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A Strategic Analysis Of
Herman Miller
Matt Zellars
CBAD 478-‐ Strategic Management
Dr. Keels
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Table of Contents
APPLE Analysis…………………………………………………pg. 3-‐12 External Analysis……………………………………………...pg. 13-‐17 Internal Analysis………………………………………………pg. 18-‐20 Analytical Conclusions & Summary…………………..pg. 21-‐22 Plan of Action……………………………………………………pg. 23-‐26 References………………………………………………………..pg. 27-‐28 Appendices……………………………………………………….pg. 29-‐59
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Apple Analysis
Introduction
Herman Miller Inc. is commonly referred to as simply Herman Miller. Founded in
1923, Herman Miller Furniture Company was created by D.J. De Pree after buying the
Michigan Star Furniture Company with a loan from his father-‐in-‐law, Herman Miller. The
firm is a leader in the furniture industry (primarily office furniture). The firm designs,
manufactures, and distributes innovative products for use in residential, office, and
educational settings. This firm operates primarily in the Wood Office Furniture
Manufacturing industry under the NAICS code 337211. While Herman Miller has steadily
increased its performance in recent years, the problem in this case questions whether
Herman Miller will be able to continue to use its innovative product strategies amidst
uncertain economic conditions for long-‐term growth.
Areas of Operation
Key Activities/Products/Services
Herman Miller provides its furniture product and solutions to many different
industries including: home/residential, small and medium businesses, healthcare,
education, and government. Its product mix includes: seating, workspaces, tables, storage,
healing spaces, and accessories. The firm operates globally providing its products and
solutions to over 100 countries on all major continents through its extensive operation,
sales, dealer, and manufacturing facilities. In addition to its own facilities, Herman Miller
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has many subsidiaries in which it owns 100%. The geographic spread of its subsidiaries
gives the firm a unique ability to reach many different segments.
See Appendix 1: Subsidiaries
Key Value Chain Activities/ Vertical Integration
Herman Miller has a large amount of critical value chain activities. Operating on an
international level, the firm’s key value chain activities are design, manufacturing,
distribution, and sales. Manufacturing facilities are located within the United States, United
Kingdom, and China. Herman Miller does not have one single location dedicated to a single
function. All properties owned or leased by the company support multiple functions
including: manufacturing, distribution, warehouse, office space, and design. In addition to
the major facilities, Herman Miller also has showrooms and sales offices near major
metropolitan areas throughout North & Latin America, Asia, and Europe. The companies
owned facilities make up 2,636,600 square feet of space, and leased properties make up
574,500 square feet. The companies largest facility is in Holland, Michigan at 917,400
square feet and supports all the companies key value chain activities (Securities and
Exchange Commission, 2013).
See Appendix 2: Key Value Chain Activities
Based on Herman Miller’s key value chain activities, the firm is very well vertically
integrated. The firm has ownership of a variety of subsidiaries that provide a great deal of
inputs that are required for the manufacturing of products. Owning these subsidiaries
greatly reduces that cost to produce the products and helps make the process more
efficient. The company uses its subsidiaries to provide key components of products, which
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reduces manufacturing closer to simply assembling products. This ultimately results in the
forward integration of the firm.
Evolutionary Learning/Adjustments & Vehicles Used
See Appendix 3: Timeline/Key Milestones
Herman has gained a presence in the international market from its major
milestones. The firm has positioned itself first by establishing dealers throughout South
America and Europe. After establishing the sales of products in these areas, the firm
expanded its manufacturing and distribution to places such as the United Kingdom and
China. Along with its strategic partnerships and acquisitions, Herman Miller has been able
to reduce production costs and increase market position. The only sacrifice the firm has
made as a result of the milestones is the additional costs incurred by using LEED
construction for its facilities (Herman Miller, Company History).
Present Strategic Posture
Corporate Level Strategy
Based on Herman Miller’s business activities, the corporate strategy can be best
classified as a related diversification. Most of the firm’s sales come from within the office
furniture industry. However, although Herman Miller does not realize large sales revenues
in home furniture sales and accessories, the firm understands its strong presence in these
industries. Using related diversification, the firm has the ability to share its resources
across multiple business types. Also, this allows the firm to reach economies of scale and
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gain a significant market share in the industry. This strategy gives the firm an opportunity
to continually gain market power and become a leader within the industry.
Business Level Strategy
Herman Miller undoubtedly uses an innovation strategy to compete in the industry.
Herman Miller utilizes reinventing and renewing designs that support its innovation
strategy. An example of the innovation strategy is the Aeron chair. This office chair was
added to the New York Museum of Modern Art Design Gallery and won the Design of the
Decade Award from BusinessWeek. Herman Miller has had many products that have seen
similar success. Herman Miller typically is a first mover to enter a new market because
they innovate products that are unique and inventive and define new markets. As a generic
strategy, the firm uses broad based differentiation by providing products for the office and
home and is marketed to businesses, governments, educational institutions, and
individuals.
Functional Level Strategy
The firm’s functional strategies compliment the corporate and business level
strategies and have allowed the firm to prosper in recent years. The most critical functions
of the firm are R&D/Design, Marketing, and Production. The R&D/Design function allows
Herman Miller to be innovative and provide furniture solutions that propel sales in the
industry. Herman Miller uses a unique marketing strategy that focuses on the international
market and uses green marketing to sell products. The firm also uses cooperative
advertising with partners such as Hilton Garden Inn. Finally, production and operations is
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the most critical function. The firm has production facilities in many different countries.
They also use just-‐in-‐time production to limit the cost of holding inventory. Also, the
subsidiaries of Herman Miller have made the production costs significantly less by shifting
production to more assembly based rather than making components on site.
International Strategy
Herman Miller uses a global international strategy. The firm has positioned itself
within the marketplace throughout over 100 countries. The firm also has offices,
production, and warehouse facilities across multiple continents that allow products to flow
from production to the consumer faster. Also, the firm has showrooms, stores, and sales
offices near major metropolitan areas.
See Appendix 4: Strategy Levels
Performance Assessment
Quantitative Performance Analysis
See Appendix 5a
See Appendix 5b
See Appendix 5c
Based on the performance information provided in the case and the ratios obtained,
Herman Miller has improved its financial performance in recent years. Past troubles for
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Herman Miller were a result of the economic downfall in 2008 and 2009. “Through 2006,
the companies leverage ratio was well below the industry average and its times-‐interest-‐
earned ratio was over twice the industry average” (Shipper, Adams, Manz, Manz, 2014, p.
