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Herman Miller Case

In: Business and Management

Submitted By bigshow3010
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Herman Miller, Inc.

Traditional Case Study

June 18th 2012

David Maillie
Andrew Hatfield-O’Hern
Andrew Withers
Isil Ecevit
Nawaf Nizamudeen

Current Status
Herman Miller began in Zeeland Michigan as a manufacturer of high quality furniture and bedroom suites entitled the Star Furniture Co. In 1909 the company’s name was switched to the Michigan Star Furniture Company. At the same time, Dirk Jan De Pree was hired as a clerk. Just 10 years later, Mr. De Pree became president of the company. Mr. De Pree saw great potential with the company and soon after talked his father-in-law, Herman Miller, to purchase the company by buying up the majority (51%) of the company stock in 1923. The company name was then changed and named after Herman Miller and remains that way today.
Early on, Herman Miller became a company that treated workers very differently. Most manufacturing companies, De Pree stressed that all workers are important individuals with special talents and potential (Adams, S. B., Manz, C. C., Manz, K., Shipper, F. (2010). He saw that workers were more than just hourly labor and knew that if he could encourage them to expand their horizons and broaden their knowledge and interests that the company would also benefit from this.
In the early 1930s, the Herman Miller company was known for producing high-quality, traditional furniture. However, this was the time of the Great Depression. A very trying time with unemployment rates as high as 25% in the United States and as high as 33% or more in other countries (Unemployment Statistics During the Great Depression, n.d.). The demand for Herman Miller's high-quality, traditional furniture plummeted. Sales dropped sharply and the company's viability was at stake. Mr. De Pree did not want the company to go under and ended up working out a deal with a modern designer named Gilbert Rhode.

Gilbert Rhode’s designs were very different from the traditional furniture that Herman Miller had been known for. These new designs were less ornate and very minimalistic. The focus was on usefulness and purpose. At first, De Pree was not agreeable with many of Rhode’s designs, but eventually he saw their usefulness and that there would be a market for these new, modern furniture designs. From that point onward, Herman Miller was forever changed as it no longer offered traditional design furniture. Instead it changed its offerings completely to the new modern furniture designs from Mr. Rhode.
In 1942 Herman Miller embarked on a new mission of building office furniture with designs from Mr. Rhode. Unfortunately, in 1944 Gilbert Rhode died. It took a while for Mr. De Pree to find a worthy replacement for Mr. Rhode. In 1945 he hired architect George Nelson as director of design and in 1946 he hired the husband and wife team of Charles and Ray Eames as designers. This team with George Nelson and Mr. and Mrs. Eames was world class and their modern furniture designs have been featured as exhibits in museums around the world and some of their designs have even become part of the New York Museum of Modern Art's permanent collection.
In the 1950s, the company introduced fiberglass molded chairs which had never been seen in the industry before. This was followed by the wildly popular (and still a hot selling item today) Eames lounge chair. The design of the Eames chair became synonymous with the Herman Miller name. When one saw the finally crafted, curved wood legs and seat rest you knew you were looking at a Herman Miller design. The Eames lounge chair was a best seller right from the beginning. It is still a wonderful design that you will see in executive offices and fine homes today.
In the 1960s, Mr. De Pree was replaced as president and chief executive officer by his son, Hugh De Pree whom was no less interested in carrying on the same beliefs and ideas as his father. In 1962, the Herman Miller Research Division was created in Ann Arbor, Michigan. Soon after, the Action Office Line emerged and the first office modular design or cubicle was created. This was followed by the famous Ergon (ergonomically designed chair) from the 1970’s and the Aeron chair which was also added to the New York Museum of modern Art’s permanent design collection.
In 1994 Herman Miller ventured back into the consumer or residential market with a product line called Herman Miller for the Home. This product line reintroduced many of their earlier modern designs from Rhode, Nelson and Charles and Ray Eames. These products were sold solely through the website

Today, Herman Miller is traded on the NASDAQ Exchange under the symbol MLHR. They had over 1.75 billion in sales in the past 12 months and have seen their sales and income grown over 25% and 150% respectively over the same time period and is still recovering from the 2008 global recession (Herman Miller 10-K report, 2012). The company’s dedication to integrity in product quality and business relationships has developed through the years through partnerships with many of the world’s most outstanding designers.

