Herman Miller, Inc.
Traditional Case Study
June 18th 2012
David Maillie
Andrew Hatfield-O’Hern
Andrew Withers
Isil Ecevit
Nawaf Nizamudeen
Customer: Herman Miller
1. Current Status
1.1. History
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.
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Customer: Herman Miller
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.
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Customer: Herman Miller
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 hmhome.com.
1.2. Present
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.
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Customer: Herman Miller
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
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Customer: Herman Miller
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.
1.3. Goals
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.
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Customer: Herman Miller
2. Internal company analysis
2.1. 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)
PROFITABILITY
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.
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Customer: Herman Miller
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
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Customer: Herman Miller
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%.
LIQUIDITY
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.
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Customer: Herman Miller
LEVERAGE
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.
OTHER IMPACTFUL ACTIVITY AND FINANCIAL RATIOS
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.
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Customer: Herman Miller
2007
24.7
2008
23.6
2009
23.9
2010
18.7
2011
17.9
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.
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Customer: Herman Miller
3. 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.
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Customer: Herman Miller
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.
4. Weakness
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.
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Customer: Herman Miller
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.
5. External environmental analysis
5.1. 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).
5.2. 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
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Customer: Herman Miller
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.
5.3. Social
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.
5.4. Political
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.
5.5. Technology
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).
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Customer: Herman Miller
5.6. 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.
5.7. Energy
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.
6. Strategies for the Future
6.1. 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.
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Customer: Herman Miller
6.2. 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
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Customer: Herman Miller
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.
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Customer: Herman Miller
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
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Customer: Herman Miller
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.
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Customer: Herman Miller
7. Appendix
7.1. Herman miller Financial statements 2011 (10-K)
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Customer: Herman Miller
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Customer: Herman Miller
(Annual Report 2012)
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Customer: Herman Miller
7.2. Major Policies
Marketing
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
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Customer: Herman Miller
on permanent display in leading art galleries and museums like the New York Metropolitan
Museum of Art.
Pricing:
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.
Environmental:
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.
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Customer: Herman Miller
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.
Manufacturing/Operations/Production
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.
Finance
Board Equity stake requirement:
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Customer: Herman Miller
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.
Personnel
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.
Boundaries:
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Customer: Herman Miller
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
Transparency:
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.
Reputation:
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.
28
Customer: Herman Miller
7.3. References
100 Best Companies to Work For. (2010). 97. Herman Miller. CNN. Retrieved June 15,
2012, from
money.cnn.com/magazines/fortune/bestcompanies/2010/snapshots/97.html
Adams, S. B., Manz, C. C., Manz, K., Shipper, F. (2010). Herman Miller Inc.: The
Reinvention and Renewal of an Iconic Manufacturer of Office Furniture. C-319-C332.
Annual Report 2011. (28, May 2011). Herman Miller, Inc., and Subsidiaries. Retrieved June
16, 2012 from
http://www.hermanmiller.com/content/dam/hermanmiller/documents/investors/HMI
2011_ANNUAL_REPORT_10-K.pdf
Chatzky, J. (2005, October 12). Theres no place like (an office at) home. Today Money.
Retrieved June 12, 2012, from http://today.msnbc.msn.com/id/7254610/ns/todaymoney/t/theres-no-place-office-home/
Gross Profit Margin. (2012, April 4). Investopedia. Retrieved June 12, 2012, from
http://www.investopedia.com/terms/g/gross_profit_margin.asp#ixzz1y0aN4aK8
Herman Miller Financials. (1999, January 2). ADVFN. Retrieved June 10, 2012, from
http://www.advfn.com/p.php?pid=financials&symbol=NASDAQ%3AMLHR
29
Customer: Herman Miller
Herman Miller Inc. (1990, August 15). A Better World Report. Environmental Advocacy.
Retrieved June 8, 2012, from http://www.hermanmiller.com/about-us/our-values-inaction/a-better-world-report/environmental-advocacy.html
Herman Miller Inc. (1997, September 6). Who is Herman Miller. Company Timeline.
