Evaluation of Herman Millers Strategy - Case Study Example

Brian Walker, CEO ABC November 22, Evaluation of Herman Miller’s Strategy EVALUATION OF HERMAN MILLER’S STRATEGY Mission. The mission statement for Herman Miller is, “Inspiring designs to help people do great things.” Expand Nationally and Internationally. Herman Miller ranks the highest amongst its competitors with respect to return on equity, return on assets and net profit. Thus, it can financially grow and expand its market in both national as well as international level. At present, the company has its wholly owned subsidiaries in Canada, France, Germany, Italy, Japan, Mexico, Australia, Singapore, China and India. The dealers of the company are in England, South America, Central America, Australia, Canada, Europe, Africa and Japan. Further, the company is considered to have highest competitive strength owing to innovativeness and risk taking capacity, effective corporate culture and skilled employees (refer to appendix 4). Innovativeness and producing quality products are of great opportunity for the growth of the company. In order to expand internationally to other countries, the company has faced some challenges in the areas of new product development, customer preferences, dealership license, new tax structure and tariffs of a foreign country (Refer Appendix 1). Thus, in spite of such challenges, if Herman Miller wants to expand, then it should adopt a strategy of ‘international expansion based on innovation’. By following this strategy, the company may be able to serve the needs of the specific foreign market segments with better innovative furniture products (Herman Miller, Inc., “Herman Miller Better World Report, Our Journey towards a Better World”). Increase Merchandise Selection. In order to compete in the foreign market segments, it is necessary to increase the merchandise selection for Herman Miller. Accordingly, the company is required to make the buying experience more attractive to the consumers with the help of better pricing, product display, stores layout and other promotional activities. Thus, it is necessary for the company to select larger merchandise with the assistance of which it can deliver it products at the convenience of the consumers (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Expand on Member Service. The main aim of the company is to provide innovative and supreme quality furniture to the consumers. In addition, the company also focuses on the expansion of member service (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Membership Options. Presently, no membership cards options are provided by the company. Thus, it can create a monthly or yearly based membership cards for its consumers through which different benefits can be provided to them. The membership card option is to be provided to medium and high class people having demand for innovative furniture products. The membership will provide certain benefits that include discount and promotional offers among others. The member card option will improve the goodwill of the company in the market (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Payment Option. Moreover, the company should accept all types of credit cards and debit cards from the customers because in the present contemporary business scenario, global people prefer to make payments through cards rather than cash. The company can also adopt the strategy of online purchase through which it can reach a larger section of a society (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Acquire Hooker Furniture. Hooker Furniture is one of the top competitors of Herman Miller and is regarded as the most admired and reputed home furnishing company in the world. Thus, by acquiring this company, the current market share as well as the geographic territory of Herman Miller would increase. As the acquisition is within the same industry, it will result in the transfer of skill as well as cost sharing. Acquiring Hooker Furniture will not only result in improvement of the current strategy of Herman Miller, but also it will help the company to become an industry leader and grow successfully within this growing industry (Hooker Furniture, “The Company”). RECOMMENDATIONS As the position of Herman Miller is on the top among its competitors with respect to return on equity, net profit, return on assets and high competitive strength, it is possible for the company to make a worldwide international expansion. Though it has expanded in different market segments of Canada, Germany, France, Japan, Mexico, Italy, Singapore, Australia, China and India along with dealers in England, Central America, Australia, South America, Europe, Canada, Africa and Japan, it can also focus on expanding its market to other parts of the world. Moreover, the innovative nature of the company is an additional benefit for its acceptability among different sections of customer. In this regard, it can be recommended that the company should increase the merchandise selection, which can help in reaching a greater section of the market segments (IBM Corporation, “The Value of Smarter Merchandising”). The strategy can be implemented by adopting broad differential strategy in order to attract a large customer base (refer to appendix 3). In addition, products are to be displayed in an attractive way with better layout of stores, so that the products are promoted in an efficient manner. It may also be recommended to adopt the membership service with the assistance of which the company can provide the facility of membership cards through which some benefits may be provided to the customers. Online marketing strategy may also be a beneficial way to expand its market and improve market share (Mongay 1-39). In today’s world, people mainly prefer to purchase their required products from internet, as it has become a convenient way of shopping. Thus, Herman Miller should apply this opportunity in its business. Additionally, Herman Miller is planning to