You are on page 1of 16

1.

Introduction
1.1 Executive Summary
As one of the leaders in the office furniture industry, Herman Miller Inc. has creates
their own innovation and processes. Herman Miller promise that they will take the
society into the account first rather than the companys profitability. Therefore,
Herman Miller will ensure that the entire product that produces by the company is
socially environment to society as well as take initiative to involve in the CSR
activities.
In order to achieve the companys vision and mission, the company has set various
long term objectives so that it can attain it and more forwards to the next stage. Today,
more and more company move towards globalize, therefore the company should
analysis its external and internal environment, SWOT analysis, strategies choice. Due
to this analysis that had conduct, it will help the company to ensure that what are the
threats or weakness that the company facing now and how to prevent, what are the
opportunities that the company can grab, and so on. Furthermore, by doing this, it will
help the company to have a better understand about the strength of the company.
1.2 Company Background
Herman Miller Incorporation is the leaders in the office furniture industry, which have
high reputation in term of innovation as well as the processes. DirkJan (D.J.) De Pree
as a clerk and sooner promoted as the companys president in 1919. After few years,
he convinced his father-in-law, Herman Miller to buy over the majority share. During
1970s, Herman Miller Incorporation has been listed and at the same times, the
company first stock (IPO) has been issued. Furthermore, the company had be awards
as Fortunes Most Admired Companies, The 100 Best Companies to Work For
and FastCompanys Most Innovative Companies in 2008 and 2010.

1.3 Company Vision and Mission Statement


The vision statement of the company,
Economic vitality, healthy and environment friendly is the elements that cause the
future quality of human life [Therefore] we have launched Perfect Vision, a broad
initiative that sets significant sustainability targets for the year 2020.
Source: adapted from Maillie, and et. al. (2012)
Its shown that the company is placing the society and the environment in the first
place rather than their companys profitability which related to corporate social
responsibility and ethical practise.
The mission statement of the company,
By design the furniture and providing related services that can help to enhance the
human experience in workplace as well as socially responsible to the community
which cause the world better around you
Source: adapted from Maillie and et. al. (2012)
Its shown that the company promise to provide the better quality of furniture to the
consumer, so that it caters to their unique demands in good condition. Other than that,
the company also provides a productive and healthy workforce to their employees.
1.4 Corporate Social Responsibility and Ethics
The CSR activities that perform by the company:
1.4.1 Community Services
The company has set the goals to each employee which each of the employees must
participate at least up to 16 paid hours a year with the charitable organizations.
1.4.2 Environmental Advocacy
The companys policy is not to produce unnecessary wastes and fully rely on green
energy at the end of 2020 by ordering the raw materials which not hazardous
chemical.

1.4.3 Health Risk Assessment


By providing the health risk assessment to employees is also one of the corporate
social responsibilities, so that the employees can have a strong feeling which the
employer is concern about them.
1.5 Long Term Objectives (LTO)
According to Maillie et. al. (2012) cited that:
1.5.1 Environmental Advocacy
The company concern on the internal and external point of views that towards the
company by providing their work environment, and the goal in 2020 by eliminate all
the pollution that the company produces.
1.5.2 Innovation
The company will ensure that the product that the company produces always in
modern design as well as usefulness to entire consumer.
1.5.3 Quality
Besides, the company also ensures that the products qualities that the company
produces are good and meant to be used.
1.5.4 Performance
Herman Miller treat all their employees as team members and make them put 100%
effort for their job every day, so that it can ensure the employees can achieve what the
company want to be.
1.5.5 Market Growth
To ensure that the company grow and gain the market shares in furniture market at
home market as well as in the international level.

