Introduction:

Bang & Olufsen is one of the oldest manufacturers of home entertainment in the world. Created in 1925 in Denmark by Peter Bang and Svend Olufsen, whose first significant product was a radio that worked with alternating current, when most radios were run from batteries. Today it manufactures audio products, television sets and telephones often seen as synonymous with good design of technology based products. The company is evolving in a niche market segment but has also collaborated with high volume manufacturers like Samsung and today with several car manufacturers such as BMW and Audi. With a tradition of creating the best and the first styles of products in its 80 year history and in line with the Danish reputation of revolutionary design and innovative products, the company has won numerous design awards and a lot of its products appear in industrial design collections of museums all around the world.

Financial Conditions over the last 10 years

The economic development of the B & O has had a few ups and downs during the past 10 years. B & O entered the new century with economic optimism and positivity. B & O's profits grew the first few years of the millennium, until it reached its peak in the financial year 2006/07. This surplus was more than half a billion before tax, something that is a record for B & O. This year, B & O also has a return on equity of 22% - another plus point. Then occurred the financial crisis. B & O went from a profit before tax of over half a billion in the financial year 2006/2007 to a loss before tax of just over half a billion in the financial year 2008/2009. This was an unexpected dramatic decrease of over one billion. The global financial crisis had led to a sharp slowdown in consumer spending, which in turn led to large sales decline in such Europe. The launch of new products did not go as planned, and therefore, sales of new products, which traditionally consist of 25% of B & O's total sales, did not go as planned. Still further, the company was also slow to respond to the lack of sales, and therefore also late at being able to reduce cost the cost. This, along with other minor factors contributed to a record deficit in 2008/2009. Financial year 2009/2010 was a relatively good year for B & O. They were facing a deficit of over half a billion was reduced to a deficit of almost 50 million DKK. B & O ascertained this positive growth to increased product launch, sales growth in the automotive and cut costs. With a surplus of 40 million. before tax for the financial year 2010/11, B & O once again started making money. Although they were not completely satisfied with the results, they were satisfied with a profit. In the annual report the increase in the automotive category stands as one of the key reason for the increase in finances. Sales had increased by 69% and the total turnover was 452 million DKK. Financial year 2011/2012 proved to be more fruitful. This time the company had a surplus of 104 million DKK.

Market
B & O has from the start established itself in a niche market. As a manufacturer of high-end audio / video products, B & O has managed to appeal to the relatively small proportion of the population who are looking for a unique audio / video product at a relatively expensive price.

Financial Year 2009/10

5% 12% 12% Denmark 3% 28% Scandinavia Central Europe Other Europe North America Asia

Financial Year 2010/11

6% 3% 13%9% 36% 33%

40%

The figure above shows the relative spatial distribution of the B & O sales in the financial years 2009/10 and 2010/11. It is worth noting that the decline in the Danish market. The Danish market has always been the largest market for B & O and has always had stable sales. However, this has changed over the past year. The Danish market went from a sales share of 11% in 09/10 to only having a share of 9% in 10/11 of B & O's total sales. The figures show not only a relative decline, but also an absolute. In the financial year 09/10 B & O had sales worth of 313 million DKK in the Danish market, while the same figure was only 268.4 million DKK in financial year 10/11. If we look back over a longer period, we can see that Danish sales figure in the financial year 04/05 was 673 million DKK means that over six years B & O has seen a decline of about 405 million DKK in the Danish market. B & O has also seen a decline in the Other Europe market as well. The relative share of sales was 38% in 09/10, while in 10/11 had fallen to 32% thus a decrease of 6%. Although sales from the Central Europe region have seen a positive trend. From the financial year 09/10 to 10/11 this part grew from 5% points up to 32% of B & O's total revenue. B & O has for many years been focusing on emerging markets (especially the BRIC countries). Most markets in Europe and the U.S. have been in recession, stagnant state or at best at small growth over the past few years. This has resulted in lower consumption in these markets, and hence a smaller demand thus why B & O decided to look at emerging markets. Emerging markets such as the BRIC countries have been in constant growth over the last few years. The Chinese Market has been really important to B & O, which since 2003 has had a real GDP growth of between 9% and 14%. The Russian market too has been in B & O's focus during the past few years. Therefore, we see that the market "Asia" have an increase of 1% points - from 11% to 12% of B & O's total revenue from 09/10 to 10/11.

Products
As stated earlier in this report, B & O both manufactures, markets and sells B & O a lot of different products, everything from telephones, televisions and audio equipment to luxury cars (automotive). The B & O's annual report shows that the group operates in seven different product categories. Six branded categories and a non-branded category. In the branded part you will find product categories, video, speakers, audio, phones, spare parts etc. and automotive. The brandindependent product category is ICEpower. B & O's product portfolio can be divided into business-to-consumer (B2C) and business-tobusiness (B2B). Automotive and ICEpower is part of the B2B business area, while the B & O's other product categories fall under the B2C segment.

Branded Products Category The largest and most important branded product category has for many years been the video portion. It is mainly on the video section, the B & O in recent years have had their greatest revenue. B & O has recently been known for their well-developed and stylish home theaters. A good example is the BeoVision 4-85 which is also B & O's first Full HD 3D monitor. B & O has also sought to develop and produce the best in sound. The most famous B & O product within its audio category is the BeoSound range. BeoSound is B & O's version of an iPoddock. It is available in several versions and design. The latest member of the BeoSound family is the BeoSound 8. As It is designed to be able to connect to either an iPad, iPhone or an iPod. More than 25,000 copies got sold within the first six months of its launch, making BeoSound 8 the fastest selling audio product in the company's history. In recent years, automotive sound systems have been an important part of B & O's core business. Some years ago B & O began to develop, produce and sell exclusive and sophisticated sound systems for cars in the upper segment. This has led to B & O making agreements with automakers such Audi, Aston Martin, Mercedes-AMG and BMW. Automotive has become one of B & O's core businesses. With increased focus on the automotive field B & O expects growth in the coming years, and it will definitely contribute significantly to B & Os future turnover.

Revenue from Products 2010/11

kr176 kr81 kr443 kr407 kr452 kr1,228 Video Speakers Audio Telephones Spare Parts Automotive

The above figure shows the B & O's product distribution from the financial year 2010/2011. As you can see from the figure, it is the video portion that fills most of the B & O's product sales. In 2010/2011 video had sales of 1,228 million DKK globally - or around 42.5% of B & O's total sales.

ICEpower
Sales of loudspeakers, audio and automotive lay in the financial year 2010/2011 407 million. DKK, 443 million DKK and 452 million DKK repectively. ICEpower not being under the B & O brand, had sales of 93 million DKK in the financial year 2010/2011. B & O PLAY B & O's latest venture is a new product category they have chosen to call B & O PLAY. B & O has for many years been criticized for, inter alia, expensive and exclusive products only to appeal to the older population. This is the B & O PLAY be a response to. B & O has launched a new and cheaper product category, which should help to get new and younger customers to buy B & O products. First product under B & O PLAY was Beolit 12, which was launched in January 2012. This is a portable

music system based on Apple's AirPlay technology - ie. it can be used for wireless playback from an iPod, iPhone, iPad, Mac and PC. As a new strategy B & O decided to sell the B & O PLAY products in Apple stores. This should help attract the younger population. In addition to Apple stores, you can also get B & O PLAY products in B & O's own stores and B & O PLAY new online store.