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Bang and Olufsen

Trabajo final de la asignatura Business Strategy. En este trabajo buscamos


aconsejar la estrategia ideal para B&O en Europa, para ello aplicamos modelos
como el PESTEL, la matriz de Ansoff En este proyecto obtuvimos un 73/100,
segn mi universidad esa nota equivale a un 9,13 espaol.

Final project of the subject "Business Strategy. In this project we looked for the
ideal strategy for B&O in Europe. Due to this, we applied models as the Pestel or
the Ansoffs Matrix. The grade was 73/100.
Report to Board of Directors

Business Strategy
BM 391

3 compaeros y yo (No pongo su nombre debido a la LOPD).

Three classmates and me. I can not put their names due to the Spanish privacy and
data protection law.
Business Strategy: Report to Bang & Olufsen Board of Directors 2
Executive summary

The main issue of this report is to find the appropriate strategy that Bang & Olufsen should
put in place in Europe regarding the analysis of the macro environment, the industry, the
market in which the company situates itself while using at its best level its resources and
competences.

We based our analysis on different strategic models as for example PESTEL, Porters Five
Forces, SWOT and TOWS matrices, Ansoffs matrix, BCG matrix, which can be found in the
appendices.

To reach our conclusion and formulate our recommendations, we analysed carefully the main
factors of influence on Bang & Olufsens activity:

- The current global economic context of recession


- The importance of the technological aspect through the constant offering of innovative
products
- The fragile but crucial relationship between Bang & Olufsen and its supplier Philips
- The large potential B2B market and the influence it can have on Bang & Olufsen

Our analysis has demonstrated that Bang & Olufsen could follow different strategies.

At the business unit level, as defensive strategies, Bang & Olufsen can cooperate with its
niches competitors, or buying their shares and selling them. In another way, as offensive
strategy, the company could attack its local competitors in the Danish market.

At the corporate level, in the short-term, even if the sector starts decreasing Bang & Olufsen
needs to confirm its position on the audio-visual competitive sector but also should be
focused on the automotive sector, as it is currently one of the leading providers of sound
systems for cars. In the long-term, Bang & Olufsen should focus on the B&O Play business
unit, as it represents a future huge profits opportunity for the company.

Business Strategy: Report to Bang & Olufsen Board of Directors 3


Table of content

I. Analysis of the Bang & Olufsens external environment ............................................... 6

1. The macro environment ...................................................................................................... 6

2. The industry ......................................................................................................................... 6

3. The market and the competitors ........................................................................................ 7

II. Analysis of the Bang & Olufsens internal strategic capability ................................. 10

III. Conclusions and recommendations for the B&O future strategic direction .......... 13

1. Strategic direction at the business unit level ................................................................... 13

2. Strategic direction at the corporate level ......................................................................... 14

IV. References and bibliography ....................................................................................... 17

V. Appendix ......................................................................................................................... 23

1. The Macro environment.................................................................................................... 23

Appendix 1: PESTEL ANALYSIS on the luxury market of video and audio products ...... 23
Appendix 2: SCENARIO ANALYSIS ................................................................................ 25

2. The industry ....................................................................................................................... 27

Appendix 3: PORTERS 5 FORCES on the luxury market of audio and video products ... 27
Appendix 4: THE VALUE NET.......................................................................................... 32
Appendix 5: COMPARATIVE ANALYSIS ....................................................................... 33

3. The market, the competitors ............................................................................................. 35

Appendix 6: THE TYPE OF INDUSTRY........................................................................... 35


Appendix 7: THE INDUSTRY LIFE CYCLE .................................................................... 35
Appendix 8: STRATEGIC GROUPS .................................................................................. 36
Appendix 9: MARKET SEGMENT .................................................................................... 37
Appendix 10: STRATEGIC CUSTOMER .......................................................................... 40
Appendix 11: BLUE OCEAN STRATEGY CANVAS ...................................................... 41

4. Organisations internal strategic capabilities.................................................................. 42

Appendix 12: RESOURCES AND COMPETENCES ........................................................ 42


Appendix 13: SUSTAINABLE COMPETITIVE ADVANTAGE ...................................... 47

Business Strategy: Report to Bang & Olufsen Board of Directors 4


Appendix 14: THE VALUE NETWORK ........................................................................... 48
Appendix 15: KNOWLEDGE MANAGEMENT SYSTEM & THE CONCEPT OF A
LEARNING ORGANISATION .......................................................................................... 53
Appendix 16: BENCHMARKING ...................................................................................... 54

5. The SWOT and TOWS Matrices ..................................................................................... 56

Appendix 17: SWOT MATRIX........................................................................................... 56


Appendix 18: TOWS MATRIX........................................................................................... 59

6. Strategic choices at the Business Unit level ..................................................................... 61

Appendix 19: PORTER GENERIC STRATEGIES ............................................................ 61


Appendix 20: THE STRATEGY CLOCK .......................................................................... 62
Appendix 21: THE STRATEGIC LOCK-IN ...................................................................... 63
Appendix 22: THE HYPERCOMPETITIVE ENVIRONMENT ........................................ 64
Appendix 23: GAME THEORY.......................................................................................... 66

7. Strategic choices at the Corporate level ........................................................................... 68

Appendix 24: PARENTING STYLE................................................................................... 68


Appendix 25: ANSOFFS MATRIX ................................................................................... 69
Appendix 26: INTEGRATION VS DIVERSIFICATION .................................................. 71
Appendix 27: OUTSOURCING .......................................................................................... 72
Appendix 28: BCG MATRIX .............................................................................................. 73
Appendix 29: GE-MCKINSEYS MATRIX ....................................................................... 76
Appendix 30: PARENTING MATRIX ............................................................................... 79

VI. Minuted notes of group meetings ................................................................................ 81

VII. Individual group contribution ..................................................................................... 84

Business Strategy: Report to Bang & Olufsen Board of Directors 5


I. Analysis of the Bang & Olufsens external environment

1. The macro environment

After realizing the analysis of Bang & Olufsen macro environment, we reached the
conclusion that two factors are most likely to have a significant influence on B&Os activity.

The current global recession decreased seriously peoples purchasing power and, even
though sales in the luxury sector grew by 10% in 2011, it still represents a major threat for
Bang & Olufsen. In addition to that, unlike its competitors, B&O did not subcontract a part of
its production overseas which increases its production costs. However, B&O Play, the new
brand launched by the firm that offers cheaper products, can be a good opportunity to
develop the sales of the company despite this current economic context.

The technological evolution of the brand is also crucial. B&Os competitive advantage is
based on innovation, which means that the brand needs to be ahead of competition on every
product that it offers (Appendix 1). In a context of fast innovation, the obsolescence of the
product is a determinant characteristic that customers will take into consideration in their
purchasing decision process. Indeed, the major threat for B&O, in this scenario, is that
prospects will prefer to invest in other brands that offer cheaper products. In this way, they
will be able to replace quickly as they evolve (Appendix 2).

2. The industry

Bang & Olufsen situates itself on the industry of high-end audio and video products that
mix quality and design. We can say that B&O evolves in a comfortable position in this
industry. Indeed, the barriers of entry are high and it is unlikely that B&O will suffer from
new entrants, as entering the industry requires high investments and experience (Appendix 3).

In addition to that, B&O situates itself in a niche market so we can safely state that substitutes
and competitors represent a low threat.

However, even if the Dutch company is not threatened directly, B&O should pay attention to
several elements that could evolve in their disadvantage in the future.

Business Strategy: Report to Bang & Olufsen Board of Directors 6


Its B2B customers, especially the car manufacturers such as Audi and Aston Martin have a
relative strong bargaining power over the company. Indeed, they buy significant amount of
products and they also have contracted long-term contracts of orders. But, most importantly,
their image is highly associated with B&O that can benefit from this association in terms of
publicity. In the future, it is probable that those B2B customers may force B&O to make some
sacrifices (Appendix 5).

Moreover, even though the suppliers, mainly Philips, are not considered to be a threat, it is
essential that B&O keep building deep relationships and partnerships with them because the
level of danger depends on those.

Finally, in terms of competitive rivalry, the only threat could come from the flat screens that
have become popular and therefore offered in a wide range of prices by several competitors
thanks to economies of scales. Once again, in order to remain in the race, B&O need to push
further on its competitive advantage, innovation, and need to invest heavily in R&D in order
to offer more innovative technologies while keeping their design and price premium intact
(Appendix 3 and 4).

3. The market and the competitors

Bang and Olufsen situates itself in an oligopolistic industry as the high-end audio and video
products industry is dominated by Bang and Olufsen and its direct competitors Loewe and
Bose. However, Bang and Olufsen is the only one in the market of luxury as it associates
innovation, design and high quality product whereas its competitors have more focus on the
quality only (Appendix 6).

In this industry, the competition is still quite low even if Bang & Olufsen has some
competitors like Loewe and Bose. The barriers of entry are really high as demonstrated earlier
(Appendix 3). However, as it is a luxury brand, the products are not standardized and Bang &
Olufsen tries constantly to innovate therefore it is hard to evaluate whether Bang and Olufsen
situates itself in the shake-out stage or the maturity stage (Appendix 7).

The two major competitors of B&O are Loewe and Bose Corporation. They compete in the
same market, the same geographical area and offer similar ranges of products. However, their
level of innovation and design is not as strong as B&Os (Appendix 3).

Business Strategy: Report to Bang & Olufsen Board of Directors 7


Bose Corporation, like B&O, distributes its products through stand-alone stores and
furnishes car manufacturers like Ferrari and Porsche with its audio equipment. Loewe offers
the exact same range of products and distributes them through stand-alone stores too.

B&O is largely ahead of competition in terms of quality and design of its products. However,
the prices adopted by the brand are higher than the competition and its range of products is
not as wide as Loewe. Indeed, B&O enters the TV market rather late compared to Loewe and
does not provide a significant amount of different TVs. To diversify from competition, Band
and Olufsen could invest heavily on R&D concerning the TV segment.

Thanks to the strategic group analysis (Appendix 8), we have been able to identify three
strategic groups and therefore determinate who is the direct competitor of B&O.

The main competitor of B&O is Loewe as it is the only brand that offers as well designed
high-end audio and video products through a complete geographical coverage of Europe
thanks to stand-alone stores. Therefore, Loewe is the brand that B&O should closely study
(Appendix 8).

In terms of customers, Bang & Olufsen pursue a niche marketing strategy. Their market
segment is composed of customers who are affluent, with high income, in the upper or the
high level of the middle class. They are likely around 40 and 60 years old and live in cities.
Their market segment researches the quality, performance, simplicity, and elegant design
when they purchase B&O products (Appendix 9).

The main issue is that the Market segment is relatively small and exigent. It is crucial that
B&O responds to their needs. Therefore, once again, it is primordial that B&O invests heavily
in R&D to remain on top of its niche market.

However, with the launch of their new brand B&O Play, B&Os objective is to attract a
younger segment, mainly the digital generation, by offering convenient stand alone audio
video products rather than home installation and at a cheaper price. It would be interesting
for the brand to pursue in that direction without forgetting its main market segment in order to
increase its coverage.

Business Strategy: Report to Bang & Olufsen Board of Directors 8


In conclusion, in this first part we can identify the opportunities and threat that faces B&O. In
terms of opportunities, B&O should consider two main aspects.

The most obvious one is the development of their brand B&O Play. Indeed, it offers potential
to increase market shares and gain more customers and in this way operating on two different
market segments. In the last quarter, B&O Play doubled its shares in the financial result of the
firm and in that way, proved to be an efficient strategy.

The second option to envisage is enlarging the B2B market with other automotive and real
estate partners. The association of the brand with famous automotive brands brings benefits in
terms of public image. Moreover, as it is a sector that represents 10% of B&O benefits, the
automotive business unit has potential for growth (Appendix 28).

On the other hand, several threats need to be taken into account. The actual economic
recession slow downs the activity of most industries. B&O Play was a good strategy to
implement in order to overpass this difficult economic context. It is essential for B&O to
follow that strategy. In addition to that, close competitors might try to enter B&O niche
market; it is therefore crucial to survey them.

Business Strategy: Report to Bang & Olufsen Board of Directors 9


II. Analysis of the Bang & Olufsens internal strategic capability

The purpose of this part is to analyse the Bang & Olufsens internal strategic capability that
could respond to the external opportunities and threats identified in the previous part. The
strategic capability of a company includes the threshold and distinctive resources and
competences.

Bang & Olufsen has established itself in a niche market, the audio-visual luxury market. In
this market, the company is focus on innovation, a timeless design, high performances and
an uncompromising quality (Appendix 12). These aspects have enabled the brand to become
one of the most well-known and famous brands in the audio-visual industry. Thanks to its 88
years of experience and its know-how, the Bang & Olufsen brand has a very high profile and
is now internationally known. However, due to these elements, the B&O products are
positioned in a luxury market with premium prices, higher than its competitors such as Bose
and Loewe (Appendix 16).

Indeed, one of the major threats for the company, identified previously, is the increasing
competition from established companies such as Sony or Samsung (Appendix 3). These
companies have started to create sophisticated design combined and high technological
products, which are ones of the B&O products characteristics, at lower prices. To respond to
this threat, Bang & Olufsen need to offer low price products or extra value to its customers.