64). Once the economic recession hit, the firm realized an 18.99% decrease in net sales
from 2008 to 2009. Another notable result of the recession was the increase in total debt-‐
to-‐equity ratio of 16.05 to 47.18 from 2008 to 2009.
Despite the rough results of the horizontal, vertical, and ratio analysis of past years,
the firm has performed very well in recent years. Looking at the vertical and horizontal
trends, in 2011, inventories only made up 13.8% of total current assets. This is promising
because the firm aims to limit inventories on hand by using JIT production. A horizontal
trend that is concerning is the increasing amount of accounts payable which has increased
42.47% from 2009 to 2011. A crucial decision that helped boost performance was the
reduction of dividends by 70% to increase short-‐term assets in 2009. Even with economic
woes, Herman Miller has held true to its innovative strategy by only having to reduce
research and development expenditure by 10.54% from 2008 to 2011. Without continued
investment in research and development, the innovative products, which set Herman Miller
apart from competitors and allow them to maintain a strong presence in the market,
current financial performance would not be as bright.
Qualitative Performance Analysis
Overall, Herman Miller’s performance has positioned the company among the elite
within its industry. Herman Miller ranks second in the furniture making industry with
$1,724 million in revenue, which is about the average industry revenue of $1,395.25
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million from the top 12 firms (Market Share Reporter, 2012). Herman Miller ranks fourth
out of the five focused competitors within the industry in regards to gross profit margin
percentage. Herman Miller has a percentage of 25.27% with the highest of the five having a
35.65% margin.
Leadership and Governance
Leadership
The leadership at Herman Miller is like that at any other firm. The company has a 14
member Board of Directors led by chairman Mike Volkema. In addition to the requirements
for board members set by NASDAQ National Market, the independent board members were
not allowed to have any other material relationship with the company or executive of the
company. Also, it is specifically noted in the guidelines of a board member that they must
hold equity in the company so that they act in the interest of the stockholders.
Herman Miller is managed by president and CEO Brian Walker. In 2011, Walker’s
compensation was listed as $693,969, which was below the range of four competitors
CEOs. In January 2009, Walker and four other top executives took a 10 percent pay cut
because of poor financial performance, and another 10 percent pay cut in March 2009
along with all salaried workers. This shows the effectiveness of management in realizing
financial performance and being proactive in combating it. Also, the first and second pay
cuts both involved executives, which shows their passion for the firm and its employees.
Also, pay cut was not a reduction of working days rather than a per/hour cut.
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Overall, the leadership of the firm is adequate in its structure and current members.
Although the firm has had recent struggles, the leadership of the firm has actively
addressed the issues at hand.
Vision and Mission
See Appendix 6: Vision and Mission
Herman Miller did not have their vision of mission available. Understanding the
firms products, market, and strategies, it was easy to develop a vision and mission for the
firm. The vision, as depicted in Appendix 6, conforms to the firm’s international presence
and its goal of being the largest provider of office and home furniture solutions. The vision
also fits with the mission we developed. Herman Miller, with a strong focus on innovation,
is consistently designing new products to suit the needs of its customers and potential
customers. Furthermore, the firm has created many campaigns to promote its move toward
eco-‐friendly products, processes, and buildings.
Essential Challenges
Herman Miller despite past financial struggles has continued to succeed in meeting
the vision and mission of the firm. The recent struggles have proposed challenges to the
firm that, if addressed, will provide long-‐term success for the company.
Challenges Identified in Areas of Operation
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A challenge that Herman Miller will need to face to provide success in future years is
the current array of products it offers. Operating if different sub-‐industries (office, home,
accessories), the firm may face diminishing market share in one of the sub-‐industries. With
the innovation that is involved with each product, it will become very expensive for
Herman Miller to continue operating in all segments. Another challenge that should be
addressed is the firm’s evolution. As the firm continues to grow, additional
manufacturing/distribution centers might be necessary to reduces costs and bring the
product closer to expanding markets.
Challenges Identified in Profile of Competitive Strategies
The main challenge the firm should address is that of green products. The firm has
recently undertaken a movement to become more environmentally friendly with its
products, marketing, and buildings. As a result, the firm will begin to see a drastic increase
in capital expenditures required to support this strategy. The firm will need to plan very
strategically the future progress and movement into this strategy.
Challenges Identified in Performance Assessment
A challenge associated with the firm’s performance is that of market share. While
the firm is currently among that top in market share, many firms are closely behind.
Another challenge related to performance that will dictate the firm’s future performance is
that firms increasing accounts payable. If the firm continues to see increase in this area, it
will begin to experience financial troubles in the future. Additionally the firm must keep
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watch on its debt to equity ratio. As the firm realized in recent years, a rise in this ratio will
cause performance issues and cause the company to cut back in crucial segments to the
firm.
Challenges Identified in Leadership and Governance
The firm does not have any challenges associated with the leadership of governance
of the firm.
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External Analysis
Current Industry Framework
The wood office furniture industry (under NAICS 337211) is currently made up of
416 firms in the United States. The reported value of the industry was estimated at roughly
$25 billion in 2009. However, the industry has competition from firm in many other
companies such as Germany, Brazil, and South Africa. Most firms in the industry sell
products primary through representative, wholesalers, and retailers. Product innovation is
crucial in the industry to keep up with the changing demands of furniture to meet new
office technology. Specific demands for products in this industry appear to be in the Latin
America and Asia Pacific regions due to rising demand in office space. The primary
innovation focus of the industry is developing ergonomic products to accommodate the
users physical well-‐being (Wood Office Furniture, 2013).
Five Forces Analysis
Rivalry
The rivalry among competing firms in the industry is the strongest threat to
profitability potential. With a large number of competing firms internationally, market
share is important to be a profitable firm. The industry is also currently growing with new
development of office space. The aggressive moves made in the industry rely on a firm’s
ability to make large capital investments in research and development. As a result, the
equipment required for such investments then makes it difficult for that firm to exit the
market or industry.
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New Entrants
Threat of new entrants poses a very weak threat to the profitability of a firm in the
industry. With so many firms, low product differentiation, and high switching costs, it is
difficult for a new firm to enter and capture any portion of market share. Furthermore,
product differentiation is low which would require a new firm to make significant capital
investments in research and equipment to make an aggressive move in the industry.
