Bang & Olufsen Holding A/S Business Information, Profile, and History

Company Perspectives:

At the threshold of a new century, Bang & Olufsen's reputation remains second-to-none in the global market for leading-edge audio & video products. Little wonder that New York's Museum of Modern Art arranged a 39-piece special exhibition of Bang & Olufsen products in 1978--an honor only given to three other companies during the 20th century.

History of Bang & Olufsen Holding A/S

Bang & Olufsen Holding A/S (B & O) is a leading consumer electronics firm, manufacturing a complete line of technologically sophisticated, sleekly designed stereos, speakers, televisions, and telephones. The company sells its products in 40 countries through a network of more than 2,000 stores that are partly owned by the company. Renowned for its attention to design and leading-edge technology, the company represents a singular force in the multibillion-dollar consumer electronics industry.

B & O Begins with an Experiment

Peter Boas Bang and Svend Anreas Gron Olufsen grew up in era of swift technological innovation. Both were born around the time Guglielmo Marconi's made his 1901 transmittal of long-wave radio signals across the Atlantic Ocean in, a historic achievement that set the stage both youths' experiments with radios. At age 10, Peter Bang read about the world's first live radio transmission, Enrico Caruso's performance at New York's Metropolitan Opera in 1910. Soon after, he began his first experiments with radio, eventually leading him to pursue an engineering degree at the Electrotechnical School in Århus, Denmark. After earning his degree in 1924, Bang moved to the United States, where the flourishing radio industry had 600 commercial broadcasting stations and so presented fertile ground for exploring his interests. In the United States, Bang worked at a service station and at a radio manufacturing plant, but he soon felt entrepreneurial urges again. After six months, Bang returned to Denmark, intent on starting his own business.

Back in Denmark, Svend Olufsen was busy building his own radio. Olufsen also liked to experiment with electricity and chemistry and had attended the Electrotechnical School at the same time as Bang, also earning an engineering degree. Olufsen began his radio experiments at his family's Quistrup estate, occupying a room in the attic where he started building a mains receiver, a radio that required neither accumulators nor the batteries needed to recharge them. While he was away at boarding school and later at the Electrotechnical School, Bang had written frequently to his father asking for money to pay for more batteries. Bang's mains receiver would be the prototype upon which Olufsen's experiments would be based.

At Quistrup, Olufsen's mains receiver was half finished when Bang returned from the United States. Olufsen needed help, and his former classmate was uniquely qualified to provide it. Bang left Copenhagen and traveled to the countryside in the west to the Olufsens' Quistrup. There, in the attic that would serve as B & O's first laboratory, Bang and Olufsen worked together on the mains receiver, a nest of thick copper wire and insulated cables that stretched from one side of the room to the other. The pair used the money Olufsen's mother received for selling the farm's eggs to finance their endeavor. Before long, Bang achieved his entrepreneurial dreams. In 1925, Bang and Olufsen, with the backing of their fathers, formed a limited company funded with DKK 10,000.

After traveling to Copenhagen, where the necessary papers were drawn up, naming Bang's father, Camillo Cavour Bang, as B & O's first chairman of the board, the two radio aficionados returned to Quistrup. Bang moved into the attic, putting his bed in the same room as the mains receiver. Bang and Olufsen hired the cowman's daughter as the company's sole employee, whose first task each morning was to wake up Bang 15 minutes before the company's day officially began. The company's first product was the B & O Eliminator, a device--an aggregate--that connected a battery receiver to the mains to produce noise-free current.

B & O grew quickly. By 1927, the activities in the attic had spread throughout the estate and spilled onto the lawns, where B & O Eliminators were assembled by a staff of 30. Quistrup could no longer accommodate the growth of the company's payroll and the sprawl of the manufacturing operations, forcing Bang and Olufsen to establish a new site for the company's headquarters. Their fathers, who together owned 20 percent of the company, remained unconvinced that radio would last, so they stipulated that the new factory be designed as a school building in case radio proved a fleeting fancy. In 1927, B & O moved into its new factory, and the company soon began development of a new radio.

The Five Lamper Debuts in 1929

By 1929, the company had completed the design of its breakthrough radio, the 'Five Lamper,' and its peripheral 'Type D' loudspeaker. Powered from the mains, the Five Lamper only required connection to an electrical outlet for operation. It was the company's first signal success, embodying the two characteristics that would define B & O's success in the decades to follow: style and technology. The Five Lamper was a technological marvel, displaying what would become a signature trait of B & O's products. The Five Lamper was also the first radio encased in a walnut cabinet, exuding elegance in design that drew its inspiration from the Danish furniture industry. For B & O, the combination of style and technology would prove to be a potent formula for success, becoming the foundation upon which all of its subsequent products were based.

