Steinway & Sons: Buying a Legend

Executive Summary
Steinway & Sons are a leading manufacturers of high-end, high quality vertical and grand pianos
On April 18 1995, Steinway &Sons was acquired by the Selmer Company for $100 Million Steinway & Sons was facing stiff competition from the other Piano manufactures How can Steinway & sons, now acquired by the Semler company recreate the brand?
Leader of high quality grand pianos for 140 years Endorsed by leading musicians across the world Hand made, still assembled by craft methods, with limited use of assembly line techniques Introduced a new product line, Boston Pianos designed by Steinway but manufactured in Japan in 1992 to enter the midtier segment Also introduced special editions like Steinway Limited Editions and Crown Jewel Editions which were a huge success

The combined company was called Steinway Musical Instruments, Inc. Should the combined company continue its high-end, niche strategy of being the worlds pre-eminent maker of high quality pianos? What should be the strategy for the mid-tier Boston Pianos? Is the acquisition a good idea?

The market share of Steinway & Sons for the Grand Pianos had gone down by 25% There was a sustained downturn of the piano industry, with global sales dropping by 40% since 1980 Increased competition from the high volume piano manufacturers like Baldwin, Yamaha and Kawai The emergence of the Asian manufacturers threatened Steinways market share The sales of used Steinway Pianos were cannibalizing the sales of the new pianos

Continue to promote the Boston Pianos which will compete with the other brands in the mid-tier segment Marketing strategies to promote Steinways legacy of quality partner with leading musicians, leading music labels, music schools Explore the opportunities to expand in the Asian markets Explore the opportunities to get market share for the vertical pianos

History and Value Proposition

Leader in the market for high quality pianos Proven record in providing the best hand crafted piano in the industry Premium quality as attested by the leading high caliber musicians over decades

Positioning and Differentiation

Premium Grand and Vertical Pianos Market Leader in the segment Offers the best hand crafted product in the market Famous for traditional quality and durability Buyers include experienced musicians who value the effort and time put into making of the piano Mid Tier Boston Pianos Relatively new product (introduced in 1992) Increasing market share Designed by Steinway, manufactured in Japan Introduced to compete with other brands in the industry like Yamaha Lacks the quality associated with the original Steinway Piano; efficient vs. handcrafted

Challenges to the position

Emergence of competitors in the premium segment like Bsendorfer and Fazioli Yamaha, by using highly automated, assembly techniques to manufacture eating into Seinways market share by selling low cost, high quality pianos Yamaha has been able to same quality of product with added services that address the premium segments needs. The used piano segment has been growing steadily which cannibalizes the sales of new pianos.

Strategic Alternatives
Promote the Boston Pianos Brand to gain a market share in the mid-tier piano segment Overhaul the marketing strategy to rejuvenate the Steinway brand and recreate the value Explore the opportunities in the Asian market through the Boston Piano brand Using innovative technology, Steinway and Sons could potentially increase markets by appealing to lower and middle class purchasers with low to mid-priced products Partner with more concerts and elite music schools

Boston Pianos
Boston Pianos are not consistent with the Steinways traditional brand Should not be discontinued because it is a strategic brand that allows Steinway to compete on the mid priced segment where Yamaha has strong presence Growing brand for Steinway; Will help acquire the market share
Growth of Boston Piano
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Units Sold Revenue

Axis Title

526%

1992 600 2700

1994 2300 16,900

Boston Pianos
US Grand Pianos Units Sold
4000 3500 3000 2500 2000 1500 1000 500 0 U.S. Grands Humburg Grands Total Grands

9% since 1992

INCREASING MARKET SHARE Units Sold (Boston Piano)

2500 2000 1500 1000 500 0 1992 1994 Boston Piano

526%

EVALUATING THE MERGER

The investment is a good idea for Messina and Kirkland Advantages
Selmer is a company that is in the music instruments industry and produces high quality band instruments. So, the brand value is identical to Steinways Messina and Kirkland have a proven record for turning around Selmer. Their financial expertise can help Steinway turn around Cost Advantages Sharing of marketing and sales teams, may be inventory storage optimization, improve operating efficiencies, common workforce resulting in low costs Revenue Advantages Cross selling the Boston Piano products to the schools, upselling the Steinway Grand Piano to music schools

OTHER ALTERNATIVES
Steinway can explore other product lines like Electronic Keyboards Partner with leading music labels to promote the musicians who endorse Steinway to attract the musical crowd and students While other opportunities like Antique furniture, collectibles can be explored, Steinways aim should be to recreate its brand image