Headquartered in Zeeland, Michigan, Herman Miller has worldwide operations, sales offices, dealers, licensees, and customers in more than 110 countries on 7 continents. The company’s manufacturing facilities are located in the United States, China, Italy, and the United Kingdom. The company operates through several focused businesses, brands, and distribution channels, including Herman Miller, Herman Miller Healthcare, Nemschoff, Brandrud, Geiger International, Meridian, Colebrook Bosson Saunders (CBS), the Herman Miller Collection, Herman Miller for the Home and independently owned dealerships.
Since its early days with Mr. De Pree, Herman Miller has kept with its philosophy of emphasizing the individual and their importance to the company. This emphasis on the individual and the ethical treatment of workers has helped transform Herman Miller into the great company it is today (100 Best Companies to Work For, 2010). Herman Miller is also a very ethical and green company. They have enacted many initiatives over the years to increase efficiency and environmental friendliness. For example, in 1981 their Energy Center used steam power and electrical power they generated from burning waste to run their 1 million square foot facility. It is obvious that Herman Miller is a very green and environmentally conscious company. The company is also an internationally recognized innovator in contemporary interior furnishings, furniture and systems, personal work accessories, related technologies, and strategic services. Many of their furniture designs are works of art in their own right and are on permanent display in museums around the world. Customers have come to associate the name and brand of Herman Miller with quality, modern design and usefulness. The Herman Miller mission statement states, “Herman Miller works for a better world around you--by designing furnishings and related services that improve the human experience wherever people work, heal, learn, and live.."
The company specializes in designing useful, office furniture and related services and sees this as being the mainstay of their business and its profitability. Herman Miller wants to be known for making furniture that people can live with and use with comfort and functionality. In their vision statement, “… we believe the future quality of human life is dependent on both economic vitality and a healthy, sustainable natural environment … [Therefore] we have launched ‘Perfect Vision,” a broad initiative that sets significant sustainability targets for the year 2020”. They show that they place the individual and the environment above the company. Rather than envisioning greater profitability, market share or something similar, they basically want to make the world a better place to live in for everyone.
Herman Miller believes in the old adage of treating others the way you would want to have them treat you. Treating employees as their number one asset, giving customers high quality and useful furniture, and being environmentally conscious are vitally important to the company and its corporate culture. Eventually these beliefs will make them the market share leader and result in a larger proportion of return customers, sales and profits.
Herman Miller has always emphasized design and usefulness of their furniture offerings. Goals for the future will be mentioned in the strategies section of this report. With respect to current goals, the first one is environmental advocacy. Herman Miller is very interested in improving their work environment from both an internal and external point of view. The second goal is to be innovative and pay attention to details. The Herman Miller name, since the 1940’s, has been associated with modern design based on usefulness and has won many awards over the years for this.
The third goal is quality. Herman Miller designs and creates furniture that is not only an art piece, but an art piece that is meant to be used. The fourth goal is performance. Herman Miller expects 100% effort from every team member (employees are all considered team members at Herman Miller) every day. And finally, they also want to grow and gain market share in the furniture industry on both national and international levels.

Internal company analysis
Financial analysis
After analyzing the financials of Herman Miller Inc, of which were collected from various sources, it is now safe to draw some conclusions as well as make some predictions. As it is well known, Herman Miller did suffer in certain areas during the recession. They must have decided to do something right because they still are the third largest player in the office furniture industry with $1.65 billion in global sales, an installed base of $8 billion in the US and 12% of the industry's market share. ("MLHR INCOME", 2012)

Gross Profit margin= 33.57%
A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. (“Gross Profit Margin”, 2012) Herman Miller earned $399.80 million in revenue and gross profit of $134.20 million. In 2012 the profit margin has dropped from 34.3 to 33.57. Investors seem to take notice to this drop.

Return on Assets= 9.8%
This is an indicator of how profitable a company is relative to its total assets. ROA gives information about how efficient management is at using its assets to generate earnings.
ROA tells you what earnings were generated from invested capital assets. ("Herman Miller Financials", 1999) They earned 9.8 cents for each $1 of assets which means they are somewhat asset heavy. In 2007 the Return was 19.4%. In 2008 it was 21.0%, In 2009 it was 8.8%. In 2010 it dipped down to 3.7 % and rose back to 8.9% in 2011. We are seeing its return on assets slowly work its way back up since the recession.

