There's just one reason for outsourcing:


MONEY!

raveny:

One good example is the Vertu: it's handmade in England. Compare it with an iPhone and most people would take the iPhone even if they were priced equally.

I may be wrong - but isn't the Vertu built on a re-engineered nokia platform, and is in effect a re-housed version of the standard Nokia chipset and os ?

If not, then I apologise, but I am almost sure that when I saw a customers Vertu a few years ago ( he was a first month Serene buyer back in the day)  he was grumbling to me that it did NOTHING his company supplied Nokia wasn't able to - it just had a fancy case. 

Edit - I remeber there was a special "Key" to dial a concierge service with one touch - although a speed-dial button is hardly a major innovation, albeit it has its own button.

Perhaps that was just the early ones....although I recall it was also many many times the price of a Serene.

yes it is a Symbian phone... they have other screens, keypads, speakers, etc. It's owned by Nokia but they are trying to sell it.

There's an analogy between a Vertu phone and a BeoVision. Display from Samsung, Panasonic or LG with different casing, speaker...

TWG:

There's just one reason for outsourcing:


MONEY!

True!

As a manufacturer,if the choice is between installing a production line,and engaging,and training,additional employees to operate it,or having the product manufactured by a third party,which would make more economic sense?

They've been outsourcing for years - big deal

It's what comes out at the end , not how they made it it - that matters !

folkdeejay:

raveny:

One good example is the Vertu: it's handmade in England. Compare it with an iPhone and most people would take the iPhone even if they were priced equally.

I may be wrong - but isn't the Vertu built on a re-engineered nokia platform, and is in effect a re-housed version of the standard Nokia chipset and os ?

If not, then I apologise, but I am almost sure that when I saw a customers Vertu a few years ago ( he was a first month Serene buyer back in the day)  he was grumbling to me that it did NOTHING his company supplied Nokia wasn't able to - it just had a fancy case. 

Edit - I remeber there was a special "Key" to dial a concierge service with one touch - although a speed-dial button is hardly a major innovation, albeit it has its own button.

Perhaps that was just the early ones....although I recall it was also many many times the price of a Serene.

 

 

People who buy a Vertu is beyond my comprehension... 

This has been an interesting discussion.  It remains to be seen if the Beolit 12 sells in signficant numbers to be a success for Bang & Olufsen.  My expection is that it will be very profitable.  Does this mean that B&O will change?   Yes it probably will change.  Maybe it will be more like the Bowers and Wilkins business model.  For B&O it will mean some products will be made in the EU (Denmark and the Czech Republic) and other products will come from Asia.

This is not a well know fact but I will make it into a silly question.  Do you think South Koreans will be upset that Samsung is going to produce the Apple A5 processor in Texas USA?  The truth is outsourcing moves in many directions.

http://www.reuters.com/article/2011/12/16/us-apple-samsung-idUSTRE7BF0D420111216

Folkdeejay – I agree with you on the fact that sub-brands are not uncommon but not when it comes to luxury audiophile equipment as Bentleyman rightly said, it lowers the brand!. Fender and Gibson are brands for the masses whether they have professional equipment or not, they are not luxury exclusive brands. They are like Panasonic and Sony that also have really high end professional electronic equipment that is made in Japan, and lower end stuff that's made in China, or like the photography brands I mentioned: Canon and Nikon that make their professional gear in Japan and outsource the rest. Now look take a look at high end audio manufacturers such as McIntosh that make everything by hand in the USA, they will never have a sub-brand and are considered by audiophiles to be perhaps the best manufacturer of amplifiers, in fact they have the least THD out of almost any amp company in the world. Does Bang and Olufsen want to be an audiophile niche maker that are so respected or do they want to become what most audiophiles think of them? There are so many others: Zingali from Italy, Quadral from Germany, Vandersteen from the USA, Dali from Denmark, MartinLogan USA, Final from Netherlands, the list has about a thousand manufacturers of high quality audio equipment that don't have sub-brands and that don't outsource. Those are the “luxury audiophile brands” not the mainstream brands such as Bose, Sony, Pioneer, etc... that B&O is becoming. Your suggestions will bring the brand exactly to that level and it will be disappointing to see. If the thousands of other high end luxury audio brands out there can survive without sub-branding and manufacturing in China, than so can B&O. P.S. They already have 50-70 pounds A8 earphones, and the Form 2's are made in Japan, not China, by a very high end audio manufacturer... If you want those cheap products you mention, go and buy Bose or some other generic brands. B&O was never about that.