The Five Lamper established B & O in the Danish market, securing a leading and lasting position for the West Jutland company, far removed from the hub of activity in Copenhagen. Strong sales and a sleek design at a time when radios were clunky and cumbersome set B & O apart, establishing a reputation that the company would solidify during the 1930s. During that decade, B & O introduced new products, including a radio gramophone in 1930 and several new radio models (Radio 5 RGF, Hyperbo 5 RGF, and Beolit 39). These products notwithstanding, the years preceding World War II were most notable for less tangible results. The 1930s saw B & O strengthen its image as a design-oriented, technology-driven company. It was a company that proclaimed itself as 'The Danish Hallmark of Quality,' registered as the company's slogan in 1931, and a company that bore a 'pregnant B' inspired by the Bauhaus school of design as part of its corporate logo, trademarked in 1932.

The outbreak of World War II cast a pall over the future of B & O just as the company had taken a firm hold on the Danish market. Denmark was largely defenseless against the onrush of the German Blitzkrieg, and within seven months of the war's start, the country was occupied by German troops. Not surprisingly, raw materials became hard to come by, particularly radio tubes, but Bang and Olufsen had anticipated the war's arrival and had begun increasing their stock of essential parts as far back as 1935. Consequently, B & O was able to retain its full workforce during the first few years of the war, a rare feat for Danish manufacturing companies. Ultimately, however, B & O paid a price for its resilience and, specifically, for its resistance. In January 1945, the Germans bombed B & O's factory, targeting the building because the company had refused to collaborate and because a number of B & O employees were suspected Danish Resistance members. Construction of a new factory began the day after the bombing and was completed in early 1946, but it took another year before full production was resumed.

A Pan-European Strategy Takes Shape in the 1960s

As B & O recovered from the turmoil of the 1940s, it enjoyed a brief respite before another portentous event clouded the company's future. After introducing electric shavers into the market in 1946--a diversification spawned from the scarcity of raw materials during World War II--B & O started manufacturing televisions and tape recorders, fleshing out its product line as it honed its skills in design. Beginning in the 1950s, the company began soliciting the help of Denmark's renowned architects and designers, drawing from the pool of talent that had made the Danish furniture industry an influential force in design. The effect of the company's collaboration with the country's leading designers became evident during the latter half of the 1950s, as B & O radios, televisions, and tape recorders earned high praise for their aesthetic appeal. At the same time, by the end of the 1950s, the company's prospects for survival appeared grim. A little more than a decade after rebuilding its factory, the company again faced the considerable might of the Germans, a face-off that few industry observers believed B & O could withstand.

B & O's concerns stemmed from the 1957 Treaty of Rome, which spawned the European Economic Community. Tariffs, duties, and customs were relaxed between member countries, leading to the consensus that the Danish radio industry, comprising approximately 20 small companies, would be subsumed by the superior strength of the much larger German manufacturers. The looming threat of much stiffer competition forced B & O to rethink its strategy, prompting the company to leverage its esteemed design expertise and its experience selling semiprofessional, high-fidelity equipment to the United States as the basis for its new approach. The company decided to sacrifice its leading market position in Denmark in order to concentrate on the much larger European market, forsaking dominance in a small market for a small share of a bigger market. In accordance with the new business focus, the company began to develop an entirely new line of stereo products that catered to the high end of the market, an approach evident in the slogan adopted during the 1960s: 'B & O--for those who discuss taste and quality before price.'

B & O' efforts to penetrate the European market bore fruit with the introduction of the Beomaster 900. The Beomaster 900 did to Europe what the Five Lamper had done to Denmark 30 years earlier: the transistorized radio became a success throughout Europe, and despite the company's fears, its share of the Danish market did not diminish. The Treaty of Rome had forced many of the Danish manufacturers out of business, leaving B & O in a position to strengthen its domestic lead. By the time Beomaster 900 was introduced, B & O was ready to secure a presence in the then-developing market for high-fidelity systems. The company wanted to establish the standard by which all stereo systems would measured, an ideal that was realized with the Beolab 5000 series. Featuring a sensitive tuner, a powerful amplifier, and linear controls instead of knobs, the Beolab 5000 became B & O's second European success, spawning more affordable versions, Beomaster 1200 and Beomaster 3000.

