Herman Miller Inc Essay Example for Free

Herman miller Inc EssayFrom the headquarters of Herman miller Inc. , Curt Pullen talks amid the unmistak up to(p) pounding sounds and commotion associated with a construction devise site about his familiaritys jut to rebound from the ceding back. Pullen, the firms exe sheerive vice president and president of northern some America, says the workers be inst onlying new lower-height Herman miller workstations blueprinted to accommodate a ontogenesis disposition in authorizations toward much open, collaborative environments.The new result, called Canvas, is part of the beau mondes market-shift scheme later on the demand for office furniture fell hard during the economic downswing. The plan to a fault involves diversifying into the health tutelage and academic furniture markets and more speech pattern on emerging economies. The plan appears to be paying off. For the first date in nearly four stratums the phoner reported two sequent quarters of double-digit p ortionage sales growth after releasing its second-quarter earnings statement on Dec 15th.Orders in the second quarter roseate 34% to $462 million. CEO Brian Walker noned the companys rotateed market reach as a contributing factor to growth. Significant maturations occurred in international markets where sales rose 33%. In 2010 the company acquired UK- ftd ergonomic workstation manufacturer Colebrook Bosson Saunders and purchased assets from Australian furniture do workr Living Edge Group. In 2008, the company announced a coalition with Chinas Posh Office Systems Ltd. to expand in the Asia-Pacific region.The company attributed a year-end surge to gains in its international, health care, learning and retail vertical markets. The expanding health care industry has become one of the companys key growth targets. One of the more recent expansions into the health care field came on Jan. 31 when Herman miller consummate its acquisition of health care furniture manufacturer Nemschoff Chairs LLC based in Sheboygan, Wis. Herman moth miller designed the Canvas workstation at a lower height than handed-down workstations to facilitate a workplace trim toward more collaborative environments.The design also allows more light into work areas and saves space, the company says. Including sinks and headwalls, to be reconfigured to meet patient take ups. 2. Business Strategy Broad Differentiation Strategies This dodge pursues the buyers conducts and preference to make them satisfied with the intersection. And to be polar from other rivals, the increase must have unique product attributes that a wide range of buyers find appealing and worth paying for. The strategy achieves its aim when an attractively large-scale numbers of buyers find the customer buyer assess proposition.Herman miller is pursuing this strategy as we refer to the instance study that their products are based on the design which is designed according to the plenty who intake the furniture. Like the president of Herman moth miller said pile are of the essence(p) not the furniture. Furniture should be useful. Besides, this company emphasizes on product design and environmental friendly, these are two radical things that they have been practicing for many decades. Furthermore, they also invest more in research and development for product innovation.Take an example of office design product, Herman Millers Insight and Exploproportionn team observed various workplaces to break how volume collaborate and the ways in which their interactions vary over the course of a day, and passim the support of a project by differentiating the subtleties of how, when, where, and why people connect independent of content or industry. Senior Researcher Shilpi Kumar notes that, outlining these collaborative work behaviors go away empower designers and decision makers with a greater understanding for how people really work, and will enable more informed choices in regards to office spaces . Herman Miller takes advantage of the growing desire for green products to raise a mitigate world and increase ergonomic furniture, because the consumers are willing to pay a premium for such quality and social responsible product. Since the designer of Herman Miller forceful quality, excellence, and the continual approach of their products, obviously one of their product which is designed by Charles and Ray Eames since its launch in 1950 had developed from plastic chairwoman to wood chair in 2000.She also confirmed that this wood chair is 100 times recyclable since Herman Miller is concerned about environmental friendly, and Eames Molded Wood situation Chair earns Gold award at NeoCon 2013 in the Guest Seating category. 