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Steinway & Sons: Combining Craftwork and Teamwork

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Steinway and Sons remains one of the best-known producers of concert pianos in the world. Throughout its great history the company has shown a distinctive talent at innovation and quality workmanship, as evidenced by its 114 patents. In an age of mass production, Steinway continues to manufacture a limited number of handmade pianos in a unique testament to individual craftsmanship. However, Stein¬way’s dominance in the concert piano market is being chal¬lenged by several rivals. Can Steinway continue its cherished ways, or will it need to adjust to new circumstances?

A Long History. Steinway & Sons was founded in 1853 by German immi¬grant Henry Engelhard Stein¬way in a Manhattan loft on Varick Street. Henry was a master cabinet maker who built his first piano in the kitchen of his Seesen, Ger¬many, home. By the time Henry established Steinway & Sons, he had built 482 pi¬anos. The first piano pro¬duced by the company, num¬ber 483, was sold to a New York family for 0.

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It is now displayed at New York City’s Metropolitan Museum of Art. Steinway’s unique qual¬ity became obvious early in the history of the firm, evi¬denced by its winning gold medals in several American and European exhibitions in 1855.

The company gained in-ternational recognition in 1867 at the Paris Exhibition when it was awarded the prestigious “Grand Gold Medal of Honor” for excellence in manufacturing and engineering. Henry Steinway developed his pianos with emerging technical and scien¬tific research, including the acoustical theories of the renowned physicist Hermann von Helmhotz. In the early 1890s, Steinway moved to its current location in the Astoria section of Queens, New York, and built Steinway Village. Virtually its own town, Stein¬way Village had its own foundries, factory, post of¬fice, parks, and housing for employees.

Its factory today still uses many of the crafts¬manship techniques handed down from previous genera¬tions. Steinway produces ap-proximately 5,000 pianos an¬nually, worldwide, with over 900 prominent concert artists bearing the title of Steinway Artist. New Competition Yamaha Corporation of America has sold pianos in the United States since 1960 and remains the preferred brand for top jazz and pop artists. But in the late 1980s, Yamaha chose to en¬ter the concert piano market in direct competition with Steinway.

Developing grand pianos such as the CFIIIS provided Yamaha with the product offering to attack Steinway’s 95 percent mar¬ket share in concert sales. Yamaha created its Concert and Artist Service—similar to Steinway’s—to supply pi¬anos across the country. Steinway was owned in the 1970s by CBS, and many concert artists complained that the quality had suffered as a result of that ownership. Pianists talked of the “Teflon controversy”, when Steinway replaced some fabric innards with Teflon (it now coats the Teflon with fabric).

Steinway was sold by CBS in 1985, and many experts voiced the opin¬ion that Steinway’s legendary quality was returning. Larry Fine, a piano expert, argues that “a Steinway has a kind of sustained, singing tone that a Yamaha doesn’t have. Yamaha has a more brittle tone in the treble that some jazz pianists prefer”. Even with increased competition, the Steinway Tradition continues. Every grand piano takes over a year to complete and incor¬porates over 1,000 details that set a Steinway apart from competitors.

A tour of the Steinway factory is a trip back through time, as many of the manufacturing tech¬niques have not changed since 1853. Recently, Steinway de¬veloped Boston Piano in an attempt to broaden its market. Boston pianos—designed by Steinway & Sons with the latest computer technology— are manufactured in Japan by Kawai, the second-largest Japanese piano maker. At first, Boston intended to ship all of its pianos to markets outside of Japan, but when Kawai expressed interest in distributing them throughout Japan, Steinway took a differ¬ent tack.

Boston’s success in Japan is a result of an un¬orthodox method called “guer¬rilla marketing”. This ap-proach involved developing new dealers, referrals, and di¬rect-mail programs. But the strategy also brought into play “selection events”. With dis¬play space at a premium in Japan’s cramped cities, dis¬playing 65 grand pianos in one location was something quite new. Using telemarketing and direct mail, Boston’s Japanese distributor attracted 260 people to a selection event in Osaka . . . and sold 100 pianos. Boston Piano now ac¬counts for 10 percent of the Japanese market.

By transferring its qual¬ity and knowledge of building pianos to Boston, Steinway is able to open up a whole new market to exploit. Its core competence of hand craftsmanship can be ap¬plied in a newer, high-tech¬nology manner to a lower-priced market niche. A New Partnership On May 25, 1995 Steinway & Sons merged with The Selmer Company, manufac¬turer of brasswind, wood¬wind, percussion, and stringed instruments, to form Steinway Musical Instruments, Inc. The new com¬pany’s strategy strives to capitalize on its strong brand names and leading market positions.

The company’s net sales of $258 million for 1996 were split between Steinway piano sales (53 percent) and sales of Selmer band and or¬chestral instruments (47 percent). In addition, the pur¬chase of William Lewis Violin and the Emerson Flute Com¬pany adds to the band and musical instrument line. On August 1, 1996, an initial public offering (IPO) of common stock raised $63 million in new equity capital. This money allowed the firm to repay over $54 million of senior secured notes, thereby greatly improving the financial flexibil¬ity of the new company.

Steinway’s piano sales are influenced by general economic conditions in the United States and Europe, demographic trends, and general interest in music and the arts. Steinway’s operat¬ing results are primarily in¬fluenced by grand piano sales. Given the total num¬ber of grand pianos sold by Steinway in any year (3,066 in 1996), a decrease of a rel¬atively small number of units sold by Steinway can have a material impact on its busi¬ness and operating results. Domestic grand piano unit sales have increased 32. % from 1993 to 1996, largely attributable to the economic recovery in the United States and increased selling and marketing efforts. Grand pi¬ano unit sales to interna-tional markets have remained relatively flat over the same period primarily as a result of the weakness of the European economies. In 1996, approximately 54 per¬cent of Steinway’s net sales were in the United States, 33 percent in Europe, and the remaining 13 percent pri¬marily in Asia. Unlike many of its com¬petitors in the piano industry, Steinway does not provide ex¬tended financing arrange¬ments to its dealers.

To facili¬tate the long-term financing required by some dealers, Steinway has arranged for fi¬nancing through a third-¬party provider which gener¬ally involves no guarantee by Steinway. In early 2001, Steinway and sons introduced a third line of pianos, called the Es¬sex, to complement its Stein¬way and Boston lines. The line offers two grand and two upright models ranging in price from $5,200 to $17,800. With the Essex, Steinway now provides pi¬anos for every level of musi¬cal ability and budget. The question remains, can Steinway continue to op¬erate in the way that has proved successful over the past 140 years?

The recent merger with The Selmer Company creates a stronger and more diversified firm. Review Questions 1. How have group norms developed in Steinway? 2. How does Steinway’s pi¬ano manufacturing process exhibit the need for teamwork? 3. Suggest how a new em¬ployee might work his or her way through the Stages of Group Development. You Do the Research 1. How does Steinway con¬tinue its emphasis on craftsmanship in this age of mass production? 2. Can any of Steinway’s processes be transferred to other companies? 3. What other consumer products appear to be us¬ing a Steinway approach to the market?

Cite this Steinway & Sons: Combining Craftwork and Teamwork

Steinway & Sons: Combining Craftwork and Teamwork. (2017, Mar 24). Retrieved from https://graduateway.com/steinway-sons-combining-craftwork-and-teamwork/

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