Bang and Olufsen Outsourced

568 replies
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KMA wrote:

By "what difference" I refer to the quality of Beosound 8 and Beolit 12 made in China vs. if they were made Struer. How much higher quality Beosound 8s and Beolit 12s people in Struer could produce, and how? And more to the point, how would we notice the difference, apart from the "Made in China" / "Made in Denmark" label on the product

I hope this doesn't come across as too nationalistic, but I bet 90% of American's don't even understand what "Made in Denmark" means. By understand, I mean, they wouldn't be able to point out the country on a map, know very little about the Danes design quality and so on. That's not necessarily being rude to American's, I only mention it as Dkatz is American, and I bet most British <25-year-olds would struggle to pinpoint Denmark on a map either. With this in mind, it wouldn't make the slightest bit of difference if Struer outsourced to Brazil, made it in Denmark or China. As these consumers wouldn't make their purchasing decision based on this.

Most consumers just do not care. They only care about what makes them look good (particularly to their mates). If they can buy a brand at a discounted price, they will. That's their priority. Made in China/Made in Denmark will make very little difference to Beosound 8 sales. I was in my local dealer the other day and a 60-year-old couple were getting a demo of the BS8. They were quite impressed. They didn't turn it around to see where it was made, they didn't ask and they probably wouldn't even notice.

Dkatz beef is China and the way he believes they treat their residents. Strangely though, I find Chinese to be some of the happiest people we've done business with. When they are here in the UK on business, whilst they have a lot of mutual respect for our history, they are glad to get back to their country, are proud of their nation, prepared to work hard to better their nation and only have positive things to say.

It is ironic to be having this discussion when the same Chinese residents are buying Rolls Royce cars, our brands, have become Mulberry's number one customer....yet Dkatz is so angry/worried/annoyed about the Chinese. Which part of their lifestyle is affecting you?

I would even go as far as saying it's more of a pleasure - as a Brit - to do business with a Chinese company than American. With respect, American's look down at business in this country, in our experience, making it hard to secure a business deal. The only way we ever secure deals in America is where the person doing business has studied or lived in Europe, widening their horizons. True American's care only about America. Whereas the Chinese are particularly keen to do business over here, despite the size of their nation.

Just an opinion - I can see the replies now - but working in tech publishing, we do a lot of international licencing and syndication deals, and it's very difficult doing any deals in America. We have a number of key magazine brands, you'll see all over the world (including China), but not in America!

Dkatz, I can agree about your laptop. I have just came back from Berlin, Germany and was surprised about their demand for quality. Almost every car was German. They really don't stand for poor quality, and as you say Fujitsu Siemens are produced there, Nokia of Finland, Loewe and Technisat of Germany. I doubt very much if their own products were being produced with low standards. I don't expect how you can get a quality product out of China when the order of the day is make them cheap and make them quick

Fujitsu-Siemens used to be about as bad as computers got... 

Nokia is garbage. All models. Best models are made in Finland though.

 

 

Puncher – Perhaps in your case this item was $20 but my point is that it doesn't cost B&O that much more to produce an iPod dock in China than it does many other manufacturers that charge ¼ of as much so B&O are actually making more of a profit per item than them based on their name and prestige that people buy for although build quality and sound quality is only marginally better.

 

Look at my previous post about iPhone and how economists have calculated that it would only cost $65 more per iPhone to build them in America! It's a $400 phone for the top end model so their profit would still be extremely high, especially with the amount the are selling. With mass production, when you are selling that many units, it's possible to make billions of profit for the company.

 

Look at Braun's OralB electric toothbrushes, even the cheaper models are made in Germany. The top end ones cost less than the Philips SonicCare which are made in China and they still manage to make a really good profit off of them.

 

Again my point is that B&O's only way was not to outsource and release inferior goods for the masses and ripping people off by making thousands of percents in profit. I think their audio equipment that's made in Europe that costs thousands is cheap in comparison to the BS8 and Beolit12 that cost less than 1000 because even at those prices they are not worth it. If it costs B&O say $20-50 to produce a BS8 or Beolit12 and they sell it for $800 that is a HUGE profit margin and unjustified. Of course it will make them money, way more than they need (but I guess not more than the CEO, boardmembers and shareholders need ;-). This is why I feel ripped off! If they are making a high quality hand assembled, struer built unit for $10,000 built by people who get good wages with a much lower profit margin percentage wise per unit, then I feel like I'm getting a much much better deal out of it!