3. Functional strategy Research and Development (RD) This category focuses on strategy that is concerned with the actions in managing particular functions within a business especially in RD. In terms of Herman Miller RD, they invested in research and developme nt (RD) financially. Although at that place was downturn in financial, Herman Miller unruffled invested tens of millions of dollars in RD.The enthronization in RD was code invoked Purple. A result of investment in RD was an outgrowth of project Purple. The polish of this project was to spread beyond the boundaries of normal business. Herman miller created a special team called the accessories team in which the team-identified a possible growth area. This team is do to recruit people with different disciplines involve to support that goal. In addition, this team focuses on contributing ideas to the success of the team from all resources and also to develop a particular product as it goes through that piece of work.This project is in line with functional strategy of RD in which a companys product development represents the plan for keeping the companys product in accordance with what buyers are looking for (Thompson et al, 2014). In the case of Herman Miller Inc, they began wi th research in every real design solution in which the exploitation and insights of the best research leads to human-centered design and problem solving. Herman Miller Inc is doing many things for RD in the case of education, sustainability, performance, healthcare, manufacturing, architectures design and biotechnology.Herman Miller Inc has its major RD activities and projects, i. e. its way to support and develop a companys product. According to Herman Millers financial statement for financial years 2006-2011, there was a decline in design and research in 2009 due to the ongoing economic downturn. hear 1. 1 Spending on Design and research So far, they have done some research projects regarding education such as students research work behaviors tardily innovation spaces. In the fall 2012, there was a project Herman Miller funded as a way of investing in the next geneproportionn of workers by giving students the casualty to apply what hey learn in a real-world setting. Herman Mi ller wanted them to look at the business objective of the company. Besides Herman Miller providing the funds, the employees of the company also participated in the project.After the field research, the goal of this project was that the students shared what they had learned from going to the company for a workshop. The company also wanted to light upon more about places that encourage creativity and the places of creative people. Besides Herman Miller providing the funds, the employee of the company also participated in the project. In regarding with the research in technology, the research starts by understanding which technological trends are creating new behaviors in the workplace. So from that, they can produce new design solution. Over the last three years, a meeting of designers, engineers, and researchers, the Insight Herman Miller and Explo proportionalityn Team (I E) has focused on emerging technologies and how they alter social behavior in the workplace.Herman Millers go al is to hear the technology trends that are relevant to the office and also understanding new behaviors that allow the designers, architects and manufacturers to bring new workplace design. For healthcare, Herman Miller Healthcare saw the luck to study and analyze by doing the research from the discussion of Bluewater health in which anterior to design development and also the satisfaction and safety of patients and staff members. Herman Miller Healthcare is sponsoring a research project that will explore how changes in the built environment have affected staff in three important areas Ambulatory Care, Intensive Care Unit and Emergency Department. 3 4. Functional Strategies Marketing Marketing is one of the strategies used under functional strategy.First and foremost, Herman Miller products were sold internationally through wholly owned subsidiaries in countries including Canada, France, Germany, Italy, Japan, Mexico, Australia, Singapore, China, India, and the Netherlands. Hence , they use the international strategy to compete its products in each country. In other words, they use the foreign subsidiary strategies because it seemed that they prefer to have a direct realize over all aspects of in operation(p) in a foreign country that is the reason why they established wholly owned subsidiaries.As a result, this strategy was successful as their brand was recognized by customers and increased customer base spreading over 100 countries. Moreover, they used green marketing strategy to sell their products. This is because they mainly focus on environmental friendly such as Mirra chair, one of their products which was made of 45 share recycled materials, and 96 per centum of its material were recyclable. Therefore, the chairs used 100 share renewable energy. Due to this strategy used, Mirra chair was put down as one of the Top 10 Green Products by Architectural Record and Environmental Building News.Hence, this can indicate the success of using this strate gy. In addition, Herman Miller engaged in cooperating advertising with strategic partners. As the example of Hilton Garden Inns which they equipped the Mirra chair in some room and on the desk in the room, was a card that explain how to adjust the chair while also providing the advertisement of Herman Millers website, how to purchase the products. Likewise, this is one of the advertising used to erect their products by using the strategic partner. As a result, they can reduce the advertising appeal and gain more brand awareness. . Operating Strategy take to the woods Production Initially, at Spring Lake, Herman Miller had invested in a giant robot assembly that welded supports inside file cabinet housings, including a tractor-trailer-length automated join line with 1,000 sensors to drive labor completely out of the process. Unfortunately, big customers like Hewlett-Packard and ATT were pulling their orders of 100 instead of 500 and some wanted file cabinets in two weeks instead of six with much luxuriouslyer quality.The Spring Lake plant could not deliver, and certainly not for the lower prices customers demanded. 