The high prices applied by the company are not only due to high technological components
but are also the consequence of the operational logistic aspect. Indeed, in reference to the
Appendix 14, Bang & Olufsen has established its production facilities in Czech Republic and
Denmark, which is one of the worlds countries with highest wages, whereas its
competitors like Bose has decided to outsource its production in Mexico and Malaysia
(Appendix 16). Moreover, the establishment of B&O production facilities in the same and one
geographical zone has as consequences high shipping costs to send their devices to other
regions in the world (Appendix 14). Therefore, Bang & Olufsen has to consider outsourcing
its production in the future in order to get lower production and shipping costs and like this
offer lower price products. In addition, this creates the opportunity to enter in new markets
like in Asia or in South America.

Business Strategy: Report to Bang & Olufsen Board of Directors 10


In the actual bad economic climate, the pricing issue is very important. The actual recession
that you can observe actually in Europe and in the major parts of the world is a threat for a
company like Bang & Olufsen (Appendix 1). Indeed, this economic crisis has caused a
decrease of the purchasing power that affects the Danish company in a negative way. To
respond to this factor, the outsourcing issue, by offering lower prices, could improve this
situation but also compromise the close relationship between the production department and
the R&D department that B&O benefits currently (Appendix 15).

Besides the outsourcing opportunity, Bang & Olufsen can also continue to offer extra value to
its customers as they always do it. As we can see in the Appendix 12, one of the B&O
distinctive competences is to provide a great consumer service that is observable at different
levels.

First, Band & Olufsen supplies spare parts for its products for up to 12 years (Appendix
12). This fact demonstrates the long product life cycle on average of 10-15 years that the
B&O customers can enjoy (Appendix 13). It is one of the sustainable competitive advantages
of the firm.

Secondly, as Loewe, B&O has decided to run away from the large retailers and decided to
adapt a selective distribution with thousands of specific stores (Appendix 16). In this way, the
company has a total control on their distribution and can offer a high experience to their
customers in their 674 B1-stores and 244 shop-in-shops stores worldwide (Appendix 12). To
provide the best service, B&O has high-trained employees but, also high skilled professionals
as designers, technicians or dealers that interact between us (Appendix 15). Bang & Olufsen
tries to every time offer a unique experience to their customers when they enter in a B&O
store. Indeed, customers are shown demonstration models in private showrooms, where a
design consultant talks through feasible options, and provide a unique configuration and
expert advice for them.

In addition, they offer to their customer the possibility to customise their products to respond
exactly to their wants and needs and make them unique. Therefore, the manufacturing process
for a product only begins when a customer has placed an order. This made-to-order
production strategy allows the company to eliminate expensive inventory, reduce the storage
and reduce the risk of obsolescence, and wastage. With all of these elements, B&O tries to
gain the customers loyalty (Appendix 14).

Business Strategy: Report to Bang & Olufsen Board of Directors 11


To gain this loyalty, Bang & Olufsen has also developed another distinctive competence that
is the intelligent home control. Indeed, the BeoLink, is a technological innovation that
establishes a home network to link all products together in order to control them (Appendix
12). This system makes Bang & Olufsen stand out from the crowd. Moreover, to enjoy this
intelligent integration, customers have to buy different B&O products. With this type of
technological systems, B&O is able to retain their clients and place a barrier to its
competitors.

In the same way, the technology that Bang & Olufsen has developed through their own
patents is a high competitive advantage for the company. As these patents belong to them,
none of their competitors can use them for the moment. The high level of technology and
design that the firm produces through its products but mainly in its high-end sound systems
has allowed it to establish prestigious partnerships with luxury car manufacturer brands such
as Audi, Ashton Martin, Mercedes AMG and BMW (Appendix 12). The B&O partnerships
with these brands are a core competence and, the Bang & Olufsen Automotive business unit
is seen as an important element of the firms core business. Therefore, as we said before, this
B2B segment represents a good opportunity of development for Band & Olufsen.

Business Strategy: Report to Bang & Olufsen Board of Directors 12


III. Conclusions and recommendations for the B&O future strategic direction

1. Strategic direction at the business unit level

This part is going to be focused on the Appendixes 19 to 23, not taking into account the
Appendix 21 because the Strategy: Lock in cannot be applied to Bang & Olufsen.

As it is explained in the Appendixes 19 and 20, B&O responds with its devices to a niche
market that is looking for high quality, design and unique products. Furthermore, the
company ensures a perfect customer service selling the high majority of its devices in their
own shops. These features allow the company to sell its products at a premium price.
Moreover, the not hypercompetitive behaviour of the niche (Appendix 22), the characteristics
of the difficulty of entrance (Appendix 23), the low possibility of substituted devices, the
B&O leadership in the market and, the good relations with its most important suppliers who
are Philips and Panasonic allow us to think that the B&O competitive advantages and its
leadership are ensured for the organization.

But, there are three threats to take into account. As was said in Appendixes 22 and 23, one
threat is the possibility for a competitor to develop a new technology superior to B&Os
one, which can have as consequences a loss of its market shares and revenues. The other
threat could be that a large company try to enter B&Os niche buying one of its
competitors because they have technology and are powerful in the finance field. An
important point to consider is that the company has a very good relationship with its main
suppliers. In our opinion, these relationships hold the important brands cited previously, to
continue with their role of suppliers and not to intent to enter in the market where Bang &
Olufsen competes. Finally, the last threat is the use by the B2B clients of their power to
reduce the B&O margins in their purchases.

We have some defensive strategies to avoid these problems, and keep the revenues as well as
market shares. In the case of the threat number one, new and higher technology, if you do not
have enough competences and skills inside your company, you should cooperate with the
other affected competitors. With this, you will obtain power to attack the new products of the
competition and avoid the loss of customers. It is one of the two scenarios where Bang &
Olufsen should cooperate with its niches competitors (Appendix 22 and 23).

Business Strategy: Report to Bang & Olufsen Board of Directors 13


Additionally, we have the threat number two, where a large company enters B&Os niche
with the acquisition of a competitor (Appendix 23). To avoid this scenario, we have a strategy
that the company can put in place. Indeed, Bang & Olufsen has to be attentive to the rumours
in the market, and when they start, the company has to take care of the shares price of its
competitors, buying shares and selling them when they have enough value. If the strategy
works, Bang and Olufsen is going to be reinforced and to earn money, due to the trading with
the shares as well as to avoid the desires of entering the market by other important companies.
The main weak point is, if the company fails in the defence, the B&O shares could drop, and
some competitors could be able to buy the firm.

The next defensive strategy is: how to avoid a price war of B&O devices with the B2B
customers? It is an illegal strategy but we have to take it into account. If B&Os B2B
customers are doing pressure on its prices, the Danish company has to speak with its
competitors in this field and pact similar prices. If the strategy works, B2Bs power
disappears instantly, but if it does not work, the legal authorities could be informed about the
pact and B&O should face important fines for altering the market, and probably it is going to
lose almost all its B2Bs clients. It is for Bang & Olufsen to decide.

Finally, we are going to provide for B&O an offensive strategy to improve its market shares,
revenues and profits and, maybe, margins of its devices. This strategy is based on the
Appendix 22, and consists in attacking the local competitors in the Danishs market. To
do this, Bang & Olufsen has the help of one or some of its global competitors; with their
cooperation the company is going to flood this market with its devices and publicity. It is a
long-term strategy, but if it works, B&O should buy the company with or without the co-
operators. The benefits are to improve its market shares and also, help the company obtaining
new technology, at the same time it would give B&O the possibility to eliminate a possible
global competitor. The potential companies to attack are Dantax and Audiovector.

As conclusion, we can ensure that with these strategies the company is going to have a
brilliant future, to keep the market shares, the profits and its brand image. These aspects may
be improved in the case of follow the offensive strategy.

2. Strategic direction at the corporate level

Business Strategy: Report to Bang & Olufsen Board of Directors 14


The purpose of the following part is to focus on the strategic choices at the corporate level
for B&O. The strategy is based on the models from Appendix 24 to 30.

Before to start this study, we have decided to focus only on the Europe zone to conduct our
business strategy analysis.

Taking into consideration this geographical restriction, and as Bang & Olufsen is already well
implemented in the European zone, as we can see it by its number of shops: there is the
double number of B&Os shops in Europe than in all the rest of the world, B&O should
develop a strategy based on the development of new products and services. The current
product range of the Danish brand is quite limited. The companys competitive advantage has
always been based on a higher technologic system. Always be innovative and develop new
products and technology is the best way to stay ahead of the competition (Appendix 25).

Indeed, B&O may follow a diversification strategy. The company could take advantage of
its technological knowledge and competencies in terms of design, sound, acoustic as well as
craftsmanship to develop new products and improve its services. Bang & Olufsen can also
avail oneself of its current position on the audio-visual market (Appendix 26).

Bang & Olufsen has already started doing this by launching its new brand: B&O Play. This
new business unit is offering convenient stand-alone audio video products rather that home
installation. This new brand is also offering a new positioning with products dedicated to a
wider and younger audience.

As a result, it would be a wrong idea for Bang & Olufsen to try to outsource its production.
The main advantage in outsourcing the production would be to reduce production costs by
outsourcing in emergent countries such as India or Brazil. But, by producing products in these
geographical zones, B&O would increase its shipping costs, as the main market of the Danish
brand is Europe. Outsourcing can be also viewed as a risky choice in terms of cost, law
expertise and loss in productions control (Appendix 27).

However, if we look at a worldwide level the strategy may be totally different. The company
may decide to follow a market development strategy to develop its presence in the BRICs
market, where the purchasing power of the population is growing every year (Appendix 25).

Business Strategy: Report to Bang & Olufsen Board of Directors 15


In this case, Bang & Olufsen might also decide to outsource its production. Outsourcing could
allow the company to reduce its labour and shipping costs (Appendix 27).

At the corporate level, the BCG matrix provide a good analysis of which business unit has the
best potential in the future, and which one B&O may focus on. According to the BCG model,
we can say that the strategy of B&O in the next years, in the short-term, should be focused
on the automotive sector. Bang & Olufsen Automotive is currently one of the leading
providers of sound systems for cars (Appendix 28).

This business unit can be considered as the star one for B&O, it is the one which can
provide to the Danish brand the higher profits in the next two or three years. Indeed, B&O
automotive business unit has high market shares in a growing market (Appendix 28).

But, as the automotive sector is not expected to grow as much as it had growth these last
years, in a long-term point of view, Bang & Olufsen should focus on the B&O Play business
unit. Even if this business unit is currently representing a small part of the B&Os business,
with 13% of the overall B&O revenue, the market is growing and the revenues corresponding
to this market are also growing substantially, with a 155% increase in 2012 (Appendix 28).
That means that the B&O Play business unit represents a future huge profits opportunity
for the company.

However, in the short-term, and even if this sector starts decreasing, the company needs to
confirm its position on the A/V competitive sector, because it is currently representing the
main source of revenues for Bang & Olufsen (Appendix 29).

To conclude, we can say that these strategic choices are in harmony with the strategic
controls parenting style strategy that B&O is currently following. It is a good mix between
immediate financial targets, ensured by the A/V sector, and the long-term strategic objectives
represented by the B&O Play business unit (Appendix 24).

Business Strategy: Report to Bang & Olufsen Board of Directors 16


IV. References and bibliography

Books

- Ajami, R., Cool, K., Goddard, G. and Khambata, D. (2006) International Business:
Theory and Practice 6th edition M.E. Sharpe.
- Cejas, O and Lanza, P. (2006) Direccin estratgica: Desarrollo de estrategias en
ambientes de turbulencia, Nobuko.
- Johnson, G., Whittington, R. and Scholes, K. (2011) Exploring Strategy, 9th Edition,
Pearson Education.
- Porter, M. (1998) Competitive Advantage: Creating and Sustaining Superior
Performance Free Press.
- Robert G. (1990) Stage-Gate Systems: A New Tool for Managing New Products
Cooper Business Horizons.