Return on Equity= 36.54%
This measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity. ROE shows how well a company uses investment funds to generate earnings growth. (“WebFinance, Inc”, 2012) ROEs between 15% and 20% are generally considered good and as we see the ROE of 36.54%. In 2007 the return on equity was 87.9%, in 2008 it was 170.5%. In 2009 it rose to 433.1 %. When 2010 and 2011 came around they would drop back down to 164.2 % and 49.7%.

Current Ratio= 2.206
This ratio is an indication of a company's ability to meet short-term debt obligations. The higher the ratio, the more liquid the company is. Being that its CR is over 2, this means they have over twice as many assets as liabilities. (“WebFinance, Inc”, 2012) The current ratios over the past 5 years have seemed to stay stable with it in 2007 at 1.4, 2008 and 2009 had a 1.6 ratio. In 2010 it dropped down to 1.3 but rose to 1.8 in 2011, with it on the rise as we see in 2012.

Quick Ratio= 1.3
This is measure of a company's liquidity and ability to meet its financial obligations. This ratio is a more conservative measure of liquidity than the current ratio. Quick ratio is viewed as a sign of company's financial strength or weakness. A higher quick ratio means a more liquid current position. (“WebFinance, Inc”, 2012) This ratio being 1.3 (over 1) is a sign that the company does not have to rely on inventory to pay its bills. Herman Miller has been able to maintain a good quick ratio over the past 5 years.

Debt to Equity Ratio= 0.929
This is the measure of a company's financial leverage. Investing in a company with a higher debt to equity ratio may be riskier, especially in times of rising interest rates because the additional interest that has to be paid out for the debt. (“WebFinance, Inc”, 2012) Their Debt Equity Ratio has been steady decreasing over the years. Their debt to equity ratio in 2007 was at an all-time low with 1.1. In 2008 the ratio would jump up 15.2 points, going to 16.3. In 2009 it jumped up even more going to 37.8. After 2009 things would start creeping down. The debt to equity ratio in 2010 was 2.5 and 2011was 0.9972. . They are headed in the right direction with it coming down every year since the economic downturn.

Inventory Turnover= 17.3
It is an activity/ efficiency ratio and it measures how many times per period a business sells and replaces its inventory again. This ratio is used to measure the inventory management efficiency of a business. A higher value indicates better performance and lower value means inefficiency in controlling inventory levels. A lower inventory turnover ratio may be an indication of overstocking which may pose risk of obsolescence and increased inventory holding costs. ("Herman Miller Financials", 1999) However, a very high turnover may result in loss of sales due to inventory shortage. The inventory turnover tells us that an average one dollar invested in stock will turn into 17.3 times in sales. 20072008200920102011 | 24.723.623.918.717.9 |

Price to Earnings Ratio= 12.70
This is the most common measure of how expensive a stock is. A higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio. (“WebFinance, Inc”, 2012) The P/E ratio can be seen as being expressed in years, in the sense that it shows the number of years of earnings which would be required to pay back the purchase price, ignoring inflation. It earns growth and the time value of money.