Having established itself as a genuine contender in the vast European market, B & O spent the late 1960s restructuring its operations to conform to its new market orientation. The company established subsidiaries that replaced a network of agents that had previously carried out the international distribution. The reorganization included the formation of Bomark in 1970, which created an international marketing department responsible for coordinating all of the company's marketing activities. Previously, the company had taken whatever advertising it had created for the Danish market and used it to support its foreign marketing efforts, changing it only slightly to reflect cultural and market differences. The new system regarded the Danish market as only one of many markets, driving the company's evolution toward becoming a multinational concern. B & O marketing adopted the company's new perspective, as advertising campaigns became specifically tailored for the nuances of individual markets amid divergent cultures.

After the success of Beolab 5000, B & O next prodded its engineers and designers to develop a complete array of stereo components. The first product to make its debut was Beogram 4000, a turntable introduced in 1972 featuring a tangential arm that reproduced a recording in the same way in which it had been made. The record player was designed to target a different, much larger market segment, music lovers rather than the more exclusive retinue of technology-focused customers. Advanced technology, always an integral aspect of B & O's products, was not forsaken, but hidden beneath the surface, as the company's products earned a new distinction of exterior simplicity. This quality was first evident in Beomaster 1900, a system introduced in 1975 that market a turning point in the evolution of the B & O product line. For the next 20 years, Beomaster 1900 would be the company's best-selling product.

Problems in the 1980s Are Resolved in the 1990s

This success notwithstanding, the 1980s proved to be a difficult decade for B & O, as the company struggled to beat back fierce competition from its Asian rivals. Although external pressures played their part, the company also fell victim to internal problems, problems of its own making that B & O's management was slow to acknowledge. The company's distributors lost faith in the B & O product line, and revenues began to slip. Initially, B & O tried to arrest its slide by narrowing its market focus on its wealthiest customers, but in the process the company's products lost some of their integrity, as substance was sacrificed for style. The company also tried to restore loyalty within its distributor ranks by staging seasonal product launches in exotic locations, but the effort failed. B & O's fundamental problem had to do with the decentralization that followed the company's full-fledged foray into international markets. The subsidiaries, by the 1980s, had become separate fiefdoms, which led to overspending, high costs, and superfluous bureaucratization. At the same time, the company had lost the ability to react nimbly to changing market conditions.

Before the end of the decade, B & O became a cash-strapped enterprise. The need for capital led to a strategic alliance with Koninklijke Philips Electronics N.V., the Dutch consumer electronics conglomerate, but the capital gained from the investment was soon drained. Rudderless and ailing financially, B & O entered the 1990s in crisis mode.

Salvation arrived in May 1991, when B & O's board of directors installed a new management team, led by Anders Knutsen. Knutsen's first task was to cut costs, an objective fulfilled by laying off employees, streamlining operations, and paring away excess layers of management. Knutsen also implemented a new strategic plan known as 'Break Point 1993,' which addressed the problems born of the company's earlier decentralization. Knutsen reintroduced centralized management and made the company more responsive to the demands of its customers. Stocks of finished products and parts were removed from many of B & O's subsidiaries, as Knutsen transformed B & O from a company geared for mass production into an enterprise organized to fulfill customers' orders. The changes sparked a turnaround, refreshing the spirit and resharpening the focus that had predicated B & O's success.

At the end of the 1990s, B & O approached its 75th anniversary as a unique competitor in the consumer electronics industry. The company's attention to design and its long record of technological advancements remained the qualities that set the B & O name apart. With sales nearing the half-billion-dollar mark by the century's end, B & O promised to figure as a prominent force in the years ahead, as a new generation of high-technology stereos, speakers, and televisions, and telephones continued the legacy established by Peter Bang and Svend Olufsen.

Principal Subsidiaries: Bang & Olufsen Medicom A/S; Bang & Olufsen Telecom A/S; Bang & Olufsen Technology A/S; Bang & Olufsen PowerHouse A/S; Bang & Olufsen America, Inc.

Principal Competitors: Bose Corporation; Harman International Industries, Inc.; Matsushita Electric Industrial Co., Ltd.

Chronology

• Key Dates:

• 1925: Bang & Olufsen is formed as a limited company.
• 1929: Introduction of the Five Lamper secures Bang & Olufsen's presence in the Danish market.
• 1962: Concerted push into European markets begins.
• 1975: Beomaster 1900 becomes best-selling product for next 20 years.
• 1980: Company revenues drop due to Asian competition and internal corporate problems.
• 1991: New management team spearheads recovery.