Reference no: EM132430540

Bang & Olufsen

The Danish company Bang & Olufsen manufactures upscale electronic products. Using its core competencies in product design and manufacturing, the firm produces an array of what have been labeled as "fantastic-looking" luxury items. Among its offerings are $1,800 to $5,000 television sets. Striving deliberately for high style and quality, the firm's top-of-the-line products are targeted to audiophiles and video buffs that are willing to pay premium prices. In describing the company's product design, Ole Bek, director of Bang & Olufsen international distribution center, noted that he learns much more by window shopping at Luis Vuitton in Paris than by looking at consumer electronics outlets.

To highlight more clearly and consistently the uniqueness of its products and to better serve the specialised interests and needs of its target customers, the firm decided recently to launch a string of impeccably (perfectly) designed stores that sell only its own products. Simultaneously, Bang & Olufsen discontinued the practice of distributing its products through what it considered to be "downscale" shops. The practice of concentrating on its own dedicated shops as the primary means of product distribution is consistent with actions taken by other companies that serve upscale customer needs. Luis Vuitton, for example, sells its bags only in its own boutiques. Cartier International Inc. and Guicci Group have pulled their products from the shelves of hundreds of stores in the United States. Moreover, selling products through its own retailing outlets allows Bang & Olufsen to move even further upscale.

Questions:

Question 1: How does the Bang & Olufsen move to distribute its own products affect its value capture part of its strategy? Explain.

Question 2: What is the rationale behind that move from a corporate strategy point of view?