995, they adapted Toyotas leading-edge formula for plant-floor focus into an approach they called the Herman Miller operation System (Boozco. , 2010, para 20). Based on the above quote, it depicted that Herman Millers decision to employ Herman Miller exertion System (HMPS) lean outturn, was to maintain efficiencies and greet savings by minimizing the amount of inventory on hand through a just-in-time process. To ensure a mentally ill flow on the order driven production, Herman Miller collaborated with reliable and strategic suppliers.HMPS created competitive advantage through large assembly manufacturing based. For example, direct materials and components purchased as needed to meet the demand and some suppliers delivered parts to Herman Miller production facilities five or six times per day. This resulted in a sample lead time of 10 to 20 days for majority of the products and low inventories on hand. Interestingly, HMPS managed to increase the variable costs rather than fixed costs while retaining proprietary control over manufacturing process.It was reported that the plant managers across Herman Miller have learned that the best-run plants rely on people, not machines. Only people can solve problems to make assembly lines go high-speed, run cheaper, and deliver higher quality (Boozco. , 2010, para 25). Therefore, it can be concluded that labor intensive approach tend to beat machine intensive approach especially when the products demand further customization with limited time and the majority of industry products are built to each customers unique order. interrogative 2 Culture at HMI healthy and largely supportive of good strategy execution.Herman Miller had codified its massive-practiced organizational values, intended as a basic for uniting all employees, building relationship, and contributing to society. Herman Miller started in 1905 with the Star Furniture Company and created the Herman Miller furniture company with his son in police force named Dirk Jan De Pree. From the beginning, De Pree committed himself to treating all workers as individuals with specials talents and potential. This was part of Herman Millers corporate culture which continued to generate respect for all employees and take advantage of the vicissitude of skills possessed by all.This is one of the functional strategies in corporate culture in Herman Miller Inc in which included the companys approach to people management, procedures and operating practices that provide the guidelines for the behavior of the company. The impact of this culture became one of the competitive advantages that make strong management and employee satisfaction in the company. The business principles and ethical standard of Herman Miller are the management practices as the key of companys culture. Herman Miller was one of the furniture company named to Fast Companys closely Innovative Companies in both 2008 and 2010.Herman Miller had pursued a path of reinvention and renewal. Herman Miller has many ways to develop their products and its culture is also unique. Through the growing of the company, Herman Miller maintains the relationship with the employees. Herman Millers commitment to innovation included sharing ideas and opinions from the employees. On January 1979, Herman Miller established new organization structures that included all employees were to be given the opportunity to discuss new plan in small group settings. In addition, Herman Miller also established a plan in which all employees became shareholders.Herman Miller Inc. also focuses on more efficient and environmentally friendly by taking a major initiative in 1981. It is in line with a better world value which is pursuing sustainability and environmental policy. They established environmental quality action team whose goal was to unionise environ mental programs worldwide that involves many employees. A Herman Millers culture is grounded in and resides to certain core value and some sets for ethical behavior. Herman Miller had long practiced organizational values that were button up used in 2012.The values are as basis for uniting all employees, building relationship, adapt the implied attitude, behaviors and work practices. The company adopted inclusiveness which means they include all the expressions of human talent and potential that society offers. As mentioned forwards, Herman Miller corporate culture continued to create respect to all employees and looking for and utilizing the skills possessed by anyone. The second value is design in which it is important to Herman Miller Inc. in order to make in advance(p) products. It is the way for them for looking at the world and how it can work.The results of this value are Herman Miller established many innovative products and designs. In 1971 and 1984, they introduced produ cts based on ergonomics principles such as the Ergon chair and Equa chair. For another groundbreaking design, it introduced the Aeron chair which was almost added to New York Museum of Modern Arts permanent design charm in 1990. Other important values are based on Herman Millers best performance that focuses on enriching the lives of employees, customers and create value for the shareholders.The result of this value has made Herman Miller share the gains and pains with the employees especially about the compensation. All employees received a base pay and they also participated in a put on sharing program where they received stock in accordance to the companys financial