Watch industry news from Switzerland reveals that big Swiss watchmaker Swatch is pushing to reduce the number of movements and parts it sells to rivals.

Rivals include big luxury brands like Cie, Cartier and Tag Heuer, who use Swatch components in some of their most exclusive products. Swatch, on the other hand, is known for its playful plastic watches that are incredibly reliable and well-made. It’s almost as if these other brands are taking the best parts of Swatch and refinishing them in higher-end materials.

From the sound of it, Swatch is effectively subsidizing the competition by shouldering research-and-development and production costs for the rest of the industry. While Swatch makes itself profitable due to intense market penetration, they are still losing out in comparison to other companies due to the incredibly low price in which they have to offer their components. In some cases, rival companies can turn around and resell those same components for a profit.

“We are in a ridiculous situation that would be like having BMW supply all the engines for Audi and Mercedes,” says Nick Hayek, Swatch’s chief executive and the son of the company’s founder. “In no other industry do you have one company supply all the critical parts to the people who then compete directly with it.”

Undoubtedly, Swatch has made a strong case for themselves. And the good news is they aren’t planning to completely eliminate its supply of components to other watchmakers, but merely to reduce supplies and name their own prices.

If they win their lawsuit, smaller watchmakers could go out of business or be forced into the arms of larger companies like Audemars and even Swatch.

Whichever way the court rules, the Swiss watch industry will remain innovative and perhaps the market will see amazing new ideas as companies are forced to respond creatively to this news.

Read the full article here on The Wall Street Journal.

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