominate the world

watch market
(4J14)
eo
10%
50%
90%
80
a^.
COMMENTS
40. Mechanical watches will still dominate the world

markat segment of cheap watches ( < S 30) in
lOyaars
(4.1)
COMMENTS:
a. Electrooic watches wil. dominate
Agree
Disagree
10 % Year
50 % Fore90 % cast
J
j i
62%
38%
3P
l-2 -1|+1 +2 3
Oiiar>ree / Aoree
41 Solid state watch market will develop only
Agree
46 %
slowly over the next three years
(4J6)
Disagraa ' 54 %
COMMENTS ANO REASONS:
s. But aggressive companies. which have nothing to loosa by displacing the traditiona. watch induttry, ara lallino
the product
b. Neglectt tne revolutionary display, accuracy and potant'ial.v low prica of tha new product
c Because of price and uncertainty regarding durability
d. Becausa of limited production capacity
b.
c
d.
-3 -2 -1 *) *2 +3
D jaoree / /Vgree
42
T5
Given the same price level, the solid state watch
10 %
will take tha placa of the automatic jewel lever
50 %
is^
watch
(4J10I 90 %
COMMENTS:
s. Solid stata watch will outse.l only at higher pricat
b. Bacauia tha tolid itate watch will provide mora accuracy for a given price
10 % V e a r
5 0 % Fora9 0 % cast
-3 -2 -1 *\ *2 * 3
1 Anri r*
mMM\rttn
43. The electronic tuning (ork walch wll dominste
' I ' M
Aurnn
jb %
the total electronic watch market during tho next
iMuruo
70 %
6 yeers
(4Jil)
COMMENTS:
s. Tuning fork watch wil. be norvexiitant In 5 yeari
b. But auartz tuning fork could extend period of dominance or viability
c Not if digital watches are avalable
I 1
s.
b.
c
-3 -2 -1 1 +2 +3
Oi 2re / M r e
Total world production of solid state watches

will reach 10 million units/yr
(4J7)
10%
50%
90 %
TT
.77
78,
Xl.
COMMENTS:
0. But 10 million units will on.y represent 3,5 % of 1976 world consumption
b. 10 mil.ion units/yr will be reached before 10 years, because of the reality of the rT>arket place and tha
ttrategv of the semiconductor producers (e.). in the U.S. electroniC calculators went from 2,5 to 7,5
mil.ion in one yeer a.one and watches should behave timilariy)
46. Total world production of quartz crystal watches

will raach 25 million units/yr
(4J15)
10 %
50%
90 %
10 % Year
50 % Fore90 % cast
.w
a.
b.
-3 -2 - 1 1 +2 3
Oi sa<^ re / orf >e
7B
77.
10 % Yaar
50 % Fora90 % cast
. ^ .0
1^ y^
9"-
COMMENTS;
0. Quaru crytta. products wi.l replaca mechanical watchet with ease
b. Tha fol.owing factors may limit the developrr>ant of tha quartz cryttal market
al pr(xluction capacity limitations
b) comumer non-acceptance. (such as ideat ipraading that a.g. cryttali would giva cancer. atc)
c) banary problemi
a.
b.
p.
1
1
1
3 2 -1 *\\*7 3
Oi saoree 1 Agrile
271
46 Total U.S. wratch producton (mechancal and

alectronic) will raach 80 million units/yr
(4A2)
10 -
lO %
50 %
90%
7\_^M
fli.
10 % Year
'j % Fore9 0 ^ casl
.as
COMMENTS
a. Questioneble whether productlon raachat 80 mil.ion by 1980. bacauia of dacraeiing populatlon and low per capita
watch coniumption m the U.S.
b. Dlfficult to go from 32 mlllion (1972) to 80 million (19601, unlou export marketi are developed and continuouily
cuitivated
47 Half of the annual Swlu watch producton (in

units) will be tolid ttate
(4B1)
10%
50%
90%
a.
-2 l | + 1 2 *-3
Diiogr* / A<irve
7
.03
80u
COMMENTS
a. Ooubtful wf>ether competence or organization to handle this transformation yet exist in Switzerland
b. Swiss canr>ot compete successfully in solid state watches
c Production wi.l always ba rr>ainly mecf>anical
b.
10 % Year
50 % =ore90 % cast
-^^
a.
b.
c
-3 -2 -1 + 1 |-t-2|+3
9 s/inree / AjnBe
48 26 % of total annual Swiis production (in units)

