Bang & Olufsen Case Study: Strategic Analysis and External Factors

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Bang & Olufsen Case Study: Strategic Analysis and External Factors








6001 ASSIGNMENT 1



Introduction

The report is based on Bang & Olufsen case study that has mainly adopt to achieve the market condition to launch new electronic products in the market. The company mainly focusing on developing new strategic plan, improving efficiency, enhances the development of the products that result is it effectively produce TV, speakers and other electronic products. For developing new technology to produce the products the company has to focus on many areas such as strategic direction, external and internal analysis via usage of Pestle, SWOT, Porter and product life cycle models.



Set 1

Evaluate how strategy adopted by Bang & Olufsen impacts the company’s decisions and activities

Strategic direction at the business unit level

It is strategy of business level that is formulated by the senior managers of the company. It also emphasizes strengthening the position of the company competitive products and services. As per analyzing the case study of Bang & Olufsen it provided the information that primary purpose of the company is to adopt innovative technology that played an important role to design unique products and services in the market.

  • Functional strategy: This is known as the division strategy that defines the role of each department of Bang & Olufsen. These departments are related to technology, human resource, marketing, research & development and manufacturing (Tomczak, Reinecke and Kuss, 2017). The main purpose of these departments is to work as one unit to achieve the common goals of the company.

  • Operating strategy: Under this strategy, Bang & Olufsen company is focusing on product development in fewer product categories such as video and primarily audio. In this part, the technological digital platform helps the company to reduce cost and time for the product launches. The operation strategy of the product gives the benefits to Bang & Olufsen to develop its global sales strategy by supporting 800 authorized concepts of the stores. The focus of this company is to adjust the cost structure as per the conditions of the market.

  • Corporate level strategy: This strategy is formulated by top-level manager of Bang & Olufsen. This strategy describes as overall direction in terms of production of products. Bang & Olufsen company main business is to adopt the changing market strategy in launching new products with the best technology (Calandro et al., 2015). For this purpose, the company has to focus on setting an effective strategy where the organization manages its operational activity and makes it innovative compared to other marketers.

  • Business level strategy: This is formulated by the senior managers of Bang & Olufsen. This strategy is also composed the cooperative and competitive strategies. It consists of the action plan that would be adopted by managers to use best resources and competencies to gain sustainable advantages from the other marketers. This strategy is also focusing on product development, integration, innovation, diversification as well as market development (Verweire, Letens and De Prins, 2019). By focusing on this Bang & Olufsen company produce effective design related products for its company.

Strategic direction at the corporate level

This strategy is known as the plan that would be developed by the company to look at the activities of organization which they interact over the given period.

  • Stability strategy: The stability strategy helps Bang & Olufsen to serve the customers with same products and services with best quality compared to other marketers. Its main purpose is to focus on incremental improvement of functional performance. The long-term strategy of this requires reinvestment, innovation and research & development (Furrer, 2016). For developing the quality of the products Bang & Olufsen uses the Pole position that used to design new strategy which meant is to signal the clear gaols, sense of urgency, clear task as well as teamwork to achieve the goals of the company.

  • Expansion strategy: This serves the public additional products & services and focuses on its strategic directions on major increase in pace of the activity within the present business. By using this strategy Bang & Olufsen company makes its technology expand to design innovative products for its customers. For this purpose, the company is focusing on adopting Pole position strategy that is metaphor chosen from Formula one motor racing and development in new strategies in many categories of products such as mobile phones, standalone products, MP3 players and DVDs.

  • Retrenchment strategy: This requires the firm to redefine the business and also involve the divestment of major product lines. The uses of retrenchment in the business are to use layoff, reduce R&D and increase the collection of receivable. For retrenchment of the business, Bang & Olufsen is focusing on redefining its market segmentation for TV and video system that provide higher advantages to the company to design the products of the company innovatively.

  • Combination strategy: This includes stability, retrenchment as well as expansion with main purpose is to improve the performance. By using this Bang & Olufsen provide information to its employees about what are their roles and responsibilities and how they adopt innovative strategies to produce effective products for the company (Wheelen et al., 2017).

Analyze the external factors

External Analysis – Key Issues in the External Environment

Customers, competitors, technology and economy, social and political condition are the main factors that influence the environment of the business. Further, the external environment also affects Bang & Olufsen current strategy of operations, growth as well as long term sustainability.

