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Herman Miller Inc. Exploratory Essay


Given its position as a mass distributor of furniture products, Herman Miller needed to improve its marketing strategy to access a higher number of targetable market segments. Although cost cutting has been a historically reliable strategy in reviving profit levels, it may not help in maintaining competitiveness.

Some of the funds that had been invested in research and development would have been better suited in funding a more aggressive marketing strategy. For instance, creating infomercials for the new product designs can make a significant impact to the market’s acceptance of new product concepts in an affordable way.

The bargaining power of consumers is now much greater given the decreasing levels of demand that the furniture industry is facing. The bargaining power of suppliers has also increased since the cost of imported raw materials seems to have risen. This means that unilaterally all competitors in the market will be forced to give up the advantage of having better terms with suppliers.

There is a low threat of new entrants into this particular market due to the well placed market share that each successful firm has already accrued. The threat of substitute products and services is however the highest factor for competitiveness in this industry. The furniture industry faces a great threat in its corporate client base due to the increased spread of telecommuting as an option to the traditional office work desk culture.

One weakness of the company’s sales strategy was the excessive use of innovative product advancement to increase demand for their product line up. Again, the green marketing techniques that were used targeted minor segments of their clientele. The creation of a website and a 3-D design application for the residential market was highly commendable

Year 2010 2009 2008 2007 2006
Quick ratio 0.93 1.25 1.22 0.96 0.99
Asset Turnover ratio 1.72 2.10 2.78 2.88 2.60
Debt-to-equity ratio 8.62 94.91 32.47 3.29 3.83

The company’s growth seems to have grown volatile with increased debts but this drastically changed in 2010.

Southwest

The strategy used by Southwest Airline is heavily dependent on volume maximization. To achieve this, the firm took on a policy of charging highly competitive fares. Later on, adding promotional advertising into their marketing strategy helped them pull in a larger pool of customers.

The company chose to employing a set of attractive cabin attendants to serve travelers as a means of retaining and growing their customer. What would thus be recommended is the formulation of recruitment policies that encourage the advancement of personal talents and skills possessed by new employees in addition to attributes such as attitude.

New entrants in the airline business present a weak threat in terms of competition. This is chiefly because of the huge start up costs of even serving short interstate routes and secondly because of the power that existing firms use to block entry through legal intervention.

The threat of substitutes such as road and railway line is moderate due to the efficiencies provided by air travel as an alternative to connecting between destinations. There is a strong bargaining power owned by customers and this is shown by the effect that the lowered flight rates introduced by Southwest airlines had on the industry as a whole.

The main strength of Southwest’s sales and marketing strategy was that it had both cost differentiation and product differentiation angles. The fares charged for most flights were lower than those of all other airlines and in situations where these charges were contested, the firm improved on their product by adding offers such as the free scotch offer for Dallas Houston passengers who paid a 26 dollar fare instead of 13 dollars.

Year 2009 2008 2007 2006 2005
Quick ratio 4.29 4.02 8.18 8.59 10.05
Asset Turnover ratio 0.73 0.78 0.59 0.67 0.54
Debt-to-equity ratio 0.61 0.71 0.30 0.24 0.21

The quick ratio and the asset turnover ratio show improved performance by Southwest airlines in terms of its ability to settle debt and convert revenue from assets. On the other hand, a general increase in debt burden on stockholders can be observed as the firm expanded its operations.

Starbucks

Starbucks have a sales and marketing strategy that has focused more on delivering on quality and distribution channels. A nationwide advertising strategy would have helped in new market penetration operations e.g. in the case of the stores in Chicago. A management training program for employees in different Starbucks location would help improve the performance of stores and steer expansion plans faster.

The threat of new entrants is strong in the restaurant industry in general. It did not take a long while before Schultz himself had managed to match the success of Starbucks with his own start up.

The threat of substitute products is also strong due to the existing trends for consumption of other hot beverages such as tea and chocolate. Likewise, the bargaining power of customers is strong considering the many other options they have with substitute products. The bargaining power of suppliers is most prominent amongst the competitive forces. This is because of the high demand for quality coffee by consumers.

Year 2009 2008 2007 2006 2005
Quick ratio 2.62 1.64 1.56 1.68 2.33
Asset Turnover ratio 1.75 1.83 1.76 1.76 1.81
Debt-to-equity ratio 0.70 1.39 1.50 1.18 0.72

The firm’s quick ratio was at its lowest in 2007 and at its highest in 2009 showing that Starbucks is losing its liquidity. The asset turnover has been steady while the debt burden on stockholders has reverted to its former low which is a sign of improvement in the manner in which growth strategies are being financed.

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IvyPanda. (2019) 'Herman Miller Inc'. 5 June.

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