Web pages

- Arrieta, E. (2011) Bang & Olufsen nunca entrar en la guerra de precios, siempre ser
lujo, Expansin. Available at:
http://www.expansion.com/2011/10/03/empresas/digitech/1317602858.html (Accessed: 3
January 2013)

- Atmel Corporation (2011) Atmel and Bang & Olufsen ICEpower Collaborate to
Develop High-Quality Audio Platform. Available at:
http://ir.atmel.com/releasedetail.cfm?ReleaseID=542083 (Accessed: 6 February 2013)

- Audi Group (2013) The production site: Aurangabad at a glance. Available:


http://www.audi.com/com/brand/en/company/production_plants/aurangabad.html.
(Accessed: 1 February 2013)

- Bang & Olufsen Group (2008) Annual Report 2007/08 Available at: http://www.bang-
olufsen.com/en/investors/company-
announcements/%7E/media/B08A4ADF275D4FEE9CC41A149D6E9704.ashx
(Accessed: 3 January 2013)

Business Strategy: Report to Bang & Olufsen Board of Directors 17


- Bang & Olufsen Group (2009) Catalogue: Hospitality, Testimonials Available at:
http://catalogue.bang-olufsen.com/Catalogue/Hospitality/Testimonials2009/ (Accessed: 3
January 2013)

- Bang & Olufsen Group (2011) Annual Report 2010/11. Available at: http://www.bang-
olufsen.com/investors/~/media/B70F43FACA7C484EB948D353F184C547.ashx
(Accessed: 4 November 2012)

- Bang & Olufsen Group (2012a) Annual Report 2011/12. Available at:
http://www.bang-olufsen.com/UserFiles/File/Investor/annual_report_2011-12_UK.pdf
(Accessed: 4 November 2012)

- Bang & Olufsen Group (2012b) CSR reporting 2012. Available at: http://www.bang-
olufsen.com/UserFiles/File/Investor/CSR_webpage_UK.pdf (Accessed: 29 January
2013)

- Bang & Olufsen Group (2012c) Annual Report for the 2011/12 financial year.
Available at: http://www.bang-
olufsen.com/UserFiles/File/Investor/q4_webcast_presentation_UK_FINAL.pdf
(Accessed: 5 February 2013)

- Bang & Olufsen Group (2013a) Automotive. Available at: http://www.bang-


olufsen.com/en/the-company/business-to-business/automotive (Accessed: 29 January
2013)

- Bang & Olufsen Group (2013b) Manufacturing environment. Available at:


http://www.bang-olufsen.com/en/the-company/heritage/manufacturing-environment
(Accessed: 29 January 2013)

- Bang & Olufsen Group (2013c) Adding value to your development. Available at:
http://www.bang-olufsen.com/en/the-company/business-to-
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Business Strategy: Report to Bang & Olufsen Board of Directors 21


- Sherman, L. (2009) How--And How Not--To Sell Luxury, Forbes. Available at:
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Thesis

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analysis of projest management in two companies, CBS thesis. Available at:
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2013)

Business Strategy: Report to Bang & Olufsen Board of Directors 22


V. Appendix

1. The Macro environment

Appendix 1: PESTEL ANALYSIS on the luxury market of video and audio products

Political

Denmark is not in Schengen space, which might affect and not facilitate the exportation.

Economic

The current economic context is recession, which means a decrease in purchasing power and
that people will reduce their costs but Bang and Olufsen products are extremely expensive.
However it situates itself on the market of very high quality as well as aesthetical luxury
electronic products and the luxury market is in good health even in time of crisis. In late 2011
sales in global luxury market grew by 10%, which represents $191 billions (LExpansion and
AFP, 2011).

In addition, all manufacturers of competitors are in Asia whereas B&Os are in Denmark. The
competitors might be able to cut production costs and have a final price cheaper than ours.

B&O is a Danish company based in Denmark, which is not in the euro zone, therefore the
variation of currencies may affect the global revenues.

Social Demographic

Before financial crisis, consumption had significant functions for consumers especially in the
industry of luxury products, which were considered as status, symbols. Consumers were
looking for those luxury-designed products this lead to a favourable environment for Bang
and Olufsen. However other technological brands tried to follow and enter this market by
focusing on the design of the product like Apple. The issue here is that those recent
competitors offer cheaper prices.

Business Strategy: Report to Bang & Olufsen Board of Directors 23


Technological

In some range of products like Full HD flat screen TVs, which it was able to sell not before
2009, Bang & Olufsen is behind the competition. In terms of technology, the highest threat is
obviously Asia.

The other threat is the fact that Bang an Olufsen did not developed itself in specific ranges of
products that are nowadays extremely important for consumers and that its competitors can
offer to its clients: mobile phones, MP3. There are more mobile phones on the planet than
there are TVs (Hopkins, 2011).

All those new technological devices of great quality can represent a threat of substitution to
Bang and Olufsen.

Ecological

The companys impact on the environment and being green has become an important trend
of consumption in the past few years. According to a new study commissioned by Green Seal
and EnviroMedia Social Marketing, one out of five persons still buy green products despite
the current economic situation (Environmental Leader, 2009). Bang and Olufsen always took
into consideration the impact of its activity on the environment and put in place a corporate
social responsibility department. However, even though being environmentally friendly is
crucial for the company, they do not advertise on that aspect of their products, which could
bring them more consumers, as being friendly is now important for consumers.

Legal

More and more laws have to be taken into account (environmental) when producing products
in Europe but mainly in Denmark.

A positive aspect might be the fact that there are a lot of legislations in Europe to protect the
copyrights.

Business Strategy: Report to Bang & Olufsen Board of Directors 24


Appendix 2: SCENARIO ANALYSIS

Economic

1) The economy is still decreasing 1 or 2 %. European central bank need to implement


more expensive monetary policy that will lead to inflation which means that every
costs in the process of production are getting higher to compensate the inflation.
Therefore, B&O will need to increase its prices to compensate the growth of the costs.
Due to that, sales could decrease but not dramatically as it is a luxury product.

2) Stabilization or small increase of the economy. This scenario does not really change
B&O sales cause when there is a growth in the economy people tends to invest money
in leisure or primary products.

Socio-demographic

1) Growth of the use of substitutes in opposition to Bang and Olufsen products that has
as consequences a loss of market shares.

2) Trend states that consumers are more attracted by well-designed products. Design
becomes the focus point in the purchasing decision and that will result in reaching
new targets, new consumers and therefore gain more market shares.

Technological

1) Very fast innovation. This will pose the problem of the products obsolescence that
means products will be quickly behind the competition in terms of technology because
due to the high prices people will not invest in new products. The result will be the
loss of prospective consumers that prefer to invest in other brands that they would be
able to replace.

2) Innovation reaches a saturated point. In that case, people are more willing to invest in
luxury and high quality product that they wont have to replace quickly.

Business Strategy: Report to Bang & Olufsen Board of Directors 25


Different scenarios that can be occurred in the future

Fast technological innovation Slow technological innovation

Problem of obsolescence of
the products People are more willing to
Decreasing growth Loss of middle class invest in high quality products
rate customers No new customers
No new customers

Slight increase of sells


Considerable increase of sells
amongst upper class
Increasing growth amongst every customers
customers
rate
New customers
No new customers

Business Strategy: Report to Bang & Olufsen Board of Directors 26


2. The industry

Appendix 3: PORTERS 5 FORCES on the luxury market of audio and video products

Threat of new entry

Luxury market of audio and video products is a niche market which means the entry is
extremely limited. High investment and experience are both needed in order to enter the
market. On one hand, new competitors will have to invest heavily in terms of technology and
capital which means that the huge negative cash flow needed to start would not be able to be
covered, compensated by the product launch. On the other hand, the experience curve effect
has a high probability to happen which means that Bang and Olufsen has a high advantage on
potential new entrants because they have experience, they have learned to produce those high
quality and designed products more efficiently than and inexperienced new entrant.

Also, potential new entrant cant have a perceived added value compared to Bang and Olufsen
that offers already both the design and the high quality.

In addition to that sells in the luxury market are motivated mostly by the name of the brand
and the social status applied on the consumer which means that a new competitor will not
have this advantage to have a name, a brand to sell.

Business Strategy: Report to Bang & Olufsen Board of Directors 27


Moreover, as it is stated in an article from Forbes How--And How Not--To Sell Luxury,
luxury is associated with history, tradition and well detailed past. Bang and Olufsen has it
but new entrants would not be able to offer that part of heritage (Sherman, 2009).

The only serious threat would be the existing supplier in the audio and video market like
Samsung and Sony. They could decide in the future to apply a differentiation strategy by
implementing themselves on the luxury market and incorporate designed elements in their
products (Brownsell, 2008).

In conclusion, we can say that the entry barriers of the luxury market of audio and video
products in which Bang and Olufsen situates itself are high and it is unlikely that new entrants
could represent a threat to Bang and Olufsen. But established companies in the audio and
video industry are to keep an eye on.

Threat of substitution

The only substitute that could be considered on the market of audio and video products (does
not take into consideration devices that need headphones) is the computer. Nowadays, thanks
to technological innovation computers are now provided with very high quality audio systems
or high definition screens such as Mac Retina screens, which could lead them to replace audio
products or home cinema and television screens as we stock everything in our computers and
therefore they are more convenient.

However, even if this hypothesis is probable, a substitute is defined as products or services


that offer a similar benefit to an industrys products or services but by a different process
(Johnson et al., 2011) and we can say, without any doubt, that watching a movie on a
computer does not provide the same experience as the one you can have with very large high
definition screens and home cinema sound systems.

On the other hand, if we push that theory further, buying a designed and very expensive
product being the main motivation, then any other designers products can be a substitute.

We can state then that substitutes are a low threat to the niche industry in which Bang and
Olufsen operates.

Business Strategy: Report to Bang & Olufsen Board of Directors 28


Buyer power

Who are the buyers? We can distinguish two categories: the private customers and the B2B
customers such as luxury hotels and luxury car manufacturers.

- Private customers:

As we have seen before, the threat of substitute is quite low therefore when a customer
decides to buy a luxury audio and video product his choice is limited as it is a niche
market. The bargaining power of the customers being low, they will not be able to
negotiate terms of sale, as the individual sales are small relatively to total sales of the
brand.

- B2B customers:

B2B customers are more likely to have a bargaining power as they will buy significant
amount of products and also have long contract of orders for specific products. In
addition to that in the case of the cars manufacturers which are Audi, Aston Martin and
Mercedes AMG, Bang and Olufsens image is associated with the car brands, which
means they can benefit from this association in terms of publicity and therefore the car
brands are more powerful.

In conclusion we affirm that the private customers will have a low bargaining power in
opposition to the B2B customers especially the car manufacturers that should be highly
surveyed.

Competitive rivalry

According to a survey realized by Marketline in 2011, B&O competitors are the following:
- Dantax (audio-visual, only present in Nordic market)
- Raidho Acoustics (worldwide company specialized in speakers)
- Audiovector (specialized in speakers mainly present in Nordic market)
- Bose Corporation
- Harman international industries (specialized in audio products)
- Loewe

Business Strategy: Report to Bang & Olufsen Board of Directors 29


The two major competitors are Loewe and Bose Corporation that compete in the same market
that is the production of audio and visual product of very high quality in Europe. However
their level of innovation and design is not as high as B&O.

Bose Corporation

It is an American company that focuses its production on high quality audio and video articles
essentially on speakers. Bose priority is the high quality of its products so to them design is
not as important as for B&O.

Like B&O, Bose distributes his products through stand-alone stores, where you can only find
the brand products, and also competes with B&O as a contractor with car manufacturers like
Ferrari and Porsche.

Loewe

Loewe is a German a company that competes on almost every market in which B&O is
present: flat screen plasma televisions, Hi-fi and audio. About distribution, we can say that
they also have their stand-alone stores as B&O and Bose. They are really close competitors
however; B&O still have an advantage on the audio range of products.

The products of Bang and Olufsen company have a high level of differentiation, it is one of
its competitive advantages, in Flemming Mller Pedersen words When buying a B&O
product you buy an experience but not only its design. Another important competitive
advantage is the high-end strategy employed that seeks to have the most innovative and
performing technology. According to Lars Flyvholm "people regard B&O products as mainly
design products this may pose a problem, because if you are spending EUR 10,000 on a TV it
is important that the technology is very good

The main issue that B&O is likely to face is the fact that flat screens TV have become more
and more popular and therefore the competition will be able to offer lower prices thanks to
economies of scale. This means that in order to remain in the race, B&O need to invest
heavily in R&D in order to offer more innovative technologies while keeping their design in
order to stay ahead of competition and not lower their prices.

Business Strategy: Report to Bang & Olufsen Board of Directors 30


In conclusion, the degree of rivalry is extremely high on almost every aspect of B&O range of
products. However, the company is still the only one to offer all types of products in the home
entertainment area.

The power of suppliers

Even if Bang & Olufsen has its own factory and production facilities in Struer and in
Koprivnice, the company also has to buy components from other producers. One of the main
suppliers of B&O is the multinational company Philips. The relationship with this competitor
of the audio-visual sector is quite imbalance as Philips is a much larger company than B&O.
Philips have a high supplier power toward B&O because the Danish company represents a
little share of its business. It can represent a threat for B&O.

But B&O always try to keep a close and friendly relationship with its suppliers, which are
able to provide the company with knowledge and skills for the development of products
(Bang & Olufsen Group, 2008). The relation of B&O with its supplier can be described as a
kind of partnership because it benefits to both parts. This type of relationship decreases the
possibility for suppliers to take advantage of their bargaining power.

Another important aspect is that B&O performs in the audio-visual industry where the
number of possible suppliers is extremely large. A lot of companies are able to produce the
components needed to make the B&O products. Again, this specific aspect of the industry
makes the power of suppliers decreasing, as it is quite easy for an important company such as
B&O to find alternatives suppliers in a case of a dispute with a current supplier.

But this point of view has to be balanced because a company such as B&O, which produces
high quality products, has special requirements for the products conception. This
characteristic may reduce the number of possible suppliers. Furthermore, switching supplier
can have consequences on the security and the protection of the companys technology. There
are also financial costs to take into consideration when switching supplier. This can increase
the dependence of B&O toward its suppliers and increase their bargaining power.

Overall, we can say that the suppliers bargaining power is not considered to be a major threat
for B&O in the audio-visual industry, especially for the Danish brand, as they try to build
deep relationship and partnership with their suppliers but it remains fragile as the level of
threat depends only on the built relationship.

Business Strategy: Report to Bang & Olufsen Board of Directors 31


Appendix 4: THE VALUE NET

Suppliers

The principal supplier of B&O is Philips. Additionally, if this relation is broken, on one hand
Philips could create a top brand that could compete with B&O. On the other hand, in the
audio-visual market there are a lot of companies, they could be suppliers of B&O.

