Danish Hi Fi company Bang and Olufsen is under pressure to perform as several leading Hi Fi vendors as well as Companies like Jaemo Apple and Sennheiser grab market share away from them. The Company who prides itself on its stylish design is also coming under pressure in the TV market where it has resorted to buying made in Taiwan LCD screens and tarting them up in B&O livery and then selling them at up to triple the price of similar LCD TV's that come off the same Taiwanese production lines.
It was only 18 months ago that the Danish Hi Fi Company in Australia went from being run by Australians via a licensing arrangement to being run by Danes from Singapore. The move was taken after B&O struggled to get traction in the Australian market with their over priced products. The previous licencee the Smorgen family, who also happen to be one of the richest familes in Australia gave up as they simple could not make money from the brand. Contributing to the problems was the fact that B&O insisted that the brand be sold via their own retail network which while sucking cash to run was not delivering a fast enough turn over.
The Company who prides itself on its stylish design is also coming under pressure in the TV market where it has resorted to buying made in Taiwan LCD screens and tarting them up in B&O livery and then selling them at up to triple the price of similar LCD TV's that come off the same Taiwanese production lines.
It was only 18 months ago that the Danish Hi Fi Company in Australia went from being run by Australians via a licensing arrangement to being run by Danes from Singapore. The move was taken after B&O struggled to get traction in the Australian market with their over priced products. The previous licencee the Smorgen family, who also happen to be one of the richest familes in Australia gave up as they simple could not make money from the brand. Contributing to the problems was the fact that B&O insisted that the brand be sold via their own retail network which while sucking cash to run was not delivering a fast enough turn over.
Un der the Australian management B&O would constantly give consumer electronic journalist's regular updates about their products. They even issued fancy "Preferred Journalist" cards for those seeking information on the Danish Companies products. Now the cards are useless, the PR Company sacked and the B&O hotlines discontinued.
At the same time B&O executives refuse to return calls. During the past few years in both Australia and overseas B&O has struggled to compete. However of late things have started to look up, but for how long no one knows as the high end CE market is starting to see some well designed products emerge that are not only leading edge but edgy in design and looks and are reasonable priced.
In an effort to stay competitive B&O is outsourcing both its design and OEM manufacturing for several products in its portfolio.
Late last year Taiwanese Company Amtran Technology received orders from the Denmark-based Bang & Olufsen for several sizes of LCD TV's with shipments set to kick off by the end of this quarter. The orders placed include 26, 27 and 32-inch LCD TV. These are the same panels that are used in Vizio LCD TV screens. They are also used in Amtran's house brand LCD TV's which are sold in the US market.
By simple adding B&O design to the LCD TV product along with a B&O sound system consumers are being asked to pay literally thousands more for the TV simply because it has B&O stamped on it. The same applies to B&O plasma panels .These are made in Japan and are the same panels that appear in leading Japanese plasma sets at a quarter of the price that B&O charges.
For Bang & Olufsen the problem is that other electronics manufacturers are starting to think like they do. Apple's iPod is a case in point. Bang & Olufsen had already deployed touch-wheel technology in a CD player, and it already had an MP3 player--just not the two together--when Apple unleashed Jonathan Ive's masterwork in 2001.
Products like the iPod, which make available groundbreaking design and technology at mass-market prices, signal a potential threat to Bang & Olufsen, says analyst Peter Nyborg Moltke at Danish investment bank Gudme Raaschou. "The question becomes, Will B&O continuously be able to differentiate in this environment?" Moltke says. "We just don't know." He notes that while B&O's earnings are up by 13%, its top line is still flat.
A telling sign for B&O is that a great deal of B&O's design is now being outsourced.
According to Fast Company Magazine It's a business model that wouldn't work for most companies, even companies that embrace great design. Consider what happened in December 2003, when Sorensen asked that an inch be added to the depth of the BeoVision MX 8000 TV. He wanted to incorporate electronics that would make the set compatible with HDTV standards--a simple enhancement that would have extended its life and preserved its $10 million-a-year cash flow.
Bang & Olufsen's chief designer, David Lewis, cried foul. The alteration would have been an affront, Lewis says now, to one of the elementary principles of design: "Sometimes, it's what's not there that really counts." That is, truly elegant design incorporates top-notch functionality into a simple, uncluttered form.
"I had to negotiate with [Lewis] for three weeks over this one inch," Sorensen says merrily. "Finally, I told him, 'We're only talking $10 million. Forget about it.' "
Think about that: Lewis was unwilling to compromise design, even if that meant walking away from easy revenue. And Sorensen was prepared to accede--even though B&O's sales were down 14% from their peak two years earlier.
The truly amazing thing is, Lewis doesn't even work for Sorensen. The native Londoner heads his own studio in Copenhagen, yet he has controlled design for nearly every B&O product made since the 1980s, from remote controls to the highest-end audio systems. Lewis says it's important to keep some distance from the company so he can present challenging, almost absurd design ideas without regard for internal marketing or engineering issues. "My role," he intones, "is to light a fire under people here, to give them impossible challenges." Amused eyebrows arch up among B&O staffers as he says this, clueing a visitor in to the wild understatement of the remark.
Sometimes, impossible challenges can open up unexpected opportunities. One of Lewis's most famous skirmishes involved the BeoLab 8000, a sleek set of speakers designed in 1991 and still among the company's top sellers. As the speakers headed to production, engineers discovered they couldn't make a flat cap with the polished finish Lewis wanted. Their proposed solution was to substitute a cap with a rounded edge, instead of sharp as the design called for.
True to form, Lewis wouldn't budge. At his insistence, B&O launched an intense research effort into aluminum production, finally coming up with a solution that involved outfitting a cutting tool with natural diamonds. Today, the company is leveraging its newfound aluminum expertise to make specialty auto parts for the likes of BMW and Audi.
Indeed, Bang & Olufsen's problem isn't that Lewis is too demanding or Sorensen too yielding. No, it's that other electronics manufacturers are starting to think like they do.
Tell me what you think of Bang & Olufsen. Are their products overrated. Do they produce good Hi-Fi. Send your emails to dwr@4squaremedia.com
http://www.smarthouse.com.au/TVs_And_Large_Display/Industry/P5V6F4R2?page=1