performance. The company also offered to the employees the employee stock purchase plan (ESPP), retreat income plan, offered one-year bonus to all employees based on companys performance, and in regard to profit sharing both the employees and executives have same computing of bonus potential. High performance cult ureIn Herman Miller Inc. there is a strong sense of involvement on the part of company military group and emphasis on individual initiative and creativity. Two of the greatest strengths lie behind our heritage of research-driven design. Respecting and encouraging risks, exploring new ideas and freedom of speech. Owners actively committed to the life of the community called Herman Miller, pride in doing things right, sharing in its success and risks. The strengths and payoff really comes in when engaging in peoples own problems, solutions and behavior. Performance is required at the highest level possible.Herman Miller enriches employees lives, delight its customers, and create value for its shareholders. Herman Miller includes all the express human talent and potential, everyone should have a chance to realize his or her potential regardless of color, gender, age, sexual orientation. It believes that skill different educational background could bring the company uniqueness. Adaptiv e Culture Herman Miller unendingly keep innovating its products to serve their customers better. Herman Millers corporate culture, which continued to generate respect for all employees, had fueled the seeking to tap the diversity of gifts and skill held by all.The company designs products according to what people want the most, and it is a way of looking at the world and how it works or does not. To design a solution, rather than exclusively devising one, required research, thought sometime starting over, listening and humility. Manager and employees support each other in dealing with working environment. Herman Miller designed the Canvas workstation, at a lower height than traditional workstations to facilitate a workplace trend toward more collaborative environments. The design also allows more light into work areas and saves space, the company says.Additionally, the company also keeps changing its production designs from time to time according to the needs of the people and fo llow ergonomic system. Herman Miller hired much expertise to design its furniture, and it is costly to spend on RD but company the company was willing to take risks on new innovation. Financial performance Year 2008 2009 2010 2011 Revenue ($ millions) $ 2,012. 1 $1,630. 0 $1,318. 8 $1,649. 2 RD to Sales Ratio RD/Sale 51. 2 / 2,012. 1 = 2. 5 % 45. 7 / 1,630. 0 = 2. 8 % 40. 5 / 1,318. 8 = 3. 1 % 45. 8 / 1,649. 2 = 2. 8 % Table 2. HMIs Revenues and RD to Sales ratio from 2008 to 2011 Figure 2. 1 Research and development (RD) to Sales ratio from 2008 to 2011 The above graph shows the trend of RD sales ratio which increases from year 2008 until 2010. However, it returnd slightly in 2011 due to low RD investment because of recession. However, it is not clear whether measuring the RD ratio is a good metric to represent its efficiency towards a company. This is because it takes into consideration the RD expenses rather than RD investment thus it is slack to manipulate the number by lower ing the RD expenditure.Even, in the vestibular sense sheet of Herman Miller, the RD investment is not disclosed under assets. If RD is capitalized as asset, then it depicts the efficiency of RD towards business revenues. In brief, due to that constraint, we assume that at least the RD sales ratio increases and contributes positively towards Herman Millers business structure as Herman Miller invests heavily in RD to create the furniture. Figure 2. 2 HMIs Revenues from 2008 to 2011 The above graph illustrates that the trend of sales revenue decreases from year 2008 until 2010. However, it started to increase in year 2011.Thus, in brief, Herman Miller is improving in their sales through investment in Research and Development and produces competitive design. Question 3 HMIs Financial situation prior years and its competitors 1. HMIs financial situation In order to measure the financial performance of Herman Miller Inc, we have used different ratios, such as liquidity, profitability, s upplement and activity ratios. Besides, we also compare the financial performance of HMI in relation to its competitors HNI and Steelcase Inc from 2008 until 2012 based on the above mention ratios.For our case, we have used the true ratio to measure the extent to which the three companies (HMI, HNI and Steelcase) can meet their short term obligations as shown in the figure below. Figure 3. 1 HMIs latest ratio versus its competitors ratio The figure above shows the menstruum ratios for the three manufacturers of office furniture and equipment for five consecutive years. In the case of Herman Miller Inc. , their circulating(prenominal) ratio showed some slight increase of about 1 percent from 2008 to 2009. However, a drop of about 21 percent was xperienced in 2010 but they were still able to maintain a current ratio of greater than 1. In the year 2011 and 2012, there had been a tremendous increase in their current ratio to 1. 76 and 1. 