Competitors

The main B&O competitors are Bose, Loewe, Harman/Kardon. However, B&O is the leader
in this market, because, as we explained, it has its own niche market. The biggest threat
would be that those companies try to enter B&O niche market. Moreover, we cannot forget
other threats as the fusion of our competitors or the appearance of new competitors.

Complementors

There are a lot of complementors to B&O products, for example, a luxury car could be a
complementor because it needs the music systems (Audi Q3, Q5, Q7 or Mercedes AMG).

Another important issue would be that the B&O products are complementors. A customer buy
a TV, in the same purchase, we should try to sell the speakers or the support.

Finally, it is still possible for the customers that have already equipment from another brand
to buy some additional elements like speakers from B&O

Customers

B&O has an important advantage on its competitors. When a customer buys a B&O product
he can be identified as someone successful with taste.

Furthermore, B&O provide an efficient after sales service, indeed, if the customer has any
problem with the equipment he can call for assistance and the user instructions are available
online via the B&O website.

Moreover, B&O provide the opportunity to customize some products.

Business Strategy: Report to Bang & Olufsen Board of Directors 32


Appendix 5: COMPARATIVE ANALYSIS

In the luxury audio-visual industry, Bang & Olufsen have to face an industry with a low
rivalry degree. As the Danish brand is performing in a niche market, the bargaining power of
suppliers is low and the buyers one is medium. These characteristics show that the type of
industry of B&O is an oligopolistic industry.

In this type of industry, there are a small number of firms as the barriers to entry are really
high because companies need a high investment in order to enter the market.

The rivalry power in the future may not change a lot, as Bang & Olufsen is performing in a
niche market. It may be a little bit higher as there is a small threat of new entrants in the
future. Some existing brand such as Sony could decide to enter in the audio-visual luxury
market and increase the competition.

Business Strategy: Report to Bang & Olufsen Board of Directors 33


The buyer power may increase in a near future as B&O is developing more and more
partnerships with car manufacturers who have a higher bargaining power than private
customers. These buyers will have a high importance for the Danish brand and may force the
company to make some sacrifices.

The supplier power may decrease over time as B&O is building long-term and deep
relationship with its suppliers.

Finally, the substitute threat is quite minor nowadays but may become a major issue for the
future of the audio-visual sector. With the fast evolution of technology and multifunctional
products, some substitutes will be able to offer services with higher benefits for the customers
and maybe provide an experience quite similar than the B&Os one. But this threat is not as
high as for other brands of the audio-visual sector as B&O is performing in a niche market
and invest massively in R&D.

Business Strategy: Report to Bang & Olufsen Board of Directors 34


3. The market, the competitors

Appendix 6: THE TYPE OF INDUSTRY

Bang and Olufsen situates itself in an oligopolistic industry as the high-end audio and video
products industry is dominated by Bang and Olufsen and his direct competitors Loewe and
Bose. However Bang and Olufsen is the only one in the market of luxury as it associates
innovation, design and high quality product whereas his competitors have more focus on the
quality only. Moreover as we can see in the porter 5 forces analysis Bang and Olufsen has
power over buyers and suppliers so it is in its interest to minimize the rivalry with its
competitors in order to stay strong together in front of the buyers and suppliers.

Appendix 7: THE INDUSTRY LIFE CYCLE

(Johnson et al., 2011)

In the luxury audio and video industry the competition is still quite low even if Bang and
Olufsen has some competitors like Loewe and Bose. The barriers of entry are really high as
demonstrated earlier. However as it is a luxury brand, the products are not standardized and
Bang and Olufsen tries constantly to innovate therefore it is hard to evaluate whether Bang
and Olufsen situates itself in the shake-out stage or the maturity stage.

Business Strategy: Report to Bang & Olufsen Board of Directors 35


Appendix 8: STRATEGIC GROUPS

Scope of activities and resource commitment:


Group n1: production of luxury designed high end audio and video products,
complete geographical coverage of Europe, distribution mainly made through stand
alone stores, technological leadership, few advertising. (B&O, Loewe)
Group 2: specialized in audio equipment, global coverage, high technology,
consequent advertising (Bose Raidho, Harman)
Group 3: only present on Nordic market (Dantax, Audio Vector)

Group 1: Global
production of
audio and some
visual items

Diversity of products
Group 3:
Nordic market
specialized in
audio

Group 2: Global
specialized in
audio

Level of internationalization

Business Strategy: Report to Bang & Olufsen Board of Directors 36


Appendix 9: MARKET SEGMENT

A market segment is defined, as a group of customers who have similar needs that are
different from customer needs in other parts of the market. Bang & Olufsen pursue a niche
marketing strategy targeting a very affluent section of the market, which has particular wants
and needs with high expectations from their luxury brand. Their market segment is composed
of customers who are affluent, with high income, in the upper or the high level of the middle
class. They are likely around 40 and 60 years old and live in cities. Their market segment
research the quality, performance, simplicity, and elegant design when they purchase B&O
products.

The Customer profile established by B&O is the following (Bang & Olufsen Retailer, 2010):
Gender: Predominantly Male, 73%
Age: Top penetration 46-55, next highest 36-45
Education: 30% Bachelor and 25% Graduate degrees, 23% High School diploma
Occupation: 15% Executives, 11% Doctors, 10% Professionals, 4% Self employed
Residence: Primarily single family, larger apartment buildings
Household: Head of household without children, or with children 0-3 years
Lifestyle: Magazine buyer, political contributor, news and financial interest, cultural
interest, art and events, ski, tennis and foreign traveller.
Automotive: Late model luxury automobiles, 49% own/lease a foreign automobile
including Audi, BMW, Jaguar, Land Rover, Lexus and Mercedes
Income: Median Household income exceeds $150,000 annually

As we say before, Bang & Olufsen pursue a niche marketing strategy targeting a very affluent
section of the market, who have particular wants and needs. It is important to understand what
choice criteria are important for buyers.

The choice criteria are the various attributes and benefits a consumer uses when evaluating
products, and services. There are four main categories of choice criteria technical, economic,
social, and personal.

Technical criteria: related to the performance levels of the product

Business Strategy: Report to Bang & Olufsen Board of Directors 37


Reliability prides itself on delivering excellent quality products that work consistently.

Durability The design of products are tested strenuously to ensure, that although products
are pleasing to look at that, the products are rugged enough to withstand normal wear and
tear. All of their products are stringently and individually tested for durability, robustness,
longevity, and efficiency

Performance engineered to ensure that they achieve high performance levels. The company
invests heavily in R&D, so that a B&O product is in the top of its field.

Style/look/aesthetics realizes that the design, look, and feel of a product is central in
achieving market success Based on its Scandinavian heritage, the company has been much
lauded for its product range, which has even been displayed in contemporary art galleries. The
product range is designed so that it fits easily within modern lifestyles and homes, providing a
timeless appeal.

Delivery Surprisingly customers have to wait for deliveries as the firm has no immediate
inventory, this is all part of the companys lure in having the equipment made especially for
the client, and emphasizing craftsmanship.

Convenience takes the hassle out of choosing by providing expert advice in their specific
boutique stores.

Complete Solution Customers can buy a complete solution from B&O to suit all their needs.
The company liaises with architects, builders, and interior designers so that the technology
fits into the living space. Also customers can buy products that seamlessly work with one
another.

Customization Retail staff focus on the individual needs of the prospective customer during
the consultation, and customize the most suitable suite of B&O products to suit the specific
needs of the client.

Simplicity All products are designed with simplicity in mind. Having a single remote control
for example.

Economic criteria: focus on the cost of the purchase

Business Strategy: Report to Bang & Olufsen Board of Directors 38


Price The company is targeting a niche, rather than the mass market. One of their slogans
was Bang & Olufsen, for those who discuss design, and quality before price. The company
focuses on selling products at the premium end of the market. The premium prices signify and
act as cues to signal their products superior performance and quality levels.

Running Costs Having a product that requires no costly repairs and or other expensive
consumables is important. Customers want products that will justify their expensive price tag.

Lifecycle/Costs Similarly important that no additional costs are required, such as servicing.

Social criteria: look at the impact of the purchase on a persons perceived relationships
with other people, and their influence on the social norms of other people

Status Buying a B&O product is a status symbol, due to its proud brand heritage, and the
sheer strength of the brand in the sector. Buying a B&O product is a total experience.

Social Belonging Through buying a B&O product, a consumer has joined an elite group of
audiophiles, with very discerning tastes. Some owners share their experiences of B&O on the
web and set up blogs. They have entered the Bang & Olufsen brand community, and have
now become brand of this unique brand tribe.

Fashion It is important that their products remain fashionable, and are in line with
contemporary design tastes, otherwise the products may become out-dated and lose their
appeal amongst their target audience.

Personal criteria: concern how the product or service relates to the individual from a
psychological perspective

Self Image By buying a B&O product, a customer may feel cool and successful. They are
showing that they are high achievers, wealthy, and exude an image of being fashion
conscious.

Risk Reduction Bang & Olufsen are regarded as very safe products to buy due to their
high quality levels, and customer service provision.

Emotions Buying is seen as an emotional process guarded by rules of logic. When buying a
B&O product, consumers may experience fun and pleasure in using.

Business Strategy: Report to Bang & Olufsen Board of Directors 39


Ethics If the product is made thorough environmentally friendly methods, and the company
is behaving in en ethically correct fashion (e.g. treating employees well etc.).

Appendix 10: STRATEGIC CUSTOMER

By definition, the strategic customer is the one at whom the strategy is primarily addressed
because they have the most influence over which goods or services are purchased (Johnson
et al., 2011). Then we can say that the strategic customer would be the final consumer in the
Business-to-consumer (B2C) market and the car manufacturers in the Business-to-business
(B2B) market even though the brand was primarily designed to sell products to the final
consumers.

Business Strategy: Report to Bang & Olufsen Board of Directors 40


Appendix 11: BLUE OCEAN STRATEGY CANVAS

12

10

6 B&O
Bose
4 Loewe

0
Price Quality Design After sales Diversity of
services products

Bang & Olufsen is largely ahead of competition in terms of quality and design of its products.
However, the prices adopted by the brand are way higher than competition and there range of
products is not as wide as Loewe. Indeed, B&O enter the TV market rather late compared to
Loewe and does not provide a significant amount of different TVs. To diversify from
competition, Band and Olufsen could invest heavily on R&D concerning the TV segment.

Business Strategy: Report to Bang & Olufsen Board of Directors 41


4. Organisations internal strategic capabilities

Appendix 12: RESOURCES AND COMPETENCES

Threshold resources

Physical

B&O Company has its own buildings, machines, software computer system, raw materials
and a range of products as most of the companies in the audio-visual sector. The company has
its own factory and in-house production facility in Struer in Denmark and also in Koprivnice
in Czech Republic (Bang & Olufsen Group, 2011, pp.10).

Moreover, they use traditional channels like Bang & Olufsens dedicated shops to distribute
and sale their products (Bang & Olufsen Group, 2011, pp.24).

Financial

During the year 2011/12, B&0 result before tax was DKK 104 million compared to 40 million
in the year 2010/11. So, B&O has a cash flow and financial resources required to conduct its
business.

Human

B&O has about 2106 employees at the end of the year 2012 (Bang & Olufsen Group, 2012a,
p.3). The company has a chief executive office who is Tue Mantoni since 2011.

In addition, B&O disposes of a large number of suppliers from Europe and Asia, as it exists a
large amount of electronic goods in these geographical zones.

Threshold competences

Physical

The production of Bang and Olufsen is relatively high thanks to an efficient use of its
machines. Its productivity allows the company to reinvest each year in new product and
branches.

Business Strategy: Report to Bang & Olufsen Board of Directors 42


Financial

The results obtained in the last year show that B&O is able to raise funds and manage its cash
flow in order to reinvest in products development (Bang & Olufsen Group, 2012, p.13).

Human

In the B&O Corporate Social Responsibility (CSR) reporting, it is mentioned that B&O aim is
to create a safe and healthy working environment both physical and psychological for its
employees (Bang & Olufsen Group, 2012b).

Additional category

To compete in this market, it is necessary to have the innovation competence because this
market is one of the most rapidly changing markets today, where changes happen all the time.
B&O as all other competitors develop each year new and innovative products.

Distinctive resources

Physical

B&O audio and video products are sold under the brand name in more than 900 dedicated
stores with 674 B1 stores and 244 shop-in-shops stores worldwide at the end of May 2012 but
in majority located in Europe (Bang & Olufsen Group, 2012a, p.15). Besides, the new brand
B&O Play is sold in leading retailers such as Apple stores, independent premium shops and
chain stores in USA and Europe as well as on the online shop (Bang & Olufsen Group, 2012a,
p.16).

In addition, Bang & Olufsen holds numerous own patents among them we can distinguish: the
Acoustic Lens Technology (ALT), a technologic patent that ensures the correct timbre
whether you sit left or right in a car. Another one is the ICEpower, a digital amplifier
technology that combines extreme power and low energy consumption, reducing it by a factor
of 10 compared to conventional technologies with a high quality of sound (Bang & Olufsen
Group, 2013a).

