Bang & Olufsen

Group B12Görkem Gülan, Carlos Hurtado, Lars Chr. Eriksen, Carmel Roche, Renato

Zanetti

Agenda

• Introduction• “Break-Point ‘93”• Strategy Analysis

– Value Chain– Environment Analysis (Internal / External)– Value Proposition

• Conclusions• Q & A

Selection of Products

Introduction: B&O

• B&O is a Danish company mainly active in the high quality, distinctive home entertainment category (Founded in 1925)– 2700 Employees– €511 Million

• Uniqueness of B&O– Do what nobody else can do– Award Winning Design– High Price!!

• Even the CEO of Sony brags about his B&O’s publicly!

1925

1980-90

1992

1993

Heading for Crisis

• External Causes– Freer markets globally and in the EU– Faster development and launch of products– New technology

• Internal Causes– Product driven company– Development and design were kings.

Manufacturing and sales were servants– Blinded by own excellence– Awards more important than money!

1925

1980-90

1992

1993

CRISIS!

• New CEO : Anders Knutsen

• Changes the organization structure : “The Butterfly”– Breaking down “kingdoms”

• 25% of the employees fired– No strikes, No quality reduction

• Factory closed

1925

1980-90

1992

1993

Break-Point 93

• Launched in November ’92 : Nobody believed in it!

• Includes seven initiatives of internal re-structuring

• Design, Quality re-affirmed through vision:Superior quality in picture and sound and a unique combination of high quality user control/interface and

design

1925

1980-90

1992

1993

7 Initiatives to Implement Turnaround

Performance

Time

OrganizationAccuracy

Core competence

ISO 9001

Speed and productivity

Technological roadmapping

Lean product development

1925

1980-90

1992

1993

Value Chain Management

Purchase / External supply

Customercenter

Retail Customer

Mechanics Assembly

Electronics

Supplier

Supplier

Supplier

Orders (Demand) Orders (Demand)

• Strategically reduce suppliers from 1000 300

• Form strategic purchasing partnerships

• Focus on core processes – Outsource Non core

• Increase speed and reliability through LEAN

• Reduction of warehouses and costs

• Direct order & Assembly to order processes

• Lead time reduction (BPR) to 5 days for 85% orders

Demand Side Alignment

Distribution channel• Dedicated outlets B1• Shop-in-shop sales areas SIS• Multi-product shops (other)

Shops per segment

Turnover share

Distribution channel• B1 is a more profitable

channel• Provides B&O with better

alignment in its Value Chain

Internal and External Analysis

Consumer manufacturers are attacking B&O’s niche segment(e.g. flat LCD)Especially Asian companiesInnovation pressure

Customization / CustomerizationAlliances in developmentPhilips, AudiAlliances in marketingHyatt hotels

Small size and resourcesWeak in Multi-brand shopsLead designer dependanceComponents shipped by competitors (e.g. Philips)

Innovation and creativityProduct and brand reputationExternal, broadminded designNiche market positioningLEAN value chain

• Market pressure– Prices– Innovation– Lead time– Time to market

Threat of substitutes

• Lower segment products entering the market

• “World Trip” or B&O?

Consumer´s bargaining power

• High consumer power in the industry

• Less bargaining power for the niche segment

Barriers to entry• High barriers to entry for

new competitors

• 6-8 years development • 10 years product life for

the customer• B&O culture imitation is

difficult

Suppliers bargaining power

• Low suppliers’ bargaining power. Especially for big players (e.g. Sony)

• For B&O, they strategically choose small suppliers for non-standard components.

Value Proposition

• Value • Design / aesthetics• Quality in all aspects• Longer life-cycle

• Speed• Five day lead time on a customized

television set throughout Europe.

Conclusions

• B&O managed to turn around a fatal crisis that was leading them to bancruptcy

• They managed to do this by:

– Promoting a strong internal CEO

– Realizing their core competencies and building on them

– Realizing their small but unique

– Having the courage to make bold changes!!!

Question and AnswerLock and Key

If you have a B&O System, you can walk out of your house and – with the keychain – it shuts all the equipment automatically