iwill be electronic
(4B4)
10%
50%
90%
10 % Year
50 % Fore90 % Cst
1
JL_
Sl
1 .
COMMENTS
s. A l . major producing countriat wi.. have a 25 % share of elactronic watches n 10 yeari
b. Switt will not be abla to compete because of rudimentary size of IC industry
c Un.ast Swist (T>aka a rapid transition to so.id state wstchet, they wi.l fade into unimportar>ca
a.
b.
c
-3 -2 -1 1 *2 +3
0 saqree / Aoree
49. Japanese electronic watch production will reach

5 million units/yr
COMMENTS:
s. Because of'
60.
(4C2)
s)
b)
c)
d)
e)
f)
10%
50%
90%
77
X^
.79
..80
78
dynamism of Japanese watch ir>dustry

responsiveness of organizatior>8l structure to changes in market piace
rT>arketing know-how
aggressive risk-taking
r>ew entries of electronics companiet
other
M a j o r surge o f Japanese p r o d u c t o n of solid

stata watchas w i l l occur
(2C6, 2C9)
10 %
50 %
90%
n.
10 % Yedr
50 % Fore90 % cast
.76
77,
,*.
.76
.7
Rank each factor ac(u>rding to its

importance for reaching tha stated
output level
10 % Yea:
50 % Fore90 % casi
.
_jiS
_ y 80
COMMENTS:
a. Not before 1975 becsuse of technical difficu.tic
-3 -2 -1 li+2 +3
Oltigree /
Ajitt
61. Solid state watches will be promoted as nondurabla comumar goods (throw-away watch)
10%
50%
90%
73
7(.
(4E1)
COMMENTS:
s. Daoands on prica and parformance offerad
b. Parsona. calcu.ators are not, why should watchas?
c Solid itsta watchei will bacome diiposable when battery ceeses functioning
d. No, only componant with ihortatt life span will bacoma disposabie
JL-'s
10 % Year
50 % Fore90 % cast
-fh-^
a.
b.
c
d.
- 3 - 2 - 1 1 2 t-3
0 1 S<1ree / /\Or e
272
62. Solid stata watches will rapresant 90 % of total

world watch salas
(4J12)
11
10 %
50 %
90%
dS
n^^
looe
10 % Yaar
50 % Fore00 % cast
*i-
COMMENTS:
s. 'Cha ihara of tha tolk) stata watch will nevar ba mora than 76 %
b. The key markat for lolid itata watchet wi.l be in the > S 30 price ranga
-3 -21-1 1 t-2|+3
0 jaoree / Agree
63. Solid state watchos will take 50 % (in units) of
th world markat sagmant of expensive watches

O S 100)
(4J2)
10%
50%
90%
75
74^
-'
^
ztt
JS
X i .
COMMENTS:
s. It will not ba SO % by 1 9 8 0 : foracatts macja tlnce 1969 hove contittontly fallan thort
10 % Year
60 % Fore90 % csst
.tooo
10%
S0%
00%
J^
3_
4
1 0 % Year
50 % Fore90 % cast
JS
Xi-
|71
-3 -2|-1|t-1 + 2 + 3
D l >ree / AQ'tfi
6 i Solid state watches will taka 26 X (in units) of

total world watch market
I4J8)
COMMENTS
66. Solid ttata watchas will taka 16 % (in uniti) of

total world watch markat
I4J9I
10%
60%
90%
79
Xl.
10 % lYear
50 % Fore90 % cait
-0
71.
2.
3
COMMENTS:
L3J
66. Solid stata watches at S 25 will not become a
Agrea
1 111 1 11 T
85 %
raality
(4J1)
Ditagraa
15%
COMMENTS;
a. /ktsuming no tweaping aconomic aventt, tuch at doubling of inflation in tha naxt 5 yeart
b. If thit opinion ttill pravaili in tha leaderthip of tha S w i u watch induttry, it it doomad
-3 -2 n +1 +2 3
/ Ayea
67. Appaarance of tha S 2 5 - 3 6 solid state watch