Business Strategy: Report to Bang & Olufsen Board of Directors 43


Human

The B&O Research and Development department is very active with a team of more than 100
engineers dedicated to the sound and acoustics innovation in order to always develop and
launch new and innovative products (Bang & Olufsen Group, 2013a).

Finally, over the years, B&O has established partnerships and long-term relationships with
several famous architects and designers. For instance, one of the first partnerships has been
established with Ib Fabiansen (Marketing Magazine, 2011).

Additional category

The brand name Bang & Olufsen is ranking 20th in the Consumer Superbrands 2012 ranking
which is the UKs strongest Business-to-consumer brands ranking (Superbrands, 2012).

In addition to the high profile brand, B&O benefits from its 88 years of experience in the
audio and visual field. These two elements have contributed to its very good reputation in the
audio and visual luxury market.

Distinctive competences

Physical

In order to increase the productivity and avoid the repetitive monotonous work, B&O has put
in place the system of job rotation. In fact, all B&O employees are trained to be able to
operate all various assembly stations to switch between them (Bang & Olufsen Group,
2013b).

Besides this work strategy, the leader in the luxury audio and visual market uses the logistic
strategy: on-demand production for the customized and personalized products to satisfy all
demands. Moreover, thanks to this logistic strategy, B&O has small storage for their products.

Human

Bang & Olufsen provides a great consumer service. For example, Bang & Olufsen supplies
spare parts for its products for up to 12 years after a product is last made (Bang & Olufsen
Group, 2012b, p.6).

Business Strategy: Report to Bang & Olufsen Board of Directors 44


The Danish company is able to establish prestigious partnerships with luxury car
manufacturers brands like Aston Martin, Audi, BMW and Mercedes AMG (Bang & Olufsen
Group, 2012a, p.9).

Additional category

One of the highest B&O competences is the long product life due to supreme quality of their
products (Bang & Olufsen Group, 2013c). On average, a B&O product has a lifetime of 10-15
years without any deterioration in audio or video quality. But, it is not rare to know that some
households have a 20-30 years old B&O product that works very well (Bang & Olufsen
Group, 2013d).

Moreover, the B&O products have a timeless design from a solid high design tradition (Bang
& Olufsen Group, 2013d), partly, due to the partnerships developed with designers.

Finally, another competence of the B&O Company is the intelligent home control. Indeed, the
BeoLink, is an intelligent integration that establishes a home network to link all products
together in order to control them from Beo4 remote control (Bang & Olufsen Group, 2013c)
or from the BeoLink application available on the App Store (Jonhson, 2010). This system
makes Bang & Olufsen stand out from the crowd.

Business Strategy: Report to Bang & Olufsen Board of Directors 45


Resources and competences in the context of value chain

To summarize all the Bang & Olufsen resources and competences, we are going to place the
main ones in the context of the value chain, from the model established by Porter.

Firm infrastructure
- Own buildings, machines and software computer system
- Own factory and in-house production facility in Struer in Denmark and also in Koprivnice in
Czech Republic
Human Resource Management
- An active R&D department with a team of more than 100 engineers dedicated to the sound and
acoustics innovation
- Partnerships and long-term relationships with several famous architects and designers
Technology Development
- Numerous own patents like: the Acoustic Lens Technology (ALT) and the ICE power
- Intelligent home control
Procurement
- A large number of suppliers from Europe and Asia
Inbound Operations Outbound Marketing and Service
Logistics Logistics Sales
- Long product - Timeless design - Distribution of - Capacity to - A great
life with an - Innovation their products establish consumer
average in more than prestigious service:
- On-demand
lifetime of 10- 900 dedicated automotive supplies spare
production for
15 years due to stores partnerships: parts for its
the customized
the purchasing worldwide Aston Martin, products for up
and
of supreme Audi, BMW and to 12 years
personalized
quality product Mercedes AMG
products
components - Brand name, 88
- System of job
- Small storage years of
rotation
experience,
- A safe and reputation
healthy working
environment

Colours code:
Threshold resources Threshold competences
Distinctive resources Distinctive competences

Business Strategy: Report to Bang & Olufsen Board of Directors 46


Appendix 13: SUSTAINABLE COMPETITIVE ADVANTAGE

The four key criteria by which capabilities can be assessed in terms of providing a basis for
achieving sustainable competitive advantage are: value, rarity, inimitability and non-
substitutability.

According to the Bang & Olufsen resources and competences mentioned in the previous part,
the two major core competences that the company has developed are the timeless design
combined with the high quality of its products. Quality gives the consumers extra value by the
fact that the product life cycle is very long with an average of 10-15 years. Moreover, design
has also a long time period because you say that the Bang & Olufsen products are timeless
design. The products are designed by great and famous designers that make them unique and
inimitable. Therefore, these two aspects, quality and design, are today a competitive
advantage for Bang and Olufsen. However, as companies such as Apple and Samsung try to
challenge them, this competitive advantage will be change to a qualifier for the Bang &
Olufsen products.

Furthermore, the technology that Bang & Olufsen has developed through their own patents is
another competitive advantage for the company. As these patents belong to them, none of
their competitors can use them for the moment.

Business Strategy: Report to Bang & Olufsen Board of Directors 47


Appendix 14: THE VALUE NETWORK

The value network comprises the set of inter-organisational links and relationships that are
necessary to create a product or service (Johnson et al., 2011). These organizations are: the
suppliers, the production company, the distributors and companies directly in contact with the
customers.

Bang & Olufsen


Value chain

(Porter, 1998)

The value network analysis is going to be split in four parts. Each part has the analysis of the
value chain of one of these participants: Suppliers, Bang & Olufsen, distribution channels and
customers.

Benefits of the linkage with the suppliers

Bang & Olufsen has more than 200 suppliers and his key supplier, in words of John Bennet-
Therkildsen, head of the Operations Division of the brand, is Phillips (BeoWorld, 2007).

Firstly, is going to be exposed the synergies obtained with Philips a supplier of hardware that
is inside the device. According to Ajami et al. (2006, p. 474) the brand chose this company to
ensure this access to new technologies and components at low cost. Thanks to its linkage,
another advantage that can be highlighted is the stability that is provided by the 60 years of
this relation with the Dutch multinational that helps and makes easier doing business between
the two companies.

Business Strategy: Report to Bang & Olufsen Board of Directors 48


Secondly, in the field about material of out the machine hardware, B&O has some suppliers
and the requirements for them are very strictly. For example, to do a cover of a cordless
telephone as BeoCom 2, they need the best aluminium, because it is going to be naked in the
cover. Here, we distinguish another advantage because Bang & Olufsen only works with
high-standard suppliers, under pressure. They know their goals and if they do not reach them,
B&O will cut all relationships with them (BeoWorld, 2007).

Finally, about Microsoft, B&O changed in 2008 its IT services supplier. The last supplier was
IBM but it did not reach its objectives and was changed for Microsoft. The American
company provides the Operation System (OS) and another IT solution. The principal benefits
of this linkage, until 2011, were a reduction of 35% in operation costs and the respond time is
40% faster than the previous OS, but not only these, because the company improved their
resilience and availability (Microsoft, 2011).

Value Chain of Bang & Olufsen

Inbound logistics

To obtain high quality products, Bang & Olufsen needs high technology components. To
obtain it, the company has to develop strategic partnerships with key suppliers like Philips. In
this way, B&O can be focused on their products development and on the core functions of its
business.

Finally, according to Sharma (2011, p.6), B&O has to manage their external designer team.
Their designers give another way to do the products with a high degree of innovation and
design that add some value to the devices.

Operations

The high prices of B&O products are due to the latest technology and the best design of their
products. These two aspects add enough value to justify the price.

B&O has a business unit ICEpower that is responsible of research and development of new
technologies. Due to the fact that B&O has all the shares, it has full availability of all the
news technologies that develop the subsidiary. It is an important advantage over the
competitors. It is the process that adds more value to the devices.

Business Strategy: Report to Bang & Olufsen Board of Directors 49


Moreover, they have another subsidiary called Bang & Olufsen Enterprise that manages the
relationships with hotels. This section creates some value in this part of the business.

The production is located in Denmark (Sung, 2012), which is one of the worlds countries
with highest wages (OCDE, 2011). Therefore, we think that the production could be in
another cheaper country without any losses in quality.

Outbound logistics

Bang and Olufsen has the distribution center in Struer in Denmark (Datalogic, n.d).

On one hand, it implies high shipping costs because the company hast to send their devices
around the world. However, on the other hand, it is easier to do the inventory and the
management of their products. Regarding this last aspect, the B&O logistics add some value
to the product.

Marketing/Sales

In the B&O stores, the employees are trained to offer the best quality service. Furthermore,
they help the customers to personalize the devices purchased and they looking for help you at
the time to choose the best devices according with the place or the use that they are going to
have. In our opinion, this philosophy of providing the better customer experience is a high
competence for Bang & Olufsen (Bang & Olufsen Group, 2013e).

Services

The customers service is one of the key factors that makes different the Bang & Olufsen
brand than its competitors. To provide the best service, B&O has the best train staff but, also
high skilled professionals as designers, technicians or dealers. In addition, they offer an
individual configuration and installation of their devices according to the preferences of the
customer. With all of these elements, B&O tries to obtain the loyalty of their clients.

Furthermore, B&O consumers do not want to buy other brands because, if they buy another
brands device, they are going to lose the integration and intercommunication between the
B&O devices. This last point is an important barrier to buy another brands devices.

Business Strategy: Report to Bang & Olufsen Board of Directors 50


Benefits of the linkage with the channels

The distribution of the products of B&O could be split in:

1. Internal distribution: was explained in the previous point B&O Value Chain

2. External distribution: is going to be exposed in this point. In 2011 the brand opened new
distribution channels as Apple Store, Excelsior or John Lewis.

With these new channels B&O tries to achieve new customers and improve their presence in
growing markets like the BRICS one. An example that demonstrates this fact is the B&Os
intention to expand them in emerging markets without lose their high quality image is the
agreement with Shreyans. It is the distributor of Ferrari, Porsche and other luxury brands in
India. With this agreement, the Danish company gains the experience of Shreyans in the
Indias market and an extensive number of points of sale to their products. It is an important
element at that time to enter in a new market. Following the example, the agreements with
luxury brand retailers as Excelsior in Italy or John Lewis in United Kingdom give to the
company an important competitive advantage. Indeed, today, B&O reaches more customers
without lose the luxury brand standards at that time when they cut their stores expenses
(Bang & Olufsen Group, 2012a, p.15-16).

Another 2012 important issue is the agreement with Apple to sell their products in the Apple
Store. This new distribution channel could help B&O to not lose their brand image as well as
reach more customers. Furthermore, B&O could take advantage of the good Apples image
(Jyske Bank, 2011).

Customers value chain

Business to customer (B2C)

B&O is changing their philosophy respect to the customers. It is due to their business model
that is based in high standard products with a high level of customisation.

Usually, when a customer buys something in one of the B&O stores, they do not pay and take
away the product.

Business Strategy: Report to Bang & Olufsen Board of Directors 51


Instead of this process, the customer starts to choose features like the colour and the size of
the product he bought. Next, there is a feedback between the customer and the design team
that allows a pull strategy.

But with this type of strategy, the company has some problems: for example, during the
customization process, customers often change their preferences. In addition to the pull
strategys problems, their devices have a seasonal demand, focused in autumn and winter. All
these factors provoke an accumulation of stocks in their facilities. To avoid this, they are
trying to implant a business model made-to-order. It consists in providing all the possible
parts of each product, manuals and instructions to the dealer, and it can assemble the product
when the customer wants it.

If they are successful with this new model, they could give the final product with the
customers features in only five days. This process will be faster than the competition, thus
the company gains a competitive advantage (BeoWorld, 2007).

Business to business (B2B)

B&O is supplier of some most important luxury cars brands, for example Mercedes AMG,
Audi, Aston Martin and BMW (Bang & Olufsen Group, 2012a, p.23).

It was noted by Arrieta (Arrieta, 2011), the relationship that B&O started with Aston Martin
in 2008 was benefited by the luxury image of the cars company. Therefore, they follow the
same strategy with Mercedes AMG, Audi and BMW. The competitive advantage of this
linkage is the strength that the different partnerships with luxury carmakers provide to the
Danish enterprises image.

Another important issue, in the B2B market, is that B&O is supplier of some hotels. They
should choose its products because they have a good construction quality, they are easy to
integrate, to use and they can be personalized.

In this way, B&O can benefit from this in two aspects. Provide the media devices to hotels
can allow the company to have economies of scale and if B&O products give a good image to
the guesses, they could buy them in the future. (Bang and Olufsen Group, 2009).

Business Strategy: Report to Bang & Olufsen Board of Directors 52


Appendix 15: KNOWLEDGE MANAGEMENT SYSTEM & THE CONCEPT OF A
LEARNING ORGANISATION

Knowledge management in B&O focuses on interactions between employees from different


departments. B&O is dependant on tacit knowledge such as employees rare competencies
like having a really good hearing. This tacit knowledge is not transferable. Explicit
knowledge is transferred between employees thanks to a very close cooperation and the
autonomy that the management gives to its employees. Indeed, according to a manager, every
employee can walk around and talks to anyone in order to solve its problem. Autonomy is a
key tool. B&O also implemented some internal courses where employees can share their
knowledge and teach specific competencies to others. In the case of the development process,
key persons unique competencies are used in order to make it difficult for competition to
imitate B&O products (Christensen and Bukh, 2008).

