General Forum

Re: "Making technology work for you"

saf — Mon, 21 Jan 2008 14:39:50 GMT

Mr10Percent:

Finally, I know this is a subject of good debate and that we all have our own opinions, but I think we should give B&O a little more credit than we currently do in terms of their business savvy. I think they have a lot more information to hand than we armchair enthusiasts and that they (B&O) are capable of making educated business decisions based on the data. I don’t think they are missing the obvious.
10%

Personally, I like this remark ...

Edit: OK, that said, I believe the biggest reserve B&O have is in the sales & marketing function: (don't stone me but) I believe enough of their products are fairly attractive to find enough buyers - despite the fast moving technology challenges they no doubt are facing. Frankly, I'm generally not impressed by the dealers ability to make use of consumer - and potential customer - data available. Available with just a little bit of effort, not neccessarily costing money. HQ should (be able to) help them with this, though. Then again, isn't this the challenge that many (if not most companies) face: the right sales organisation? I guess it boils down to finding and motivating the right people ...

Re: "Making technology work for you"

355f — Mon, 21 Jan 2008 14:35:57 GMT

mobeyone:

Another thing to add is that in terms of growth, has B&O reached a plateau? can it really create more avenues for revenue in what could be a shrinking market if consumer confidence is as many believe on a downward spiral? is it wise for a company the size of B&O to be investing at this moment in time?
Personally, I think B&O are preparing themselves for the proverbial hitting the fan.... watch out for more changes on the back of the end of year figures and possibly a drastic change in direction... I would imagine that they pay for the best advisers and in terms of where the company could have gone with products like serenata and the new mp3 player.. maybe this short lived phase/flirtation with "keeping up with the Jones's" has come to an abrupt end?
Back to basics anyone?

spot on!

Re: "Making technology work for you"

mobeyone — Mon, 21 Jan 2008 14:13:11 GMT

Another thing to add is that in terms of growth, has B&O reached a plateau? can it really create more avenues for revenue in what could be a shrinking market if consumer confidence is as many believe on a downward spiral? is it wise for a company the size of B&O to be investing at this moment in time?

Personally, I think B&O are preparing themselves for the proverbial hitting the fan.... watch out for more changes on the back of the end of year figures and possibly a drastic change in direction... I would imagine that they pay for the best advisers and in terms of where the company could have gone with products like serenata and the new mp3 player.. maybe this short lived phase/flirtation with "keeping up with the Jones's" has come to an abrupt end?

Back to basics anyone?

Re: "Making technology work for you"

355f — Mon, 21 Jan 2008 12:21:37 GMT

I dont think its a question of doubting the business savvy of BnO at all.

I suppose one could argue that the ones most likely to offer the better solution are those that are not directly involved in it- this is the case with many business transformations that have taken place in the past. When a busienss model has been effective in the past its very difficult to bring about wholescale changes to return the operation to previous success.

Isnt it the case that all FTSE companies for example have more information about their business than an 'armchair enthusiast' and are capable of making educted business decisions and dont miss the obvious? and yet they go bust, merge ect.

Re: "Making technology work for you"

Mr10Percent — Mon, 21 Jan 2008 12:07:27 GMT

Dave:
If they actually wanted to bring the prices down, all they need to do is take out a wager, and lower prices and watch production demand increase,

Errr - No! Unfortunately, boards and shareholders don’t like betting with their own money.

I believe that it is not a simple fix just to simply lower prices. Nor is it a corner they have purposely painted themselves into. Volumes may go up slightly (to the plants capacity), but revenues will tumble. If B&O could knock say £2,000 of the price of a BV7-40 (and assume an equal percentage reduction in original margin AND original cost on an assumed original margin of say 45% or £3,780), they will have to sell 30% more TV’s to make the same quantity of profit.

Question is, given their manufacturing scale, can they:

a) actually increase capacity by 30% without expanding the plant?

b) can they actually realise a 24% cut in component costs (implied in the calculation above)? I think not.

c) will there be sufficient new customers who will be captured under the normal-distribution curve once the prices are cut by £2K. Or is it simply still too much of an expensive TV for the masses?

Finally, I know this is a subject of good debate and that we all have our own opinions, but I think we should give B&O a little more credit than we currently do in terms of their business savvy. I think they have a lot more information to hand than we armchair enthusiasts and that they (B&O) are capable of making educated business decisions based on the data. I don’t think they are missing the obvious.

10%

Re: "Making technology work for you"

355f — Mon, 21 Jan 2008 09:57:49 GMT

For the cost structure, there was an interview with Torben where he mentioned that they make a much higher margin towards the end f the cycle of a product. Might have to do with lower part cost but also could be volume. QUOTE

Well of course it will be!