acquire Hooker Furniture, which is one of the closest competitors of the company. It would be a wise decision for the company regarding the acquisition of Hooker Furniture, because by acquiring Hooker Furniture, the market share as well as the geographic territory of Herman Miller will increase. As the acquisition is within the same industry, so transfer of skill and cost sharing will be easy and thus, would benefit Herman Miller (refer to appendix 5). This acquisition will be a competitive advantage for Herman Miller, as the competing firm is a reputed company and the risk of competition will decrease to a certain extent (Herman Miller, Inc., “Annual Report”). EVIDENCE AND ANALYSIS Herman Miller is a US based furniture manufacturing company. The company is considered as the leader in manufacturing office furniture. The company is renowned for producing innovative furniture of various categories. The company has been performing its business operations distinctly on the basis of reinvention along with renewal. Herman Miller has enormous opportunities to expand its market and grow within the industry for adopting innovation. In this context, the discussion in this report has been regarding Herman Miller’s strategy, its competitive position and its recent moves. There are certain strategies that should be taken by the company in order to expand its market share (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Herman Miller is considered as the leader in manufacturing office furniture of innovative designs. The company has established its market in different parts of the world and it has become possible due to the strategies and values adopted by the organization. The company aims at manufacturing products, which will not affect the environment as the materials used are all environment friendly. The company is loyal to its employees, which have a long term positive impact for creating organizational values and loyalty of employees. Considering the satisfaction of the employees, the company has established a safety program i.e. Behavioral Based Safety program for the employees in order to decrease the on-the-job accidents. Through this program, the employees are educated and trained regarding preventive measures that may be taken in case of on-the-job accidents (ProAct Safety, “Lean Behavior Based Safety”). For the company, human resource is considered as an important strength based on which the employees are always given the highest preferences. The employees are provided with a decent pay and the pay structure depends on the performance of the company. Numerous benefits are offered to the employees for their satisfaction. The benefits may include health insurance to the employees, dental insurance, prescription plans, vision care plans, disability insurance, health services, gym memberships, flexible working schedule and many more. All these benefits may influence the employees to be dedicated towards the company and thus, it will help in the effective organizational growth. Moreover, Herman Miller is identified to possess a strong management, which helps the company to reach its potential for better accomplishment of organizational objectives. The company also follows the strategy of working on a cross functional basis. According to this strategy, all the members of the company work together as a team, which assist the team to perform in a more efficient way (Mealiea and Baltazar 141-161). The team members are re-allocated to new projects as soon as the manufacturing of a product is completed. The employees are facilitated with the opportunity of participating in the decision making process and can come up with their new ideas, which may result in the overall benefit of the company. The company also follows an effective marketing strategy that helps to build market sustainability and perform competitively. The innovativeness in the manufacturing process is one of the greatest strengths of Herman Miller. Herman Miller is recognized to have manufacturing units as well as dealers and customer base on a global context. The company also follows the strategy of green marketing because of which the products manufactured are eco-friendly and thus, the environment is affected to a minimum extent. This strategy makes the company different from other competitors in terms of social responsibility measures and environment consciousness (Experian Information Solutions. Inc, “Create an Effective Green Marketing Strategy”). The company is also following the strategy of cooperative advertising with the strategic partners with the aim of promoting their products in a more efficient way and to a larger customer base. Herman Miller is using a system of lean manufacturing technique, which is recognized as Herman Miller Performance System (HMPS). The company with the assistance of the system is able to ensure that business operations are conducted in an efficient and cost effective manner. In addition, the company is also able to manage inventory with better effectiveness, so that the amount of inventory in hand is minimized with the use of the process of Just-in-time. The company has developed a marketing strategy by which it can limit the production related fixed cost by outsourcing component parts from the strategic suppliers (Kennerley and Neely 213-229). With the help of this strategy, the variable nature of the cost structure is possible to increase while retaining proprietary control over the production process. This strategy is also considered as a competitive advantage for the company to expand business operations with the strategy of acquisition (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). STRATEGIC AND FINANCIAL GOALS AND OBJECTIVES Strategic Goals. Herman Miller has adopted the strategy of manufacturing premium quality products with the help of environment friendly process. Thus, the strategic goals of Herman Miller are to provide premium quality innovative designed furniture to the customer of eco-friendly nature