In terms of KMS, B&O uses the Coopers stage gate model in all new development projects.
Most companies that count mostly on product innovation use the gate model. In fact,
according to a study led by Fortune magazine, the single strongest predictor of investment
value is the companys degree of innovativeness (Beyer, 2011). The stage gate model is
costly to implement, approximately one million dollars but the results are impressive. It leads
to shorter time to launch new products, fewer mistakes, less recycling and rework in the
development process. The principle of the stage gate model is to implement strict quality
control checkpoints in form of a gate to ensure that the product development meets high
standard of execution. The stage is where the work is done and the gate is the checkpoint.
Usually, it implies from four to seven gates. When the project leader reaches a gate, he knows
exactly what inputs are required.

The development process is divided into a number of workstations stages and, between each
one of them a quality control is made. The gates are managed by senior managers who are
multidisciplinary and multifunctional. Their role includes the qualitys checking of the inputs
or deliverables and the approval for the next stage.

The process development is made in parallel, it means at every stage because many activities
take place and involve different department of the firm. One main advantage is that the stage
gate process provides a road map for the leader and the team. Every team member has a
clearer idea of where the project stands and what needs to be done next (Robert, 1990).

Business Strategy: Report to Bang & Olufsen Board of Directors 53


Appendix 16: BENCHMARKING

Production - Distribution

In looking at the audio-visual market, we can see that B&O has high production costs. B&O
could optimize its production and distribution process by outsourcing a part of its production.

As we said before, B&O productions facilities are situated in Struer and Koprivnice. As
B&O new strategy is to expand its business in emergent markets (Bang & Olufsen Group,
2012a, p5), the shipping costs to export the products in these regions will be high.
Furthermore, Denmark has the fourth highest labour cost in the world (Eurostat, 2012). The
production and distribution costs for B&O are highest than its competitors as most of them
had choose to open plants in emergent countries with lower production costs and with a
proximity to the geographical target market such as Asia and Brazil.

These companies such as Bose have proven that outsourcing the production do not
automatically affect the quality of the products as Bose is still providing top quality and
luxury products. The American company currently runs manufacturing facilities in Mexico
and Malaysia.

Other countries such as India have low production costs and are today being rated among the
best countries in terms of manufacturings quality (Kapur, 2010).

Outside the industry, other luxury brands have chosen to outsource their production. For
example, companies such as Audi in the automotive sector have plants in India and China
(Audi Group, 2013).

Place

To resist to the competition of the Asian brands (Sony, Samsung), B&O decided to focus on a
niche market, the audio-visual luxury industry, with a specific channel of distribution. As
Loewe, B&O decided to run away from the large retailers and decided to adapt a selective
distribution with thousands of specific authorized dealer, where the products are sold with a
strict bill of specifications like the formation of the employees and the design of the store. In
this way, they have a total control of their distribution (Pericone, 2011).

Business Strategy: Report to Bang & Olufsen Board of Directors 54


On another hand, Bose has decided to expand its channel of distribution by selling its
products in specialised hypermarkets and by developing an e-market on it website.

B&O may consider the online option seriously as nowadays, the e-market represents a large
part of the market for companies, and not only in the audio-visual industry. Anyway, it is
more difficult for company such as B&O to use Internet to sell their product as they sell very
customized products. However, we can notice that B&O with its sub-brand B&O Play has
started to put in place this strategy on the B&O Play website.

Products

(Bose, 2013) (Bang & Olufsen, 2013) (Loewe, 2013)

B&O and its main competitors have approximately the same range of products. They are all
providing TV, speakers, home cinema and professional customized solutions for B2B clients.

We can notice that even if these companies have the same basic range of products, some of
them are innovating; Loewe is providing Phone apps, and Blue ray systems. Bose and B&O
are providing headphones and audio systems for the automotive sector. However, Bose is the
only one, which does not provide TV screens. We can also see that B&O products are more
focused on design than its competitors.

Price

(Bose, 2013) (Bang & Olufsen, 2013) (Loewe, 2013)

It is difficult to compare the prices of the products in the audio-visual luxury industry as the
companies in this sector are providing high-customized products for each customer. But,
globally, we can say that B&O are proposing higher prices than Loewe and much higher
prices than Bose (Catalogue Bose, B&O and Loewe).

Business Strategy: Report to Bang & Olufsen Board of Directors 55


5. The SWOT and TOWS Matrices

Appendix 17: SWOT MATRIX

This appendix is a summary in which we are going to identify the Bang & Olufsen strengths
and weaknesses that they can use to maximise the opportunities and neutralise the threats. It is
based on all the previous appendices with their references that we have developed before.

Strengths Weaknesses

- High brand profile - Expensive production facilities


- Timeless design and high quality - Two production sites in the same
products geographical zone
- Small storage - High shipping costs
- Own patents - High prices
- High customer service - Fall in the number of B1 stores
- Good partnerships: designers and
automotive partners

Opportunities Threats

- Establish them in new international - Actual economic recession decrease


markets of purchasing power
- Outsource their production - Variation of currencies
- Extend their B2B market with other - Close competitors might try to enter
automotive partners and real estate B&O niche market
partners
- Develop their new brand B&O Play

Strengths

First of all, when we evocate the Bang & Olufsen company, the first things that we can notice
is their high brand image. Thanks to their 88 years of existence, the company benefits from
their long experience in the luxury audio-visual sector and has established them as a top
brand. Its high brand profile is due to their high quality and timeless design products. Indeed,
the company differentiates itself from its competitors by focusing on superior design and
quality. To reach these two core competencies, Bang & Olufsen has established strong
partnerships with designers and has also employed skilled technicians. Therefore, Bang &
Olufsen is able to develop high-end technology and innovative products.

Business Strategy: Report to Bang & Olufsen Board of Directors 56


Moreover, Bang & Olufsen holds own patents that are crucial to be ahead of its competitors in
the future and prevent from copying their products.

Another strength that Band & Olufsen has developed is their strong relationships with luxury
automotive buyers such as Audi, BMW, Aston Martin and Mercedes AMG. That allows the
company to benefit from a good and prestigious image as well as high incomes.

Finally, Bang & Olufsen offers to their customers very good services. Among them, we can
distinguish the fact that most of Bang & Olufsen products are personalized and can be
customized in order to fit customers needs and wants. Therefore, the company uses the on-
demand production strategy and can, in this way, decrease their storage.

Weaknesses

One of the main weaknesses of Bang & Olufsen is that the Danish company own production
facilities in Struer and Koprivince in Denmark and in Czech Republic where the labour costs
are one of the most expensive in the world. Furthermore, the two plants are situated in the
same geographical zone, which can be consider as a weakness as it increases the shipping
costs when exporting in other areas.

The premium prices of Bang & Olufsen in this time of economic recession could be
considered as a weakness, even if the luxury market is not as affected as other segments of the
industry.

Finally the fall in the number of B1 stores is a new weakness to take in consideration for
B&O and need to be face.

Opportunities

The main opportunities that B&O should take into consideration are the following. The
most obvious one is the development of their new business unit B&O Play. Indeed, it offers
potential to increase market shares and gain more customers and in this way, operating on two
different market segments. In the last quarter, B&O Play doubled its shares in the financial
result of the firm and in that way, proved to be an efficient strategy. The second option to
envisage is enlarging the B2B market with other automotive and real estate partners. The
association of the brand with famous automotive brands brings benefits in terms of public
image and it is a sector that represents 10% of B&O benefits and has potential for growth.

Business Strategy: Report to Bang & Olufsen Board of Directors 57


Outsourcing part of their production might be an option to consider as well. All B&O
competitors outsource their production, which allows them to reduce production costs and
realize more important profit margin or even lower their products price. However, the fact
that the production is entirely made in Denmark is an important sell argument.

Threats

On the other hand, the actual economic recession slow downs the activity of most industries.
B&O Play was a good strategy to implement in order to overpass this difficult economic
context it is essential for B&O to follow that strategy. The variation of currencies is also a
serious threat as Denmark does not belong to the euro zone and the devaluation of some
currencies might affect B&Os final result. In addition to that, close competitors might try to
enter B&O niche market. It is therefore crucial to survey them.

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Appendix 18: TOWS MATRIX

The TOWS Matrix is based on all the previous appendices with their references that we have
developed before.

Internal Factors
Strengths Weaknesses
SO Strategic options: WO Strategic options:
- Expansion strategy - Outsourcing
Opportunities
- New sub-brand B&O
External Play
Factors
ST Strategic options: WT Strategic options:
Threats - Defensive strategy - Outsourcing
- Investments good - B&O Play

SO Strategic Options

Expansion strategy: Bang & Olufsen is a high brand profile, due to timeless design, high
quality products and high customer service. The brand can try to enter in BRICS but to be
successful in these markets, the company has to appeal to the features previously cited and be
focused on the high-income clients. After that, the company should try to enter in the N-11s
markets, it means the market that includes: Bangladesh, Egypt, Indonesia, Iran, Korea,
Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam (Goldman Sachs, 2011). In these
countries, B&O could be interested by starting its position in the market, with this, the
population of these countries will start to know the brand. As these countries will reach the
level of development countries, the brand will be well positioning against competitors, and it
will be easier to obtain and keep the leadership in these markets.

New brand B&0 Play: This brand is directed for a new type of client: the new customer has
less income than the traditional. Thus, B&O Play has to provide devices that engage the
clients. To do this, B&O Play must seize the patents, design, quality image and customer
service of its matrix. With this the B&O holding could seize the synergies to have two similar
brands.

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ST Strategic Options

Defensive strategy: Taking into account the possible increase competition in B&Os niche,
the organization should emphasize its strengths: high brand profile, timeless design, quality
products and the high customer services. Indeed, in this way, Bang & Olufsen is able to win
the customers mind and make difficult the apparition of new competitors.

Investments good: With the actual economic recession, B&O with its timeless design and
high quality products may communicate to the clients that buy one of its product is more an
inversion that a cost, because with its devices, the client is ensure a long life-cycle device.
B&O products imply an important spending for the customer but, in opposition to other
brands, when you buy a device, you know that is not going to be outmoded in a few months.
For the customer, it could be a major difference at the time to buy an expensive good.

WO Strategic Options

Outsourcing: B&O should enter in the emerging countries (BRICS+N11). To reduce the costs
of production and shipping, the organization has to outsource the production to these
countries. With all of it, the margin of the products should be improved. Furthermore, if the
company creates jobs in them, B&O will obtain free publicity and maybe the help of the
government to enter in the market. Moreover, the organization will be able to stop the fall in
the number of B1 shops. Additionally, if Bang & Olufsen outsources to these markets, the
weakness of two production sites in the same geographical zone will be resolved.

WT Strategic Options

Outsourcing: B&O should reduce the expensive production facilities by outsourcing them.
This option can allow the company to face the possible increase of competition with a strong
position. Furthermore, the exposition of the company to the currencies market should be
reduced, because they could choose the currencies of the countries where B&O will have its
facilities.

B&O Play: In the actual recession, the high prices of the companys devices are not the best
strategy. Therefore, the new sub brand B&O Play, could be a revulsive for the sales of the
group. Indeed, the weakness of the high prices is eliminated, without affect to the B&O image
and at the same time, the company follows an adequate strategy to deal with the recession.

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6. Strategic choices at the Business Unit level

Appendix 19: PORTER GENERIC STRATEGIES

(Johnson et al., 2011)

If we take into consideration Porters Generic strategies, Bang and Olufsen need to carry on
with a Differentiation focus strategy.

Indeed, as luxury, premium products, B&O merchandise is targeted to a narrow target: upper
class with high income and interested in design. And we saw earlier that their competitive
advantage is based on their differentiation strategy: offering very high end products with high
quality mixed with design and the possibility to customize them.

Focusing on one particular segment helps to build specialist knowledge and technology,
improve brand recognition and customer loyalty as there is no other competitor that serves
their particular need that well (Johnson et al., 2011).

Successful focus strategy depends on at least one out of those three factors:
- Distinct segment needs
- Distinct segment value chains
- Viable segment economics

B&O products respond to a specific segment need: high quality and designed products.

In addition to that, their value chain is extremely specific when talking about distribution
channels. B&O sell the high majority of its products in their own stores, or stores within a
store, concept that they created.

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Appendix 20: THE STRATEGY CLOCK

(Johnson et al., 2011)

If we now take a more market-focused approach by using the Strategy Clock, we can clearly
see that B&O follows a differentiation strategy and more precisely, a focused differentiation
strategy that is design to customers that demand top quality with a high premium price. B&O
targets a niche where the high prices are accepted by the customers thanks to their products
uniqueness and quality. This strategy is likely to be sustainable thanks to the lack of
competitors in that niche market.

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Appendix 21: THE STRATEGIC LOCK-IN

The Lock-in strategy is when users become dependent on a supplier and are unable to use
another supplier without substantial switching costs (Johnson et al., 2011). The best example
can be found in the razor market where the razors of brand x can only be used with the
blades of this same brand x.

For the moment, the B&O range of products is limited and the compatibility between B&O
products is also limited. As a consequence the lock-in strategy is not really adapted to the
B&O company.