Major Strengths

Environmental stewardship:
Herman miller has out lined a set of directives entitled the Perfect Vision Goals to take control of the impact the company has on the natural environment. The purpose of these goals involves reducing all negative environmental factors to 0 by 2020(Herman Miller, 2012). These policies help Herman Miller maintain its brand image as a premier leader in providing environmentally green furniture and help set the company apart from its industry peers.
Employee satisfaction and loyalty:
The company prides itself on taking the initiative to elicit employee opinions and suggestions. The initiatives encourage openness and communication through the entire hierarchy. CEO Brian Walker passionately encourages openness and communication by discussing strategy and answering employee questions at annual meetings. In recent economic times the board of directors often took salary cuts before employees did (). This can explain reduced employee turnover over the past 3 years and shows increased employee retention (Herman Miller 2011, 2011). This action by the Board has helped to dramatically reduce human resource costs. Forward vertical integration & operational intelligence:
Herman Miller has actively reduced prices to the end user through vertical forward integration by integrating its core competence of design and manufacturing. Its operational intelligence stems from a reduction in lead times and years of expertise. Unmatched industry warranty:
Herman Miller emphasizes extreme quality standards and thus provides a 100% warranty that covers parts and labor costs for 12 years from the original date of sale. This warranty is unmatched in the furniture industry.
Strong commitments to R&D:
The company has constantly challenged the norms of the office furniture industry with its designs by trying to combine ergonomic principles with environmentally sound objectives and modern design. This gives HM a core competence in ergonomic furniture design and manufacture.
Costs of environmental advocacy:
Herman Miller’s environmental initiatives are a key component in the way the company conducts business. However, in the short to medium term these goals will lead to higher prices in the end product and may cause a substantial drop in sales during a recession.
Poor geographic diversity:
The majority (60%) of Herman Miller’s revenue stems from large companies in the U.S. that require office furniture (WIKI ANALYSIS, 2012). The company should diversify its revenue streams into markets outside the U.S. Poor vertical backward integration:
The company currently has no control over its raw materials and relies heavily on suppliers to make sure their inventory is fully stocked. Furthermore, this lack of control in base raw materials reduces Herman Millers ability to control costs and favours.
Excess cash reserves:
Herman Miller Currently has over 250 million dollars in cash or cash equivalent reserves (Annual report, 2012). This is not an optimal use of these funds.
External environmental analysis
General economy
With the US economy moving sluggishly, the outlook for the commercial furniture industry seems to be stagnant for the rest of 2012 to 2013 (Cranes Michigan Business report). However, there is much indecisiveness over the next 5 years because there is strong argument for both a bullish and bearish perspective. Arguments for bullish sentiment involve looking at history and observing periods of recession are often followed by periods of economic boom. This would lead to increased demand for office furniture due to an increase in business activity. However, sluggish US growth coupled with political uncertainty, turmoil in Europe and a general slowdown in emerging economies point to a bearish outlook in which case Herman Miller may start to see a steep reduction in demand for its high priced furniture. Furthermore, the state of the economy and US equities in particular affect Herman Miller employee pensions because a significant amount of employee pensions are invested in US equities (Herman Miller 10-K, 2012).

Industry and competition
Due to the proximity of Herman Miller’s operations to its rivals ( i.e most major players are located in Michigan, the company may suffer from information leaks on new produces, designs and core technical design principles to rivals. This can put Herman Miller at a strong disadvantage because the company will spend time and money on R&D and will have to factor those costs in to its final price while other manufactures can undercut Herman Miller by charging a lower price to customers due to lower costs. Herman Miller does not have competition only locally. a significant source of illegal competition stems from copyright and patent infringement in Chinese markets. These manufactures often create poor quality replicas of Herman Miller products and sell these products at a significant discount.

There is a growing trend in society that demands corporations be held accountable for the damage they cause to the environment. With the rise in social awareness on environmental issues consumers are demanding more environmentally friendly products from companies. This rise in social environmental consciousness is an opportunity that could catapult Herman Miller further ahead of its competition.
With the current political climate and propensity for politicians to introduce new regulations .Many companies are holding onto vast reserves of cash. Furthermore, with the new regulations regarding carbon tax credits and pollution caps, companies are being forced to take part in in the carbon credit exchange system (Watson ,P.J., 2009) and provide opportunities for green companies like Herman Miller.
Recent advances in internet related technologies (i.e. VPNs, AutoCAD, etc.) have made it so more designers and other employees are able to work remotely and securely from home. This is a growing trend in all facets of business (Chatzky, J.,2005).

Natural resources
The current price of raw materials is in constant flux due to market volatility. HM heavily relies on its suppliers such as timber processors, plastic molders, etc. This can severely affect output if deliveries from suppliers do not happen on time.
There is a growing trend in global, corporate social responsibility. Many companies are switching to renewable energy sources. In the next few years, the availability and affordability of renewable energy sources will continue to grow corresponding to this trend. Furthermore, the carbon tax credit system will assist companies using renewable sources of energy like Herman Miller to enjoy deductions in corporate taxes.
Strategies for the Future
Future Strategy
Currently the world is in a global crisis and it is common knowledge that the office segment is negatively impacted by recessions. It is important that companies like Herman Miller (HM) that specialize in office products and designs become more diversified into business sectors that are less likely to be impacted by recessions and financial downturns. The idea of becoming recession proof would be ideal, but is unrealistic in this situation. The main objectives are for Herman Miller to diversify their product offerings to the impact of recessions and downturns and maintain its ability to reinvent and renew itself.

