* Sustaining handcraft skill in piano design
The age long competitive advantage for Steinway in its piano design would have to give way to a modern automated system for quick assembly and reduction in lead time.
* Threats of close substitutes -such as the electronic keyboard, new design of personal computers etc as a form of entertainment is feared would erode Steinway’s market share and its perceive value.
* Erosion of brand image
The decision within the CBS years (1972-1985) to increase production levels and choice of other methods of marketing through competitor sales distribution outlets opens an opportunity for customers to question Steinway’s piano quality, uniqueness and perceived brand image.
This resulted in declining sales and frequent order cancellations. The used pianos also pose an issue of how Steinway would hold well of its value creation at the customer end1.
Relatively, Boston’s piano introduction also further eroded Steinway’s piano; a middle-range product an advance from the traditional offerings.
Strong competition stem from Yamaha and other Asian brand of piano2. These new designs were built on highly automated systems and had quick assembly time than Steinways with a two year manufacturing time.
* Customer relations services
The competitors are better at rendering a highly valued after sales checks and feedback from their customers than Steinway. There is a track record of begrudged customers who have made official complaints about Steinway’s service level; an example in the case study is famous pianist Andre Watts who turned to a competitor (Yamaha) purely on this basis.
* Ownership Change
The frequent acquisitions and ownership change is a great challenge and pproduct quality has become a concern. This would possibly give rise to the problem of continuance of corporate mission. Therefore, it’s necessary for Steinway to retain its leadership position to fully understand and make attempt to maintain the core competences and brand image for customer retention and loyalty3
What have been the recent challenges to Steinway’s Value Creation?
Main competitors are Yamaha – the largest piano manufacturer in the world.
Most pianos are vertical units – 90% – with small grand pianos making up the remaining 10%.
Their production is based on highly automated systems resulting in quicker assembly than Steinway, where a grand piano takes 2 years to manufacture.
To most users, other than classically trained pianists, Yamaha represents comparable quality to Steinway.
After-sales service is also an issue – the example in the case study is that of the famous pianist Andre Watts, who defected to Yamaha complaining of a lack of attention and support from Steinway.
Steinway is the ‘Rolls-Royce’ of the piano market.
Throughout the CBS years (1972 – 1985), emphasis was placed on increasing levels of production. Critics began to question the quality of the pianos, and this filtered through to the customer. This ultimately led to a drop in sales and cancelled orders (at one point they had 740 boxed pianos left in stores awaiting shipment)!
The release of the Boston piano, in 1992, by the Birmingham Brothers (1985-1995) was a major shift in Steinway’s brand. This piano is a mid-range product, representing a significant break from tradition.4
Perversely, Steinway’s quality has become a problem for them. Their pianos are so durable that the market for them is near saturation point. Second-hand units, that hold their value well5, are now competing with sales of new units.