Steinway and Sons, a renowned manufacturer of concert pianos, has built a strong reputation in the industry. Its long history is marked by a remarkable ability to innovate and produce high-quality pianos, exemplified by the impressive 114 patents it holds. In a time where mass production is prevalent, Steinway remains dedicated to crafting a limited number of handmade pianos, showcasing their commitment to individual craftsmanship. However, Steinway now faces competition from various rivals, leading to questions about their ability to sustain their traditional approach or adapt to changing circumstances.
Steinway & Sons has a long history, being founded in 1853 by German immigrant Henry Engelhard Steinway. The company was established in a Manhattan loft on Varick Street. Prior to this, Henry had already built 482 pianos as a master cabinet maker, starting with his first piano made in the kitchen of his home in Seesen, Germany. The company’s first official piano, number 483, was sold for $500 to a family in New York and is now showcased at the Metropolitan Museum of Art in New York City.
Steinway’s exceptional quality became evident early on as it won gold medals at various American and European exhibitions held in 1855.
In 1867, the company achieved international recognition at the Paris Exhibition when it received the esteemed “Grand Gold Medal of Honor” for its exceptional manufacturing and engineering. Henry Steinway incorporated the latest technical and scientific research, including the acoustic principles of renowned physicist Hermann von Helmhotz, into the development of his pianos. In the early 1890s, Steinway relocated to its current position in the Astoria area of Queens, New York, and established what is now known as Steinway Village. Serving as its own self-contained community, Steinway Village boasted its own foundries, factory, post office, parks, and employee housing.
Steinway still utilizes the traditional craftsmanship techniques that have been passed down through generations in its factory today. With over 900 renowned concert artists holding the title of Steinway Artist, the company produces approximately 5,000 pianos worldwide annually. Meanwhile, Yamaha Corporation of America, which has been selling pianos in the United States since 1960 and has maintained its status as the preferred brand for leading jazz and pop artists, decided to enter the concert piano market in direct competition with Steinway in the late 1980s.
Yamaha developed pianos like the CFIIIS in order to compete with Steinway’s dominance in the concert sales market. In response, Yamaha established its own Concert and Artist Service to distribute pianos nationwide, similar to Steinway’s offering. During the 1970s, Steinway was owned by CBS, leading to complaints from concert artists about a decline in quality. The “Teflon controversy” occurred when Steinway replaced certain internal materials with Teflon, although they now apply fabric coating to the Teflon.
In 1985, CBS sold Steinway, and it was believed by many experts that the renowned quality of Steinway was being restored. Larry Fine, a piano expert, contends that Yamaha pianos lack the sustained and melodic tone that is unique to Steinway, as Yamaha tends to have a more piercing sound in the higher notes, which certain jazz pianists may prefer. Despite facing more competition, the longstanding tradition of Steinway endures. It takes more than a year to manufacture each grand piano and includes over 1,000 distinctive features that distinguish Steinway from its rivals.
During a tour of the Steinway factory, visitors are transported back in time as they witness manufacturing techniques that have remained unchanged since 1853. In recent years, Steinway has expanded its market by creating Boston Piano, utilizing cutting-edge computer technology for design. However, the production of Boston pianos takes place in Japan, where Kawai, the second-largest piano maker in the country, handles the manufacturing process. Initially, Boston pianos were exclusively intended for markets outside of Japan, but when Kawai showed interest in distributing them within Japan, Steinway adopted a different approach.
Boston Piano’s success in Japan can be attributed to their unconventional marketing method, known as “guerilla marketing.” This approach involved various strategies such as developing new dealers, referrals, and direct-mail programs, but it also included the implementation of “selection events.” In a country with limited display space like Japan, showcasing 65 grand pianos in a single location was something completely innovative. By utilizing telemarketing and direct mail, Boston’s Japanese distributor successfully attracted 260 individuals to a selection event in Osaka, ultimately resulting in the sale of 100 pianos. As a result, Boston Piano currently holds a noteworthy 10 percent share of the Japanese market.
By extending its expertise and experience in piano manufacturing to the city of Boston, Steinway has the opportunity to enter a previously untapped market. Their primary skill in hand craftsmanship can be applied to a more affordable market segment using advanced technology. On May 25, 1995, Steinway & Sons merged with The Selmer Company, a manufacturer of brasswind, woodwind, percussion, and stringed instruments. This merger formed Steinway Musical Instruments, Inc., whose strategy aims to leverage their well-established brand names and dominant positions in the market.
The company had net sales of $258 million in 1996, with 53% coming from Steinway piano sales and 47% from sales of Selmer band and orchestral instruments. Additionally, the acquisition of William Lewis Violin and the Emerson Flute Company expanded the company’s band and musical instrument line. On August 1, 1996, an initial public offering (IPO) of common stock generated $63 million in new equity capital. This capital allowed the company to repay more than $54 million of senior secured notes, resulting in significant improvement in the new company’s financial flexibil¬ity.
Steinway’s piano sales are influenced by economic conditions, demographics, and interest in music and the arts in the United States and Europe. The company mainly relies on sales of grand pianos for its operating results. In 1996, Steinway sold a total of 3,066 grand pianos – even a small decrease in units sold could significantly impact its business. Domestic sales of grand pianos experienced a 32% increase from 1993 to 1996 due to the economic recovery in the United States and increased marketing efforts. However, sales to international markets remained stagnant during this period due to weak European economies. In terms of net sales distribution in 1996, approximately 54% came from the United States, while Europe accounted for 33%, and Asia made up the remaining 13%. It is worth noting that Steinway stands out among its competitors as it does not offer extended financing arrangements to its dealers.
Steinway has established an arrangement for long-term financing for certain dealers through a third-party provider. This arrangement typically does not involve any guarantee from Steinway. In early 2001, Steinway and Sons introduced the Essex line of pianos, in addition to their existing Steinway and Boston lines. The Essex line includes two grand and two upright models, with prices ranging from $5,200 to $17,800. With the introduction of the Essex line, Steinway now caters to musicians of all skill levels and budgets. However, the question remains whether Steinway can continue its successful operation as it has done for the past 140 years.
The recent merger with The Selmer Company results in a stronger and more diverse firm.
Review Questions:
1. In Steinway, how have group norms been established?
2. How does the piano manufacturing process of Steinway demonstrate the necessity for teamwork?
3. Provide suggestions on how a new employee can progress through the Stages of Group Development.
You Do the Research:
1. In this era of mass production, how does Steinway maintain its focus on craftsmanship?
2. Are any of Steinway’s processes transferable to other companies?
3. Which other consumer products seem to be employing a similar approach to the market as Steinway?