Goals * To lessen impact of recessions and financial downturns. * To diversify into consumer markets at home and abroad. * To increase control over Herman Miller’s value chain through backward integration to 90% or more. * Possible diversification into two or more profit streams. * To better utilize the $228 million in cash reserves.
With that in mind, research has evidenced that the consumer market for furniture and especially designer furniture is less affected by financial downturns and recessions. Therefore, one ideal solution would be to utilize distribution networks and resources currently in place at other companies through joint ventures with established furniture manufacturers. Furniture manufacturers like Ashley Furniture Industries Inc., Ethan Allen Interiors Inc., Bassett Furniture Industries Inc., and other similar companies. These companies already have well established customer bases and distribution networks and HM could establish a mutually beneficial partnership with them based on white labeling. Another great solution would be for HM to backward integrate by investing in timberlands and wood processing companies. Both of these strategies would make HM more resilient to financial downturns and at the same time maintain their great brand name, image and corporate culture.
With white labeling, instead of using the Herman Miller name, HM would sign a non-compete and disclosure agreement with each company it deals with and then would manufacture furniture based on each companies designs and requirements. This furniture and related designs would then be sold under the respective company’s brand name(s). This would help diversify HM into consumer markets at home and abroad. It would also provide these other businesses with access to Herman Miller’s internationally renowned expertise in producing exceptional high quality designed furniture. There’s a reason why Herman Miller has a 12 year, 100% warranty and these other companies don’t – Herman Miller is synonymous with high quality and workmanship.
Changing Herman Miller’s business model slightly to incorporate white labeling and utilizing manufacturers with already established distribution networks would diversify the company. Currently companies like Ethan Allen are experiencing similar to or greater than 12% increases in sales whereas the office furniture segment is closer to being flat at this time. White labeling would help minimize the financial impact of downturns because retailers of consumer furniture and related durable goods like Ethan Allen are experiencing higher rates of growth and sales at the close of 2011 (Yin, 2012) that Herman Miller can share in. This would enable HM to have a faster turnaround and recovery from recessions and financial downturn.
At the same time HM would also benefit from the larger marketing efforts of the consumer furniture companies as a whole. Another added benefit is a reduction in inventory. These white label products would be ordered and paid for upfront by these companies and shipped out FOB origin. So, once the products are manufactured they would be loaded in the company’s trucks and shipped out resulting in minimal inventory levels. White labeling would increase cash flow, better use resources and reduce inventory carrying costs. The white labeling process would have lower costs because it is not associated with the Herman Miller brand and thus would not require strict adhesion to the costly HM environmental advocacy initiatives. All of which would benefit the bottom line at HM. Also, if HM decides to venture further into the consumer goods market they will now have a much stronger foothold and be more established with their operations. They would also gain an insider’s perspective from working with multiple consumer furniture companies or manufacturers. At the same time, Herman Miller has averaged $250 million or so in cash reserves over the past five years (currently at $228 million according to the HM 2011 10-K filing) and some of this money would be better utilized by investing in backward integration. This issue could best be served by purchasing a wood processing company and timber producing lands. There are several prospective hard wood processing companies all for sale around $10 - $29 million (Merger Network, 2012). There is one for sale located near HM headquarters in Wisconsin that has an established commercial customer base of 1,100 customers that goes back 30 years, mill plant and showroom, and has always had a positive cash flow.
There are numerous hardwood timberlands available for purchase in the nearby Wisconsin and Michigan areas. These are all in the range of $2,000 to $3,000 per acre and HM could easily purchase quite a few of these (Landflip, 2012). In this market there is much room for negotiation and HM could get a lot of premium timberland with oak, cherry, walnut, other various hardwoods and pine. According to the Woodworking Network (Woodworking Network, 2012) prices of hardwood lumber have dropped 17% in the past few weeks due to slowing demand from China as its economy is slowing. This could indicate a prime buying time to acquire distressed timberlands at reduced prices. Buying timberlands would not only vertically integrate HM further, but lock in current lumber prices and remove dependencies on suppliers and the market. Additionally, Hardwood lumber has a very short shelf life and thusly is very recession proof and would help HM in financial downturns.
This strategy of backward vertical integrating would benefit HM by lowering costs of lumber and fine woods they use in production along with processing costs. This would also give HM more power over their suppliers and open up new sources and avenues of business through sales of hardwood lumber with already established cash flows (over 30 years in one instance). As an added plus, timber producing properties have a very positive track record of returns over the past 25 years or more. Timberlands have been known to consistently provide returns in excess of 10% per year or more (Woodworking Network, 2012). This would definitely increase the bottom line at HM and due to the current economic downturn, these wood processing companies and timber producing properties could be acquired cheaply.
Once all the above two strategies (white labeling and backwards integration into timberland and hardwood processing) are implemented successfully in the U.S. and are shown to create substantial savings or generate additional revenues then these strategies will be taken elsewhere to include China, Italy, Brazil, etc. These strategies will use Herman Miller’s strengths and address all of the current weaknesses listed earlier on in the above case.

