CASE 22 HERMAN MILLER INC.: THE REINVENTION AND RENEWAL OF AN ICONIC MANUFACTURER OF OFFICE FURNITURE
Dr. E. Escobedo
August 15, 2013
Herman Miller, Inc. is primarily concentrated in the business and institutional market. Herman Miller is one of the leading players in the US office furniture industry with a 12% market share. Over the last several years, the entire industry has experienced significant declines in sales due to poor macroeconomic conditions. However, Herman Miller has managed to outperform most of its competitors in terms of profitability, illustrated through strong operating margins and return on sales. Herman Miller has a strong reputation for high quality, innovative products, strong customer service, high customization, and reliability. This strong brand equity enables the company to leverage its brand strength across different market segments, leading to extended customer reach I have analyzed the company and the industry, and have chosen the best strategy to expand customer reach, and increase sales revenue. My analysis chosen will consist of a three-year implementation plan that will bolster sales revenue and expand the company’s customer base. Herman Miller Inc. internal environment brings to light the following strengths and weaknesses, threats, and opportunities.
The $1.3 billion manufacturer of office furniture is known for its distinctive innovation skills and management methods. The following list of strengths elaborates on the company’s distinguishing capabilities.
Innovative products and processes – Herman Miller has led the industry with many ground-breaking developments, such as the first open-plan modular office system, the first seating configuration scientifically based on ergonomic principles, and cradle-to-cradle environmentally friendly product construction. Organizational culture and value system – The company’s culture is built on an empowered workforce and human resource practices that acknowledge the special talents and potential of all individuals, utilize committee-oriented collaboration to generate improvement ideas, encourage risk-taking, and exemplify shared sacrifice. Herman Miller’s codified values serve to unite employees, build productive relationships, and advocate employee-driven community contributions. Its “Business as Unusual” philosophy expands performance beyond the confines of measurable capabilities. Human resource and compensation policies – The company’s HR practices, such as promoting from within, emphasizing education and training, providing generous pay, benefit, and retirement packages, linking universal profit-sharing and bonus plans to corporate performance and values, and promoting employee stock ownership effectively keep employee retention above 98% and develop a high-value, knowledge-based workforce. High-profile and research-driven product design – Herman Miller’s long-held, inventive design capabilities have produced revolutionary, winning furniture designs recognized by the art community, Time magazine decade and century awards, industrial designers, and international groups.
The company’s financial management practices are relatively conservative during normal economic times. Typically ahead of the industry in terms of profitability, stock market value, and leverage ratios, Herman Miller is currently experiencing serious financial pressure resulting from the recent domestic recession. Despite actions to sell 3 million stock shares, reduce dividends per share by 70%, and eliminate all capital expenditures, the company’s debt-to-equity ratio remains high. At 3.81, the debt-to-equity ratio indicates a substantial level of debt being used to finance growth and is higher than levels typically observed even in capital intensive industries (which can be above 2.0). Cash is down 30% in the past year (from $193 million to $135 million), and...
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