Talking about Brand Image and Quality look at Tiffany's, nothing they make is manufactured in a developing country and yet they don't advertise this at all. They do it for the quality and partly for brand image in case anyone does go to question their brand ethics. They even went as far as asking a certain US pen company to make ballpoint pens for them in the US, yet that company outsourced all its manufacturing to China, but just for Tiffany's they have a factory in the US making pens for them because Tiffany's didn't want to have a pen that was made in China and was willing to pay more to have it manufactured here. In fact I have a friend that is one of the best lacquer-ware artists in the world in Japan and he makes the lacquer pendants that Tiffany's sells. I got to visit his workshop and see just how handmade they are, there are upto 100 steps to painting them all by hand, it was amazing to see how stringent and strict Tiffany's demands are and how expensive their products are to produce yet how cheap they sell them for. Definitely good value for money (especially the lacquer jewelery).

Raveny – I completely agree with you. Especially in regards to Luxury that it needs special materials, skills for manufacturing, etc...! The fact that you mention loudspeakers in this category is exactly my point, they still need a lot of money for R&D yet many thousands of luxury speaker manufacturers do not outsource

In regards to electronics: Nokia keeps some of their high end phone manufacturing still in Finland such as the E series. Yes they are priced higher than other models accordingly. If Apple didn't care about their shareholders and execs so much they could have made the iPhone in the US, charged the same, and made 1 billion in profit instead of 5 billion for example (after R&D costs you mention). You are right in the sense that for certain electronic products such as that too much money goes to R&D and there are tens of thousands of employees getting paid excellent salaries for that R&D role. But for some electronics such as computers if people wanted to pay more they could buy a Fujitsu in Europe that's made in their factory in Germany. The iPhone is perhaps the only real exception because everyone wants one and there is only one...

TerryM – Many companies that outsource do so by cutting staff in their own factory or closing their own factories down in order to manufacture abroad. Only some new companies outsource because they can't open their own factories. B&O has the trained workforce and can integrate it into their own production lines as they did with new products for nearly a century. Even companies that do outsource because they can't open their own factory, need not outsource to developing countries, they can find excellent high end manufacturers in almost any country for almost any product. Look at Tom Ford as an example, he didn't have the means to open his own factory, especially with the low volume he was producing, so instead he commissioned an Italian factory to make his clothes. In fact they are probably better in quality than he would have gotten here as the Italians are world renown for manufacturing of clothing.

Flappo – They've been outsourcing to Japan and other developed countries for years and only for a couple of products. Creating a whole new product line is completely different. Especially if the products they are releasing are lower end, even by their own standards and they admit it. This lowers the image of the company. The product that comes out at the end is not of the same standards, if it were they would have outsourced all their higher end products as well!

Rmclachlan – Yes hand-assembled might be a better description than handmade as they don't make the aluminum or plastic parts by hand but have them molded by machines, etc... I have a '91 Lotus Elan M100 and it's been extremely reliable, yes it has its electrical problems with relays and such but mechanically it's been the most solid car I have ever owned, and the most fun to drive. Lotus doesn't make much money on its cars exactly because they are too cheap. $50,000 for a car that's hand-built in England? The only other cars that are build like that cost 2-3 times more than that (Ferrari, Lamborghini, Bentley, etc...). The biggest difference is that the other companies use their own components, Lotus chooses to use Toyota Engines and Transmissions and bits and pieces from other suppliers to cut costs so that they can still have a handbuilt car, just like B&O chooses to have Samsung displays in their Beovision's that might be built in Denmark.