Herman miller Financial statements 2011 (10-K)

(Annual Report 2012)

Major Policies
Nature of Product Line:
Herman Miller focuses mainly on modern furniture with a heavy emphasis on office furniture and modular designs.
Extent of Market Penetration:
60% of Herman Miller revenue stems from U.S sales and is from large companies that require office furniture. The company has manufacturing and distribution facilities in Michigan, Georgia, Wisconsin, United Kingdom, China and Italy. Their customers are primarily businesses, hospitals and colleges. HM sells products internationally through wholly owned subsidiaries and branches in various countries including Canada, Mexico, Brazil, France, Germany, Italy, Netherlands, Japan, Australia, Singapore, China and India.
Channels of Distribution:
HM sets up their distribution channels with one or two factories and a national headquarters in each country they do business in. The headquarters usually houses the customer showroom and design center specific to the region. For example, in China HM has two production facilities in Ningbo and the showroom and offices are in Shanghai. Customers can then visit the showroom and place orders there or from online. Using mass customization orders are then processed shipped and delivered to the customer.
Promotion Methods:
Henry Miller promotes its furniture designs and products through online advertising on various home and news related websites. They also place advertisements in leading furniture and design magazines like Architectural Digest. Many of the furniture designs are on permanent display in leading art galleries and museums like the New York Metropolitan Museum of Art.
HM does not really compete on price. Their products are highly designed, unique pieces of art that are also functional and comfortable. Their products are priced for the upper scale and affluent business market and clientele. Prices range from $600 for a small Aeron chair on up to $6,500 for a royal leather Eames chair and ottoman. Herman Miller is big on customer satisfaction and provides a 100% warranty that covers parts and labor for 12 years from the original date of sale.
Non-price competition:
Rather than competing on price HM offers a substantial 12 year warranty as described above. Furthermore HM competes on the parameters of modern design, ergonomics, quality and environmental consciousness and sustainability.
Market Research:
HM routinely tries to solve problems that relate to ergonomics and functionality with a hint of modernism. HM routinely does market research to look into physical and virtual collaborative work behaviors to find ideas and opportunities for future designs and product lines.
HM holds itself strictly to compliance and meets or exceed all environmental laws and regulations on an international level. This helps to differentiate and brand the Herman Miller name and its furniture designs. Herman Miller is really big on green marketing and uses it to sell its products.
Lowering Advertising Costs:
HM uses cooperative advertising with its strategic partners where possible to reduce costs.
Expanding Offerings:
HM will use the Accessories Team (outgrowth of Project Purple) and other resources as necessary to increase product offerings and profits through the use of accessories.

Product Offering Policy:
Modern design, quality and usefulness are the basis of their product line. HM prides itself on the decades of great furniture designs that the company still makes and markets today.
Limiting Costs:
It is important at HM to limit fixed production costs by outsourcing parts manufacture where it is markedly beneficial (must be outsourced with suppliers that meet HM’s ethical and environmental standards).
Type of Integration:
Herman Miller is vertically integrated as they do their own designs and manufacture their own furniture and office products. They have recently become horizontally integrated as they opened up a website through a separate business for consumers that offer some of their older designed furniture.
Board Equity stake requirement:
All directors must have an equity interest in the company and are encouraged to carry an amount equal to or greater than 3 times their annual compensation in company stock.
Employee Ownership:
All full-time employees after 1 month of employment share in ownership and profits of the company.
Empowerment of workers:
Workers at all levels are encouraged to come up with new ideas. Some of the company’s most valuable or biggest money saving ideas have come from the front line managers and employees.
Executive Responsibility Policy:
All executives will take a pay cut before salaried workers in times of hardship.
Compensation Based on Performance:
Most forms of compensation at HM are based either partially or wholly on performance.
R & D
Investing in R & D:
Research and Development is very important at HM. Regardless of the economy, even in downturns and recessions, investment into research and development is crucial to the success of HM.
At HM there are to be no boundaries. After the creation of HM’s Accessories Team ideas and the Purple Project (which was instituted during the dot-com downturn) research into areas that stretch beyond the normal areas of business was regularly encouraged.

