February 1, 2016

Economic Specialization – The Case of Swiss Watch

vintage watch
Photo by Allo002 (Own work) [CC BY 1.0 (http://creativecommons.org/licenses/by/1.0)], via Wikimedia Commons

I’ve been researching about watches in the past two years. My enthusiasm begun when my friend gave me a watch; it was a fantastic watch which spurred my enthusiasm to do research about time pieces.

When you Google a watch, one country will emerge – Switzerland; the country claims to be the pioneer of watch making. This is not surprising since the biggest names of watch industry like Patek Philippe, Rolex, Audemars Piguet, IWC, Omega, Breitling, TAG Heuer and the likes are located in the said country. What is amazing about these watches is that they were able to create great value on their watch which fuels their mother economy.

Switzerland, located at Central Europe, is classified as developed country with modern cities (like Geneva) and high standard of living. The country is not only well known for specializing in watches but also known for banking and chocolate industry. According to statistics (year 2012), the Swiss watch industry employed more than 50,000 people in Switzerland which caters the demand of luxury watch enthusiast and collectors worldwide – with top clients coming from Hong Kong, US, China, France, and Germany.

With all of this being said, how did the country emerge as the home of watch making? And how did Swiss watch companies able to put high price tags on their automatic watch? And with high price tag, these watches are still being bought despite the emergence of lower priced battery powered Japanese quartz.

According to Swiss watch makers their watch is a device that tells time but crafted with artistry – their watch is handmade (some with signature of the watch maker inside) with high time telling precision from high quality materials that can stand the test of time (100 years or more). When a watch becomes an artistic masterpiece relative to it rareness qualities – it can now command a price like the paintings of Leonardo Da Vinci (e.g. Mona Lisa, The Last Supper). Art is highly valued by some members of the society and some of them are willing to pay the price. When a wealthy member of the society wants the well crafted watch – he or she will pay for the watch despite the luxury price – using his or her disposable income. Thus, the upper class members of the society with higher disposable income create demand for luxury watch. Because a watch claims be a work of art, with its owners putting high value on the device, the owner will not sell the watch at a lower price (because the owner is wealthy) – as a result the value of luxury watch increases. This is one of the scenarios why the value of a highly crafted watch increases.

So what is the point of this in economics? Well, one of the lessons here is that high value cannot only be generated from mass production (the likes of China’s economic model); there is a great value in high precision craftsmanship. Philippines (and other countries) small business can learn from the Swiss model; value can be created from creating a high quality goods and services. In the case of developing countries, creating high quality products can be started from non-complicated goods like agriculture products. As knowledge evolved on producing a high quality product, knowledge is shared and produces a specialized economy like Switzerland.

1 comment:

  1. China automatic movement is penetrating the watch market


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