Bose Corporation Business Information, Profile, and History

Company Perspectives:

Bose believes that audio products exist to provide music for everyone, everywhere--that music, not equipment, is the ultimate benefit. The Bose goal is to create products that combine high technology with simplicity and small size to create the best possible sound systems that are easy to use and accessible to all consumers.

History of Bose Corporation

Ranking 220th on Fortune's Private 500 list, Bose Corporation is engaged in the development, manufacture, and marketing of loudspeakers, consumer and professional audio systems, automobile sound systems, noise cancellation technology for the aviation industry, and computer simulation software to analyze auditorium acoustics. Initially producing amplifiers for the U.S. Defense Department, Bose later introduced the Bose 901 Direct/Reflecting speaker, which, with modifications, would remain the company's flagship speaker into the early 21st century. Known for its industry innovations and the high quality of its products, Bose markets a wide variety of sound equipment popular among consumers and corporate clients, most notably automobile manufacturers General Motors Corporation, DaimlerChrysler AG, Honda Motor Co., Ltd., Nissan Motor Co., Ltd., and Audi AG. The company maintains production facilities in the United States, Canada, Mexico, and Ireland. Its products are sold through retailers, via 60 company-owned Bose outlets in the United States, and directly to consumers through the company web site, direct mail, and newspaper and magazine advertisements.

Early History

The Bose Corporation's founder, Dr. Amar G. Bose, was born in 1929 to a political refugee from India and his wife, a Philadelphia school teacher. Bose would later suggest, in an interview in USA Today, that defending himself as a young boy in a racially prejudiced America equipped him with the fighting spirit important to his success. When his father's import business suffered during World War II, the teenaged Amar Bose convinced his father to begin a radio repair facility in the family business. There, the self-taught Amar did the repair work. Following this early experience in the electronics field, Bose attended the Massachusetts Institute of Technology (MIT), where he earned a doctoral degree in electrical engineering in 1956.

Bose Corporation arose in part from Dr. Bose's dissatisfaction when he attempted to buy speakers for his home stereo system in 1956. As an engineer, he had expected that laboratory measurements would indicate sound quality. To his dismay, however, he realized that measured sound and perceived sound differed. Dr. Bose directed his research efforts into psychoacoustics, the study of sound as humans perceive it, and psychophysics, the study of the relationship between measurement and perception. His research led to numerous patents and the creation of Bose Corporation in 1964 to develop and market products using those patents. Despite the later financial success of his company, Dr. Bose, professor of electrical engineering and computer science, remained on the staff at MIT, teaching acoustics and mentoring undergraduate and graduate thesis students.

Bose started his company at the suggestion of MIT professor Y.W. Lee, who provided Bose with $10,000 in start-up capital. That investment would later be worth an estimated $250,000, when the company repurchased Lee's stock in 1972. So that he could continue his teaching career, Bose hired one of his students, Sherwin Greenblatt, to help develop and market a product. During their first year of business, according to a company publication, Greenblatt was the company's only employee, and 'Bose, who was [still] teaching, was paying Greenblatt more than he, himself, was earning as a professor at MIT.' Greenblatt would later become president of the company.

Bose produced its first 901 direct/reflecting loudspeaker in 1968, and its first customers were secured through contracts with the military and NASA. The 901 was based on Bose's earlier research, which indicated that in excess of 80 percent of what audiences heard at a concert, for example, was reflected sound; sound bouncing off walls, floors, and ceilings apparently contributed to the quality of the listening experience. Bose determined that his disappointment in speakers then on the market resulted from the fact that speakers only directed sound straight forward. To achieve a better spatial distribution of sound, therefore, Bose developed the 901, which aimed eight of the nine transducers in the speaker to the rear of the speaker where the sound could bounce before it reached the listener. The 901 employed an active equalizer to allow the speaker to reproduce the audio spectrum.