But, in the future, with a possible larger range of products, the Danish brand could take
inspiration from what Apple is doing with all its products, which are all compatible
(iTunes), and where customers are really dependent on the brand.

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Appendix 22: THE HYPERCOMPETITIVE ENVIRONMENT

It was noted by Cejas and Lanza (2006, p.96) that a hypercompetitive market is a market that
changes in every second. According to D Aveni, in this type of market, it is an erosion
process in the competitive advantages [] (to be successful) you have to break the status
quo, no keep the advantages. To identify a hypercompetitive market, there are some keys:

Short life cycle of the products


Entry of new competitors in any moment
Mergers and alliances between competitors
Frequently swifts in the leadership of the markets

Now, we are going to apply the previous elements to know if we are in a hypercompetitive
market:

Short life cycle of the products: As the assignment shows previously, the average
life cycle of a B&Os product for the client is 10-15 years. In comparison with a
hypercompetitive market as the mobile phones, the life cycle is large. For example, it
was said by Roth (2012), the IPhone 4s was released in the US market on the 14th
October 2011 and the IPhone 5 on the 21th September 2012. The difference is less than
one year.

Entry of new competitors in any moment: As we said previously, the principal


competitors are: Dantax (1971), Audiovector (1980), Bose Corporation (1968),
Harman international industries (1940), Loewe (1931). As we can see, the youngest
brand has 32 years, instead Apple entered only four years ago in the mobile phones
market (Segura, 2012).

Mergers and alliances between competitors: In the history of the competitors told
previously, we did not find any merger or alliance.

Frequently swifts in the leadership of the markets: It was noted by Fisher (2013),
B&O lost the leadership of the market in 2008, but until this moment, it was always
the leader. Because of this, we can say that there are rarely swifts in the leadership of
the market.

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After this analysis, we can say that the B&O market has not got hypercompetitive behaviour.

Furthermore, B&O has adopted a focus strategy in a market that is changing each moment,
with this; the company owns its niche in the market (Bordes, 2009, p.16).

To be successful in this niche, the brand had changed the value chain to emphasize the
differentiation of its products. At the same time, they chose a target customer, that any other
company could not satisfied as well as B&O. Due to this, the strategy provokes some
difficulties to other brands, when they try to catch the B&Os clients.

Another advantage of this strategy is that be focused on a target of client, protect the company
of major changes in the industrys competitive environment. But, it can be found an important
disadvantage, if a broad-line competitor develops a new technology or improve some key
features of its products; these may change the customers preferences.

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Appendix 23: GAME THEORY

As we explained before, Bang & Olufsen cooperates with a kind of siblings partnership with
Philips, and has some partnerships with car manufacturers such as Audi, Aston Martin and
Mercedes AMG. We did not find any evidence of cooperation with Harman, Bose, and
Loewe.

Taking into account the five forces analysis previously showed, B&O should not cooperate
with their competitors. It is going to be explained with the issues of the Five forces:

New entries: As it was said, a new company is going to have hard difficulties to enter
in this market; the problem could be if a generalist competitor tries to enter in the
niche. The easiest way to enter in this market is buying an established company. To
avoid this possibility, B&O should protect the share price of competitors in case of
rumours of acquisitions.

Threat of substitution: In case of the appearance of a new revolutionary technology,


that could be a substitute of B&Os devices, the company does not have to cooperate.
If a new technology appears, and the company does not have enough resources to fight
against it, B&O should join their niche-competitors because Unity makes strength.

Buyer power: Private customers do not have enough bargaining power to negotiate
with the brand, but B2B market has enough power. If the brands starts to lose B2B
customers, maybe that can make an agreement with the competitors to established
prices. It is outside the law, but it is a strategy.

Competitive rivalry: In this point, we have global competitors and local competitors
in the Nordic market. For the company, it could be good to form alliances with global
competitors to attack the Nordic market, and try to eliminate the competence (Dantax
and Audiovector). B&O should be the beneficiary of the offensive because the Nordic
market is near the original market of the brand. Then, it knows their preferences and
has better image in the Nordic market. B&O should attack the Nordic market with the
help of a global competitor or some of them. At the time of applying this strategy,
B&O has to be cautious, when the companies attack the other ones. B&O has to have
enough cash.

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Competitive rivalry (condt): In case of a large company wants to buy the attacked
brand, B&O should buy this brand to avoid the entry of a new competitor. The two
main advantages of this strategy are: B&O improve its share of the market and can
also obtain new technology.

Suppliers: As we said in the five forces, Philips has a strong and good partnership
with B&O. Due to this fact, we do not think that Philips is going to take advantage of
its bargaining power.

Rivals A+B:

As it was said before, B&O has partnerships with companies like Philips and Panasonic,
which could be presented as competitors, but really, there are not competitors their higher
devices cannot compete with the lowest of Bang & Olufsen. The organization should
cooperate with generalist competitors, to obtain cut in costs in some features, but the
company should not cooperate with its niches competitors, because, B&O being the leader
has too much things to lose, and few ones to win.

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7. Strategic choices at the Corporate level

Appendix 24: PARENTING STYLE

According to the Business Dictionary (n.d.) parenting style is: A corporate strategy that
relies on very tight strategic and financial targets. The strategy is an attempt to
make connections between different businesses in order to create a competitive edge against
others.

According to Caldart et al. (2006), there are three different types of parenting style:

1. Strategic planning: Parents make the most important decisions about plans and
decisions, give the direction of the organization and encourage the cooperation between
different businesses. For them, annual financial targets are less important than long-
term strategic objectives.

2. Financial control: For the parents, the plans lose in importance, and they look for
business that can be stand alone, with the more autonomous possible units. Moreover,
the units can design their plans and their own strategy. The financial performance is the
guide of the businesss success.

3. Strategic Control: It is in the middle of the two previous strategies, the business put
forward strategies. These strategies have to be moderated at the corporate level to know
if they satisfy the strategic and financial criteria.

With crisis, B&O had some bad years. Due to this, the company has not enough margins to
apply a strategic planning. Although, the company does not have a financial control, because
it is a small company with a high brand profile they never were worried about high profits
or revenues. Perhaps, in the past they followed a Strategic planning but nowadays the
organization follows a Strategic Control, because they have to fix the bad performance of
the last years. But, at the same time, they are changing the company, trying to do this
company more accessible for new clients with the new sub-brand B&O Play. Moreover,
Schulte (2011) said that when someone do not matter the level of the person in the hierarchy
of the company has a good idea, the idea is applied and the person is awarded. All these
elements show that B&O has a Strategic Control.

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Appendix 25: ANSOFFS MATRIX

(Johnson et al., 2011)

B&O, implemented recently a new brand, B&O Play that is offering convenient stand alone
audio video products rather that home installation and at a cheaper price in order to enlarge
their targeted customers especially the digital generation.

I we do not take only the zone Europe into consideration, it is clear that B&O should
implement a market development strategy. Indeed their presence is still extremely limited in
the BRIC zone like Asia or Russia. Those regions have experienced a large period of growth
and increase in purchasing power and are less affected by the fluctuation of the economy;
they could help B&O to install itself on a larger geographic zone.

However we decided to focus only on the Europe zone in the beginning of this study, thus a
new products and services development would be the best strategic choice for B&O. Indeed,
their product range is extremely limited and their audio products are more and more
threatened by the increase of the use of the computer or MP3 to listen to music. In addition to
that, B&O competitive advantage is based on its extreme higher technology techniques. In
order to stay ahead of competition it is crucial that B&O carry on developing the technology
of its products that is the main factor of their uniqueness.

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Distribution development: Number of B1-shops per region
(Bang & Olufsen Group, 2012c, p.11)

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Appendix 26: INTEGRATION VS DIVERSIFICATION

Integration and diversification are strategies taking by a company to increase its scope.

B&O is currently using a diversification strategy. The company is taking advantage of its
position in the existing audio-visual market and its knowledge on the conception of audio-
visual products to launch a new brand: B&O Play.

With this new brand, which has a different positioning: lower end product, younger audience
and more accessible to the mass, B&O is using its resources and competences to increase its
market shares and its market power.

However, this strategy represents a risk for the Danish brand as if these new products may
increase sales in a first time; launching a new brand with a different positioning, may have
bad consequences in the future. Indeed, as said by Al Ries, the chairman of marketing
consultancy Ries & Ries, this new project could dilute a luxury brand in the eyes of
consumers (Lamb, 2012).

B&O is also following a backward integration strategy. Indeed, the ICE power A/S is a joint
venture founded by Dr. Karsten Nielsen with Bang & Olufsen in 1999 (ICEPower, 2013).
ICE power can be considered as a component manufacturer for B&O.

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Appendix 27: OUTSOURCING

The choice to outsource or not is an important issue for a large company such as Bang &
Olufsen. A lot of B&Os competitors like Bose have chosen to outsource a part of their
production in developing country like in India or Brazil.

Other companies such as Loewe made the opposite choice and have decided keep the entire
production in their home country. As Loewe, B&O has currently decided to not outsource
the production.

Outsourcing the production can have a big advantage in terms of labour cost, production costs
and workforce. B&O is still producing in Denmark whereas this country has the fourth
highest labour cost in the world (Eurostat, 2012). Another issue is the quality of the products.
European countries are known to produce top-quality products. But, nowadays, low
developed countries such as India are able to produce with the same manufacturings quality
for lower cost (Kapur, 2010). Finally, when exporting products in BRIC countries,
outsourcing is an efficient way to reduce shipping costs.

However, outsourcing can also have disadvantages in terms of production processs control
and on the protection of the companys knowledge. When a company decide to outsource, it
is important that the core business competencies is not being transferred to another party.

Furthermore, even if another company could be able to do something cheaper and with the
same quality, the processes to making that happen are important in terms of cost, law
expertise, and control of the production.

For B&O, which mains market is currently the European market, outsourcing is not the best
decision to take. The risks of legislation, privacy control, and the costs may be too high
compare to the advantages.

But as the new strategy of the Danish brand for the next years is to implement itself in new
markets like the BRICs market, the brand will have to seriously consider this option and
outsourcing may be the best solution to stay competitive in terms of prices in these new
markets.

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Appendix 28: BCG MATRIX

The Bang & Olufsen Group consists of two business lines: Business-to-consumer (B2C) and
Business-to-business (B2B). In B2C business line, we find their core business area the Audio/
Visual (A/V) segment which represents the major part of the turnover with the revenue of
DKK 505 in the Q4 in 2011/12 (Bang & Olufsen Group 2012c, pp.9). This segment
comprises audio and video products. Moreover, the B&O Play segment is also part of the
B2C business line and offers digital audio and visual equipment. The B2B business line is
composed of the Automotive segment that includes development, production and sale of
sound systems for cars, such as Aston Martin, Audi, BMW and Mercedes-AMG, and the
ICEpower segment that includes the development, production and sales of compact, digital
amplifier units (Espinoza, 2012).

To analyse the Bang & Olufsen business units, we are going to develop one of the most
famous portfolio models: the Boston Consulting Group (BCG) Matrix. This model provides
us a great analysis at the corporate level on what B&O business unit is weak or has a good
potential for the future. It is composed of four categories: Stars, Question Marks, Cash cows
and Dogs.

B&O Play

Automotive ICEpower

Audio/visual

(Johnson et al., 2011)

The Audio/Visual segment

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The Audio/Visual segment is the B&O core business area. It is their major revenue source as
we can see in the chart below. Indeed, the A/V segment generated revenue of DKK 2,043
million in the 2011/12 financial year that represents 68% of the B&O revenue with a gross
margin of 43,1% (Bang & Olufsen Group 2012a, pp.19). Moreover, the B&O market share is
quite high in the niche of the luxury audio-visual market.

However, this segment is not growing but it is stable or even decreasing. During the financial
year 2011/12, the A/V segments revenue decreased by 1% (Bang & Olufsen Group 2012a,
pp.20).

To conclude, in reference to the BCG Matrix, the B&O Audio/Visual segment is a cash
cow. It means, according to Johnson et al. (2011), a business unit that has a high market
share in a mature market.

Repartition of the financial result per business unit and in comparison with last years result
(Bang & Olufsen Group, 2012c, p.10)

The B&O Play segment

The B&O Play is a recent segment launch at the beginning of the 2012-year by Bang &
Olufsen. Actually, B&O Play offers a limited products range of five plugn play products
(B&O Play, 2013). In the financial year 2011/12, the revenue from B&O Play amounted to
DKK 378 million that represent 13% of the overall B&O revenue. But, the revenue increased
by 155% compared to the year before (Bang & Olufsen Group 2012a, pp.20). It means that
B&O Play develops in a growing market.

With reference to the BCG Matrix, B&O Play business unit can be considered as a question

Business Strategy: Report to Bang & Olufsen Board of Directors 74


mark. It means, according to Johnson et al. (2011), a business unit in a growing market, but
it does not have a high market share. However, we can forecast that in the future, B&O Play
will become a star because this young segment is actually going to growth and gain market
share.

The Automotive segment

In the Automotive market, B&O plays a key role due to their prestigious partners with luxury
car brands such as Audi, Aston Martin, BMW and Mercedes AMG which have a high total
market share in cars industry.

In the 2011/12 financial year, the Automotive segment generated DKK 454 million that
represents 15% of the overall B&O revenue. Compared to one year before, the Automotive
sections revenue increased by 1%, so the market remained stable (Bang & Olufsen Group
2012a, pp.22).