One anticipates that the life of the product in the range will be say 7 years, so its priced accordingly to amortise the tooling over say 5 years. Now if you increase the price every year( as BnO do) and pay less every year for the electronics ( as BnO do- and a good deal less) then you have the formula for huge profits nearing the end of the product cycle

If your 'lucky' with products like the BnO evergreens and one does not make any efforts to improve the specification its a good busienss model to have- until the cycle comes to an end. Then one ends up with high prices, an incomplete, technically lacking range- maybe where BnO are now come to think of it!

Onto the BS3 - its agood product but i think dealers asking for even higher prices on it is a myth- if its true I bet they are sorry they voted for such an increase now!

Re: "Making technology work for you"

jk1002 — Mon, 21 Jan 2008 09:47:15 GMT

I might be off on the MTV cribs thing. I do look for the BV screens though in these media rooms. Nothing. I guess I don't watch this as often as I should ;0)

>> but i'm aware that there are SO may other variables affecting price... aren't there?<,

Well for BS3 and BL4, didn't the dealer complain that the pricing was too low. So they could afford it I guess.

I don't think the assembly of the product is so expensive, I think the fine tuning and QA where they do it is.

There is still no good explanation why B&O doesn't behave like the other ultra luxury brands in a recession. Unless they are no ultra luxury and then they shouldn't do stunts like they did with BL4 and BS3 where if I recall correct they increased prices based on dealer request.

Re: "Making technology work for you"

355f — Mon, 21 Jan 2008 09:10:58 GMT

Mr10Percent:

I was once told by my dealer, that the total number of B&O products (major products i.e. TV’s, audio systems and loudspeakers) was circa 15,000 units per year for the entire UK.
If one could assume the UK constitutes say 10% of the world market of say a guestimated 150,000 units, one can realise that B&O probably makes no more than 150 TV’s, 150 audio products and 150 pairs of loudspeakers per day. Spread that over a lot of models:- There’s 3 to 4 different TV’s (of any meaning “volume” out of the dozen or so models. 3 or 4 audio products, 10 to 12 loudspeaker sets etc.
B&O is not a large volume producer by any sense. A large cottage producer. It probably makes only 50 BV7-40s and 50 BV7-32s per day absolute tops. BV9 is probably no more than a dozen a week! It therefore leads that electronics and components built to B&O specs for B&O are not going to be at the same price level as a similar component made by Sony on a 1000 to 5000 unit a day run. In fact they are probably going to be at almost individual consumer price per component once design, production design, tooling etc.. are all taken into account.
Thus re-aligning there price structure would not necessarily work;
a) they don’t have the capacity unless they build in the Far-East and none of us want that do we? What capacity do they capitalise? 10 fold increase in capacity?, 100 fold? Which lines – TVs, Audio, loudspeaker, all of them?
b) They would not be able to shave sufficient enough margin out of bulk-order component ordering. I doubt the return on investment would pay unless they changed the whole ethos of the company to a mass manufacturer. Then they are like Sony et al – unprofitable.
c) I suspect TBS’s business plan for expansion centred on introducing a wider range of smaller less expensive products (mobiles, MP3 players etc) where they really can make greater margins. They probably don’t make that much on a BV9 despite its high cost. That strategy has been blown out of the water with this years results as they cant keep the costs and one-off introduction costs down.
In terms of marketing and manufacture, I think they are in a pretty difficult situation. They are neither a true luxury brand nor an mainstream electronics company per se. They are somewhere in the middle of the two and that may not necessarily be a good business thing.
10%

We must remember that B&O has one of the highest gross margins of any consumer electronics company, the profits they make on a BV9 or BV4 make others in the industry weep - low volume of not.

The mobile/MP3 market is simply the toughest out there in terms of price and quality- very difficult to make money in that market especially as the cost of memory is very volatile.

Why not accept that some products should be built in the far east, allowing the profits to develop more high tech solutions and bring them to market sooner and the 'introduction costs are at least 60% less.

Whilst there is reluctance by many for such a move, I know of many factories that would produce a better product and better finishing than some of the items we have in the lower end BnO range now. The issue for the future is will they ever manage to amortise the tooling given the decreasing shelf life of product?

I rather suspect that the policy was to charge ever increasoing prices for items that are up to 17 years old, like the bl8000, bs9000, bl6000 -the list goes on- and most dealers have survived on these products. Clearly its that policy which no longer works as there is nothing in the present range that has the longevity appeal.

BnO are going to have to come up with a plan for long term survival in this business , I rather suspect that the drop in sales shown on the accounts is in fact a lagging indicator of the true position which is far far worse. The introduction of new products last year which all dealers are commited to buy changes the true position.

Re: "Making technology work for you"

Dave — Mon, 21 Jan 2008 07:51:09 GMT

Mr10Percent:
I was once told by my dealer, that the total number of B&O products (major products i.e. TV’s, audio systems and loudspeakers) was circa 15,000 units per year for the entire UK.

If one could assume the UK constitutes say 10% of the world market of say a guestimated 150,000 units, one can realise that B&O probably makes no more than 150 TV’s, 150 audio products and 150 pairs of loudspeakers per day. Spread that over a lot of models:- There’s 3 to 4 different TV’s (of any meaning “volume” out of the dozen or so models. 3 or 4 audio products, 10 to 12 loudspeaker sets etc.

