This statement analyse business environment consists of micro and macro environment of Bang & Olufsen (B&O) a Danish company that make and designs a special range of luxury products, which include music systems, loudspeakers, multimedia system products and telephones with the help of technical brilliance and the wonderful design range of product. B&O products sold over 100 countries by more than 1000 retailers where more than 70% are exclusive B1 stores (Olufsen, 2011).
Johnson (2002) highlights that strategic management will go beyond the schedule, short-term, operation-specific concerns of an organization. It handles complexness arising out of ambiguous and non-routine situations with group huge implications. It requires understanding the strategic position of the business, its strategic options and exactly how they switch strategy into action.
Everyone is facing global recession; demand for luxury products in the market is in suprisingly low level. It is surprising to learn a successful period with extreme growth can finish up with loss.
There are numerous proper frameworks which are used to evaluate strategy for both inner and external examination. This article used two tactical frameworks; Porter's five makes for exterior business environment analysis and Value Chain for internal environment analysis to evaluate B&O strategy. Exterior environment is powerful which keeps on changing that is why analysis of exterior environment for just about any company is important and factor to analyse is both diverse and complicated. Porter's five causes model for external environment really helps to analyse competition within industry by potential opponents, degree of rivalry from established companies, bargaining electric power of suppliers and customers and hazards from substitutes. Porter's five pushes framework helps to analyse competitive makes within an industry in order to identify threats and opportunity confronting a business (Hill & Jones, 2007).
In this statement, we will give attention to how to make B&O position more powerful in the business. This statement will explain the B&O's current market position as well as what kind of problems facing by B&O and in concern with its future success and what may be accomplished in the foreseeable future.
B&O announced new strategy with the session of new CEO, titles as 'Pole Position Strategy', the name taken from Formula One auto racing. This strategy allows B&O to focus on its product range and profitability.
Major point of B&O's Pole position strategy are the following:
Sales Concentrate on product development:
Building common digital platform
One standard sales organisation
More retailers in progress market
New management team
Strategy Management :
To understand the strategy situation, we use two frameworks.
Porter's Five Forces can be used to for the industry level and Porter Value Chain framework use for the company level.
B&O is afflicted by macro-economic situation. This construction will analyse, how B&O is put on the market as nervous about its industry.
Because of the instability in the economy people and businesses save their cash and do not devote to luxury products. Because of lack of liquidity in the current economic situation B&O's business is under pressure as well.
Most of people on earth have notice the big drop of in their personal prices, etc. drop in share market or drop in property value (Economist, 2008).
According towards the Guardian (2011)"house prices placed to show up by up to 20% over another two years as rising unemployment and general population spending slices take their toll, experts are alert". It really is clear indication for the blissful luxury product businesses about general population spending is less likely compare to previous situation. B&O is the main one of the business to be effected due to its high end product. Less buying electricity and high insecurity, B&O is currently having big challenge ahead.
Currency exchange rate is yet another issues to handle by B&O, who's sales is having large market show in the united kingdom. B&O is facing devaluation of the Pound to the Euro value(X-rate, 2011).
Figure 1 : Euros to at least one 1 GBP
Source: X-rates (2011)
For planning long and short-term strategy B&O take help of some monetary issues. Like above exchange rate issues, B&O need to consider other macro-economic issues which can be corporate duty for the respected countries and its own different VAT rate.
Porter's Five Pushes:
As per global industry, this framework is the good tool to evaluate B&O's new problems. "Porter argues that stronger each one of these pushes is, themore limited is the ability of estabishied companies to raise prices and higher revenue (Hill & Jones, 2010)".
Substitutes- : Risk of Substitutes
Current recession make significant difference between all income categories. Due to the income, the majority of the people attempting to save lots of money for little longer period to buy luxury product. "People in all income brackets have been influenced, not just adults surviving in poverty, said the CDC (Psychiatry media, 2011)". Even richer people received affected by current recession, which indirectly damaged on B&O sales.
Other physical Swap is really the only Computer, which can effect on audio and video products. Music on computer is the risk for B&O's product, nonetheless it also wide open door for B&O to create speakers for computer systems. Television provides big screen to view movies, which computer can't be comfortable at this situation. People still choose to watch their favourite program on television set rather than computer.