2. Macro-environment Analysis
2.1 Political and Legal
The regulation which imposed by politician which are forced the company to involve
in Carbon Credit Exchange System, which related to carbon tax credit and pollution
caps (Watson, 2009).
Besides, Herman Miller had comply with the U.S. Securities and Exchange
Commission (SEC) which appointed majority of the 14 member of the board which
must independent (Shipper, et. al. 2012).
2.2 Economics
Due to dot-com bubble burst and terrorist attacks in 11th September 2001, was affected
the U.S. economy. At the same time, it also causes the company sales dropped from
$2.0 billion in 2008 to $1.6 billion in 2009. Moreover, the profit of the company has
been dropped from $152 million to $68 million during recession. In 2012, the
company had also facing turbulent and uncertainty economy condition.
2.3 Social
Maillie, et. al. (2012) cited that the growing trend in the society toward the
environmental issues, therefore, the society will demand more on the product which is
environment friendly. Hence, it creates a good opportunity to the company and further
ahead of its competitors.
2.4 Technology
In 1998, the company had introduce a new website (www.hmhome.com) to boost the
sales by connecting with 180 small businesss retailers as well as made a 3 dimension
(3D) design computer program to provides customization services to customers.
Besides that, Herman Miller Production System (HMPS) with Just-in-Time (JIT) is
tried to minimize inventory amount (Shipper, et. al, 2012, p334).
2.5 Environment
The company starts to take the initiative by using their Energy Centre to generate the
electrical and steam power to run the facility by burning the waste. Furthermore, the

company is using the substituted raw materials which are walnut and cherry wood to
replace the endangered rosewood to sustain the resources (Shipper, et. al. 2012).
Formation of the Environmental Affairs Teams, which responsible for the recycle
activities and reduce the solid wastes have been authorized by Max De Pree.
3. Industry Analysis
3.1 Porters Five Forces
3.1.1 Supplier Power
The bargaining power of the suppliers for Herman Miller is low due to the product
that the company produce become merchandise or commodity. Besides, bargaining
power is low also because Herman Miller has alternative choice in choosing suppliers
(Herman Miller, 2012).
3.1.2 Buyer Power
In contrast, the bargaining power of the buyers is high. It is because they are a lot of
competitors are offering the similar products to the consumers. Therefore, consumers
can change their preference towards Herman Millers product to competitors product
(Severianogarza. 2012).
3.1.3 Competitor Rivalry
Herman Miller is facing the high competitor rivalry. It because there are a lot of the
existing furniture manufacturer or company such as Steelcase, Haworth, HNI and so
on which competing directly by selling the similar and high quality products
(TermPaperWarehouse, 2014).
3.1.4 Threat of Substitution
Due to the high competitor rivalry, it cause the company have the high threat of
substitution. The more the different types products which can replace and used as
chairs and table, example modern look in office (Severianogarza, 2012). The
consumer will have the high chance to change their preferences.

3.1.5 Threat of New Entry


The threat of new entry is high due to the office furniture industry have the low
barriers of entry, and it has many local and global company easy to start their business
in the country (Severianogarza, 2012). Therefore, Herman Miller will compete with
more and more local as well as the global competitors.
3.2 Porters Diamond
3.2.1 Firm Strategy Structure and Rivalry
There is a low entry of barrier to the furniture industry, therefore, it cause a huge
number of rivalries enter into the this industry such as Steelcase, Haworth, HNI and
so on (Chhantyal, 2012). Due to this, it shown that the rivalry became more and more
intense.
3.2.2 Related and Supporting Industries
As the market leader in the office furniture industry, Herman Miller have built up the
relationship with various companies that help the company to ensure that can produce
the high standards and quality of the products and services and meet the consumers
needs and wants. Based on Herman Miller (2014), the collaboration companies
include CORT Rental furniture, Eagle Group, Luxo and so on.
3.2.3 Demand Condition
The trend of the people that like to spend their time in-front of computer, keep on
increase slightly. Therefore, to minimizing the bargaining power of the buyers,
Herman Miller had come out a new concepts which producing the ergonomic
furniture and make it become their companys core competence to retain the customer
bases. The ergonomic furniture can help to lower possibilities of fatigue and injuries
like carpal tunnel syndrome (Shipper, et al. 2012).
3.2.4 Factor Condition
Due to the scarcity of the natural resources and high demand of the customer towards
Herman Millers unique products, the company stop to using the endangered

rosewood and replace using the walnut and cherry wood to ensure the sustainable of
the resources and product the better qualitys products (Shipper, et al. 2012).
3.3 Yip Globalization
3.3.1 Government Drivers
In order to enter into global market or globalization, Herman Miller must comply with
all the applicable rules and regulation of that particular country (Herman Miller,
2012). Furthermore, Herman Miller should also deal with the variation of the
exchange rate and to act ethically to the society even though operate the business
overseas.
3.3.2 Market Drivers
As the market leader in the office furniture industry, Herman Miller has understood
the common customer preference towards the company products. Due to these factors,
it help the company to gain a huge number of customer over hundred countries and
wholly owned subsidiary company at Canada, France, Germany, Japan, Mexico and
so on (Shipper,et al. 2012).
3.3.3 Cost Drivers
By establish the Herman Miller Production System (HMPS) allow the company to
maintain the efficient and cost saving through the inventory control (Shipper,et al.
2012). It is because the system helps the company to minimizing the inventory level
on hand and the just-in-time process. Therefore, when this system use in other
countries, it will make the company operating in effective and efficiency.
3.3.4 Competitive Drivers
Due to threat of entry is high and the increase rivalry among existing competitors, it
makes Herman Miller more productivity and innovative in order to operate their
business overseas for gaining the market shares. Besides, it also helps the company to
build up the reputation of the customer towards the brand of the company.

