Bang and Ofulsen Case – Potential Answers

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Francois Baranne | September 14th 2010 | MBA Program – 2nd year Operations Strategy Case Bang & Olufsen Introduction It seems important to begin this case analysis with a evaluation of the company in order to underline some of the key points to keep in mind for this case. Appreciated First of all, we can say that Bang & Olufsen have developed, through a differentiation by the design, a sustainable competitive advantage in the high-tech audiovisual market which have allowed the company to increase the willingness to pay of the customers. Normally, this solution, the design-differentiation, should not have last or generate this increase but this is where B&G has done great by developing the design to the point of it has become the core competency of the firm. Every function of B&O (supply chain, manufacturing/quality… ) gravitates around the design function. Thus, such as Toyota, B&O has succeeded to developed a operations-based strategy quite impossible to reproduce because based on a philosophy. Secondly, it is interesting to note that B&O has tried to reach the last phase of the Sand Cone The company, which deliver a great quality (long product lifetime, handwork manufacturing), has a good flexibility (specialized workers, integration of top-technology by the engineering department) and is relatively fast regarding its products (delivery in 5 days, concentration of the resources, accelerating cycles), is now looking for cost-reduction. As we can see it in the documentation, the reduction of the number of employees (which had surely helped to increase profits) and the implantation of a new factory in the Czech Republic have probably been decided in that perspective. Development Now that we have defined what we consider as the key points of this case, it is time to think about the critical issues B&O is facing. Concretely, B&O is a producer of high-tech audiovisual products with great design. The problem is that, nowadays, with the emergence of new products such as the Ipod, people have extended their quality expectations about the audiovisual to the virtual level. To satisfy what B&O supposed to be the customer needs, the company has begun to think about this topic, even creating a new entity, Idealab, for this purpose. Until now, B&O has not take the risk to develop this approach to the next level and the influence of Idealab on the products in development is quite limited. Nevertheless, this situation could evolve with a new project for a digital audio/video product. In definitive, this project raises for the company the questions of the integration of more great software and network-based interaction in its products and, consequently, the importance it should give to Idealab in its organization. These issues are critical because they could change radically the way B&O is doing business. We will now see in the following development that every options has its pros and cons. To begin with, we could imagine that B&O would decide to integrate more software and network applications on its products, to reach the “50% software, 50% physical product” mentioned by Sorensen for its products,

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