So it seems that B&O could face strong difficulties from contending luxury product to consumers. It is not hard for cheaper rivals in the same market have strong chance to capture all category sections.
Buyers - : Bargaining Electricity of Buyers
There are different types of purchasers. We can split them as follows:
Luxury car dealers
Private customers are employing B1 and shop-in-shop center for buying B&O product. Most of them buy one of every product, so they bring very less bargaining ability. Even after discount on multiple products, profit is comparatively small.
Private consumer can pick any competitors shop to buy products, however when they made the decision for luxury products then there are limitation, which can be advantage to B&O sales.
Business category seems to have better bargaining electricity because company can buy several products at same time or have long contract of orders.
Car dealers will be the good example for long term agreement with B&O products.
Luxury hotels can purchase several products for their hotels and range of rooms. Due to the unique brand of B&O products, which gives higher bargaining electricity in compare to hotel give to their customer.
Real house is the least bargain electric power sector for B&O, due to low house prices and seller looking for the offers per task. It effect on less long-term contract.
It can say that no person can be a danger to B&O. private consumers bargaining electricity is less compare to business consumers, which is a lot higher.
New Entrants - : Threat of New Entrants.
New entrance of rivals as well as existing suppliers of same product could possibly be the risk. Technology and product development is the main one hurdle from many obstacles which is new opponents will face. Need large number of resources and investment. If they were in luxury business and having good brand name
Existing suppliers, who's already, have all resources for audio tracks and video recording products and product is the brand behind and affordable products face the threat. "Workstyle and lifestyle styles will powerfully shape your company's future workforce needs (Haverd Business school press, 2006)"
Figure 2 :Porter's Five Forces
Source: The marketer (2010)
Supplier - : Bargaining Electric power of Supplier
Company like large Philips is one of those items for B&O. Both are in same business like competitors. Philips is a lot bigger than B&O, it includes high supplier vitality. For B&O changing its dealer is little difficult because of the quality components B&O require is not any supplier can provide, so that it is clear that B&O is under high company risk.
It can recognize that B&O encounters high provider bargaining power and if it'll be continue B&O comes with increased ricks
Intensity of Rivalry - : Industry Competitors
It is very important to understand in which market B&O is competing. B&O is strong in its both sound and video tutorial business as well as in the high-quality goods segment. The audio and video products are used by volume of suppliers. Philips, LG, Samsung and Sony is the major in international market. All of them develop range of products in several qualities and amount. To allow them to target many different portion of consumers from low prise to high prie product as well as different quality products These businesses seeking and concentrating on amount of different segment.
Apart from all above mentioned companies, B&O has keep themselves different among most of them by offering high level of quality standard and exclusive design products. B&O maintains prices very high compare to the sound and video tutorial market.
Germen based Loewe and American based Bose is the other two rivals for the same product and taking some show in luxury high quality business.
Loewe is made on 1923 in Berlin by Loewe brothers (Loewe 2011), it is accepted by its high quality and exclusive design of its products. Loewe use the high quality brand strategy, which is the very first thing for company's international development. In 2010 2010, Loewe released mediacenter, which can offer nonstop entertainment at one place throughout the home.
This all strategies employed by Loewe is possibly lead to capturing customers from B&O. Loewe is the B&O's main competition as it competes on all its product runs.
Compare to Loewe, B&O is stand still because its advantages in audio tracks quality.
Other B&O's major competitor is Bose, who won awards for its advanced (Bose 2011) audio system. Bose was founded in 1964. It's main concentrate on providing high quality sound system. Bose have an advantage point its best audio system rather than its design compare to B&O's design. Eventually people will more curiosity about best sound rather than so focused on the design of the merchandise.
Bose is providing sound system to cars traders like B&O will. Bose have contract with the luxury car retailers (Bose, 2011) such as Porsche, Ferrari and even more.
Porter's Value Chain:
This is an instrument of analysing the business's inner environment and resource facility. It is a thought created by Michael Porter. It'll identify all activities that produce and test company's potential and monetary performance.
