Herman Miller, Inc.

Traditional Case Study

June 18th 2012

David MaillieAndrew Hatfield-O’HernAndrew Withers Isil EcevitNawaf Nizamudeen

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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.

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Customer: Herman Miller

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.

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

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Customer: Herman Miller

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.

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

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Customer: Herman Miller

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

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

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Customer: Herman Miller

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.

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

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Customer: Herman Miller

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

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

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Customer: Herman Miller

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.

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.

2007

2008

2009

2010

2011

24.7

23.6

23.9

18.7

17.9

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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.

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Customer: Herman Miller

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.

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:

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Customer: Herman Miller

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.

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

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Customer: Herman Miller

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

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

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Customer: Herman Miller

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).

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.

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Customer: Herman Miller

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.

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.

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Customer: Herman Miller

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

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

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Customer: Herman Miller

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.

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.

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Customer: Herman Miller

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

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

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Customer: Herman Miller

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.

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

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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.

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Customer: Herman Miller

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

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.

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Customer: Herman Miller

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.

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:

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Customer: Herman Miller

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:

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.

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Customer: Herman Miller

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:

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.

30

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

31

Customer: Herman Miller

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/today-

money/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

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-in-

action/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-herman-

miller/company-timeline/1900.html

Herman Miller Inc. (2009, May 22). Governance Philosophy. Corporate Governance.

Retrieved June 9, 2012, from http://www.hermanmiller.com/about-

us/investors/corporate-governance.html

32

Customer: Herman Miller

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/

2011_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/

2011_Better_World_Report_GRI_Index.pdf

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-better-

world- 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

33

Customer: Herman Miller

http://www.landflip.com/landforsale.asp?

country=United+States&size=0&state=Wisconsin&use1=Timber&county=&price=0&q

s=1&sort=

Merger Network.(2012, June 16). Lumber manufacturers for sale. Retrieved June 12, 2012,

From http://www.mergernetwork.com/index/lumber-and-building-products-

manufacturers-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-s-

history.com/pages/h1528.html

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-first-

carbon-billionaire/

34

Customer: Herman Miller

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-

Timber-and-Wood-Products-Market-Update-158499395.html

35

Customer: Herman Miller

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