Substitutes
Firms in other industries offer similar products as our industry. The main factor that
makes a moderate threat to industry firms is the pricing and availability of substitute
products. Many other industries or firms with similar products have similar pricing and
have the product readily available to be sold to a customer. Although prices are similar, the
high switching cost provides a great deal of protection from customers substituting
products.
Suppliers
The concentration of suppliers relative to the industry is very high. This threatens
the industry firms by giving suppliers the ability of forward integration if capital
investments are made. The best protection from forward integration is the large amount of
supplier firms. This give established firms in our industry to be able to easily switch
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between suppliers for better pricing and the opportunity of acquiring suppliers to increase
profitability.
Buyers
Buyers have very little bargaining power in relation to the industry. Much of the
buyers of products from our industry are focused in business, healthcare, and government,
which pose no threat of backward integration. Also, our products are high relied upon to
provide a quality final product of the buyer. Also, buyer demand is currently very high due
to the increased amount of office space development and the amount f buyers is very high.
See Appendix 7: Five Forces Summary
Key Success Factors
There are a few vital key success factors that are crucial to success in the industry.
First an foremost, innovation allows a firm to provide furniture that meets the demands of
changing technology. Also, innovation directly relates to the ergonomic designs that firms
have been using. Ergonomics is vital in this industry because customers can develop health
issues from poorly designed furniture. Finally, international presence from the perspective
of both marketing and sales is important because much of the office space being developed
is outside of a firm’s normal operational boundaries. This then requires a company to
position itself with another key success factor, a well-‐developed network of distribution
channels.
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See Appendix 8: Key Success Factors
Strategic Group Map
The two characteristics chosen for the strategic group map were price/quality of the
products and innovation of the products. All the firms have similar price/quality
characteristics. Although the product differentiation within the industry is very low, this
does not hold true for innovation. The strategic map infers that product innovation is a
large determinant of the financial performance of a firm and the significance of its brand
name. The closest competitors to Herman Miller are Steelcase Inc., HNI Corp., and Haworth
Inc. Based on the proximity of the firms, the map suggest that while price/quality remains
high among the firms, the innovation can vary drastically based upon research and
development investments. The map shows an opportunity for firms to reach lower
price/quality customers with low and high innovation.
See Appendix 9: Strategic Group Map
Close Competitor Analysis
Based on the close competitor analysis of Steelcase Inc., the firm is currently the
leader in market share within the industry. The strategies of the firm have position them to
reach a large portion of the target market at an international level. However, much like
other firms in the industry, Steelcase struggle to obtain significant revenues from
international markets. The firm however, has a bright future because of its innovation
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capability and sound financial performance. While the firm saw similar woes during the
economic downturn, the firm recovered. Steelcase will continue to challenge the case firm
to be innovative and try to capture more international market share.
See Appendix 10: Close Competitor Analysis of Steelcase Inc.
PESTLE Analysis
The most important trends from the PESTLE analysis are the political, economic,
and technological trends. With firms competing internationally, other countries have the
ability to place tariffs and trade barrier on products to protect their own industries and
firms. Countries with office space development will attempt to help their own furniture
manufacturing industry by imposing such political barriers. Furthermore, the cost of labor
in some countries can be very cheap compared to others. This is an opportunity for firms to
expand production to these areas but can also be bad because firms based in these
countries have a significant cost advantage. Finally, technology has shifted a large portion
of customer purchases to the Internet. This can be advantageous to the firms because they
can reduce or simply sustain their current physical locations and sales staff as Internet
shopping continues to grow.
See Appendix 11: PESTLE Analysis
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Internal Analysis
Strategy Summary (Strategy Diamond)
Herman Miller operates primarily in the office furniture industry but also provides
accessories and solutions for the home. The firm operates in over 100 countries in North
America, Latin America, Asia, Europe, and Africa. Using innovative designs, the firm
provides ergonomically designed products to the customer to meet their specific needs and
promote personal well-‐being. The firm has reached its present size and position by airing
smaller companies. The firm has used these acquisitions to enter into more niche markets
and to reduce production costs by acquiring suppliers of components. Furthermore the
firm was able to reach its current condition by internally developing a strong design unit.
With fierce competition in the industry, the firm differentiates itself by using innovation.
The customers value products that are both innovative and meet the changing technology
in office spaces. The economic logic behind the firm is to provide a quality product by
lowering costs as much as possible. Owning many of its suppliers, the firm can lower
production costs, which also lowers the prices and increase value for the customer. Finally,
the firm is a first mover, which is a crucial factor that helped the firm reach its current
condition. Innovating products for existing markets and newer markets, the firm is able to
capture more market share as a result.
Summarizing Stakeholder Management
Stakeholder interaction is not provided in the case.
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Assessing Resources and Capabilities
After assessing the firm’s resource and capabilities, it is apparent the firm has
weaknesses in its ability to control debt. Also, the firm has weaknesses in its distribution
resources and market reach. The firm is currently has a weakness in its distribution
network because it is not reaching the full potential of customers specifically in emerging
markets such as Asia. This also supports the firm’s weakness in market reach, which are
both vital to producing revenues and obtaining market share for the firm. However, the
firm has significant strength in innovation and R&D, both of which are of highest
importance in the industry. A capability strength of the firm is within its suppliers. Owning
multiple subsidiaries allows the firm to lower its cost of raw materials and components as
well as have control over inputs. Despite the consumer side of distribution, the firm has
moderate strength in the proximity of its production/distribution to the end consumer.
Facilities in the US, UK, and Asia have positioned the firm to supply most major markets.
See Appendix 12a: Resources and Capabilities Chart
See Appendix 12b: Resources and Capabilities Map
Adding Value for Customers
Herman Miller creates value for itself and customers in multiple different ways.
Owning many of its suppliers not only translates to lower production costs, but also lowers
prices for the customer. Within the firms operations, a substantial budget for R&D allows
the firm to use new technology and practices to create innovative products that appeal to
customers and meet their needs. Finally, the firm’s distribution centers make delivery less
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costly and get to the customer faster. The network of sales locations also helps the firm
reach more customers and provide a better and more efficient way of customers
purchasing products.
See Appendix 13a: Value Creating Activities for Herman Miller Inc.
