Bang Olufsen Group B 12 Grkem Glan Carlos

Bang & Olufsen Group B 12 Görkem 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 1925 • 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 a unique combination of high quality user control/interface and design 1980 -90 1992 1993

7 Initiatives to Implement Turnaround 1925 Performance Lean product development Technological roadmapping 1980 -90 1992 1993 Speed and productivity ISO 9001 Core competence Accuracy Organization Time

Value Chain Management Electronics Supplier Mechanics Orders (Demand) Assembly Supplier Customer center Purchase / External supply Retail Customer Supplier 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 B 1 • Shop-in-shop sales areas SIS • Multi-product shops (other) Turnover share Distribution channel • B 1 is a more profitable channel • Provides B&O with better alignment in its Value Chain Shops per segment

Internal and External Analysis Innovation and creativity Product and brand reputation External, broadminded design Niche market positioning LEAN value chain Customization / Customerization Alliances in development Philips, Audi Alliances in marketing Hyatt hotels Small size and resources Weak in Multi-brand shops Lead designer dependance Components shipped by competitors (e. g. Philips) Consumer manufacturers are niche segment (e. g. flat LCD) Especially Asian companies Innovation pressure attacking B&O’s

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

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 Answer Lock 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