B&O was Low Volume just like Lotus until recently but they went about it the wrong way. How does Lotus make their money? From consulting work, nearly 85% of all components used in cars today were invented or integrated by Lotus. They tune suspensions for various car-makers, they help them with design, and this consulting work is what makes them their money as they make a loss on most of the cars. B&O could have also done that as they did by licensing out their Class D amplifier technology to many manufacturers. They could have started a consulting branch and tried to make most of their profits off that without lowering their standards and their image.

Imagine if Ferrari suddenly wanted to make a city car and decided to make a Fiat 500 like car to branch out, they would build it in China to save costs and sell it for $30,000, not the $5-10,000 it would cost but $30,000 with the addition of the name and engineering expertise. All of you would be laughing and saying that it's ridiculous, yet nobody is laughing now at the fact that B&O is doing the same! The fact that it's hand assembled by skilled workers like a Ferrari or my Lotus that I am so proud of owning for this fact is yet another thing that attracted me to B&O so much! B&O is not a budget brand just as Ferrari is not a Budget Brand!

bayerische:

People who buy a Vertu is beyond my comprehension... 

A Vertu phone is a little bit more than just "bling bling". In terms of build and component quality there's nearly nothing on the market that you can compare. 

They had a nice little report video on Vertu manufacturing where some Vertu stuff took a Vertu phone, layed it on the floor, entered his car, drove with his car over the phone(!), picked the phone up from the floor and continued the phone call... :) Needless to say that the phone survived without any damage!

You can't do this with 99% of the other phones out there ;) 

The Serene and Serenata, the iPhone and many other phones simply feel like very cheap toys compared to a Vertu. A Vertu phone is built like a tank! Just visit a Vertu shop (e.g. in Cannes (France)) and judge for yourself. 

Dkatz -

I have no wish to get into an argument or debate about what is/isn't a luxury brand, with or without a sub brand.

However, two examples from the guitar world that do, I feel , counter your suggestion that the US brands are not succefully trading at the same time in the high-end, mid market and mass market.

Here - a £7,000 Les Paul.  This is surely a luxury item, by any definition?

http://www.guitarvillage.co.uk/productdetail.aspx?pid=11072&product=Gibson%3aLes+Paul+1959+Reissue+VOS+%28HB341C%29%2c+New%2c+Bourbon+Burst%2c+Inc.+Case

Here - the basic "starter" sub-brand version £369

http://www.guitarvillage.co.uk/productdetail.aspx?pid=7437

Both from the same retailer - for the sake of a valid comparison.

Visually very similar, in fact from about 10 feet I would suggest 95% of the population would not even know which was the better - unlike your Lotus and a Fiat 500 !!

Like the high end audio you mention, there are many other examples I could cite - but you see the point.  The same company sells both guitars through the same retailer - one costing almost 20 times more than the other.

Why ? - its all about aspiration, desire, prestige and kudos.  Both the retailer and the brand are looking for a novice, enthusiastic customer to buy the Epiphone, and if they get better/older/wealthier, as some no doubt will, then hopefully a customer for the top end stuff later on. 

It is not necessary to "sell out" or abandon your high end principles when you run a secondary product line.

With regard to the high end audio - well, before becoming a B&O Dealer Principal of my own B1 shop a fews years back (I am now out of the industry and at university studying Archaeology), I spent my early "audio" years installing high end cartridges (Dynavector, Koetsu, Linn, Van den Hull, etc etc ) into high end tonearms onto some of the worlds best turntables.  I was quite good at it, actually.  I heard a lot of audio back then, and was one of the first installers factory trained by both Linn and Naim to set up their active monoblock systems in the UK.

So I do know a bit about audio.

I would respectfully suggest that B&O has NEVER strived be an audiophile niche supplier like  the McIntosh / Martin Logans of the world.  

You hint at the lack of respect B&O has had in audiophile circles - that is true in the last 25 years or so, but not before then.  Indeed, it could be arued its the audiophiles that changed tack, not B&O.  I know Denmark has always been very proud (and a bit too defensive, imo) about the absolute sound and picture quality they supply, compared to the reactions of critics and audiophile reviewers.  The "style over substance" criticism was often just lazy journalism and ignored the genuine efforts made to supply class-leading audio and video performance that was domestically acceptable whilst outperforming the "multibrand, mass market hoarde - and domestically acceptable by Scandanavian design standards - not hair-shirt, semi industrial "flat earth" audiophile standards.