 

Moxxey and Folkdeejay – I might have exaggerated by saying a couple of hundred years but being a constitutional monarchy that is democratic through having a prime minister along with a parliament and having labour unions since the 19th century is progress compared to most other countries. There are many instances of worker uprising in that era, and the fact that this is not even happening in China today is quite depressing and shows how the government controls everything and everyone in the country. It is a much more authoritarian rule, perhaps more like Britain in the middle ages. The fact that people worked for measly wages during Dickensian times is due to poverty, but there was also a rising middle class during this time. In China and many developing countries the separation between rich and poor today is perhaps similar or worse in many ways to that time. They hardly have a middle class. To top it off, Britain in the 19th century invented so many things in use today. It was one of the greatest places of invention during the industrial revolution. China's industrial revolution however is a copycat one filled with people filling orders for western (or Japanese) designed and engineered products.

 

On another note both my grandfather and uncle were engineers in the Soviet Union working in factories that dealt with manufacturing equipment for oil and gas extraction in Baku. My mother was in HR at the biggest (and I think only at the time) air conditioning factory in the USSR. She did a lot of auditing. This was in the 1960s-1980s and my whole family got decent living wages and so did the rest of the factory. The working conditions were not as appalling as those in China, in fact they are horrified when they see pictures of factories in China in comparison. Yes they look a lot cleaner, tidier, perhaps more health and safety in China but they also work a lot more like slaves with the hours they work and the miniscule pay they get. The labour unions were strong in the Soviet Union, everything was very bureaucratic. The managers of the factory only got marginally better wages than my mom or other workers and they lived a better life than the average employees only thanks to favouritism, connections and certain bribes (wine, cash, etc...). This was however, audited by my mother who reported such violations and got these kind of people in trouble. They tried to bribe her to keep her mouth shut as well but she did not take this money, I guess you could call it internal affairs within the company/factory. My point is that in China the factory owners today live better than the Soviet president did (I know as I met many of their children studying with me in London), these are the people who buy the Rolls Royce's you guys talk about, and the factory workers live much worse than most people in the USSR (not counting people in the Gulag's who probably lived in similar conditions). Do you really want to support such a system? Because I don't and I won't invest my money into it!

 

TerryM – Excellent point! This is another great strategy that B&O should have used. Their higher end products are better than they ever were both SQ and design wise. If they had marketed themselves better as a high end audio manufacturer, brought out high end ancillaries and went to trade shows, etc.. perhaps they wouldn't be in the pickle they are. Instead they marketed themselves as a luxury brand based on designing cool looking things for your house and now cheap little things for your iPod...

 

Nickyg63 – Good point but I think she would have closed them down anyways because they were not profitable enough. My point about Maggy was that it was her and Reagan with their neoliberalist ideals that liberalized trade, and paved the wave for British companies to outsource. This combined with China's own trade being liberalized in 1979 made it possible for companies to do what they wanted. They didn't have a responsibility to only manufacture in their own country and over the years more and more companies were outsourcing to make a higher profit. In many ways it was like “That companies making more profit than us because they are outsourcing, let's go that route too.” So companies followed each other like a herd until there was only a few cows left. Protectionism was nearly abolished (it only exists in the EU in a few key industries that are protected by the PDO (Protected Designation of Origin) such as in Buffalo Mozzarello from Campagne, or Champagne from Champagne, etc... but besides farming and a few other industries little is subsidized. Companies felt that if they wanted to stay competitive they needed to outsource as others were doing. This is the wrong mentality though to just follow the pack and manufacture for cheaper in order to stay afloat. Some companies such as Gensis for amps, Sunspel for base-layer clothing, etc... managed to survive and upmarket their goods. So today it's mostly only the higher end products usually that are made in the UK still as they can charge more thereby staying competitive.