See Appendix 13b: How Herman Miller Inc. Creates Value for Customers
Competitive Strength Assessment
Based on the overall ratings from the competitive strength assessment, Herman
Miller’s industry can be described as highly competitive. Herman Miller has a net
disadvantage versus Steelcase Inc. Steelcase Inc. received better individual ratings in all the
KSF areas excepts skills and capabilities. The firm’s specific strength in the industry is its
innovative ability. However, the firm experiences weaknesses in the technology and
manufacturing areas.
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Analytical Conclusions & Summary
SWOT Analysis
The outcome of the SWOT analysis gives a very interesting insight on the current
position and performance of the firm. The firm is currently in a very good position with
many strengths and opportunities and few weaknesses or threats. The key strengths of the
firm including significant market share, a high R&D budget for product innovation, and
developed distribution network. However, the distribution of the firm is also a key
weakness. The firm is currently over dependent on the US market and the distribution has
failed to reach or impact new markets, specifically in Asia. The firm’s opportunities are the
market potential in Asia and online retail sales. However, intense competition and high
wages threaten the firm’s ability to further itself in the industry.
See Appendix 15: SWOT Analysis
TOWS Analysis
The TOWS analysis provided an idea of alternative actions to determine which
major issues management should consider addressing. The most important outcomes of
the TOWS analysis were to fix the firms dependency on the US market to exploit the market
potential in Asia. Also, the firm can capitalize on its market share and brand name to take
advantage of the market in Asia. Finally, the firm can use its innovative capability to protect
from intense industry competition.
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See Appendix 16: TOWS Analysis
Central Case Issues
The central issues as highlighted n the case are if Herman Miller can continue to
reinvent and renew itself and if global, economic, or competitive forces will make the firm
change its business model. After examining the firm, its current position, and completing
the SWOT and TOWS analysis, I believe that the central concern form the firm is its ability
to expand into the market in Asia. I have arrived at this believe because the firm is
currently among the leaders in its industry. The firm’s inability up to this point to exploit
this market will allow the intense competition to gain momentum and threaten the firm.
Herman Millers innovative capability is not concerning as they are among one of the most
innovative companies. The issue of the firm’s inability to exploit the market in Asia will
help reduce threats to the firm, address its weaknesses, and take advantage of a great
opportunity.
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Plan of Action
Recommendation
Response to Central Issue
The firm’s inability to exploit the market in Asia is an opportunity for the firms to
further increase its market share, protect itself from the competitive industry, and use its
innovative capability and distribution to become the largest office furniture manufacturer.
Proposed Recommendation
In response to the central issue surrounding the firm, I recommend that the firm
make significant capital investments in marketing and distributing its innovative products
to the thriving market in Asia.
Explanation
The firms dependability on the US market will not help the firm overcome the
disruptive nature of global, economic and competitive forces. With market opportunity in
Asia, Herman Miller has the ability to attack the opportunity to continue with its current
business model and overcome these forces. By making capital investments in marketing
and distribution efforts, the firm will be able to not only attack the weakness of
dependency on the US market, but protect itself further from competitive rivals.
Strategic Objective
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The strategic objective of this recommendation is for the firm to increase its revenue
and sales from the market in Asia. Also, the firm will be able to achieve a larger market
share and increase production form its facility in Asia. By increasing production at this
facility, the firm will be able to take advantage of lower wages and save on labor costs. The
changes that will indicate whether this objective is achieved is an increase of revenues
from the Asia market of more than 15% each year, and increased output by the production
facility in China.
Implementation Plan
The implementation plan that is set forth as a result of the recommended actions
will require resources and capabilities from across the entire firm. The project leader will
be the director of marketing. He will select members from across multiple business units,
including marketing/sale, distribution/supply chain mgt., and finance. This will ensure that
the strategy is implemented not only in one area, but also throughout the entire company.
Without support from multiple business units, the implementation of the strategy will fail
to produce the anticipated results.
See Appendix 17: Implementation Plan
Execution Steps
The first execution step that needs to take place is extensive market research. This
research will be used to evaluate the areas of most potential in the Asian market and much
of the further steps will be based off the results of this research. The second and third steps
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will be to expand the sales side of the distribution network by hiring additional sales staff
and opening new showrooms in areas with the most potential. Next, the production
facilities must begin producing products in order to meet the increased demand from new
marketing efforts and fill new showrooms. Finally, the firm will begin marketing its
innovative products to customers through a variety of different mediums.
See Appendix 18: Execution Plan
Stakeholder Impact
The three main stakeholder of Herman Miller are the owner/stockholders,
employees, and customers. All of the stakeholders will be supporting of the new strategy
being implemented as it provides returns to investors, increases sales and profits for
employees, and brings innovative products to a new market of customers.
Anticipated Impacts
The anticipated impact from all stakeholders is expected to be very promising.
Owners/stockholders will see increase dividends with better financial performance and
ultimately a much high return on equity. Employees will see increase sales and profits,
which will benefit the well-‐being of the company and offer rewards to employees. Finally,
the customers will continue to see innovative products out of the firm that they will be
proud of.
See Appendix 19: Stakeholder Impact Summary
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Likely Responses
The likely response from all stakeholders is expected to be receptive and supporting
of the firm’s new implementations.
Anticipated Threats
The anticipated threat from owners/stockholders as a result of the strategy
implementation is that they might begin to sell their stock because of risk associated in
entering new markets. Also, employees may not want to relocate or travel to implement the
new strategies. Finally, customers may not like the product.
Recommended Plans for Threats
In order to reduce the impact of possible threats from stakeholders as a result of the
strategy, the firm should be ready to provide owners/stockholders with information to
ensure their interest in the company will be safe as a result of the strategy. Herman Miller
should also provide incentives or relocation packages for employees who may have to
move or travel extensively to implement the strategies. Finally, the firm should encourage
customers to visit showrooms to see products before buying them. The increased number
of showrooms will make this task easier. Educating the customer on each product is crucial
to their positive acceptance.
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Detroit: Gale, 2015. Business Insights: Global. Web. 1 Apr. 2014.