Community Relations
It is very important to Herman Miller that it be as transparent as possible at all levels. All reports from employees and outsiders will be taken with due considerations with no fear of repercussions.
The belief at HM is that reputation is everything. Per the HM website, their reputation is a priceless asset. They are big on this and don’t want to do anything or be involved with any suppliers, etc. that could potentially tarnish their good name.


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...Introduction 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. We have analyzed the company and the industry, and we have chosen the best strategy to expand customer reach, expand Herman Miller’s healthcare market, and increase sales revenue. We have chosen a three-year implementation plan that will bolster sales revenue in the healthcare industry and expand the company’s customer base. Industry Analysis As part of our analysis of Herman Miller, we have analyzed the five forces that affect the office furniture and healthcare industries. The five forces include competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of suppliers and bargaining power of buyers. Competitive Rivalry Herman Miller operates in a highly......

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...Herman Miller, Inc. is a company that specializes in the production and manufacture of modern office furniture. The company began its reputation through product innovation and production processes which started in the 1920’s. In the path of their success, Herman Miller, Inc. has been able to pursue a path distinctively marked by reinvention and by renewal. I would say that in the beginning the company pursued a focused low-cost strategy. The initial items the company specialized in, is what the company perfected and grew to produce efficiently. However that was soon to change. This path was able to serve the company well for many a decade. With the passing of time the company instituted a Scanlon Plan which is a productivity incentive program that helps companies to find ways at being more productive in their product offering. This model helped the company a lot. With the usage of this the company then moved to having a differentiation strategy. They started to produce more products that were based on scientific observation and ergonomic principles…some of the same observations and principles that the company still utilizes today. In the reading of the case it was difficult for me to pinpoint exact issues in Herman Miller, Inc’s. functional departments (i.e., HRM, Accounting, Finance, Operations, etc). However in the area of human resource management this was actually a strength of the company. Being routinely listed on Fortune’s 100 Best Companies to Work for, applicants......

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...CASE 22 HERMAN MILLER INC.: THE REINVENTION AND RENEWAL OF AN ICONIC MANUFACTURER OF OFFICE FURNITURE For MGMT 599 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. Strengths The $1.3 billion manufacturer of office furniture is known for its distinctive innovation skills and management methods. The following list of strengths elaborates......

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...Question 1: Herman Miller’s Strategies: evidence on its competitive advantage and good financial performance 1. Corporate Strategy: Diversified Strategy From the headquarters of Herman Miller Inc., Curt Pullen talks amid the unmistakable pounding sounds and commotion associated with a construction work site about his company's plan to rebound from the recession. Pullen, the firm's executive vice president and president of North America, says the workers are installing new lower-height Herman Miller workstations designed to accommodate a growing trend in offices toward more open, collaborative environments. The new product, called Canvas, is part of the company's market-shift strategy after the demand for office furniture fell hard during the economic downturn. The plan also involves diversifying into the health care and academic furniture markets and more emphasis on emerging economies. The plan appears to be paying off. For the first time in nearly four years the company reported two consecutive quarters of double-digit percentage sales growth after releasing its second-quarter earnings statement on Dec 15th. Orders in the second quarter rose 34% to $462 million. CEO Brian Walker noted the company's expanded market reach as a contributing factor to growth. Significant increases occurred in international markets where sales rose 33%. In 2010 the company acquired UK-based ergonomic workstation manufacturer Colebrook Bosson Saunders and purchased......