Whilst firmly aimed at the quality end of the domestic market, for most of B&O's history they have been making a range that could be financially within reach of many people -albeit at a premium often in multiples of four or five over the "multibrand" competitors like Sony/Pana etc.  Not just a shiny toy for the top few earners.

Anyway, thanks for the info about high end clothes and cars - neither of which I have any interest in, or knowledge of.

However if B&O wish to broaden their appeal, which it seems they do-  the need for some sub £100 in-ear upgrades remains - you will find that A8's are now around £125, not £50-70 as you state. 

I know Form 2's are made in Japan - I have two pairs and I like them a lot.

Your point about how Lotus sell their expertise is a fair one - but then B&O do a similar thing when they supply ICEpower as an OEM item, and they supply (or used to) high end aluminium parts to BMW and others.  Also - medicom make some specialised kit for the health industry.

Finally, I am not saying I personally want the cheap products I mentioned - I listed those as the obvious items to include in the Play sub-brand that B&O themselves obvioulsy want to supply.  I do so because I think it is more constructive than simply wishing the Play brand didn't exist, like some here seem to. 

I hope it succeeds.

ps - for the record, I would not use anything Bose make unless I need a new "generic" doorstop at some point - but thanks for the suggestion

Do I want a well built, stylish, reliable and desirable product...................... yes!

None of the above requires it be built in any specific location, nor does it assume that Danish craftsmen are mystically more skilled or capable than any others.

A lot of what has been mentioned on this thread is about being willing to pay more money for exclusivity, not quality. If that floats your boat then fine .......... it's just unilkely we'll ever hit it off should we ever meet in a bar somewhere.

Folkdeejay – Point duly noted and I agree with most of what you say. The guitar industry differs from speaker manufacturers though as there are a few established names with a few product lines... Although B&O isn't audiophile to most audiophiles it is a separate luxury high end manufacturer that focuses on more than just sound quality but design, quality, craftsmanship, etc... This is a completely different direction for them to go... A couple things though is that the headphones, BS8, Beolab 4PC and other such products are NOT in the Beoplay category according to B&O. The only one that is is the new Beolit 12. Also the Beolit's were B&Os pride and joy of Danish manufacture They weren't necessarily just budget radio's but it is part of their heritage more than any other product. Putting it in the play category versus the others which I mentioned is rather funny. People always bought the Beolits exactly because they were the highest quality portable radio's and many still use old ones. In fact I have met some Danish people who don't like B&O because they find it pretentious but love the old Beolit's. I can see however why they would be a product that most B&O users wouldn't buy, although as a heitage product it might have been more wise to produce it in Denmark (I think it's going to be made in China as well if I'm not mistaken). I would take a Beosound 1 any day over a Beolit 12!

Puncher – It's not just about prestige or exclusivity, although many bankers and other people who buy B&O do it for those reasons along with the design. Perhaps those are the people that will care less where the product is made. Denmark is well known for the manufacture of some of the best audio equipment in the world. There are generations of people going through special apprenticeship training schemes learning to assemble this equipment (including B&O), so yes this factors into to quality. If it is made in China it won't have the same apprenticeship schemes or the history of making those products. It's the reason why the best violins are made in Cremona, why Leica and Zeiss German lenses are the sharpest in the world, the list can go on and on. If it really didn't matter as far as quality why would most very high end manufacturers not make everything in China and pocket a huge profit? Most of them don't particularly advertise where their products are made or put “made with pride in Denmark” on their posters and advertising...  

I'm sorry, but for me this thread reeks of snobbery, racism and gross generalisation..

TWG:

bayerische:

People who buy a Vertu is beyond my comprehension... 

A Vertu phone is a little bit more than just "bling bling". In terms of build and component quality there's nearly nothing on the market that you can compare. 