(4J4I.
10%
50%
90%
r.
i-
1.
COMMENTS:
a. If pottible ttata the etjmulative unit productlon raquired for achiaving thit price
-o
.40
10 % Year
5 0 % Fore90 %" cast
-.
tSL
+ 1 +2 3
D.ta<ree /
Ajrtt
68. Appoaranca of tha ^ $ 50 solid state watch

(4J3)
10%
50%
90%
10 % Year
5 0 % ForeSO % cast
.'
71
U,.
oZL
a0
COMMENTS:
a. Attuming inflatton ovar tha naxt faw yaan doat not axa aad 8 %/yr
b. There ara at many forcat likaly to incraaia pricet at there ara in the diraction of raductlont
c If pottibla i t t t a tha cumulativa unlt production requirad for achieving thit prlce
a.
b.
e.
"T1
1
3I-2
0
1
2
3_
4
F
1
m
3
4
\_
2.
3
'
-1 1 f 2 f 3
Olsog rM / (korita
273
60. Appwranca of tha $ 10 solid stata watch in

n
(4C1)
10%
50%
90%
12
Jlt.
79 lO
yi%.
.et
10 % Year
60 % Fore90 % cast
-8
0
hi
COMMENTS:
a. But U.S., not Japan wil. ba price leadar in thit araa
b. Japan hat tha lame problem ai Swltzerland: rudlnnentary IC induitry
c Ooubtful that S 10 Japanese made solid state watch wlll come into existence becauta of high inllation in Japan
d. .f pouibla iXtXf tha cumulatva unlt production roquired for ochieving thii pnce
a. At a parceived 30 % itage of the leaving curva, retall pricet go from 3 150 t( 1 million uniti cumulalive pro
ductlon to 3 10 st 400 million cumulatlva unit producllon
f. .n ganara. whet srs tha Imp.lcstiont and probabla futurs davalopmanii ot tha laarn.im curve yie.d?
s.
b,
c,
d.
a.
- 3 - 2 - 1 + 1 2 3
Oisanree / Aoree
60. Total annual world watoh production (in units)
in million units
()
COMMENTS:
1973
total mechanical
total solld state
1980
1985
1990
180
1/2
"
T
2_
2.
4
61 Expactad geographc dittribution of total
in %
annual world watch production (in percent

of total production in units)
(
COMMENTS
1973
1980
1973
1980
62. Expoctad gaographic distribution of total
1990
in %
annual solid state watch production (in pareant of total annual world'watch production in units, mechanical plus solid state)
() U.S.
COMMENTS
1985
U.S.
Japan
Switzerland
other
1985
L
1990
Japan
Switzerland
other
PLEASE FEEL FREE TO MAKE AODITIONAL PERTINANT COMMNTS ON FUTURE VOLUME AND PRICE DEVELOPMENTS:
j_
2.
3
T
274
13
7
"
3 . Solid stata svatch prica, volume (production) and marlcat shara projections
The points thown in the grsph were obtained from ir japancjant staterTtanti n>ada in Rour>d II.
" Reguler" yeer foracattt hove a.reedy bn preaentad in abova quattiorttt
Oraw your own projoctiont, laballing your curvat or
pointt to indicata tha attimatad probability of oocurranca:
a
- - 1 0 % ")
- 5 0 % V probability of oecurranca
NOTES: 1) at 25 mil.ion cumu.atlya unit production (CUP)

2) at 50 mi.lion cumulative unit prtxjuction
3) at 100-150 miltion cumuiativa unit production
4| at 400 mlllion cumulativa unit prtxluction
PHce
A -90% J
Maka additional commants to raflact your reesonino or

assumptions at r>acattary
yeor
Mfkct
Share
yoor
Vlume (
f IMtJ
-/IS/I.O
H ] 73 1i 77
n r7
eo t
12
64^ 6S IC 7 08
ae-250 j b % f |ico-(t*rk*4-
03 0
year
T
2.
3
275
64.
14
Ratraining of labor force in the Swiss watch