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...Herman Miller Inc. 1. Herman Miller Inc. has constantly focused on a reinvention and renewal growth strategy. They have done multiple things over the past century that have kept them in business, surviving The great Depression, multiple recessions in the 20th century, and the dot-com bust in the 21st century. They have made many changes during the life of the company to try and continually improve and stay ahead of its competitors, hiring design experts from numerous places that were able to design award winning furniture. They have also made many business decisions that have enabled them to remain one of the best companies in the world year after year. They hired Toyota Supplier Support Center to improve its production and operations effectiveness along with a system of lean manufacturing techniques called the Herman Miller Performance System (HMPS). This system maintained savings by minimizing inventory on hand through a just-in-time process. Herman Miller believes its success in achieving operational excellence depends on motivation and thinking of its people to solve problems and drive improvement. There is evidence that HMI’s strategy has produced a competitive advantage and financial performance. HMI has expanded overseas and had a very large market for many years. 2. HMI’s values are reflected in the company’s policies through the organizational values, which consist of: curiosity and exploration, engagement, performance, inclusiveness, design,......

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...Herman Miller’s Overall Strategy: Herman Miller Inc. focuses on growth, by introducing innovative products. The company believes that in order to achieve operational excellence, the company needs to focus on employees’ motivation and problem solving process. Herman Miller concentrates on producing high quality products. The company is trying to reduce fixed manufacturing cost by outsourcing with their strategic suppliers, which helps controlling the company’s overall cost structure and accomplish a competitive advantage. The survival of Herman Miller when facing recession came from a flexible business strategy and plan. The company did well in developing new products and designs to broaden its activities. Herman Miller also tried to strengthen existing relationships with strategic suppliers. This strategy was important because it enabled Herman Miller Inc. to achieve world-class status in its industry. Herman Miller reduced manufacturing cost, inventory costs, and time saving due to high standard production. Those changes positively impacted Herman Miller sales. In order to meet the ever increasing demands of the business, it is important that the employees are equipped with such capabilities that enable them to do so. For this purpose, the formulation and building of employee’s capabilities will consist of the following strategy: The first step in this regard is to increase the knowledge that employees possess as there is increased value being placed on knowledge. The......

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...4. Herman Miller Inc., (HMI) was founded in 1905 as star furniture company and is one of the world’s largest manufacturers of office furniture. It has a net income in excess of $74 million on sales of $1.495 million and domestically the company has held sales growth consistently higher than the industry norms. The downturn for the company occurred from late 1980s to1992 during downsizing era in which the management of the company changed three times but now it has a stable management once again. , employing approximately 7500 employee owners worldwide out of which3500 are in West Michigan. The company is ranked as one of the best places to work in America. MI is a values driven company with a history of family ownership and a reputation for innovation in its relationship with employees as well as in its products. Its culture focuses on: the obligation of management to be a recipient of ideas from all employees, the importance of design and its principles in the development of products, employee participation and employee ownership. . To promote this culture, HMI has adopted measures such as ‘open book management’ approach and Silver parachute Plan. In recent years, the HR became somewhat disconnected from the needs and strategic direction of the business but soon transformed itself to work in harmony with the corporate strategy, thus adding value to the organization and its business goals.HR function of the firm was previously not aligned with business strategy but is now......

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...TO: BUS 470 Consultants FROM: Brian Walker RE: Comparison of financial performance with rivals DATE: April 4, 2012 Herman Miller is reviewing the adequacy of our current strategy and we are requesting your services for a specific part of the analysis. Please conduct an analysis of our financial performance to determine how well our strategy is working. Include in your analysis comparisons with our principal rival(s), an analysis of the strategic factors leading to the financial performance, and, if relevant, an analysis of the strategic implementation. Please provide make specific, actionable recommendations based on your analysis of the facts. Provide a physical copy of your memo on or before April 18, 2012. As part of your analysis, please complete the following tables and append them to your two page memo in response to this request. Please use percentages for each of the criteria. Fiscal year ending | | 2010 | 2009 | 2008 | 2007 | 2006 | Net sales | 100% | 100% | 100% | 100% | 100% | Cost of sales | | | | | | Gross margin | | | | | | Operating expenses | | | | | | Selling, General and Administrative | | | | | | Restructuring | | | | | | Design and research | | | | | | Total operating expenses | | | | | | Other expenses (income) | | | | | | Interest expense | | | | | | Interest and other investments | | | | | | Other, net | | | | | | Earnings before interest and taxes | |...

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