1. Bang & Olufsen
Group B12
Görkem Gülan, Carlos Hurtado, Lars Chr. Eriksen, Carmel Roche, Renato Zanetti

2. Agenda Introduction “Break-Point ‘93” Strategy Analysis Value Chain
Environment Analysis (Internal / External)
Value Proposition
Conclusions
Q & A

3. Selection of Products

4. Introduction: B&O
1925
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!
1992
1993

5. Heading for Crisis External Causes
1925
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!
1992
1993

6. CRISIS! New CEO : Anders Knutsen
1925
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
1992
1993

7. Break-Point 93 Launched in November ’92 : Nobody believed in it!
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 and a unique
combination of high quality user control/interface and design
1992
1993

8. 7 Initiatives to Implement Turnaround
Performance
1925
Lean product development
1992
Technological roadmapping
Speed and productivity
1993
ISO 9001
Core competence
Accuracy
Organization
Time

9. Value Chain Management
Supplier
Electronics
Orders (Demand)
Orders (Demand)
Supplier
Mechanics
Assembly
Customer
center
Retail
Customer
Supplier
Purchase /
External supply
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

10. Demand Side Alignment Distribution channel Dedicated outlets B1
Turnover share
Distribution channel
Dedicated outlets B1
Shop-in-shop sales areas SIS
Multi-product shops (other)
Distribution channel
B1 is a more profitable channel
Provides B&O with better alignment in its Value
Chain
Shops per segment

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

12. Market pressure Barriers to entry Suppliers bargaining power
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.
Consumer´s bargaining power
High consumer power in the industry
Less bargaining power for the niche segment
Market pressure
Prices
Innovation
Lead time
Time to market
Threat of substitutes
Lower segment products entering the market
“World Trip” or B&O?

13. Value Proposition Value Design / aesthetics Quality in all aspects
Longer life-cycle
Speed
Five day lead time on a customized television set throughout Europe.

14. 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!!!

15. 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