and expand their market worldwide (American College Personnel Association, “Strategic Planning Priorities”). Financial Goals. Herman Miller has adopted the financial strategy of reducing the fixed cost related to production by outsourcing their components to the strategic suppliers. Thus, the company has the financial goal of reducing the variable nature of the cost structure which can help in maximizing the overall profit of the company (The Kiplinger Washington Editors, “How to Set Financial Goals”). HERMAN MILLER’S STRATEGY (refer to appendix 6) The main strategy of Herman Miller is to design innovative products with consideration for their environmental impact. The company is mainly focused on applying environment friendly materials and process for manufacturing their products. The raw materials used are mainly from recycled sources and thus, it affects the environment to a minimum extent. There are other strategies adopted by the company that mainly emphasized the benefit of the employees. The company has launched ‘Behavioral Based Safety’ program in the year 2006 with the help of which there has been a reduction of on-the-job injuries to about 40 percent a year. The program deals with reduction of all kinds of accidents on-the-job by interacting and coaching the members of the company. The employees are trained to observe on-the-job behaviors and finally a feedback is asked from them and according to that feedback, it is decided whether the behavior should be supported or sustained. It is believed that by adopting this strategy, injuries to the workers and employees can be minimized. Moreover, the company has adopted a new strategy known as “Earthright”. This strategy has three guiding principles which include positive transparency, considering the products as living things and greener together (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Management Strategy. The management team of Herman Miller works on cross functional basis, which means that employees from different levels of the organization work together as a team. According to the employee’s contribution for the team, the membership is determined. The teams in Herman Miller are all based on the development of products. In this context, when the product manufacturing is completed, the members are re-allocated with a new task that may originate from different organizational levels. The company uses the idea of “taking up and down the ladder” practice of leadership through which the workers from different level are allowed to come up with their new ideas (Leatherman 57-109). Further, the company has developed Employee Gifts Committee and Environmental Quality Action team with the intention of strengthening the beliefs and values of the company. The function of the Employee Gifts Committee is to distribute funds and the necessary resources that may help in improving the motivation level of the employees. The company follows the strategy of giving more importance to the employees of the organization. The employees of Herman Miller are also provided with an opportunity to work with any charitable organization on the basis of their choice for sixteen paid hours in a year. The goals are set regarding the volunteer hours that are to be annually contributed by the employees and finally, the CEO is being reported regarding the progress of achieving the goals. Whereas, the function of Environmental Affairs team is to involve in activities that include solid waste recycling and designing their products by making use of sustainable form of resources. The success of the teams depend on reducing the solid waste that were taken for landfills, as in this respect, the company can perform operations in a cost effective as well as environment-friendly manner (Herman Miller, Inc., “Annual Report”). Marketing Strategy. Herman Miller adopted an effective marketing strategy that led the company to achieve the goal. The company has a good international market throughout the world and the products are sold in different countries that include China, Australia, Canada, France, India, Italy, Germany, Singapore, Netherland, Japan and Mexico. Herman Miller has its customers in various countries where the customers are able to have the products from independent dealers. The company is also following the strategy of green marketing for selling its products. Green marketing refers to the manufacturing of the products with the help of environment friendly process which includes the use of non-renewable sources of energy and recycled raw materials (Experian Information Solutions. Inc, “Create an Effective Green Marketing Strategy”). In this respect, the company is identified to provide eco-friendly products. Moreover, in order to promote the products, Herman Miller has adopted the strategy of cooperative advertising (Herman Miller, Inc., “Annual Report”). Operations Strategy. The manufacturing operations of Herman Miller are identified to be positioned on a worldwide basis. The manufacturing operations in the US are located in Georgia, Wisconsin and Michigan. Similarly, the manufacturing operations in European countries are conducted in the UK, which is one of the largest markets. In Asia, the manufacturing units are located in Ningbo, China. A system of lean manufacturing technique is used by Herman Miller, which is known as Herman Miller Performance System (HMPS). The company with the assistance of HMPS is able to maintain operational efficiency and cost by reducing inventory level in hand on the basis of Just-In-Time (JIT) process (Boundless, “Just-In-Time Technique”). Herman Miller production facilities procure required parts from suppliers for around five or six times a day. The production depends on the priority of order and the raw materials are purchased from the suppliers accordingly. The main aim of Herman Miller’s manufacturing strategy is to minimize the production related fixed cost and this has been possible by outsourcing the required parts from the suppliers. In