They had a nice little report video on Vertu manufacturing where some Vertu stuff took a Vertu phone, layed it on the floor, entered his car, drove with his car over the phone(!), picked the phone up from the floor and continued the phone call... :) Needless to say that the phone survived without any damage!

You can't do this with 99% of the other phones out there ;) 

The Serene and Serenata, the iPhone and many other phones simply feel like very cheap toys compared to a Vertu. A Vertu phone is built like a tank! Just visit a Vertu shop (e.g. in Cannes (France)) and judge for yourself. 

I've seen a Vertu phone.

Filling something with gold, diamonds and leather isn't making it better.

A golden phone with early to mid 2000 technology isn't any better than a non gold phone with early to mid 2000 technology.

Will a BMW M be a better car if the shell was made from gold? 

What I'm saying is that Vertu is good for one thing. Bragging. Probably the reason why Vertu sell to the "new-rich".

I still can't comprehend the idea of buying a Vertu.

Jonathan:

I'm sorry, but for me this thread reeks of snobbery, racism and gross generalisation..

Maybe a little harsh, like I said before I think B&O need a product that sells to the masses BS8 could just be that!  Its irrevelabt where its made, It just shows how crazy that its cheaper to use chinese labour and ship around the world!  That is the sad part but the market dictates via demand I for one wouldn't be happy to pay £1500 for a ipod dock! 

Well said Puncher!

Puncher:

Do I want a well built, stylish, reliable and desirable product...................... yes!

None of the above requires it be built in any specific location, nor does it assume that Danish craftsmen are mystically more skilled or capable than any others.

A lot of what has been mentioned on this thread is about being willing to pay more money for exclusivity, not quality. If that floats your boat then fine .......... it's just unilkely we'll ever hit it off should we ever meet in a bar somewhere.

Dkatz:

...............people going through special apprenticeship training schemes learning to assemble this equipment (including B&O), so yes this factors into to quality. If it is made in China it won't have the same apprenticeship schemes....................

Many years ago I completed a craft apprenticeship before heading off to study engineering at University. I've since worked in  light engineering/manufacturing for over 25 years and regularly deal with engineers from the UK, US, Germany, Czech and China. I would never presume that I am somehow better skilled or more professional than my Chinese colleagues or that the product from their manufacturing plants is in any way substandard compared to those made in our US or European facilities.

Puncher:

. I would never presume that I am somehow better skilled or more professional than my Chinese colleagues or that the product from their manufacturing plants is in any way substandard compared to those made in our US or European facilities.

Indeed - anyone with an ipad/macbook will know how well made they are - easily on a par with the Danish produced Beocom range.

I am lucky enough to have seen the production line for Beocom 2 in Denmark - it was inspiring to see the aluminium casing go from blank to finished item - and also the care with which the Danes then constructed a phone from the parts (and I now use one everyday at home as a result) but I suspect if I ever saw the line that assembles the aluminium bodied macbooks, I would be just as impressed.

I have to agree that with the exception of some of the real tat -  that is obviously from sweatshops and made from suspect materials in probably very pooorly regulated conditions ....ie the disposable items that fills poundshops (but then every country in the world can produce crap - its easy !!) - I really do not see why it matters where things are made anymore.

The concerns about low pay and poor conditions with workers in penury and entire towns beholdento the factory is valid - to a degree -  although I am aware that in large parts of the world, what the west now consider to be unnaceptable T&C's are actually seen as a route out of poverty for many workers.

It is also true that we in the west seem to have very short memories The UK - and indeed most of the western world - was quite happy to employ millions of people on very similar terms as many emerging markets do now, until very recently.  As I look out of my window this very minute, I can see two big mill chimneys from the cotton mills that employed my grandparents generation.

We were also quite happy to pollute, despoil and generally mistreat the natural resources we had access to, including people, until very recently.

I suggest anyone who doubts just how grim it was (and not just 'up North') reads King Cotton by Thomas Armstrong.

Please note that I am not advocating a race to the bottom - just that there is a little less hubris shown about items made in Denmark, the US, UK Germany etc compared to the emerging markets.