 

KMA – My point is that B&O does not own and operate the factory that they outsource to in China. Therefore they cannot dictate working conditions and the quality control will be lacking. This is exactly why nearly all professional grade products are manufactured in developed countries in the companies own factories that are operated by them with their own employees that they trained themselves, so they can have a higher level of quality control and therefore a higher quality of product. This is another reason that the BS8 and Beolit 12 are not up to par with other B&O products. One only has to look at them and feel them to see this when comparing it. I think B&O has lowered their own standards in order to “fill a gap” and “go with the flow of other companies.” As many have mentioned on here: if they didn't need the money so badly they wouldn't have done this, well doesn't that tell you something in itself? That this was B&Os last resort must tell you that they are reluctant about manufacturing there themselves, that they feel themselves that those products would be inferior to their standards. Why else would B&O manufacture their own metals and plastics and hand assemble glorious $10,000 speakers?

 

Another point is that it's not about whose hands produce it. The BS8 and Beolit 12 are not hand assembled like their other Beosound products for one. They are extremely mass produced which goes against most of the other B&O products and this also contributes to the lower level of QC. They are not even made by B&O but simply made by another company that is not a high end audio manufacturer. When B&O produces their other products each product is tested with special equipment by one person in one room for example, this is not the case with mass production, especially of the sort in China.

 

B&O might specify materials, components, etc... but it does not mean that they will be to the standard of the Struer/Czech produced ones. If everything was the same it would be less noticeable, yet if they were producing it in Struer or Czech they might have used different materials and components that they produced themselves in their own factory in Czech or Struer so I think it would have been different. Although my point is that the fact that they released such a lower end product and were OK with the quality shows that they really are in it simply for the profit.

 

Bayerische – The Celsius H series such as the H240 I have or the newer ones are professional laptops. They have a 1920x1080 screen on a 15” laptop which is fairly uncommon, magnesium alloy cover, spillproof keyboard, shock sensors, fingerprint recognition, removable drives, etc... This was a laptop built for graphic designers, architects, etc... and it has been the most reliable and trustworthy computer I have ever owned. In fact I've had if for about five years now and it still works like new.

 

In regards to Nokia – I have an E90 and love it. It is really outdated but I love the big keyboard and dual screens. Way better than anything I have seen and also made in Finland. I have dropped it about 1000 times and still works like new! Can't seem to find a decent replacement for this phone with this kind of build quality anywhere! Vertu and other such phones are out of my price range! ;-)

symmes wrote:

I learned the best way to close a circular argument (from having teenagers past and present) is to find an example that shows the futility of continuing.  See if you can spot the irony here....Rolls Royce

 

It was I that detailed what this article confirms in numerous lengthy posts much earlier on in this thread...

Sales of Rolls-Royces and the like are skyrocketing in counries such China....the point is that if outsourcing was 'the way to go these days to survive' why dont R-R actually outsource to a Chinese company to build cars with 'R-R' badges substantially cheaper i.e. a lot more profitably for RR?

Simple reason is the damage it would do to their brand image, loss of control over their extremely high quality standards, subsequent loss of exclusivity and confidence in their products....The new super wealthy clients RR are acquiring in the far east is precisely because of the exclusivity of RR as a hand built british super luxury brand who have not gone down the outsoucing route. This is exactly why the super rich of China want to buy a RR Phantom in the first place....exclusivity.

....isnt that pretty obvious? I've said all this pages and pages ago......Erm

folkdeejay wrote:

Dkatz wrote:

You have to remember Moxxey that the UK is a democratic country, has been for ages. The fact that the Union Workers can rise up at all is a statement that it is a free country. In China if workers did that they would get fired. If they complained about the government, etc... they would be put in Jail. Britain hasn't been like that for a couple hundred years now. Even in the 19th century Unions were formed and people were up in arms about many things as far back as then!

You are joking ....😉

 

Go and live in China for a while.....

You'd soon change your mind about whether the UK is a democracy or not - irrespective of your political leanings.

 

@Bentleyman  That wouldn't be ironic, now would it.  Sorry to burst your bubble, but I don't go to BeoWorld for lengthy musings on social systems or global economics.  I am, and we all should be, very happy for the craftspeople of RR that VW and BMW chose to buy the parts of RR they wanted and kept it alive.  That way they were able to create the Chinese special edition for the titans who created the factories that.......   

symmes wrote:

@Bentleyman  That wouldn't be ironic, now would it.  Sorry to burst your bubble, but I don't go to BeoWorld for lengthy musings on social systems or global economics.  I am, and we all should be, very happy for the craftspeople of RR that VW and BMW chose to buy the parts of RR they wanted and kept it alive.  That way they were able to create the Chinese special edition for the titans who created the factories that.......   

