Word: hayek
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Make way for the Swatchmobile, a sassy two-seater that looks like a cross between a Volkswagen Beetle and a Rambler. In fact, it is the product of an odd corporate marriage sealed last week between Mercedes-Benz, the maker of luxury cars, and Nicolas Hayek, the man who put almost 150 million Swatches on wrists all over the world. So far, the two companies have worked on separate prototypes, which they plan to merge into a single model produced by a joint company (Hayek's stake is 49%, Mercedes' 51%) for the 1997 market...
...Mercedes and Hayek's company, the Swiss Corp. for Microelectronics and Watchmaking Industries (SMH), the project is not just a technological challenge but also a huge marketing risk. After all, business-school casebooks are full of stories about fashionable companies that, in search of diversification, stretched their brand names past the breaking point. Swatch tried to extend its name to telephones, pager watches and sunglasses without great success. But Mercedes, whose sales have fallen 11% in the past three years, is eager to reach out to buyers who cannot afford its traditional cars. Already the company has unveiled plans...
...Hayek may overestimate his reach -- "I am the creator of products, kingdoms and empires," he says -- but he does have expertise at taking a luxury product downscale while preserving its cachet. It was he who came up with the strategy that saved the prestigious Swiss watchmaking industry from succumbing to the Japanese hegemony in the quartz-watch business. In 1983, when he was approached for advice by a group of Swiss banks, the country had seen its share of the global watch market drop from 43% in 1974 to less than 15%. More than half the Swiss manufacturers had gone...
...Hayek put up $102 million -- mostly his own money -- and led a group of investors in buying the two companies from the banks. He then merged them, effectively taking control of one-third of the Swiss watch industry, including such famous brands as Omega, Longines, Blancpain, Tissot, Rado and Hamilton. But his big coup was figuring out that a product invented before his arrival could be the high-quality, low-price, plastic quartz watch that would challenge the Japanese at the lower end of the market. The $35-to-$40 Swatch, which reduced by half the usual number of parts...
...Hayek, an economist Reagan admires, preached that the free market conquers all. During the first term, such nostrums were handy tools for trimming some obsolete domestic programs and reducing marginal tax rates. But when Reagan reached those goals, he lacked intellectual material for a second act worthy of the first. Here another of his weaknesses came into play with devastating effect. Throughout his career his detached management style made him depend heavily on his senior advisers. After his 1984 electoral triumph, his fatigued White House staff needed relief. Instead of reorganizing it himself, Reagan allowed his then chief of staff...