4. Internal Assessment of Company


4.1 Value Chain Analysis (VCA)
It adapted from Pearce II, JA & Robinson (2013), it can divided to:
4.1.1 Primary Activities
4.1.1.1 Inbound Logistics
Herman Miller had efficiency of raw material warehousing activities by using its own
system such as Herman Miller Performance System (HMPS). This system helps in
managing, controlling and storing inventories or raw materials of Herman Miller.
4.1.1.2 Operation
Herman Miller used Herman Miller Performance System (HMPS) to maintain
efficiency and cost saving by minimizing the amount of inventory on hand through a
just in time process. Therefore, it assist the company to limit fixed production cost by
outsource components parts from supplier and retain control over production
processes (Karen, M 2012, p338).
4.1.1.3 Outbound Logistics
Herman Miller has implemented planning software-HMPS to improve their
production scheduling and delivery with the specific goal. Moreover, it allows the
company to querying about the completion date of each plant about the time taken in
building an ordered item. It also is one of the appropriate automation of production
processes which speed up productivity (McGraw 2003, p34).
Moreover, it established 180 retailers which digitally linked among the company and
its suppliers, distributors, and customers. Therefore, it can reduce the shipping time
because it will be deliver once the product is built and take between 3 to 10 business
days (Herman Miller, 2014).
4.1.2 Support Activities
4.1.2.1 Human Resource Management

Herman Miller has put a lot of effort in attracting and retaining the employees with
talents. Besides, it also implement a principle of equity and justice for everyone in the
company called Scanlon Plan, it use of committees for sharing ideas on
improvements and a structure for sharing increased profitability. Furthermore,
employees not only receive a base pay, they also will receive the profit sharing plan
based on companys financial performance. As a result, it can increase the level of
employee motivation and job satisfaction (Karen, M 2012, p333).
4.1.2.2 Research, Technology and System Development
Herman Miller used Herman Miller Performance system to maintain efficiencies and
saving cost through minimize the amount of inventory stored. Meanwhile, Herman
Miller is subsidiary to Integrated Metals Technology (IMT) analyzing, inquiring, and
enlisting help and ideas of everyone. Hence, it reduce quality defect from 9,000 in
2000 to 1,500 in 2006. Furthermore, the shipping improves from 80 percent to 100
percent. Lastly, safety incidents dropped from 10 to 3 per year (Karen, M 2012,
p338).
4.1.2.3 Procurement
There are few ways that developed by Herman Miller to reducing its cost in procuring
raw materials by using timely basis like JIT, at lowest possible cost (HMPS), and
using acceptable level of quality such as walnut and cherry woods.
Thus, it has a 300,000 square foot distribution centre that used for shipping, receiving,
warehousing, fabrication and logistics services as well as a Green House which
around 295,000 square foot factory and office building near its headquarters in
Western Michigan (William, M & Michael, B 2007).
4.2 Resource Based View
The unique capabilities of Herman Miller (refer to appendix) are:
4.2.1 Leadership and Culture
D.J. De Pree is a capable leader that the group he led have a strong and adaptable
culture. The culture of the company is focusing on Corporate Social Responsibility
and Environmental Friendly. Herman Miller Inc. was control by Hermans family

members. He encourage employee to involve in corporate social responsibility. In the


