Anton Hartmann­Qlesen*

Anton Hartmann­Qlesen*

In 1983 Bang & Olufsen, a .small Danish manufacturer of stylish consumer electronics products, had to make a double­or­quits de­

cision. Should it try to penetrate the German market further or get out altogether? If it was to stay in, how was it to gain the market share it needed?

The company's German operation, based in Hamburg, had so far been unable to make much impression on the huge German market. Over the last five years, sales had grown by less than 3 per cent and the financial results were poor. The only way to motivate the dealer base had been a series of expensive special offers: 'this week's special offer', 'buy 1 (i and pay for 8', or 'buy now and. we will offer you terms of payment of 120 days, better than anyone else in the market'.

Relationships with Bang & Olut'sen's 450 dealers were difficult. Bang & Ohifsen's turnover in the individual shops was so small that it did not matter to the dealer. Also, since turnover on the German market accounted for only 3 per cent of Bang & Olufsen's turnover in the Danish parent company, the German market was not significant to Bang & Olufsen either. Several other markets looked more attractive than Germany. The United States, Canada and Japan showed high growth and, due to the high value of the dollar, they also looked very prof­ itable. The question often came up: 'Should Bang & Olufsen concentrate on selling in the most profitable markets and close the German subsidiary? Alternatively, should it re­establish and reposition the brand following a new marketing strategy?'

Until 1983 the company had had little experience of selling outside Denmark. The sales organization looked very professional with sales subsidiaries in the United States, Japan and every country in Europe. However, there were problems beneath the surface. Almost all subsidiaries were acquired as bankrupt agents. These agents could no longer handle the changed distribution systems. Everywhere in Europe there was a shift from specialized, selective radio and TV dealer­network to the very competitive and hard­selling mass distributors. Bang & Olufseu had traditionally used a push strategy that focused on getting retailers to stock Bang & Olufsen's products. Once displayed, the consumers would buy Bang & Olufsen's distinctively designed consumer electronics.

! Horning. l)umn;irk

886 • Overview Case Six: Bang & Olufscn

The international sales organization was large but ill­defined. There was no common communication strategy, no distribution development strategy, no common approach to training and no corporate image strategy. As a result, each country developed its own strategy and they became a series of independent

'kingdoms'. Under New Management

In early 1984 a new management team started analyzing the situation. The new managing director faced several problems, and one of the most serious problems

was on Bang & Olufsen's doorstep. Germany is one of the world's largest markets for consumer electronics and, like Denmark, part of the EU. Rang & Olufscn Germany had to he healthy. But, first of all:

• An overall target market h;id to be defined. Until then each of the subsidiary 'kingdoms' had defined a target group that depended on local preferences and circumstances.

• A new ­marketing strategy needed formulating. The old push orientation was failing and could not resolve Bang & Olufsen's poor position in the market.

• A. new dealer base was needed to increase the quality and profitability of

the operation. • A neu­ organization had to meet the demands t'rom the new marketing

strategy. A move from Hamburg to Munich would signal that Bang & Glut's en Germany was part of the most dynamic, business and growth­oriented section of the country.

The 7 CIC The changes followed t'rom Bang & Olufsen's 7 CIC (Corporate Identity Components)

that defined the corporate culture and the product strategy:

1 . Authenticity. It is the company's aim to make products that guarantee

faithful reproduction of programme material.

2. Autovteuedity. The company's products must provide immediate understanding of their capabilities and manner of operation.

3. Credibility. We must constantly strive towards establishing confidence in

the company, its actions, dealings and products.

4. Domesticity. The products are for use by people in the home. They must: be problem­free and easy to operate ­ even though technically advanced. Technology is for the benefit of people ­ not the reverse.

5. Essentiality. The products must be concept bearing. Design must locus on

the essentials of the eoneept.

6. Individuality. Bang & Ohifsen has elected to be an alternative to the mass­

producing giants of the trade.

7. Inventiveness. Product development and other tasks must be inventive. New approaches to solving practical tasks should characterize the company and

its products. The Consumer Target

So far, in the whole global Bang & OKifsen operation there was no single definition of the target group, but where such definitions did exist they used traditional demographic criteria: age, sex, income, education or geographic location. Experience had proved them to be no longer valid, if they ever had been. Bang &

Olufsen saw the 1990s consumers turning away from indiscriminate consump­ tion. They instead chose a lifestyle and arranged their possessions to fit it with great care. The pan­European soeiocultural ACE research identifies different groups ol' these people. The research divides the European population into ten homogeneous groups. The groups are of equal size, but differ sociologically and culturally.

A diamond­shaped model represents the ten segments (see Exhibit 6.1). This diagram indicates that:

• People close to the top of the diamond are vital and open­minded. They influence society and society influences them.

• People in the bottom groups focus on a secure and stable life. They are passive and will often resist change.

• The groups on the left have strong ethical anchors in life. They feel responsible for themselves and society.

• The groups on the right arc constantly trying to bring pleasure and new experience into their lives.