To digress:

Leica and Zeiss  german lenses are the sharpest in the world?

Highly debateable.

Historically,I remember a Mamiyaflex being tested by AP in the 1960s where the reviewer said that the lenses were so sharp,that for portraiture, he had to put a couple of layers of nylon over them to soften the image.

Then we had the Contax SLRs,and their Zeiss lenses,made by Kyocera in Japan,the quality of which was the equal of anything coming out of Germany.

The build quality of my 10 year old Contax N Digital camera is the equal of anything being currently produced today.

I still have Topcon RE Cameras,and lenses,from the 1960s whose mechanical,and optical,quality is superb.

I would not use Optical lenses as a mark of craftmanship - these highly technical products are machine made regardless of where they are produced, although they may be hand assembled. The quality comes from the optical design and the materials used for manufacture, it has nothing to do with long apprenticeships. I think there is a valid argument regarding craft skills in products such as leatherwares, clothes etc, but not in technical products. The quality boost you may perceive when it is produced in Denmark vs China is largely a perception certainly not a reality. China has factories fitted out with the latest technology and production methods. My concern relating to outsourcing is not a quality issue but an economic and social one, where the West largely removes manufacturing from their economies and leaves a large tranche of unemployed people who could easily be making those same products, or beome dependant on service industries which produce nothing.

The latest Leica camera uses a Kodak sensor. My friends Volvo has a Ford platform, and an engine made near Liverpool. The Boeing 737's that i and the other "last of the summer wine" Chris bang around in hardly have anything made by Boeing in them, apart from the shell. Still a Boeing.

China has stealth fighters and a space programme, we don't. 

Chris:

The latest Leica camera uses a Kodak sensor. My friends Volvo has a Ford platform, and an engine made near Liverpool. The Boeing 737's that i and the other "last of the summer wine" Chris bang around in hardly have anything made by Boeing in them, apart from the shell. Still a Boeing.

China has stealth fighters and a space programme, we don't. 

The UK has developed some of the most amazing aircraft and engines.  The Rolls Royce Olympus engines on the Concorde SST was very impressive. That aircraft was an amazing achievement.  The economics never worked out.  The UK does have stealth fighter but its being done with friends.  I think one of the flags on this plane is the Union Jack.

http://4.bp.blogspot.com/_8_4GnCTp578/S6rMcLy7nAI/AAAAAAAABXI/VyONLI2YqVs/s1600/JSF_F35B.jpg

The UK is also a part of European Space Agency.  Wings for the Airbus 380 are made in Wales.  I could go on.

Volvo is now under Chinese ownership and Kodak is petitioning for bankruptcy.

You make my point better than i do. As for the F35 having a Union flag on it, i wear Nike's and it doesn't make me an athlete. Boeing won't even give the RAF the FBW software codes thats how much we are involved but thats just niff naff. 

The brutal truth is that very shortly even some of our premium brand cars will be constructed in China/Vietnam etc, with the West being relelgated to design centres. Not where i want us to be going, but the future and mostly the present.

rmclachlan:

My concern relating to outsourcing is not a quality issue but an economic and social one, where the West largely removes manufacturing from their economies and leaves a large tranche of unemployed people who could easily be making those same products, or beome dependant on service industries which produce nothing

I agree.

But the pursuit for economic advantage will continue - Apple to Brazil for example (I know it was primarily a strategy to overcome tariffs, but none the less) - and at some point we will see Africa as a cheaper labour pool open up.

But in the mean time what are we doing to ourselves, or more importantly our grandchildren ? The world can not consist of designers designing for other designers.

Here in Australia there is currently a debate about the car industry: should it continue to subsidised to survive ? or should get go the way of the footware industry (disappeared 20 years ago) ?

The tourism industry is putting their counter-claim forward - they employ more people and yet get much less support.

One could be a cynic and say that tourism is spread around the electorates ... car manufacturing is very visible and very localised to a few electorates.

This week we saw an Australia icon, a tomamto sauce factory, shut down, because it is cheaper to operate the NZ factory with NZ tomatoes and ship us the "bottles" (probably arrives in a tanker, yuck).