Retrieved June 11, 2012, from
http://www.hermanmiller.com/content/hermanmiller/english/about-us/who-is-hermanmiller/company-timeline/1900.html
Herman Miller Inc. (2009, May 22). Governance Philosophy. Corporate Governance.
Retrieved June 9, 2012, from http://www.hermanmiller.com/aboutus/investors/corporate-governance.html
Herman Miller 2011. (2011). Additional GRI data for the 2011 Better World Report. GRI
Index. Retrieved June 10, 2012, from
http://www.hermanmiller.com/content/dam/hermanmiller/documents/a_better_world/2
011_Better_World_Report_GRI_Index.pdf
Herman Miller Inc. (2011, November 8). GRI Index. A Better World Report. Retrieved June
8, 2012, from
http://www.hermanmiller.com/content/dam/hermanmiller/documents/a_better_world/2
011_Better_World_Report_GRI_Index.pdf
30
Customer: Herman Miller
Herman Miller Inc. (2012). Environmental Advocacy. A Better World Report. Retrieved June
11, 2012, from http://www.hermanmiller.com/about-us/our-values-in-action/a-betterworld- report/environmental-advocacy.htm
Investors. (n.d.). Corporate Governance. Retrieved June 10, 2012, from
http://www.hermanmiller.com/about-us/investors/corporate-governance.html
Landflip. ( 2012, June 1). Wisconson Timber Land For Sale. Retrieved June 14, 2012, from
http://www.landflip.com/landforsale.asp?country=United+States&size=0&state=Wisc
onsin&use1=Timber&county=&price=0&qs=1&sort=
Merger Network.(2012, June 16). Lumber manufacturers for sale. Retrieved June 12, 2012,
From http://www.mergernetwork.com/index/lumber-and-building-productsmanufacturers-for-sale/
MLHR INCOME. (2012, February 2). Income Statement. Retrieved June 14, 2012, from
http://finance.yahoo.com/q/is?s=MLHR&annual
Unemployment Statistics During the Great Depression. (n.d.). Depression Era
Unemployment Statistics. Retrieved June 13, 2012, from http://www.u-shistory.com/pages/h1528.html
31
Customer: Herman Miller
Watson, P. J. (2009, November 3). Al Gore Set To Become First “Carbon Billionaire
Retrieved June 16, 2012, from http://www.infowars.com/al-gore-set-to-become-firstcarbon-billionaire/
WebFinance, Inc. (2012, February 20). Debt to Equity ratio. Investor Words. Retrieved June
10, 2012, from http://www.investorwords.com/4008/debt_to_equity ratio.html
WebFinance, Inc. (2012, February 20). Price to earnings ratio. Investor Words. Retrieved
June 10, 2012, from Investorwords.com/4008/price_to_earnings_ratio.html
WebFinance, Inc. (2012, February 20). Quick Ratio. Investor Words. Retrieved June 10,
2012, from http://www.investorwords.com/4008/quick_ratio.html
WebFinance, Inc. (2012, February 20). Return on equity. Investor Words. Retrieved June 10,
2012, from Investorwords.com/4248/Return_on_Equity.html#ixzz1xjyVXj6x
Wikinvest. (2012). Wiki Analysis. Herman Miller (MLHR). Retrieved June 15, 2012, from
http://www.wikinvest.com/stock/Herman_Miller_(MLHR)
Woodworking Network. ( 2012, June 11). Global Timber and Wood Products Market
Update. Retrieved June 13, 2012 from
woodworkingnetwork.com/news/woodworking-industry-trends-press-releases/Global-
32
Customer: Herman Miller
Timber-and-Wood-Products-Market-Update-158499395.html
Yin, J. (2012, January 12). Industry surveys household durables. Retrieved June 13, 2012,
From http://www.scribd.com/doc/85334126/5/KEY-INDUSTRY-RATIOS-AND
STATISTICS
33