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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
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!!!