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Appendix 1: Subsidiaries Subsidiaries SUBSIDIARY NAME PERCENT OWNED COUNTRY Colebrook Bosson Saunders, Inc. 100% United States Colebrook Bosson Saunders, Ltd. 100% United Kingdom Colebrook Bosson Saunders, Pty. Ltd. 100% Australia Convia, Inc. 100% United States Coro Acquisition Corporation-California 100% United States Geiger International, Inc. 100% United States Herman Miller Asia (PTE.) Ltd. 100% Singapore Herman Miller (Australia) Pty., Ltd. 100% Australia Herman Miller Canada 100% Canada Herman Miller Furniture (India) Pvt. Ltd. 100% India Herman Miller Global Customer Solutions, Inc. 100% United States Herman Miller Global Customer Solutions (Hong Kong), Inc. 100% Hong Kong Herman Miller Japan, Ltd. 100% Japan Herman Miller, Ltd. 100% United Kingdom Herman Miller Mexico S.A. de C.V. 100% Mexico Herman Miller (Ningbo) Furniture Co. Ltd. 100% China (Peoples Rep. Of) Herman Miller OP Spectrum Inc. 100% United States Integrated Metal Technologies, Inc. 100% United States Maharam Fabric Corporation 100% United States Meridian, Inc. 100% United States Milsure Insurance, Ltd. 100% Barbados Nemschoff Chairs, Inc. 100% United States Office Pavilion South Florida, Inc. 100% United States OP Ventures, Inc. 100% United States OP Ventures of Texas, Inc. 100% United States Sun Hing POSH Holdings Limited 100% Hong Kong http://www.mergentonline.com.login.library.coastal.edu:2048/companydetail.php?pagety
pe=subsidiaries&compnumber=5551
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Appendix 2: Key Value Chain Activities
Production Order
• Production is driven by orders • Reduces amount of inventory on hand-‐ high inventory turnover
Raw Materials
• Focus on green products
Design • Designs of production orders are uinalized and put into production
Resource Allocation
• Component parts are outsourced-‐ reduces variabl cost of manufacturing
Maunfacturing
• Resource allocation limits the manufacturing process to mainly product assembly
• Use of Lean Manufacturing Process (Herman Miller Performance System) to increase efuiciency and reduce costs. Just-‐in-‐time process.
Distrubutuion
• Products are distributed based on production orders • Dealers/ Sales Locations recieve product
Marketing
• International Marketing Strategies • Green Marketing-‐ products made from recycled material, earn points toward LEED certiuication.
• Strategic partnerships-‐ Ex. Hilton hotels use products and provide product use information and online purchase information for their customers
Retail Sales, Dealers,
Showrooms
• Products sold an delivered to end-‐customer (individuals) at sales centers • Products sold in wholesale to other companies, educational institutes, government, etc. through dealers.
Customer Service
• Provides post-‐purchase service to consumers
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Appendix 3: Timeline/Key Milestones
1905 • Star Furniture Company, a manufacturer of high quality traditional-‐style bedroom suites, opens for business in Zeeland, Michigan.
1909 • Star Furniture Company is renamed Michigan Star Furniture Company. The company hires Dirk Jan (D.J.) De Pree as a clerk. De Pree is 18 years old.
1919 • D.J. De Pree is named president of Michigan Star Furniture Company. 1923 • Michigan Star Furniture Company becomes the Herman Miller Furniture
Company when D.J. De Pree convinces his father-‐in-‐law, Herman Miller, to purchase the majority of shares of Michigan Star Furniture Company. De Pree becomes the first president of the Herman Miller Furniture Company, which continues to manufacture reproductions of traditional home furniture.
1930 • Herman Miller faces failure during the Great Depression. De Pree meets Gilbert Rohde, a designer from New York. Rohde convinces De Pree to move away from traditional furniture and focus on products better suited to the changing needs of Americans.
1939 • Herman Miller opens a showroom in Chicago's Merchandise Mart. 1942 • The Executive Office Group, designed by Gilbert Rohde, signals Herman
Miller's entry into the office-‐furniture market. • Herman Miller's Los Angeles showroom opens.
1945 • D.J. De Pree hires George Nelson to serve as the company's first design director.
1946 • The Nelson Office designs the stylized "m" logo and introduces a new corporate image for Herman Miller.
1947 • Herman Miller gains exclusive market and distribution rights to the Eameses' award-‐winning molded plywood products.
1948 • Herman Miller publishes and sells a bound, hardcover product catalog, written by George Nelson and designed by the Nelson Office.
1949 • Molded plywood manufacturing moves from the Grand Haven, Michigan, manufacturing site of Evans Products to a Herman Miller manufacturing facility in Zeeland. Another manufacturing plant, which later becomes the Eames Studio, opens in Venice, California.
1950 • Herman Miller becomes the first company in Michigan to adopt the Scanlon Plan, a program of participative management and gain sharing.
1958 • Herman Miller begins building its Zeeland headquarters complex. George Nelson is the primary architect. A new plant opens in Venice, California, and a showroom opens in San Francisco.
1960 • The Herman Miller Furniture Company incorporates, becoming Herman Miller, Inc. The Herman Miller Research Division, which will later become the Herman Miller Research Corporation, opens in Ann Arbor, Michigan, as a wholly owned subsidiary. Its president is inventor and teacher Robert Propst.
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1962 • Hugh De Pree, son of D.J., assumes leadership of Herman Miller, Inc., as president and chief executive officer. D.J. becomes chairman of the board.
1966 • With nearly 150 dealers, Herman Miller has expanded its presence to Central and South America, Australia, Canada, Europe, Africa, the Near East, Scandinavia, and Japan.
1968 • Herman Miller introduces the Action Office system, the world's first open-‐plan modular system of panels and attaching components. Designed by Robert Propst, AO, as it will come to be called, will revolutionize office design and spawn a whole new industry.
1969 • D.J. De Pree steps down as chairman of the board. Hugh De Pree becomes the new chairman.
• Herman Miller, United Kingdom, forms. It has sales and marketing responsibilities throughout the United Kingdom and Scandinavia.
1970 • Herman Miller, Inc., offers stock to the public. 1971 • Herman Miller enters the health/science market with the introduction of
the Co/Struc system. 1974 • Rapid Response becomes the industry's first quick-‐ship program. 1976 • Star Industries, later called Integrated Metal Technology, becomes a
Herman Miller subsidiary. Building C is added to main site. 1979 • Herman Miller opens the Facility Management Institute in Ann Arbor,
Michigan, helping establish the profession of facility management. 1980 • A new Holland seating plant is built. The Building B production site is
converted to office space. 1981 • Herman Miller's Energy Center begins burning waste to generate power-‐-‐
both electrical and steam-‐-‐to run the company's million-‐square-‐foot Main Site manufacturing facility.