 

Back on Page 1 or 2 of this thread I used the word ironic in the context that it was the 'newly' rich businessmen/factory owners in China and the Far East that are actually making up much of RR and Bentleys recent increase in sales.....that is the irony....we are now talking about the exact same point on page 12....

I dont go to Beoworld for lengthy musings on social systems or global economics either.

The fact that german owned companys bought RR and Bentley and kept them alive I am not disputing, nor have I commented on that fact.

However, this thread is about outsourcing. Neither VW nor BMW have outsourced the production/manufacture of RR or Bentley. My point was.....imagine if they did.....What would that do to the image of their brands...? They are not outsourcing and yet their respective orderbooks are bulging and profits are soaring - i.e. they dont appear to need to outsource. 

Some people in this thread are saying that outsourcing is the only way Bang & Olufsen can survive in todays global consumer marketplace. I am questioning this opinion (as are others) by citing examples (in this case RR/Bentley) of top-end companys who are not choosing to go down the outsourcing road.

Dkatz has given other examples of small high end audio manufacturers who also have not chosen outsourcing - but yet they seem to be surviving ok/or doing well.

My point is simple - is outsourcing the only way in which B&O can survive (as some here are saying). I have yet to hear an definitive explanation from anyone supporting this view, why it is that some companys (many, many have been detailed in this thread) do not seem to have to resort to outsourcing as a means of self survival.

Can anyone actually give a definitive answer to this specific point? If yes, then I'd be happy to accept it. But as yet, no-one has.

Bentleyman wrote:

My point is simple - is outsourcing the only way in which B&O can survive (as some here are saying). I have yet to hear an definitive explanation from anyone supporting this view, why it is that some companys (many, many have been detailed in this thread) do not seem to have to resort to outsourcing as a means of self survival.

Can anyone actually give a definitive answer to this specific point? If yes, then I'd be happy to accept it. But as yet, no-one has.

It's not necessarily about surviving. I think that's too specific. For me, and this is something Tue mentioned last year, B&O need to expand their userbase, attract a younger generation of custom. They aren't coming in to the B&O stores, so they had to look at other ways of promoting their products. One of these efforts is to partner with Apple and to get in to the Apple stores.

To do this, they need to be able to meet the demand (or, more realistically, have enough product to spread between all the B&O stores, Apple stores and other locations). My assumption is that the Danish factories didn't have the mass-manufacturing capability and the Czech factory has been tasked with producing middle-of-the-range products such as my BV10, BC6, spares and other products.

Of course, the cost of mass-manufacturing in China also helps B&O's bottom line.

My brother has this dilemma right now. He designs and manufactures "cool" felt laptop and other bags. He produces them in New Zealand and, as a result, his costs are high. So much so that he struggles to make a profit. But he can just about fulfil demand producing them locally. He wants to ramp up distribution and move in to selling in Europe (he currently sells through the APAC region, retail/online), but to do this, he needs to find a factory that can mass-manufacture his bags. The only factories that can do this are in China (so he says), after looking around. There aren't other choices locally. But he also needs a minimum run of 10,000 units, which is excessive. As a result though, he more than halves (!) his production costs.

So, he has little choice. China it is. He doesn't want to, he wants them to be produced in NZ, but the cost of doing so and finding the production level to meet his demand, has left him with few options.

But, the sad thing is, no-one will notice they are made in China. He's had some production examples and he says they are, in same ways, better produced than from NZ and much more consistent.

Dkatz wrote:

Again my point is that B&O's only way was not to outsource and release inferior goods for the masses and ripping people off by making thousands of percents in profit. I think their audio equipment that's made in Europe that costs thousands is cheap in comparison to the BS8 and Beolit12 that cost less than 1000 because even at those prices they are not worth it. If it costs B&O say $20-50 to produce a BS8 or Beolit12 and they sell it for $800 that is a HUGE profit margin and unjustified. Of course it will make them money, way more than they need (but I guess not more than the CEO, boardmembers and shareholders need ;-). This is why I feel ripped off!

Firstly, I don't know how anyone can feel "ripped off" by buying a Beosound 8. They aren't that expensive (for B&O!) and it is a fantastic product. If you look at the Apple store - where you would expect B&O equipment to receive less than generous reviews - reviewers have given it a 5-star overall rating 

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