Case 22: Herman Miller

Topics: Gross profit margin, Profit, Profit margin Pages: 5 (1618 words) Published: April 25, 2012
Case 22: Herman Miller Inc.
History- Herman Miller’s roots go back to 1905 and the Star Furniture Company, a manufacturer of traditional-style bedroom suites in Zeeland, Michigan. In 1909 the company was renamed Michigan Star Furniture Company and hired Dirk Jan De Pree as a clerk. De Pree became president in 1919 and four years later convinced his father-in-law, Herman Miller, to purchase the majority of shares; De Pree renamed the company Herman Miller Furniture Company in recognition of Miller’s support.

1. Describe Herman Miller’s strategy. Is there evidence it has produced a competitive advantage and good financial performance? Explain. Herman Miller’s strategy is a growth strategy, through innovative products and production processes that focuses on renewal and reinvention. There is evidence that HMI’s strategy has produced a competitive advantage and financial performance. HMI expanded overseas and had a large market. HMI used a system of lean manufacturing techniques referred to as the Herman Miller Production System (HMPS). The HMOs strove to maintain efficiencies and cost savings by minimizing the amount of inventory on hand through a just-in-time process. A key element of HMI’s manufacturing strategy was to limit fixed production costs by outsourcing component parts from strategic suppliers. This strategy allowed the company to increase the variable nature of its cost structure while retaining proprietary control over those production processes that it believed to provide a competitive advantage. In 1996 due to high prices and long lead times, Herman Miller’s IMT (Integrated Materials Technology) leaders decided to hire the Toyota Supplier Support Center, which was the consulting arm of automaker Toyota. With the help and ideas of everyone from IMT and the Toyota supplier support center, improvements were made such as a decrease in quality defects in parts per million, which decreased from 9,000 in 2000 to 1,500 in 2006. Also on-time shipments improved from 80 percent to 100 percent and safety incidents per 100 employees dropped from 10 to 3 per year. 2. How have the company’s values shaped its strategy and approach to strategy execution? Provide illustrations of how these values are reflected in company policies.

HMI has codified its long-practiced organizational values and published them on its website in 2005 on a page titled “What We Believe.” Those beliefs were intended as a basis for uniting all employees, building relationships, and contributing to communities. HMI’s values are reflected in the company’s policies through the organizational values, which consist of: curiosity and exploration, engagement, performance, inclusiveness, design, foundations, a better world, and transparency. All of HMI’s employees were expected to live those values. Because of these values that were set for employees to live by, Herman Miller Inc. was able to create and maintain a profitable business that fit perfectly with the strategic approach they were taking. Also, it would make for a more comfortable feel in the workplace.

3. What is your evaluation of HMI’s financial performance? How does its performance compare to prior years? the competition? In 1930, the United States was in the Great Depression and HMI was in financial trouble. By 1990, HMI’s sales were approximately $1 billion annually. In 2000 and 2001 HMI has record profits and sales, but after the terrorist attacks of September 11, 2001 shook the economy, HMI’s sales dropped by 34% from more than $2.2 billion in 2001 to less than $1.5 billion in 2002. In the same two years, the company saw a decline in profits from a positive $144 million to a negative $56 million. HMI returned to profitability in 2003 and sales and profits began to climb from 2003 to 2008. In 2009 HMI was hit by the recession and sales dropped by 19%, from approximately $2.0 billion in 2008 to approximately $1.6 billion in 2009. The operating profit margin for 2010 was 4.06%,...
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