Current market and competitor’s analysis

Market competitor analysis is done by maintaining the relationship with market competitors. For identifying the market competitors Bang & Olufsen has to focus on analysis and identifying the strategies of competitors which is possible through thinking from the customer perspectives and also focusing on their point of view. The company should follow these steps to identify the current market and analysis the competitors:

  • Identifying the competitors through using the division method of market such as direct competitors, secondary competitors and substitute competitions. As per analyzing the case study of Bang & Olufsen the current market competitors of the company are German Loewe, Toshiba, JVC and Hitachi give an impact on the business procedures of Bang & Olufsen company.

  • After this by gathering the information of these competitors in relation to products, services, branding & position Bang & Olufsen build a strong strategy to compete with them. By analyzing the market situation, the company gets the idea about its market share that is 18% in CRT-TV, 15% in Plasma, 64% in LCD and 3% in others.

  • By analyzing strength and weakness of the competitors the company gain information about in what section or areas it needs to do some improvement (Todorov, 2020). Historically Bang & Olufsen company has strength in producing the products in magically way. However, when HR standards and LCD technology has developed, the company started facing the issue to strengthen its position in the market.

  • By connecting with competitors directly, Bang & Olufsen gather the information to distinguish its business strategy from the others. As per the case study, Bang & Olufsen major competitors are developing their own technology often dictating the standards of technology in the market (Bayani, and Crisanto 2017).

  • Identify the competitive advantages is another strategy of Bang & Olufsen to know about the current competitors of the market. This strategy helps the company to develop the message and brand image in the company. Bang & Olufsen is well known global brand that strongly focuses on high-tech solutions as well as designing the music system, televisions, multimedia and speakers’ products.

Pestle analysis

The main use of Pestle analysis is to know about the issues and their impact on Bang & Olufsen business:

Picture 1

Figure: Pestle analysis

Source: Professional academy, 2020

  • The political factor useful to know about the degree to government intervenes in the economy. This includes many issues such as policy of government, stability overseas of market, policy of foreign trade, policy, law of labor & environmental and trade restrictions. By concerning this, Bang & Olufsen focuses on adopting the changes in product development such as mobile phones, MP3 players and DVD manufacturing.

  • Economic factors also give a significant impact on the profitability amount of Bang & Olufsen. In this part, the company faces the issues of interest rates, economic growth, inflation, exchange rates, disposable income and many more. Due to this factor, the Bang & Olufsen also faces the issues to launch the products in 12 months corresponding to 25% approximately turnover.

  • Social factor is known as the social-cultural factors that involve attitudes and belief of the customers. The demand and needs of the customers are affected by the activities of Bang & Olufsen in areas of designing, new technology and quality of the products (Professional academy, 2020).

  • Technology factor gives the impact on producing the goods and services, distribution and communicating with target market strategies. The main issue which Bang & Olufsen is faced that is technology transition in the market for consumer electronics.

  • Environmental factor gives an impact on increasing the scarcity of raw material, pollution targets, sustainability and carbon targets. In this part, the main concentration of Bang & Olufsen is to focus on using good technology and quality-related raw material to provide protection to climate from the waste hazards.

  • Legal factors include health & safety, equal opportunities, consumer rights, standards of advertising, safety of product & labeling that create the issues for Bang & Olufsen to produce the products for its customers.

Porter’s five forces

Picture 3

Figure: Porter Five models

Source: Disruptive Nation, 2019

  • Threat of the new entrants in the market helps the company for reducing the barriers of new entrants. This can create issues for Bang & Olufsen in areas of regulation start-up cost, high fixed cost and protected intellectual property. The innovative products of new entrants can affect the business process of the company.

  • The power of suppliers in the market also creates an issue for the company. There are many competitors available in the market such as Toshiab, JVC and Hitachi where the supplier's power of the market affect the supplying the activity of the product of Bang & Olufsen which means by tuning towards the other marketers the suppliers can affect the activities of the business.

  • The power of buyers affects the profit margin of Bang & Olufsen. This company is electronic products related company where the quality, price, design and new technology of the company affect the product activity of the business (Disruptive Nation, 2019).

  • The availability of substitute products also affects Bang & Olufsen business profit margin and productivity level of the business. Toshiba, Hitachi and JVC are similar company same as Bang & Olufsen which serve similar products to its customers.

