Sound of Music, Danish Style : Bang & Olufsen Survives by Selling Slim, Elegant Electronics to the Wealthy

STRUER, Denmark — Bang & Olufsen, a Danish maker of fashionable sound and vision products, offers proof that a small firm can survive on world markets if it finds the right niche.

Engineers Peter Bang and Svend Olufsen started the company in 1925 making radios in the attic of a house near the present headquarters at Struer in western Denmark.

‘Special Customers’

Sixty-three years later the firm has won an international reputation for design of slim-line televisions and elegant music and video equipment available in integrated systems run from a single remote control.

“It is a very good example of how a small Danish company can survive for 63 years and can live into the future with some confidence that it can continue to grow because it has found its niche in the market,” said Vagn Andersen, company president.

“We are very conscious of our strategy: that we produce very special products which we market through the best distribution . . . to special customers who feel that their life style is in harmony with Bang & Olufsen products,” he said.

For “special” read “wealthy.”

B & O products have never come cheap.

Povl Skifter, executive vice president, added with a smile: “You can say that it is against nature that we are here.”

The company was hit by last year’s stock market crash, when suddenly, prestige-conscious consumers found they had less spare money to invest in slim, elegant stereo systems.

Pretax earnings of $9 million (61 million crowns) for 1986-87 turned into a $2.3-million (16-million crown) deficit 1987-88.

Andersen said he was confident that profitability would pick up because the company had trimmed labor costs, reduced stocks and improved its product range. And better-than-expected economic expansion in the industrial world would also help boost sales, he said.

Stock analyst Dag Schoenberg of Danish brokers O. Rye Kristiansen agreed. “Analysts believe Bang & Olufsen will have a reasonable profit this year,” he said.

B&O; says its products are not just machines for listening to music or watching TV programs. They are works of art in themselves.

In 1978, the Museum of Modern Art in New York held a special exhibition of B&O; products, and curator J. Stewart Johnson praised them for being “beautiful objects in their own right that do not inordinately call attention to themselves.”

Audio-Visual Systems

This fame was achieved despite the firm’s size, tiny in comparison with the world’s television giants. It has only about 3,000 employees and annual revenue does not exceed $300 million.

Andersen said the latest trend was to emphasize integrated systems.

“It is years ago that we stopped thinking only of components and started thinking of systems,” he said. “Today, our preferential customer buys a complete audio-visual system where a single remote control operates a compact disk, a compact cassette, a tangential record player, a radio, a color television and a videotape recorder.”

The system costs about $10,000 (70,000 crowns) in Denmark.

Latest sales figures show that B&O; sells 23% of its products on the home Danish market, with 11% to Britain and 10% to the United States.

So far, manufacturing has taken place solely at three centers in Denmark. But from 1989 the company will have its high-format MX 5000 television set--narrower because the speakers are under the screen--produced under license in California.

“The States is our biggest audio market. To remain a credible company in the States, we must give our full product range,” Andersen said. “In three, four years, the States may be as important a market as the home market.”