same time, it creates another culture for the company. The other unique capabilities of
Herman Miller are the company culture whose take care about the environment
friendly (Karen, M 2012, p337).
4.2.2 Network
A network of 180 retailers have been established and established dealers in South and
Central America, Australia ,Canada ,Europe ,Africa and Japan (Karen, M 2012, p334).
Moreover, products were sold internationally by wholly owned subsidiary. The
customer based was spread over 100 countries (Karen, M 2012, p338).
4.2.3 Innovative Product
Innovative product for Herman Miller is the first molded fiberglass chairs and the
Eames lounge chair and ottoman. In addition, it was the first one began overseas
foray, selling its product in the European market (Karen, M 2012, p333). Next, the
Equa chair is based on the ergonomic principles. Moreover, some groundbreaking
designs introduced the Aeron chair. Aeron chair won the Design of the Decade Award
(Karen, M 2012, p334).
Other than that, Mirra chair is introduced in 2003 with Posture Fit Technology. Mirra
made of 45 percent recycled materials and 96 percent of its materials were, in turn to
recyclable. In addition, 100 percent of renewable energy has been used (Karen, M
2012, p338). Moreover, the Office Automation System in 1960s is the first world open
modular office arrangements (Karen, M 2012, p333).
4.2.4 System
Moreover, Herman Miller has it software (HMPS) to plan and produce furniture with
same quality for every product. By the way, just in time also apply to Herman Miller
that controls the inventory level. In addition, it helps the company to save cost (Karen,
M 2012, p338 - p339).
4.2.5 Substitute Wood

Herman Miller Inc. also seeks for substitute wood. For example, they replace the
rosewood with walnut and cheery woods because those woods are cheaper (Karen, M
2012, p334).
4.3 Financial Analysis
4.3.1 Liquidity Ratio
The current ratio of the Herman Millar has constantly increased from 2006 to 2009
but it still not able to achieve 2:1 and less ability to meet its short-term obligation. For
current ratio of 2010, it has dropped to 1.26. It may due to lower cash and cash
equivalents, and increase in current maturities of long-term debts. Besides, the results
of acid test shows that the Herman Miller is able to meet its short-term obligation
without rely on inventories.
4.3.2 Activity Ratio
Herman Millar has a stable in days of inventory turnover which average in 12 to 16
days in 2006 to 2009 but in 2010, it has increased double to 24 days to clear its
inventory and decreased in inventory turnover to 15.38 times. It may due lower sales
in 2009 because of the recession of 2009 which the economic still in bad condition in
2010. Profits dropped from $152million to $68million. In other word, the sales
dropped lead to slower inventory turnover. Besides, the average collection period has
also effected by poor economic condition in 2009 and it need to take longer time to
collect the credit sales.
4.3.3 Leverage Ratio
Debt-to-equity ratios and long-term debt-to-equity ratios have risen precipitously in
2007 to 2009. This is because the total stockholders equity has dropped seriously in
2007 to 2009. The factors influence in 2008 is reduction of retained earnings due to
adoption of FIN 48 for unrecognized tax benefits. For 2009, accumulated other
comprehensive loss has affected total stockholders equity dropped double with
included foreign currency translation adjustment ($14millions), pension liability
adjustments ($59.9millions) and unrealized holding loss ($0.1millions) in 2009.
4.3.4 Profitability Ratio

The operating profit margin and net profit margin has dropped constantly from 2008
to 2010 due to sales of the Herman Miller has dropped due to the economic recession.
Another reason is U.S. dollar strengthened against most major currencies throughout
fiscal 2009 and 2010 indirectly influences the sales in others countries. (Financial
Statement of Herman Miller, 2009)
5. Key Strategic Issues
5.1 Economy
Due to recession in 2009, Herman Miller sales were dropped 19 percent. The sales is
dropped from approximately $2.0 billion to 1.6$ billion in the year 2008 and 2009
respectively. The profit of the year 2009 was dropped from $152 million to $68
million (Shipper, 2012). Herman Miller was laid off from 500 to 1000 employees due
to economy down in year 2009 (Julia, 2009).
5.2 Intense competition
In furniture industry, Herman Miller is facing the threat from competitor which is
Haworth, Steelcase and HNI Corporation. Some of these competitor offer the
furniture product that cheaper than Herman Miller. It is affecting sales for their
furniture. HNI Corporation have offer Stoves Furniture while Herman Miller does not
produce (Nicholas, 14 December 2009).Referring to the Appendix ()
5.3 Foreign Exchange
Herman Miller Inc. has run its business outside the United Stated. Therefore, it will
face some risk in foreign exchange rate while in trading products. In some countries,
the currencies are differing in import and export products. Besides, the fluctuations in
the rate of exchange between these currencies could negatively impact to Herman
Miller. It also had brought an impact to the international operational expense (Herman
Miller, 2014).
6. Discussion
6.1 Vision & Mission