B&O is not a large volume producer by any sense. A large cottage producer. It probably makes only 50 BV7-40s and 50 BV7-32s per day absolute tops. BV9 is probably no more than a dozen a week! It therefore leads that electronics and components built to B&O specs for B&O are not going to be at the same price level as a similar component made by Sony on a 1000 to 5000 unit a day run. In fact they are probably going to be at almost individual consumer price per component once design, production design, tooling etc.. are all taken into account.

Thus re-aligning there price structure would not necessarily work;

a) they don’t have the capacity unless they build in the Far-East and none of us want that do we? What capacity do they capitalise? 10 fold increase in capacity?, 100 fold? Which lines – TVs, Audio, loudspeaker, all of them?

b) They would not be able to shave sufficient enough margin out of bulk-order component ordering. I doubt the return on investment would pay unless they changed the whole ethos of the company to a mass manufacturer. Then they are like Sony et al – unprofitable.

c) I suspect TBS’s business plan for expansion centred on introducing a wider range of smaller less expensive products (mobiles, MP3 players etc) where they really can make greater margins. They probably don’t make that much on a BV9 despite its high cost. That strategy has been blown out of the water with this years results as they cant keep the costs and one-off introduction costs down.

In terms of marketing and manufacture, I think they are in a pretty difficult situation. They are neither a true luxury brand nor an mainstream electronics company per se. They are somewhere in the middle of the two and that may not necessarily be a good business thing.

10%

If they actually wanted to bring the prices down, all they need to do is take out a wager, and lower prices and watch production demand increase, whist the manufacturing becomes cheaper with the volumes, it will balance out, they have gotten themselves caught in a vicious cycle. They have to put the prices up because demand is low, but demand will lower further as prices become more irrational.

Sorry i wrote this as though i know what i'm talking about, this is simply an inference on my part, but i'm aware that there are SO may other variables affecting price... aren't there?

Re: "Making technology work for you"

Stars — Mon, 21 Jan 2008 06:07:43 GMT

Yeah I couldn't agree more Mobe, but generally European design is better than it is in the States. A good example of this is the difference in design between European cars and American cars. European design is also a great deal more subtle than some US designs.

Re: "Making technology work for you"

mobeyone — Mon, 21 Jan 2008 06:01:40 GMT

Henry:
Are you are you kidding JK? I've seen B&O in many homes shown on MTV Cribs! I feel a bit glum when I see B&O in the most vulgar house of some US rapper on that TV show. Don't think 50 Cent had any B&O though.

Same here Henry! 50 Cents house was amazing but have you seen Dallas Austins home? He had a pair of Pentas recessed into a wall and I think its by far the best house which has been shown to date on MTV.

Dont know why but the homes stateside are all way OTT and kind of tacky in a way.. never been one for "bling bling"

Going back to the original question... +1 for cheap. B&O have never really had to push hard for advertising but I have noticed adverts popping up everywhere.. Sky news being the last....

Re: "Making technology work for you"

mobeyone — Mon, 21 Jan 2008 05:57:25 GMT

jk1002:
Not sure how many watch that, but I never ever saw B&O on MTV Cribs.

There are a handfull of houses that have some form of B&O, Stan Collymore, Roberto DiMatteo, Mel B are ones that come to mind but sure there are more.

Re: "Making technology work for you"

Stars — Mon, 21 Jan 2008 05:55:34 GMT

jk1002:

Not sure how many watch that, but I never ever saw B&O on MTV Cribs. But plenty of Bentleys and Ferraris.

Who are you kidding JK? I've seen B&O in many homes shown on MTV Cribs! I feel a bit glum when I see B&O in the most vulgar house of some US rapper on that TV show. Don't think 50 Cent had any B&O though.

Re: "Making technology work for you"

Mr10Percent — Mon, 21 Jan 2008 05:22:33 GMT

30 TVs a day or 150TVs a day - Im guessing and probably on the high-side but its not a lot of TVs and yes, they are probably all hand built. It is not however going to be 250 or 500 or 1000 TVs a day.

And the point is, is that the number is sufficineltly low that unit purchase cost of the components is going to be more or less the same whether its 30 or 150. (Im thinking PCBs, panels etc... are going to be bespoke batch ordering etc -i.e. just plain expensive).

10%

Re: "Making technology work for you"

moxxey — Mon, 21 Jan 2008 04:30:14 GMT

Mr10Percent:

If one could assume the UK constitutes say 10% of the world market of say a guestimated 150,000 units, one can realise that B&O probably makes no more than 150 TV’s

That's a hell of a lot of hand built TVs. I can't believe you say 'no more than..'. That's far more than I had expected. Indeed, I was told a few years ago that they only made a 'handful' of TVs per day! By 'handful', I estimated <30/day.