Any thoughts about what Leitz can do to survive? Or can they survive producing a conspicuous consumption item?
I think Leica can survive, but not in the way that anyone here would care for.
Leica, as we know, is three companies. Leica Camera, Leica Microsystems, and Leica Geosystems. For the sake of this discussion, though, let's say we are talking about Leica Camera AG only. So when I say 'Leica,' I mean Leica Camera AG.
What sort of company is Leica? It is a company that produces a number of expensive products that are exquisitely well made and limited in number - primarily. It also licenses the use of its name and technology to carefully-selected partners, Panasonic being the most well-known.
If we look carefully at Leica's product line, we see that the expensive products that sell the best are those which appeal to a particular market segment - primarily that of the collector.
I'm sorry, I know it causes massive gnashing of teeth, but not that many photojournalists are carrying M-body Leica cameras as their primary instrument these days - there aren't even that many photojournalists around, really. So the days of Leica as a producer of a working tool of the trade are more or less over.
We see that many of the other Leica products do not sell in the same numbers as the famous M system rangefinders. The R system has met with some success, it may well be profitable, but it does not sell in the numbers that the M system does. The upcoming S system medium-format is hoped to become a category-killer, but the fact is, they're trying to horn in on a market that a) has well-established players whose customers exhibit brand loyalty just like Leica users do, and b) isn't really a monster segment anyway.
For many other companies, the choices would be simpler - dilute the brand name and sell cheaper products that have excellent margins - either by licensing more products to more companies, or by investing in those markets oneself.
Leica, however, cannot really do that. No more than Rolls-Royce can produce a Ford Fiesta without damaging itself. Other companies in a similar situation as Leica have tried and generally failed to avoid shooting themselves in the foot. Cadillac with the Catera; Harley-Davidson with the dirt bikes.
It is a no-win situation for Leica, unfortunately. They cannot go forward because their traditional customer base does not want anything but an M system camera (and if digital, wants it to be significantly better than it currently is - and cost less, too). But if they dilute their name brand, then they damage the value of the brand going forward.
My suggestions would include very minor changes. If the R system is profitable, keep it, but invest no more in it. Give the S system time to take off, but if it does not, kill it with malice aforethought and bury it as quickly as possible.
Continue the current relationship with companies like Panasonic, and consider expanding upon it, although with extreme caution where the word "Leica" or the red dot are to appear.
One thing that might be useful would be some advertising of the sort that educates the public, along with some low cost but relatively high-margin Leica-branded digital cameras.
People know the brand name. But people don't think of that when they go to Best Buy, nor do they see Leica there. The main reason for that is that Leica cannot compete on price sitting on a shelf next to the Panasonics and the Kodaks and the Casios (might also be part of the licensing with Panasonic; if so, change that). So create a model that can compete, but which is still not a "Cadillac Catera," in the sense of being a dog-in-Leica's clothes. Advertise that people who care about their photographs and their loved ones memories can get a Real Leica (tm) even in these Tough Times (tm), and once you're a member of the Leica family, you are a special (better, smarter, higher-class) person. Make sure the product line contains stepping stones to get those who make a buck or two more than the average Joe sold up to the next level, and maybe someday to the M system.
Keep putting money into the M system. It really is the only trump in Leica's hand at the moment, but Leica has to create a new sales channel that leads into the M system from lower-cost Leica models - and convince the public that they want to do that.
Anyway, just a couple thoughts.