Bose's 901 series was not an immediate success. In fact, Consumer Reports dismissed the product in 1970, alleging that 'individual instruments heard through the 901 ... tended to wander about the room.' Wounded by such criticism, Dr. Bose filed a lawsuit against the magazine, claiming that it had unfairly disparaged his speaker system. Litigation continued for nearly 13 years, and although Dr. Bose ultimately lost his case at the U.S. Supreme Court level in 1983, the 901 series had long since gained a reputation as one of the finer products on the market.

Critical to Bose's success was the company philosophy, itself a reflection of its founder. Company literature stated: 'Bose believes that audio products exist to provide music for everyone, everywhere--that music, not equipment, is the ultimate benefit. The Bose goal is to create products that combine high technology with simplicity and small size, to create the best possible sound systems that are easy to use and accessible to all consumers.' From the beginning, Bose directed all profits back into research and development, avowing a greater interest in producing excellent speakers than in money, and keeping his company privately held, and therefore not responsible to stockholders. Dr. Bose and company officials also stressed the importance of creativity at the company. In Operations magazine, for example, Greenblatt stated 'Our challenge is to prod people into being innovative and using their creativity to do something that's better. In the long run, this is the source of sustainable advantage over our competition.'

Since its introduction in 1968, the 901 speaker series underwent several revisions in which sound quality was improved and the speakers were made suitable for the digital age. Bose also applied the direct/reflecting concept to lower priced speakers in the company line and began marketing speakers to the general public for use in home stereo systems.

1970s: Car Stereos and Japanese Expansion

In 1972 Bose Corporation began selling loudspeakers for professional musicians. Later in the decade, Dr. Bose became interested in developing sound reproduction systems for automobiles, having noted that consumers, dissatisfied with the stereo equipment then standard in American cars, were purchasing Japanese systems for installation. The project seemed to present particular challenges given the glass, upholstery, and plastic surfaces in a car's interior. Bose, however, was optimistic, later recalling in a 1990 Electronic Business article: 'I thought I could actually create better sound in a car than in a room, [since] we can control where the sound goes in a car.'

Bose's auto sound system ideas were presented to General Motors Corporation in 1979, and a verbal agreement was reached between Dr. Bose and Edward Czapor, GM's Delco Electronics president, which resulted in four years of Bose research at an estimated $13 million to adapt car audio systems to the acoustic environment of the automobile. At the conclusion of the successful research, Bose formed a joint venture with GM to design and manufacture car audio systems for certain Cadillac, Buick, and Oldsmobile models.

Although initially slow to realize profits, Bose's car stereos and the Original Equipment Manufacturer (OEM) division they necessitated at the company, eventually became highly successful, leading to Bose partnerships with Honda, Acura, Nissan, Infiniti, Audi, Mercedes Benz, and Mazda. In many cases, Bose was able to design products not only for a specific model of car but also for specific options packages offered by the automakers. Bose was even able to meet Honda's requirement that product failure rate not exceed 30 parts per million, an exacting standard. By 1995, Bose's car audio systems represented about one-fourth of its total sales.

Also in the 1970s, Bose began efforts to introduce its products to the Japanese consumer audio market, an effort begun with much frustration. Bose's initial efforts in the Japanese market were failures; in fact, the company lost money its first eight years in Japan. Then, Dr. Bose recognized the problem as one in which Bose market representatives had neglected to establish close personal relationships with Japanese distributors. Bose decided to hire a native Japanese to head the company's sales efforts in Japan. After interviewing several unsuitable American candidates, Bose made a few trips to Japan, during which he established social and business contacts. Eventually he hired someone who would have great success introducing Bose products to Japan and would later become a vice-president in the corporation.

1980s: Acoustic Waveguide and Other Innovations

Further Bose innovations involved acoustic waveguide technology, through which Bose engineers eventually developed smaller, portable speakers and sound systems capable of producing 'big sound.' Specifically, acoustic waveguide technology showed that bass notes could be reproduced through a small tube or pipe, similar to that employed in a pipe organ, instead of the much larger 'moving cones' used by traditional stereo manufacturers. Amplifying the bass notes via an 80-inch tube folded into less than one cubic foot of space, Bose's Acoustic Wave Music System was introduced in 1984. The stereo system won praise for its compact, simple design as well as sound that many reviewers found rivaled that of larger and more costly stereo speakers and components.

