Questions for Bang Case

DIRECTIONS.

Read the Bang and Olufsen: Design Driven Innovation for background. Then, in a word

document, answer the following questions as thoroughly as possible and support your

responses with evidence from the case. Please print out your response and submit in

class. Each question is worth 25 points (total 100).

QUESTIONS.

1. What is your assessment of the competitive situation in which B&O finds itself?

What are they really good at? What should they be worried about?

2. B&O’s radical design driven approach seems at odds with conventional business

wisdom at many points—what are the advantages and disadvantages of this

approach? How does it help the company compete? Is it sustainable?

3. B&O proposes a program to create Beosound 9, a new product extension to

current B&O music systems (Case Exhibit 2). Beosound 9 will be marketed to

B&O’s core customers— liberal arts professionals over 20 years old. The table

below summarizes the three year cash inflows/ outflows for the project:

Investment* Year 1 Year 2 Year 3

$5,000,000 $5,000,000 $2,000,000 $1,000,000

* assume a 7% discount rate

a. Using Net Present Value Risk Adjusted (NPVR) analysis, assess whether B&O

should green light this project. Use Exhibits 1 and 2 to assess the

development category risks and company specific risks. You may then use

Exhibit 3 as a template to record the appropriate risk weights. In your write up,

please include a completed Exhibit 3 that displays the weights you used. After

calculating NPVR, provide a short paragraph to articulate your assessment of

the Beosound 9 project.

b. In a few sentences, describe how B&O would decrease the risks attached for

this project.

4. Select an emergent market (e.g. country) for Bang and Olufsen to enter. First,

rationalize your choice of the market using qualitative reasoning. Second,

quantitatively assess the economic potential of the selected market. Finally,

articulate an appropriate and/or creative...