  • The competitive rivalry has also created issues to develop the profit margins in the company. This will also be helpful for the company to cut in the price of electronic products, conduct advertising expenditure and also spending on the services or product improvement & innovation.

Industry life cycle

Picture 5

Figure: Industrial Life Cycle

Source: Research Gate, 2020

This life cycle refers to the evaluation of the business through four stages on the characterized of the business that commonly displayed in each phase. The industry life cycle helps Bang & Olufsen to focus on the key issues of the business such as:

  • Introduction: In this stage, the main concentration of the company is to focus on offering electronic products to the market. For adopting this, the company has to be focused on adapting to the changes in the market condition that useful to launch new products with the best available technology.

  • Growth: In this stage, the company is focusing on taking the products and also increasing the buying power of customers. For developing the growth, the focus of Bang & Olufsen company is to adopt the best technology to produce effective design and strategy related products in the business.

  • Maturity: This indicates when the products of the company start shrinking into the market due to begin in falling from the outside pressures line in areas of lower demand and competitors of Bang & Olufsen.

  • Decline: This indicates it is required for the company to keep the product in the stages of maturity as long as possible. This will also helpful for the company to adopt new innovative strategy for producing the new innovative products that attract the customers and give the competitive advantages them (Research Gate, 2020).

Internal Analysis

For analyzing the key issues in internal departments of Internal Analysis, SWOT analysis is beneficial for the company which is defining in below:

SWOT analysis

Strengths

Weaknesses

  • Produce the products by using innovative technology

  • Produce electronic products with good quality

  • Sound quality of electronic products is good.

  • Exclusive design of TV, speakers and other products

  • Competition with market competitors.

  • Lack of LCD technology and HD standards

  • Weak responses towards the competitors.

Opportunities

Threats

  • Launching new products at good quality and design.

  • Explore the sustainability of new technology-driven the market

  • Design the flat shape of the television.

  • Lack of digital TV technology





Conclusion

The report concluded that this is primary purpose of the company that it has to adopt the frameworks of SWOT, Porter and Pestle analysis because these all are helpful for the company to gain the information of its market competitors and customers demand. After knowing this, the company starts its electronic product manufacturing process that provides the advantages to the company to develop the growth of the business in market.



References



Bayani, M. and Crisanto, D., 2017. Repositioning in furtherance of future strategic direction: An analysis of Cobra beer. European Journal of Contemporary Research6, pp.218-226.

Calandro, J., Gates, D., Madampath, A. and Ramette, F., 2015. A Practical Approach to Business Unit Hurdle Rates, Portfolio Analysis and Strategic Planning. ACRN Oxford Journal of Finance and Risk Perspectives4(2), pp.75-90.

Disruptive Nation, 2019. Drive Business Strategy & Competitiveness with Porter’s Five Forces. [Online]. Disruptive Nation. Available at: https://disruptivnation.com/2019/11/17/porters-five-forces/ [Accessed on: 12 December 2020]

Furrer, O., 2016. Corporate level strategy: Theory and applications. Routledge.

Professional academy, 2020. Marketing theories- Pestle Analysis. [Online]. Professional Academy. Available at: https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-analysis#:~:text=A%20PESTEL%20analysis%20or%20more,used%20in%20a%20SWOT%20analysis. [Accessed on: 12 December 2020]

Research Gate, 2020. Industrial Life Cycle. [Online]. Research Gate. Available at: https://www.researchgate.net/figure/Industry-life-cycle-and-innovation-per-stage-Tukker-and-Tischner-2006-Studies-of-SHAs_fig1_262804737 [Accessed on: 12 December, 2020]

Todorov, K., 2020. The Strategic Engine Model: Redefined Strategy Structure, as per Market-and Resource-Based Theory Application, Tested in the Automotive Industry. International Journal of Economics and Management Engineering14(3), pp.206-211.

Tomczak, T., Reinecke, S. and Kuss, A., 2017. Strategic marketing: Market-oriented corporate and business unit planning. Springer.

Verweire, K., Letens, G. and De Prins, P., 2019. Book highlight—Setting a clear strategic direction. Global Business and Organizational Excellence38(5), pp.69-78.

Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management and business policy (p. 55). Boston, MA: pearson.



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