For the future, the Automotive segment is expected to growth because Bang & Olufsen has
announced that they will be part of the equipment list for a number of new car models.
Indeed, they concluded a new agreement with the car brand Audi to develop and deliver new
audio systems for three future Audi models (Bang & Olufsen Group 2012a, pp.22-23).

Therefore, in reference to BCG matrix, B&O Automotive business unit is considered as a


star. It means, according to Johnson et al. (2011), a business unit which has a high market
share in a growing market. However, as the market is not growing significantly, we could
also consider this section as a cash cow like the A/V business unit.

The ICEpower segment

The ICEpower business unit represents for Bang & Olufsen the smallest segment of their
portfolio. However, this section observed, during the 2011/12 financial year, a revenues
growth of 24% with an amount of DKK 155 million, compared to the 2010/11 financial year
(Bang & Olufsen Group 2012a, pp.22). This demonstrates that the market is actually growing.

As the B&O Play, the ICEpower segment is in the question mark category. But, this
segment is more mature than B&O Play and is not predicting to grow as fast as the latter.

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Appendix 29: GE-MCKINSEYS MATRIX

The GE-McKinseys matrix or the directional policy matrix, which you can see below,
follows on BCG matrix but this model is a latter and more advanced form of the BCG matrix.
It is again a strategic model that allows you to analyse the Bang & Olufsen company at the
corporate level.

Audio/visual

Automotive

B&O Play

ICEpower

(Johnson et al., 2011)

As before for the BCG matrix, we are going to process in the same way and use the same
business units to develop the GE-McKinseys matrix, it means: the Audio/Visual segment,
B&O Play, the Automotive section and the ICEpower one.

The Audio/Visual segment

The B&O Audio/Visual segment is a cash cow with a business unit that has a high market
share in a mature market. During the financial year 2011/12, the A/V segments revenue
decreased by 1% (Bang & Olufsen Group 2012a, pp.20). Regarding this tendency and with
the actual economic environment, we can state that the industry is quite stable but not in a
growing or attractive situation.

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In addition, as we see in the Porters five forces, the degree of rivalry is extremely high on
almost every aspect of B&O range of products and the rivalry in the A/V segment is actually
quite high due to the fast technological changes. So the A/V industry is a very active industry
but it can be considered at a middle level of attractiveness.

The products inside the B&O A/V business unit have a high degree of quality, design and
innovation. Moreover, the brand identity has a high profile and a very good reputation in the
sector. The A/V section is for B&O their core business area and high business strength.

With these statements, the B&O Audio/Visual business unit is considered as a selective
growth.

The B&O Play business unit

B&O play is a very young business unit and do not have actually a high market share. Despite
this aspect, B&O Play offers a range of high-end and design products that positions the
segment at a good level of competitive strength.

Otherwise, the industry of digital audio and visual equipment in which B&O Play competes
presents a high degree of rivalry because lots of existing companies as Sony tend to offer as
well digital products. The industry attractiveness is for this reason at a middle level.

To conclude, B&O Play is actually the selectivity position in reference to the GE-
McKinseys matrix but can be evolved quickly as in the selective growth or investment and
growth ones as the segment tends to growth for the future.

The Automotive segment

The B&O Automotive section is in good position actually in the market and a promising
business for Bang & Olufsen for the future. Indeed, the company has already concluded great
partnerships with luxury car brands such as Audi, Aston Martin and Mercedes AMG. In the
2012-year, they have expanded them with a new agreement with BMW. These high profile
car manufacturers allow B&O Automotive to have a strong position in this market.

However, with the actual economic crisis, the automobile sector is decreasing due to the fall
of the cars sales so this impacts in a bad way the company.

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Despite this decreasing tendency, compared to one year before, the Automotive sections
revenue increased by 1%, so the sales remained stable for Band & Olufsen (Bang & Olufsen
Group 2012a, pp.22).

With reference to the directional policy matrix and the date mentioned previously, the
Automotive business unit is in the selective growth position in the matrix with a medium
level of industry attractiveness but a high business strength.

The ICEpower segment

The ICEpower business unit represents for Bang & Olufsen the smallest segment of their
portfolio with 5% of the overall B&O revenue for the 2011/12. Nevertheless, the segment has
increased in terms of revenue by 24% compared to 2010/11, that shows an increasing and
high interest for the digital amplifier units industry (Bang & Olufsen Group 2012a, pp.22).

ICEpower today is a fast growing, scientifically based innovation house specializing in audio
power conversion solutions (ICEpower, 2013). ICEpower has actually a significant position
in the market with the development of high-end and quality products (Atmel Corporation,
2001). This segment is going to develop in the future.

From the previous data, ICEpower is in the selective growth position in the GE-McKinseys
matrix with a high level of industry attractiveness but a medium business strength.

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Appendix 30: PARENTING MATRIX

The parenting matrix is a strategic model at the corporate level that introduces parental fit as
an important criterion for including businesses in the portfolio.

(Johnson et al., 2011)

All the four business units identified in the previous models share business characteristics that
the parent presents. Indeed, Audio/Visual, B&O Play, Automotive and ICEpower business
units offer products with high quality and design as well as a high degree of technology,
performance and innovation.

However, they differ by their target market. Audio/Visual and B&O Play target the B2C
market whereas Automotive and ICEpower business units target the B2B market. Moreover,
B&O Play is distinct from A/V business unit targeting a wider audience but essentially more
younger that the B&O customers offering lower price products (Lamb, 2012).

Moreover, B&O Play, ICEpower and Automotive business units are expected to growth in the
future. Only, the A/V business unit is going to remain stable and will not grow a lot.

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To conclude, and in reference with the parenting matrix, all B&O business units have fit at a
high level between the parents skills, resources and characteristics with their critical success
factors as well as with their parenting opportunities. Thus, we can state that Audio/Visual,
B&O Play, Automotive and ICEpower business units are heartland businesses according to
the parenting matrix. It means, according to Johnson et al. (2011), The parent understands
these well and can add value. All of them are part of the B&O core future strategy.

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VI. Minuted notes of group meetings

We have create our group of four members on the Tuesday 16th of October during the
Business Strategy course. A Facebook page for our assignment has immediately been created
in order to discuss about the company choice, to share all our researches and written parts for
each step as well as to keep in touch together in an easy way when we are not organise a
meeting.

Before each meeting that we have organised, if we had decide to divide different parts of a
question, each member put on Facebook the part that he/she had to do in order to bring
together all the parts on one file.

In addition, we only organise group meetings with all members and in this way choose time
and date in order to satisfy each of us.

Tuesday 30th October: during business strategy class (All members)


- Company choice for the study: Bang & Olufsen
- Work to do for next meeting: general researches on the company and in particular on
the PESTEL analysis

Sunday 4th November from 4.30 p.m. to 6.30 p.m.: at Nicolass place (All members)
- PESTEL analysis (share all our researches): write the main ideas for each part of the
PESTEL analysis
- Scenarios analysis: write a rough copy of each possible scenario
- Work to do for next meeting: researches on Porters five forces and lifecycle

After this meeting, we realized that it is quite difficult to work as a group of four because
everybody says its opinion and we are not very efficient. So we decided, to write the part on
the Porters five forces, to split the group on two parts: one part with Hlne and Constance,
and the other one with Los and Nicolas.

Saturday 24th November from 4 p.m. to 7 p.m.: at Constances place (Hlne & Constance)
- Porter analysis:
- Type of industry
- Industry life cycle

Business Strategy: Report to Bang & Olufsen Board of Directors 81


During this time, Los and Nicolas have done their parts separately because it is easier for
them for a logistic and time issue.

Saturday 1st December from 3 p.m. to 5 p.m.: at Nicolass place (All members)
- Discuss and correct the Porters parts
- Divide between us the different parts of question 1 that we do no have done at this
time
- Work for next meeting: Finish the 1st question

Friday 14th December from 4 p.m. to 5.30 pm: at Nicolass place (All members)
- Adjust some of the parts of the 1st question in order to match the parts between them
- Discuss on the B&O resources and competences in order to start the question 2
- Work for next meeting: Do researches on the B&O resources and competences

Tuesday 18th December from 10 a.m. to 12 a.m.: during 2h of Business Strategy Class (All
members):
- Establish the final list of the B&O resources and competences with the different
elements and sources that each of us had found
- Divide between us the different steps for the question 2 for holidays taking into
account that each step of the question has to be done to continue on the next due to the
interrelation between them
- Work for next meeting: different parts of question 2

During the holidays, we were keeping in touch together via the Facebook group in order to go
ahead on the project and in particular on the question 2. We decided to organize a quick
meeting during holidays on Facebook in order to take stock on the report.

Sunday 6th January from 5 p.m. to 6 p.m.: on Facebook


- Take stock on the progression of the question 2, on the different parts that each of us
had done
- Define the main points of each part of the SWOT matrix
- Divide between us the different parts of the SWOT and TWOS matrices
- Work for next meeting: SWOT and TWOS matrices

Business Strategy: Report to Bang & Olufsen Board of Directors 82


Friday 11th January from 2 p.m. to 5 p.m.: at DBS (All members)
- Discuss on the different models of question 3 and the different strategies, that we
seemed to be the best according to the two previous questions, in order to match the
different models
- Do researches together on the different parts of question 3
- Divide the question 3s parts between us
- Work for next meeting: different parts of question 3

Saturday 26th January from 3 p.m. to 5 p.m.: Nicolass place (All members)
- Review the different parts of question 3 to be sure that all matched together and go in
quite the same way
- Discuss on how we are going to process for the written report (the main body)
- Divide the different parts of the main body between the groups members
- Work for next meeting: Write the different parts of the written report in reference to all
the appendices that we have done before

Friday 1st February from 4 p.m. to 6 p.m.: at DBS (Nicolas and Lois)
- Do an overview of the question 3
- Split the question 3 in two parts: at the corporate and the business unit levels

Friday 8th February from to: at Constances place (All members)


- Make stock on the overall report
- Divide the final parts as the executive summary, minutes

Business Strategy: Report to Bang & Olufsen Board of Directors 83


VII. Individual group contribution

Lois Bouzas Ruano (1735618)

At the beginning, we started to work the entire group in the same questions; we did some
researches for resources and competences, for the PESTEL and scenario analysis. But after
the first meeting, we realized that if we worked in groups of two we would be more efficient,
and it worked.

I worked with Nicolas in the Appendix 3: Porters 5 forces and on the Question 3:
Conclusions and recommendations for the B&O future strategic direction. We had a meeting
to do an overview and obtain a common view of the question and after, we split the question,
my part is Strategic direction at business level

Furthermore, I worked on my own in the following appendixes: Appendix 4: Value Net,


Appendix 14: Value Network, Appendix 17: SWOT Matrix, Appendix 18: TOWS Matrix,
Appendix 22: Hypercompetitive Environment, Appendix 23: Game Theory and Appendix 24:
Parenting style.

Nicolas Dupont (1741863)

To build this report, all the members of the group worked on the PESTEL and the scenario
analysis. During the first meeting, we realised that it would be more efficient to work
individually or by group of 2. Then, I worked on the power of supplier part of the PORTER 5
forces analysis and participate to the elaboration of the Resource and competencies analysis
and of the SWOT (Weaknesses). On my own, I made the analysis of the Benchmarking,
Comparative analysis, Lock in, Integration vs. Diversification and Outsourcing models.
(Appendix 12, 16, 21, 26, 27)

Finally, we made, with Lois, the Conclusions and Recommendations for the B&O future
strategic decisions. I was in charge of the Strategic direction at a corporate level.

Business Strategy: Report to Bang & Olufsen Board of Directors 84


Hlne Martin-Vallet (1741869)

For the report I first did some research on the PESTEL model and scenario analysis with all
the group which I rewrote and put into real sentences but we realized that it was way too
complicated to work as a group of four so we decided to work together with Constance on the
Porter's five forces analysis as well as the type on industry and the industry life cycle. We all
together did the tables on resources and competencies. Then on my own I wrote the following
parts: strategic groups, blue ocean strategy canvas, KMS and concept of learning
organization, Threat and opportunities of the SWOT MATRIX, Porter generic strategy,
strategy clock and Ansoff's matrix.

Constance Rambaud (1741873)

At the beginning of the assignment, I create a Facebook assignment group so as to share and
discuss on the assignment between us when we are not in meeting. I try to always put on it
what each people has to be done for the next group meeting according what we decide
together.

For the report, first, as everyone, I do some researches on the PESTEL model and write the
scenarios analysis part with the entire group but it is quite difficult to work as a group of 4.
Therefore, I write with Hlne the three following parts of the Porters five forces: threat of
new entry, threat of substitution and the buyer power as well as the type of industry and the
industry life cycle. Then, I write, by myself, the Market segments and the Strategic customers.
Afterwards, we list together the group the Bang & Olufsen resources and competences and
write on my own the section on and put them in the context of the value chain. Finally, I write
the following parts: the sustainable competitive advantages, the B&O Strengths of the SWOT
matrix, the BCG Matrix, the GE-MCKINSEYS matrix, the Parenting matrix and the second
part of the main body.

Moreover, I realize the cover page of the assignment, put each time all the parts together in
order to keep the same design for the report.

Business Strategy: Report to Bang & Olufsen Board of Directors 85