1982 • Tradex, Inc., becomes a Herman Miller subsidiary, providing easy-‐to-‐acquire workstations, casegoods, and seating. Its name is later changed to Phoenix Designs and then to Miller SQA.
• Vaughan Walls, Inc., a manufacturer of movable, modular walls, becomes a Herman Miller subsidiary.
1983 • A special stock-‐ownership plan establishes all Herman Miller employees as shareholders.
1984 • Herman Miller opens facilities in England and France. 1985 • Milcare, a wholly owned subsidiary, is formed from the company's
Health/Science Division, which began in 1971. It will be renamed Herman Miller for Healthcare in 1999.
• Dealerships open in Korea, Malaysia, and Australia. 1986 • Construction of the Design Yard in Holland, Michigan, begins. 1987 • Dick Ruch is named Herman Miller CEO, the first person outside of the De
Pree family to hold that title. 1989 • Herman Miller employees create the Environmental Quality Action Team
(EQAT) to coordinate environmental programs company-‐wide and involve as many employees as possible.
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1990 • Meridian becomes a Herman Miller subsidiary. • Herman Miller is the only office furniture manufacturer to be a founding
member of the Tropical Forest Foundation. 1991 • Herman Miller launches its Supplier Diversity Program, to increase
business opportunities for Minority-‐ and Women-‐owned businesses. 1992 • J. Kermit Campbell becomes Herman Miller's fifth CEO and president-‐-‐the
first person from outside the company to hold either post. 1993 • Herman Miller becomes a founding member of the U.S. Green Building
Council, the only office furniture manufacturer on the original roster. 1994 • Herman Miller returns to the residential furniture market with the launch
of Herman Miller for the Home. • Herman Miller buys Righetti, a wholly owned subsidiary in Mexico.
1995 • Herman Miller's website, www.hermanmiller.com, goes live. • Max De Pree retires from the Board of Directors. J. Kermit Campbell
resigns as CEO. Mike Volkema becomes CEO. 1996 • The new Miller SQA ("simple, quick, affordable") manufacturing and
office building begins operations. 1998 • Meridian, Milcare, Miller SQA, Coro, and Performis-‐-‐former subsidiaries-‐-‐
become part of Herman Miller, Inc. Milcare becomes Herman Miller for Healthcare.
1999 • Herman Miller acquires Geiger Brickel. 2002 • Herman Miller's C-‐1 corporate office facility renovation receives Gold
LEED (Leadership in Energy and Environmental Design) Green Building certification, only the 10th Gold standard awarded nationwide.
2004 • For the 16th time in 18 years, Herman Miller is ranked as the "Most Admired" company in the furniture industry in Fortune magazine's annual survey. The magazine also ranks Herman Miller among the most innovative companies in any industry, placing the firm 4th overall among the nearly 600 companies surveyed.
• Brian Walker becomes President and CEO. 2005 • The Herman Miller Creative Office launches Sonare Technologies / A
Herman Miller Company, and introduces the award-‐winning Babble, a sound management solution for confidential conversations.
2006 • Herman Miller completes construction of its European headquarters, VillageGreen, in Chippenham, England.
2007 • Herman Miller invests in two factories and a national headquarters in China to support the company's rapidly expanding client base there and throughout Asia, selecting Ningbo as the site for its manufacturing operations, and Shanghai, the largest industrial city in China, for its main office.
2008 • Herman Miller acquires Brandrud Furniture, Inc., a Seattle-‐based manufacturer of healthcare furnishings.
2009 • Herman Miller begins applying Herman Miller Performance System principles to its dealers' work. Benefits to customers include a 40 percent
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reduction in installation time. • Herman Miller acquires Nemschoff, Inc., a Sheboygan-‐based
manufacturer of high-‐quality, leading-‐edge healthcare furnishings. 2010 • Herman Miller becomes the first company in the furniture industry and
one of the first companies in the world to fuel 100 percent of our facilities with renewable energy.
• Herman Miller acquires Colebrook Bosson Saunders (CBS), a London-‐based worldwide leader in the design, manufacture, and distribution of ergonomic work tools.
2011 • Herman Miller enters into an agreement to acquire POSH, the leading manufacturer of quality office furniture in Asia. The combined brands represent one of the most extensive product portfolios in Asia Pacific.
• Herman Miller becomes exclusive distributor in the U.S. and Canada for Magis and Mattiazzi products.
• Herman Miller partners with the MASS Design Group to lend resources and employee support to humanitarian healthcare projects in Rwanda and Haiti.
2012 • Herman Miller introduces the Herman Miller Collection, a comprehensive new portfolio of authentic modern designs that lets you select, furnish, and create complete environments in a variety of settings—from the boardroom to the backyard.
http://www.hermanmiller.com/content/hermanmiller/northamerica/en_us/home/about-‐us/who-‐is-‐herman-‐miller/company-‐timeline/1900.html
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Appendix 4: Strategy Levels Strategy Level Strategy Type Evidence
Corporate
Related Diversification
The firm realizes revenue from multiple business segments: office furniture, home furniture, accessories
Business: • Competitive Broad-‐Based
Differentiation The firm has a broad range of products available to customers for the office and home. The firm also uses green products to differentiate it from other competitors.
• Blue Ocean Innovation The firm relies on innovative products that provide solutions to consumer needs. (ex. Aeron Chair)
• Timing First Mover Herman Miller focuses a large amount of time and money into innovating new products that allow it to gain further market share in the industry.
• Marketplace Approach Prospectors The firm has used acquisitions to better streamline the production process. Also, the firm has begun to produce green products.
Functional: Support of Strategy
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• R&D/ Design The firm uses innovative products to help position itself in the market.
$45.8 million R&D budget in 2011
• Marketing Green products and advertising partnerships.
Hilton Garden Inn-‐ uses HM chairs in guest rooms, provides cards where individuals can order HM furniture.
• Production Just-‐in-‐time production, subsidiaries.
JIT production allows HM to reduce the cost of storing unsold inventory and raw materials. Subsidiaries provide components to HM for production, which have reduced costs and focused production to more of assembly based.
International
Presences in over 100 countries and 4 continents.
Production facilities in US, UK, and Asia. Showrooms & sales centers near major metropolitan areas.