The vision and mission of Herman Miller company is quite confused due to it is
vague. It is because two of the vision and mission is quite similar. Therefore, it will
cause the members in the company confusing in on what are the things they need to
achieve in the future.
6.2 Costs of Environmental Advocacy
Taking the initiative for corporate social responsibilities is one of the important
components for the company. However, it will lead to high prices in the end products.
Due to the price increase, it may cause a substantial drop in the sales. Besides, when
the company keep on conducting the CSR activities and did not concern to the
shareholders interest, it will cause the member of the company unhappy.
7. Recommendation
The strategies that suggested to Herman Miller is grand strategic. It is because it help
the company to solidify its position by reinvesting their resources to increases the
companys strength. Among two alternative approaches which are market
development and product development, the company can choose to use product
development, which the customers may be interested for the products that based on
technological, or other competitive advantages.
In order to practice these product developments, the company can expand its
healthcare product by offering patient beds. There is sophisticated technology that is
deviates from traditional products of Herman Miller. Company may focus on offering
full patient room solution. By providing this, it may improve its attractiveness to
strong healthcare dealers in the market. Since the bid cycle is long due to the extended
live of a product. In addition, Herman Miller may seek to average the sale. Free cash
flow for company can let them to utilize the cash and invest to a new product. By
entering to healthcare segment, it may also help company to diversify its revenue to a
stable and growth industry.
Besides using the market development strategies, the company also can apply other
solution such as

7.1 Economy
To overcome bad economy conditions, the company may have contingency plan
therefore they may not face any problem when recession occurs. 25 % of profit should
be keeping as retained earnings. Other than that, when the economy is bad, it can cut
down their employee cost by 10 % for that period. Retrenchment should be
implementing if they have no choice.
7.2 Intensive Competition
Herman Miller may focus more on the healthcare segment and try to developed new
product for healthcare segment. Herman Miller should improve their diversification
and pay attention on healthcare segment because of healthcare industry show steady
growth from year 1989-2007(Nicholas et al, 2009). By doing so, the company can
minimizing the intensive of the competition
7.3 Commodity future contract
By avoiding the production cost increase due to material price increase, Herman
Miller can use commodity future contract to fix the materials price in the future. The
company must have foresight with the price floatation of materials to predict the
future prices to avoid purchasing higher price in the future. But it must get consent
from the supplier by bargaining the price fixed in the contract.
7.4 New Vision and Mission Statement
The companys vision must be some phase which will monitor and motivate the
member in the company towards the future strategies. Therefore, the company new
vision statement should be easy to communicate, it mean the members of the
company can easy to understand, simple, short and precise on what it is. The
recommended new vision statement should be Herman Millers Modern Furniture to
Everyone

Based on the Mission statement which stated on above (Section 2.1), a better mission
statements should be explain the companys business makeup and purpose in
language specific, so that it can help the company to differentiate themselves from
competitors. Therefore, the recommended new mission statement should be To
achieving by take care the society as well as environment
7.5 Corporate Social Responsibility Activity
Regarding to the CSR, the company should continue to practise the CSR activities, at
the same time, the company should disclose the entire shareholder, so that the
shareholder can know well about what are the company is doing. Other than that, the
company should also listen to the shareholders voice to minimizing the
misunderstanding or dissatisfaction on the CSR activities.
8. Conclusion
Herman Miller Incorporation is the leaders in the office furniture industry, and over
the year, the company had gain through a high reputation that the customer towards
the company. Today, Herman Miller can become so success in the furniture industry,
is because they not only take care to the society but at the same time it also take the
initiative to conduct the corporate social responsible. Therefore, the companys long
term objective have been listed that few way to achieve such as (1) environment
advocacy, (2) innovation, (3) quality, (4) performance, and also (5) market growth.
Herman Miller is facing the difficulties to overcome the problem which come from
the external environment as well as the internal environment. The company had facing
the hard-time during the financial crisis which occurs in 2008. Besides that, the
company is facing several problems such as economy downturn, intense competition,
and foreign exchange. In term of operation, the companys vision and mission
statement and the company aggressive in doing the CSR activities was also the
problem of the Herman Miller.
However, the grand strategy of the company is more towards the concentrated
strategies which include product development and innovation. After the analysis the

problem, we had recommend few solution to overcome the problems that the
company facing.