this context, the company is able to increase the variability of the cost structure while retaining proprietary control over the production process. Thus, this strategy is believed to provide a competitive advantage for the organization (Herman Miller, Inc., “Annual Report”). Human Resource Strategy. Human resource management is considered as one of the greatest strengths of Herman Miller. The company practices the policy of “Business as Usual”. According to the policy, the outcome results are positive in any situation. The employees of the company are conveyed with every information for the active participation of the employees during good and tough times. The pay structure is determined according to the performance of the firm. The employees are provided with a base pay. Additionally, the employees are offered with a profit sharing program based on which the employees are allocated stocks depending on the annual financial performance of the company. Moreover, a retirement income plan is provided to the employees. In accordance with the plan, the company deposits in every employee’s account around four percent of the compensation offered to the employee. Accordingly, the employees are paid with interest on a quarterly basis. The employees are also offered with annual bonus on the basis of company’s performances (Herman Miller, Inc., “Annual Report”). In this respect, the employees of an organization provided with standard benefits that include health insurance, flexible spending accounts, vision care plans, dental insurance, critical illness care, prescription plans and short as well as long term disability insurance. Wellness benefits comprising health risk assessments, health services, wellness programs and gym memberships among others is able to retain employees and raise their loyalty level (Pinnamaneni, Xu and Findley, “Strategic Human Resource Management”). Financial Strategy. The financial management at Herman Miller is identified to be conservative. In the year 2006, Herman Miller had a time-interest earned ratio was twice the industry average, but the leverage ratio is recognized to be below industry average. At the time of recession, the debt to equity ratio has been identified to rise from 1.18 in 2006 to 47.66 in 2008. In this regard, the company has been recognized to sale three million and more stocks in the year 2009. Additionally, dividends per share and capital expenditures have been reduced by 70 percent and zero respectively in order to improve the short term assets. The company has been identified to make adequate investments in research and development (Herman Miller, Inc., “Annual Report”). The financial strategy of the company is effective owing to which it has been able to conduct operations in a financial stable manner (Pavlicek 1-3). INDUSTRY CHARACTERSTICS Market Growth. The strategic plan of Herman Miller is focused on achieving the growth targets in primary markets, adjacent markets and developing economies (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Competitors. One of the closest competitors of Herman Miller is the Hooker Furniture. Other competitors are Kimball International, Steelcase, HNI Corporation, Knoll and Haworth (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Product Characteristics. The products offered by Herman Miller are of premium quality and are manufactured using environment friendly materials. The company offers a wide variety of office furniture with innovative technologies and designs, which make their product different from other manufacturers (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Customer Demographics. The products are mainly targeted to the people who want innovative designed furniture of premium quality for their home and office (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). Industry Profitability. Herman Miller is a 1.3 billion dollar company. For the year 2012, the consolidated net sale of the company was estimated to be $1724.1million, which was considered as an increase in 4.5 percent than the previous year (Herman Miller, Inc., “Herman Miller Inc. In 2012: An Ongoing Case Of Reinvention And Renewal”). DRIVERS OF INDUSTRY CHANGE Increasing Globalization. As a result of increasing globalization, Herman Miller will be benefited to increase their market share which will ultimately result in the increase in profitability if it is implemented in a proper manner (Invensys Systems, Inc, “Five Key Industrial Driving Forces”). Emerging in New Internet Capabilities. The emergence of various internet capabilities like M-commerce and E-commerce has led the customers to purchase their required products online rather than going to market or shopping malls. Thus, internet has made possible the company to sell their products online and increase their market share (Invensys Systems, Inc, “Five Key Industrial Driving Forces”). Changes in Cost and Efficiency. If the company charges low price for the products, the demand for the product will increase and as a result more products will be sold resulting in the increase in profitability (Invensys Systems, Inc, “Five Key Industrial Driving Forces”). Changing Social Concerns, Attitudes and Lifestyles. Herman Miller produces products by focusing on the environmental concerns and thus it follows eco-friendly process in the process of manufacturing. This will attract more consumers towards the company and thus, the market share also increases (Invensys Systems, Inc, “Five Key Industrial Driving Forces”). SWOT ANALYSIS OF HERMAN MILLER Strength. Herman Miller is loyal to its employees, which will have a long term positive impact for creating values for the organization. Innovativeness in the manufacturing process is one of the greatest strengths of Herman Miller. The products manufactured by the company are environment friendly, which has added value to the organization. Moreover, Herman Miller has a strong management, which helped the company to reach its potential. It has a strong brand