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Appendix 5a: Consolidated Balance Sheet
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Appendix 5b: Consolidated Statement of Operations
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Appendix 5c: Ratio Analysis
http://www.mergentonline.com.login.library.coastal.edu:2048/companyfinancials.php?pagetype=ratios&compnumber=5551&period=Annuals&range=7&Submit=Refresh
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Appendix 6: Vision and Mission
Vision To become the world’s largest international manufacturer of office and
home furniture. Mission Provide innovative furniture products to
customers that meet their unique demands. Also, Herman Miller aims to provide a productive and healthy work environment for its employees and further develop its environmental
awareness initiatives.
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Appendix 7: Five Forces Summary
Assessment Summary: Overall, the industry only face moderate threat to its profitability potential. The strongest factors influencing this assessment were the rivalry between firms, substitutes products, and threat of suppliers. With so many firms in the industry, market share is spread among a few main firms and evenly distributed among the remaining firms. With so much office space development worldwide, the potential to capture more market share causes an intense rivalry internationally. Also, competing firms in the industry share similar products, which can be substituted by customers. This assessment would have the potential to be much stronger if it were not for the high switching costs. Finally, suppliers in this industry often supply many of the components needed for the final product. Many firms simply assemble the final product from supplier inputs. As a result, this poses a moderate to weak threat of possible forward integration. If a supplier, assuming it is not a subsidiary of a larger firm, were to collaborate with other suppliers that make up the final product, it would require little capital investment to become a competitor in the industry.
FORCE STRENGTH ASSESSMENT
SCORE COMMENTS
the primary factors driving your assessment
Rivalry
3
High number of firms, Above average industry growth rate (specifically in international markets) due to office space development, Intense international competition
Entrants
1.83
Economies of scale are crucial to profitability, Switching costs are very high due to product pricing, Capital requirements (equipment) are high.
Substitutes
2.6
Low product differentiation, Substitute pricing is becoming better as firms reach economies of scale.
Suppliers
2.42
Many suppliers of inputs required for the products in the industry, Suppliers are of high important to the industry, Threat of forward integration is moderate.
Buyers
2.33
Buyers are almost entirely outside the industry (non-‐office furniture firms). No threat of backward integration due to high switching costs and capital investment
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required, Product is important to the output of buyers final product (often within business, healthcare, government, education).
TOTAL à 12.18 out of 25 Profitability Threat Assessment à (based on score summary)
Highlight appropriate threat assessment) 25.0-‐20.0 = severe; 19.9-‐15.0 = strong; 14.9-‐12.5 = moderately strong; 12.4-‐10.0 = moderate; 9.9-‐5.0 = moderately weak; 4.9-‐1.0 = weak; >1.0 = no threat
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Appendix 8: Key Success Factors
TYPE KSF Name KSF Description
Technology
• Ergonomic design • Recycled material
& synthetic wood
• Ergonomic design is becoming increasingly more popular to promote the well being of its users
• Recycled materials and synthetic wood are aiming to reduce the need for wood in furniture production and conserve environmental resources
Manufacturing or Service Production
• Lean Production Process
• Just-‐in-‐time production
• Lean production reduces the amount of expenditure wasted to provide better value to the customer
• JIT production reduces costs by limiting output to meet demand rather than creating surplus
Distribution
• Reliable network of dealers, showrooms, wholesalers
• Ability to accommodate direct sales through eCommerce or magazine
• The ability to distribute products to showrooms, dealers, and wholesalers allows a firm to continually move products
• eCommerce allows firms to not rely fully on its main distribution channels
Marketing
• Deep product line and selection
• Strong brand name
• Accuracy and timeliness of bulk orders
• International Presence
• A large variety and selection ensures the end customer can find a product to meet their specific needs
• A strong brand name provides visibility and connection with customers
• Customers with bulk orders rely on accurate and timely delivery of products as the products are crucial to the
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customers own output • An international presence
give a firm the ability to reach larger markets and customer bases
Skills and Capabilities
• Innovation
• Innovation allows a firm to stand out and provide a product that the consumer will buy
Other None
None
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Appendix 9: Strategic Group Map
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Appendix 10: Close Competitor Analysis of Steelcase Inc.
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Appendix 11: PESTLE Analysis
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Appendix 12a: Resources and Capabilities Chart
RESOURCE CATEGORIES NUMBER (R#) & NAME IMPORTANCE
RATING
RELATIVE STRENGTH
RATING
JUSTIFICATION FOR RATINGS
Finance R1. Debt Control 6 4
Importance: Low debt to equity ensures financial stability Relative Strength: Higher debt to equity reduces excess funds for reinvestment
Technology R2. Recycled Materials 5 6
Importance: Reduces the natural resource inputs required Relative Strength: Currently produce many products using recycled materials in relation to competitors
Plant & Equipment R3. Equipment 4 4
Importance: Reliable and modern equipment are necessary in the industry. Relative Strength: Reduction in equipment assets from 2010-2011
Distribution R4. Established network of distribution channels 9 4
Importance: Better turnover and efficiency Relative Strength: Weak in some markets
Location R5. Proximity of production & distribution 8 6
Importance: Costs are lower if production and distribution closer to end customer Relative Strength: Firm has production/distribution in multiple countries
CAPABILITY CATEGORIES NUMBER (C#) & NAME IMPORTANCE RELATIVE
STRENGTH JUSTIFICATION FOR RATINGS
Product Development C1. Innovativeness 10 10
Importance: Industry is driven by innovative products Relative Strength: Firm is continually listed as one of the Most Innovative Companies
Purchasing C2. Suppliers 8 7
Importance: Low cost and reliable suppliers are crucial to a firm Relative Strength: Firm owns multiple suppliers of components
Manufacturing C3. JIT Process 4 8
Importance: Reduces cost of storing inventory and waste of resources Relative Strength: Firm only
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produces enough to fulfill demand
Financial Management
C4. Control over expenditures
3 7
Importance: Most important during economic downfall Relative Strength: Made adjustments to expenditures during times of financial hardships
R&D C5. Budget 10 9
Importance: R&D is crucial to obtaining market share Relative Strength: Herman Miller has continually increased its R&D budget
Marketing & Sales C6. Market Reach 9 4
Importance: Essential to be a player in the market Relative Strength: Need to focus more on emerging markets
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Appendix 12b: Resource and Capability Map
Superfluous Strengths Key Strengths
Zone of Irrelevance
Key Weaknesses 1 5 10
Rel
ativ
e St
reng
th
10
5
1
Strategic Importance
R1
C1
R2
C2 C3
R3 R4
R5
C4
C5
C6
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Appendix 13a: Value Creating Activities for Herman Miller Inc.