In 1985 Bose began investigating the market for its products in television. As he had with General Motors, Dr. Bose approached a major television manufacturer, Zenith Electronics Corporation, and proposed that his engineers design a sound system, incorporating their acoustic waveguide technology to produce high fidelity sound in Zenith televisions. Zenith agreed, and the two companies entered into a joint venture that resulted in the deluxe Zenith/Bose television, a set that featured rich sound, and that, since its tube was folded inside, was only about an inch larger than Zenith's earlier 27-inch screen model.

Company innovation continued in 1986 with the introduction of Acoustimass speaker technology. Proving that bigger is not always better, the line featured compact yet high-quality speakers, some of which were so small they could fit in the palm of one's hand.

During the late 1980s, Bose introduced its Acoustic Noise Canceling headset, a sealed headset designed to cancel out unwanted sound. Remarking on the need for the headset, one writer for New Scientist magazine quoted Dr. Bose: 'The US government pays out $200 million a year in compensation for hearing loss caused by military service. ... Hearing loss is a common reason for early retirement of pilots, second only to psychological stress.' Indeed, the headset proved valuable in military use, particularly among pilots and tank drivers. The headset also had civilian applications and could be used by small aircraft and helicopter pilots. Bose donated two of these headsets to Dick Rutan and Jeanna Yeager, who piloted their light plane the Voyager on a nonstop around the world flight in 1986. Moreover, the technology Bose developed could be tailored to cancel out noise in several environments, such as airline passenger compartments or city streets.

By 1989 Bose's sales were estimated at $300 million, a figure that some analysts suggested was conservative. Also at this time, nearly half of Bose's sales were derived from foreign markets; indeed, Bose speakers were outselling all other brands in Japan, including those of the Japanese manufacturers. The early 1990s saw steady gains for Bose, with net revenues increasing to $424 million by 1992.

The 1990s and Beyond

The acoustiwave technology in Bose speakers and stereo systems made Bose products popular in the 1990s at concerts, theaters, and nightclubs. A Bose loudspeaker was even used at the 1992 Winter Olympics in Albertville, France. On the consumer front, the decade began with the introduction of a new line of speaker systems called Lifestyle. Featuring an integrated design, the Lifestyle system was designed to provide high quality sound while offering ease of use for both home music systems and the burgeoning market for home theater systems.

In 1993 consumers were introduced to the Bose Wave radio, a small remote-controlled clock radio suited for use in the home. The Wave boasted rich, full sound not found in other portable radios and could also be hooked up to a television or CD player, enhancing the sound capabilities of the user's existing stereo components. Expensive for a radio and featuring an unusual design, the Wave befuddled retailers, leading the company to sell the product directly to consumers via direct mail and newspaper and magazine advertisements. It went on to be a huge success; by 1998 the company was able to boast sales of 200,000 Waves in a single year.

At its manufacturing facilities, Bose became a subscriber to the total quality management concept (TQM) introduced by W. Edwards Deming. Toward that end, Bose assembly line workers were cross-trained and promoted based on performance. Moreover, Bose sought to build teams based upon mutual trust and respect, operating according to principles of responsibility and quality consciousness. Describing the company's management style in a 1993 Production article, Bose's vice-president of manufacturing, Tom Beeson, asserted: 'Communicate. Spend a lot of time on the factory floor. Micromanage every aspect. Involve all of the people. Foolproof the system so mistakes can't be made. Find the root cause of problems. Operate manufacturing with the fundamental principle: Do it right the first time.'

In 1994 Bose unveiled the Auditioner audio demonstrator, a computer system that enabled builders, architects, and facility managers to hear the acoustics of a building's proposed sound system, working from as little input as the building's blueprints. This technology was under development for ten years, and became reality only after computer technology caught up with the imagination of Bose engineers.