name, which is considered as a major strength. This enables the company to charge a higher price for the product, as it creates an additional value to the company (Refer Appendix 2). Customer loyalty is also considered as a major strength (Herman Miller, Inc., “Annual Report”). Weakness. The change in the market scenario and change in trends of the market may affect the growth of Herman Miller. Therefore, the company is required to focus on the issue to overcome the situation. The cost structure of the company is considered as one of the major weaknesses. The pricing of the products is higher as compared to competitors and hence, it has a weak cost structure (Herman Miller, Inc., “Annual Report”). Opportunities. The financial leverage of Herman Miller is considered as one of the greatest opportunities. In order to expand the markets and products easily, it is necessary for the company to leverage the balance sheet. Online marketing of their products is also a great opportunity to expand their business. It can approach to a larger segment of the society and thus, can maximize its sale and earn more profit. The emerging markets in different countries are an opportunity for the company to expand their markets in different regions of the world. Introducing new products can help the company to expand their market as well as the range of customers (Refer Appendix 2) (Herman Miller, Inc., “Annual Report”). Threats. High competition in the market can result in lowering the profit of Herman Miller, because the competing firms can come up with superior products and attract customers towards them. Undeveloped economy may also be a threat for the growth of the company. The number of potential customers may be decreased as a result of the undeveloped economy. Political conditions may also be a threat to the company and may increase the amount of risk taken by the company. The government can change the rules of the company, which may negatively influence Herman Miller in performing its business operations successfully. Finally, the availability of substitute goods at low price may prevent the company from charging high price or increase the price of the products, as the customers will move to the products, which are available at economical price (Herman Miller, Inc., “Annual Report”). COMPETITIVE ADVANTAGE FOR HERMAN MILLER The innovative nature of Herman Miller is a major key to success. The main competitive advantage of the company emerges from its ability of providing a problem solving design for the workplace. The company peruses detailed research of new products, development and design, which are assisted by the engineers and other third party designers. The result can be reflected in one of its product named ‘Aeron’ chair, which is considered as an important success in the history of the company. The company is also focused on acquisition of other companies. One of the major competitive advantages of Herman Miller is that the employees of the organization are provided with numerous benefits for employee satisfaction. These benefits includes flexibility in the working hours of the job, medical insurance, employee assistance programs, prescription plans, gym memberships, disability insurance and many more benefits. All these benefits address to the employee satisfaction and are different from the benefits provided by the competing firms and thus, it creates a competitive advantage for Herman Miller (Refer Appendix 1). It has recently purchased a Hong Kong based company named Sun Hing POSH Holdings in 2012 limited, which is also a distributor of office furniture. This acquisition has helped Herman to extend its territory to Chinese markets. At present, it is planning to acquire Hooker Furniture, which is one of the closest competitors of the company. The company has maintained a cash reserve ratio of 1.5 to 2.0 and a debt-to-equity ratio of 0.85 (Herman Miller, Inc., “Annual Report”). Works Cited “Just-In-Time Technique.” Boundless. 2014. Web. 22 Nov. 2014. “Strategic Planning Priorities.” College Personnel Association. 2014. Web. 22 Nov. 2014. “Create an Effective Green Marketing Strategy.” Experian Information Solutions, Inc. 2014. Web. 22 Nov. 2014. “Annual Report.” Herman Miller, Inc. 2012. 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Mongay, Jorge. “Strategic Marketing. A literature review on definitions, concepts and boundaries.” MPRA Paper No. 41840 (2006): 1-39. Print. “Lean Behavior Based Safety.” Proact Safety. 2014. Web. 22 Nov. 2014. Pavlicek, Jaroslav. “Corporate Financial Strategy in SMEs.” Proceedings of the World Congress on Engineering 2009 2 (2009): 1-3. Print. Pinnamaneni, Neelima, Daliang Xu and Henry Findley. Strategic Human Resource Management. 2003. 22 Nov. 2014. “How to Set Financial Goals.” The Kiplinger Washington Editors. 2014. Web. 22 Nov. 2014. APPENDIX 1. Strategy Diamond. 2. Five Forces of Industry Competitors. 3. Herman Miller’s Business Level Strategy 4. Strategies for Competing Internationally FORCES FOR GLOBAL INTEGRATION Market Drivers. Foreign markets are also seeking premium quality products Cost Drivers. Huge international competition Government Drivers. Rules and regulations, taxes and permits FORCES FOR NATIONAL RESPONSIVENESS Customer preferences across markets. This may include the taste of the customers 5. Merger and Acquisitions: Hooker Furniture Satisfied the following strategic objectives: Expansions of Herman Miller’s market reach as well as the geographical expansion of the company. Evaluation of merger: Attractiveness test: PASS The industry is highly attractive. The better-off test: PASS R&D and Technology: S/T Procurement: S/T Inbound Logistics: S/T & C/S Operations: S/T Distributions: S/T & C/S Service: S/T Skill Transfer = S/T Cost Sharing = C/S As the acquisition of both the firms is within the same industry, this will result in the skill transfer and cost sharing among them for better competitive business performance. 6. Value Chain Analysis of Herman Miller Read More