ii lustrY from micro-mechanics to microlortronic* skill will be completad
(SBD
COMMENTS
s. Not s tiuastion of retraining tinca alectronics production requires llttie or no skill
bi Lsbor can ba trainad easi.y for assembly t>ut not for compor>ent manufacture
c Ratrsining not <Jesir8ble sinca existing manpowar skil. could ba best spplied to othar products
d. Swiss Isbor foree it ona of tha mott a<japtabia in tha world
10 % Year
50 % Fore90 % cast
11
b.
c
d.
1
1
-3 2-1 l l f 2 +3
sagree / Agree
2'
66.
Stita and brofly comnMnt on tho 2 or 3 most imprtant and Critical issues of the 1980s with which th watch
induttry will b* confrontad or which will ttrongly influonc^ i o furth^r dvlopmant into tho future.
i
2
276
DATA SHEET
(for statistical purposes only)
1. Please identify your bac)cqround and deqree of relatedness to the

watch industry: (please specify)
a) direct (watch manuf acturer, etc.)
b) indirect (component manufacturer, etc.)
c) independent (no direct or indirect association with the watch
industry)
^^
2, Please indicate your country of oriqin; (please chec)c)
U.S.
Switzerland
Japan
other (specify)
3, Please indicate your "watch industry identity:" (please specify)
a) traditional technology oriented
b) traditional towards new technology orientation
c) new technology (electronic) oricnted __________
4. Please fill in your complete address:
Your name
last
first
middle
Your title
Academic
and/or
Company or institutional affiliation (Name)
Street and Number
City, State and Zip Code
Country
Professional
5. Please indicate whether you would lilce to have your name listed
in the dissertation as a participating member on the final round
of the Delphi experiment. (ple^se checlc)
Yes, agree that name appears in such a list
No, do not show my participation in such a list, I prefer to remain anonymous
6. If your answer to No. 5 was "yes," please show in what form (if
other than given under 4 ab^ve) your name and address should
appear
Than)c you for having completed Round Three and contributed to this
research.

The Future of The World Watch Industry by Pierre Hostettler

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THE FUTURE OF THE "WORLD WATCH INDUSTRY:"

A COMPARATIVE STUDY USING DELPHI

PIERRE HOSTETTLER, Diploma of M.E., M.B.A.

Submitted to the Graduate Faculty

DOCTOR OF BUSINESS ADMINISTRATION

I am most greatly indebted to my committee chairman, Dr. Louis

Special thanks must also go

to Drs. Norman C. Dalkey of UCLA (formerly with the RAND Corporation)

Although their ideas

and suggestions could not be completely incorporated in this study,

I am also indebted to the 45 middle and top level managers

in the "traditional" as well as the "new technology" time piece industry

The permission to have access to their

A very special recognition goes to my wife Barbara for her

patience, editing work and for typing the final manuscript.

Statement of the Problem

Need for Research in this Area

Purpose, Scope and Methodology of Research . . . .

THE WATCH INDUSTRY

Introduction and Background

The Post-World War II Era

A Brief Historical Perspective

The Size of the Industry

Analysis of the Transitionary Period

Definitions and Methodology

Origins of the Solid State Watch

Advantages and Disadvantages of the Solid

Analogies to Comparable Events

Uniqueness of the Transitionary Period . . . .

Multinationalization Aspects During the

THE DELPHI METHODOLOGY AD EXPERIMENT

Description of the Delphi Methodology

Origin of Delphi and Major Applications . . . .

Definition of Delphi and Major Variations . . .

Advantages of the Delphi Method

Disadvantages of the Delphi Method

Validity and Accuracy of Delphi Findings

Description of the Delphi Experiment

Organization of the Delphi Experiment

Identification and Selection of Experts . . . .

THE RESEARCH FINDINGS

American Watch Industry

Swiss Watch Industry

Japanese Watch Industry

Possible General Trends

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

The Delphi Experiment

Future Multinationalization Trends

Future Structural Developments

Future Market Developments

Item-By-Item Response to Questions in the Questionnaire.

The Delphi Questionnaire

1. Watch Classification Scheme According to Burgat . . . .

Output Comparisons Between Watch Industries of

Comparative Ranking of Major Watch Companies

Dominant Japanese Watch Companies and Their Production.

5. Advantages and Disadvantages of the Solid State Watch .

Major Characteristics of Group Communication Techniques

Schedule of Major Delphi Activities

Breakdown of Questions by Research Areas and

General Schematic of the Collation Process

Summary of Expected Major Patterns of Multinational

Problems of Liquid Crystal Displays