The mid-1990s also saw Bose undertake a $150 million expansion of its corporate headquarters in Framingham, Massachusetts, known as The Mountain for its commanding view of the countryside. The expansion included construction of a new six-story, all-glass-facade, ultramodern headquarters building, which had room for 800 employees and was completed in 1997. At the same time, the company phased out its factory in nearby Westboro, Massachusetts, citing the high cost of manufacturing in that state. (The company did continue to maintain a small manufacturing operation at the Framingham campus.) The production at Westboro was transferred to facilities in Hillsdale, Michigan, and Columbia, South Carolina. By the late 1990s, Bose had eight manufacturing sites, including the three aforementioned along with sites in Yuma, Arizona; Sainte Marie, Quebec, Canada; San Luis Río Colorado and Tijuana, Mexico; and Carrickmacross, Ireland.

Starting with the company's long legal battle with Consumer Reports, Bose gained a reputation for litigiousness. In the mid-to-late 1990s the company was involved in a number of lawsuits with Cambridge SoundWorks, Inc. (CSW), which was based in nearby Newton, Massachusetts. In 1994 Bose sued CSW after the latter claimed that its speakers were 'better than Bose at half the price.' After that suit was settled, Bose soon filed another lawsuit against CSW, this time alleging patent violations. In early 1999 CSW filed a countersuit alleging that Bose had made false advertising claims when it stated that its Wave radio was the best reviewed product of its kind on the market.

Other developments in the late 1990s included the expansion of the company's car audio business in 1998 to include more popular and lower priced vehicles, such as the Chevrolet Blazer and the Oldsmobile Intrigue; the launch of online sales of Bose products at the company web site the following year; and the introduction of a new version of the Wave radio that included a built-in CD player. According to research firm NPD, the Bose brand at decade's end was the number one speaker brand in the United States, with a market share of 20 percent, while the company's closest rival, Harman International Industries, Inc., claimed only 13 percent with its two top brands, JBL and Infinity, combined. Bose also held the number one position worldwide in speakers, with a 25 percent share of that market. For the fiscal year ending in March 1999, Bose had estimated operating profits of $170 million on sales of nearly $1 billion. The company reported its sales for the following year at more than $1.1 billion. With its innovative product development, streamlined manufacturing and delivery, and wide array of marketing channels, Bose was likely positioned to retain its top rank well into the 21st century.

Principal Subsidiaries: Bose AG (Switzerland); Bose A/S (Denmark); Bose Australia; Bose B.V. (Netherlands); Bose Canada, Inc.; Bose GmbH (Germany); Bose K.K. (Japan); Bose Ltd. (Canada); Bose N.V. (Belgium); Bose S.A. de C.V. (Mexico); Bose S.A.R.L. (France); Bose S.p.A. (Italy); Bose U.K., Ltd.

Principal Competitors: Harman International Industries, Inc.; Kenwood Corporation; Koss Corporation; Bang & Olufsen Holding a/s; Boston Acoustics, Inc.; Cambridge SoundWorks, Inc.; Carver Corporation; Cerwin-Vega Inc.; Jamo A/S; Matsushita Electric Industrial Co., Ltd.; Koninklijke Philips Electronics N.V.; Pioneer Electronic Corporation; Polk Audio, Inc.; Recoton Corporation; Snell Acoustics Inc.; Sony Corporation; Telex Communications, Inc.

Chronology

• Key Dates:

• 1964: Amar G. Bose founds Bose Corporation.
• 1968: Company introduces the 901 direct/reflecting loudspeaker.
• 1970s:Research into car stereos begins.
• 1972: Bose begins selling loudspeakers for professional musicians.
• 1983: Company loses libel lawsuit against Consumer Reports magazine, at the U.S. Supreme Court level.
• 1984: Acoustic Wave Music System is introduced.
• 1990: Lifestyle speaker systems are introduced.
• 1993: The Bose Wave radio makes its debut.
• 1997: New corporate headquarters building is dedicated at 'The Mountain.'
• 1999: Company launches online sales from its web site.