Figure 3 : Porter's Value Chain
Source : Mba Knowledge bottom part (2011)
The above number is describe value chain for the company. Most important activities and extra activities are two main process in value string.
While using of value string process you can analyse the B&O's power and weaknesses.
Figure 4: Major Activities
Marketing - Sales
B&O needed high quality complex part for his creation. So company has made proper relationship using its suppliers, who manufacture high quality technology components. This is a competitive advantage in terms of progressive technology. Suppliers can be reliable and capable, which help B&O to will save its time and money alone components development and B&O can utilise that time on focusing its main business.
Storage is one of the inbound logistics in value chain, this hyperlink keep less value to B&O. It really is looked to be a link that ought to be as small and less value as is possible because this link won't add value to its final product.
"Competitive advantage introduces the idea of the the worthiness chain, a general framework for pondering strategically about activities involved in any business and examining their relative cost and role in differentiation (Porter, 1998)".
Product design of the B&O is the most important factor for the worthiness creation, B&O product and brand are usually rely upon its product design. Such design product is not merely creative also high standard and progressive. Design is the outside appeal of the merchandise and the technology is the inner brilliance.
ICEpower (ICEpower, 2011) is the major daughter company of B&O as it is a motivation for the new technology used for B&O products. ICEpower is developed by B&O, so company get first new technology befor its opponents reach. Full control to ICEpower's development add high value for B&O.
The main issue for value chainis that the R&D division has lately know the market is wrong so developing is not acquired satisfactory peoduct line. The next R&D is the usually important for B&O in terms of companies progress and brand value. It is conclude new goal for the product line improvement, still to be seen the new strategy will be effective and get B&O in successful market.
After receving purchase order, production will sart, such a logistic strategy might not exactly add value to product. It can make the production more cost effective.
B&O can move its labour work to the different location where wages is low and also have a skill. Creation in the current location is add low value to B&O value string. because its very costly compare to other easy options.
All outbound distribution of B&O products is coming from beyond your region. B&O will pay high amount of money for shipping. Outside of European countries cost is high because of its a bit longer distance. This high cost won't give value to the value chain. B&O need to create the production service which produce cost efficient solution. Some sort of modification or assembling facility in the average person area can save some of the cost on shipment. Effective inventery management easier so that it can have a positive influence on the value chain.
Fully trained sales personnel in B1 as well as in shop-in-shop, B&O products manage from other product because of trained sales workers have brief understanding of products. Cheap shop sales employees don't give much information about product credited to they never been trained by company. This is a extra service which B&O is providing its customer when they come to the shop.
B&O has made a status in around the globe by attaining its customers demand. In an outcome these shop grow and increase sales for B&O products and increase the value of the B&O brand.
That is sure such worldwide sales support the growth in sales give a large increase and providing reputation in the market to B&O as a company.
Compare to the cheaper competition the service provided by B&O are the most crucial element in business. After new product unveiling each sales staff get training to comprehend the product and give instruction how it is suited to the customers. In person assembly by trained personnel make sure every customer get the majority of the outcome from the merchandise. This service provided for both the, private and business consumers. B&O provided provision of 12 years of service after products have been removed from creation. This help customer can consider on B&O and its own brand as well as add additional value for B&O. B&O provide service for producing extra parts for non-market item and the immediate cost of producing these parts.
All flat screen television are more familiar product and its own price is slipping rapidly day by day in the market. B&O will be facing big obstacle from its competitors. Component prices is cheaper and B&O will have to improve its product somewhat than reducing its cost. B&O faces hard competition on all his products, but B&O is the main one who supply complete package for entertainment.
So B&O need to make use of its durability and remain competitive with the technology and need to trust on its own design range of products.
The strategic hazards are depending on the industry. B&O is dependent on large sub distributor, who is big in the same technology market.
Like B&O, whole world is influenced by global financial recession; loosing wealth for the all category customer is a negative effect on B&O's sales in the year ahead if spending reduced. B&O facing increasing money risk as well. B&O facing hard competition from its rivals in all price ranges.
To help of value string B&O to be overall running well in the market. B&O creating a positive side, which is its well-functioning value chain promoting its position on top quality luxury with the aid of its unique design, different technology and its own well trained staff.
Total term : 2678
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