Value-‐Creating Activities for Herman Miller Inc. Generic Value Chain Activity
Capability Applied to à Resource à = Specific Activity
1. Supply Chain Mgt. JIT production Plant & Equipment Low cost production
2. Operations
High R&D budget Finance Product development
3. Distribution Firm has locations new major markets
Developed distribution network (dealers, showrooms, online, etc.)
Fast delivery of product
4. Sales & Marketing Ability to reach emerging markets Location Easy access to products
5. Product Innovativeness
Ability to use new technology to creates new products
Products that drive demand
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Appendix 13b: How Herman Miller Inc. Creates Value for Customers
How Herman Miller Inc. Creates Value for Customers
Firm Activities How Value
Is Added Currently for Customers
Potential For Adding More Value for Customers
Low Cost Production Prices are lower as a result of lower production costs Low cost product line
Product Development Products to fit the need of specific users
Create custom products for large bulk orders
Fast Product Delivery Customers have almost instant gratification
Emphasize the low time of delivery.
Easy access to products
Customers can view products in the available showrooms before purchasing
Enhance the online ordering/ product visualization capabilities
Innovative Products Products that stand out Incorporate customer in design process
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Appendix 14: Competitive Strength Assessment
Key Success Factor/
Strength Measure
Importance
Weight
Rating Scale: 1 = Weak; 10 = Very Strong Weight X Rating = Score
Herman Miller Inc. Steelcase Inc. Rating Score Rating Score
Technology .10 7 .7 7 .7 Manufacturing .15 6 .9 8 1.2 Distribution .25 7 1.75 9 2.25 Marketing .20 8 1.6 9 1.8 Skills and Capabilities
.30 9 2.7 8 2.4
Sum of importance weights 1.00
Weighted overall strength rating
7.65 8.35
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Appendix 15: SWOT Analysis
STRENGTHS WEAKNESSES
S1. Significant Market Share
S2. Strong Brand Name
S3. High R&D budget to innovate new products S4. Diverse distribution network
S5. Variety of products
W1. Dependent on US market
W2. Failure of distribution to reach new markets
OPPORTUNITIES THREATS
O1. Expansion and market potential in Asia
O2. Popularity of online retail purchases
T1. Intense competition within industry
T2. High wages in US
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Appendix 16: TOWS Analysis
Scenario Action Alternative
S1&2/O1 Capitalize on significant market share and a strong brand name to take advantage of market potential in Asia
S1/T1 Use significant market share to defend against intense industry competition
W1/O1 Fix the firms dependency on the US market to exploit the potential market in Asia
W1&2/T1 Fix the firms dependency on the US market and distribution to new markets to protect against industry competition
S3/O1 Capitalize on high R&D/ Innovation capability to take advantage of the market in Asia
S4/T2 Use the firms diverse distribution network to expand into countries with lower wages
S5/ O1 Use the firms wide variety of products to take advantage of online retail purchases
S4/ O2 Use the firms distribution network to take advantage of online retail sales
W2/O1 Fix the firms ability to distribute products in new markets to exploit the market opportunity in Asia
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Appendix 17: Implementation Plan
Implementation Plan RECOMMENDATION Re-‐state the Recommendation: Capital investments in marketing and distributing its innovative products to the market in Asia Responds to central issue of the case which is: Global, economic, and competitive forces will make the firm change its business model OBJECTIVE Re-‐state the Strategic Objective: Increase revenues and sales from the market in Asia Indicate how success will be measured; what changes should be observed?: Increase in revenue from Asia market of more than 15% each year, increased production from China facility. TIME FRAME Indicate the anticipated time frame (LT, MT, ST): Medium Term (1-‐3 years) Identify Milestones that will be used to indicate progress: Complete extensive market research, implement marketing plans, hire additional sales staff, open new physical sales locations Identify the Deadline by which the project must be completed: 2016 RESPONSIBILITY Who will lead this effort? Director of Marketing, Market Analysts, Supply Chain Mgt. Staff, Sales Staff RESOURCES REQUIRED Identify the key resources that will be required to implement this plan: Finance, Distribution, Plant/Equipment Why are they needed? Finance-‐ acquiring funds to support strategy, Distribution-‐ get the product to the customer, Plant/Equipment-‐ producing the product How will they be used? Finance-‐ allocating funds to invest in marketing/distribution, Distribution-‐ getting the final product in front of and to the end customer, Plant/Equipment-‐ ensuring the production facility can keep up with demand from the market How will they be acquired? The Director of Marketing will select a hybrid team to implement the strategy CAPABILITIES REQUIRED Identify the key capabilities that will be employed to implement this plan: Innovativeness, Financial Management, Marketing/Sales Why are they needed? These capabilities are needed to employ the strategies into the firm’s current business model. How will they be used? They will be used to individually align the firm to expand its market in Asia How will they be acquired? The capabilities will be acquired by high performing members of the firm.
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Appendix 18: Execution Plan
Execution Plan PROJECT MANAGER’S ACTION AGENDA for RECOMMENDATION: Capital investments in marketing and distributing its innovative products to the market in Asia Projected Start Date: 5/1/14 Projected End Date: 12/31/16 Task #1: Complete extensive market research on Asia market Start Date: 5/1/14 Completion Date: 5/15/14 Task #2: Hire additional sales staff in Asia Start Date: 5/1/14 Completion Date: 7/30/14 Task #3: Open new showrooms and sales locations in metro areas with highest sale potential (from market research) Start Date: 5/16/14 Completion Date: 12/31/14 Task #4: Begin production to meet demands of the market and fill showrooms Start Date: 6/1/14 Completion Date: 12/31/16 Task #5: Begin marketing campaign for new innovative products Start Date: 6/1/14 Completion Date: 12/31/14
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Appendix 19: Stakeholders Impact Summary
Stakeholder Impact Summary for Recommendation #_1__:
STAKEHOLDER Anticipated Impact
Likely Response Possible Threat Planned Response
Owners/ Stockholders
Increased dividends and ROE
Supporting
Stockholders begin to sell shares as a result of international expansion
Provide investors with market research to ensure their interest in the company is safe
Employees Increased sales and profits
Supporting
Employees reluctant to relocate or travel to implement strategy
Provide relocation packages and incentives
Customers Interest in innovative products
Supporting Customers are not happy with product
Encourage buyers to visit showrooms when making purchases