81 respectively. This current ratio of grea ter than 1 provides additional cushion against unforeseeable contingencies that may arise in the short term. In the case of HNI, their current ratio showed a moderate increase of about 7 percent from 2008 to 2009. However, for the subsequent years, HNI experienced a decrease in their current ratio of slightly 10 percent from 2010 all the way to 2012.Nonetheless, they were able to maintain a current ratio of at least 1 to ensure that the value of their current assets covers at least the amount of their short term obligations. As for Steelcase, their current ratio showed a moderate increase of about 8 percent from 2008 to 2010. On the other hand, the company experienced a decrease of round 8 percent in the year 2011 but they were still able to maintain a current ratio of greater than 1.However, Steelcase managed to have an increase in their current ratio from 1. 37 in 2011 to 1. 52 in 2012. Overall, Herman Miller Inc. as shown a probatory increasing trend in their current ratio as compared to the other two companies. This may suggest ameliorated liquidity of the company or a more conservative approach to working capital management. ii. Profitability ratios Profitability ratios measure managements overall yieldiveness as shown by the returns generated on sales and investment. There are a number of ratios under profitability but for our case, we have used the Return on Assets (ROA) to measure the after-tax net profit per dollar of assets and coarse Profit Margin which measures the total margin available to cover operating expenses and yield a profit.These two ratios have been used to appreciate the three companies (HMI, HNI and Steelcase). Figure 3. 2. 1 HMIs return on asset ratio versus its competitors ratio The figure above shows the Return on Assets for the three manufacturers of office furniture and equipment for five consecutive years. In the case of Herman Miller Inc. , there has been a change magnitude trend of ROA in the year 2008 to 2010 from 19 percent to 4 percent respectively. This shows that the profitability of the company is deteriorating. Nevertheless, rom the year 2010 to the year 2012, the company has shown some slight increasing trend of ROA from 4 percent to 9 percent respectively. This indicates that the companys profitability is quite improving over the years. When it comes to HNI, it has also shown a high decreasing trend of ROA in the year 2008 to 2011 from 5 percent to -0. 6 percent respectively. This shows that the profitability of the company is extremely deteriorating. However, in the year 2012, there was an increase of about 4 percent as compared to the previous year.The company was able to move from -0. 6 percent to 3. 8 percent. This signifies that the companys profitability is slightly improving. Lastly for Steelcase, there has also been a high decreasing trend of ROA from the year 2008 to 2010 with about 6 percent and -0. 8 percent respectively. This shows that the profitability of the company is ext remely deteriorating. However, there was a slight increasing trend of ROA in 2011 and 2012 of 1. 02 percent and 3. 33 percent respectively. This means that the companys profitability is somewhat improving.Overall, Herman Miller Inc. has shown a considerable increasing trend in their ROA over the years as compared to the other two companies. This may imply potent use of assets and creation of high margins by the company as soundly as gauging how well the company uses its financing from borrowing and bonds. Figure 3. 2. 2 HMIs gross profit ratio versus its competitors ratio The figure above shows the double-dyed(a) Profit Margin for the three manufacturers of office furniture and equipment for five consecutive years.In the case of Herman Miller Inc. , there has been a slight decrease of the piggish Profit Margin in the year 2008 to 2009 from 34. 72 percent to 32. 37 percent respectively. However, from the year 2010 to the year 2012, the company has shown some slight increase in th eir Gross Profit Margin from 32. 49 percent to 34. 26 percent respectively. This indicates that the company can make a reasonable profit. For HNI, there has been an increasing trend of the Gross Profit Margin from the year 2008 to 2011 with about 33. 66 percent and 34. 6 percent respectively. However, in the year 2012, there was a slight decrease of about 1. 3 percent as compared to the previous year.The companys Gross Profit Margin moved from 34. 86 percent to 34. 39 percent. This also signifies that the company can make a reasonable profit. Lastly for Steelcase, it has shown a slight decreasing trend of Gross Profit Margin from the year 2008 to 2010 with 32. 12 percent and 28. 35 percent respectively. However, there was a slight increasing trend of Gross Profit Margin in the subsequent years amounting to 29. 5 percent in 2012. This means that the company can still make a reasonable profit. Overall, HNI has shown a steady increasing trend in their Gross Profit Margin over the years as compared to the other two companies. This may indicate how efficiently the company is using its materials and labor in the production process and gives an indication of the pricing, cost structure, and production efficiency of the company. iii. Leverage ratios This ratio is used to determine the companies financing methods, or the ability to meet the obligations.There are many ratios to calculate leverage but the important factors include debt, interest expenses, equity and assets. In this section, we will examine two ratios which are debt to assets and debt to equity ratios. Figure 3. 3. 1 HMIs debt to asset ratio versus its competitors ratio The debt to asset ratio gives us a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. In general, the debt to asset ratio for Herman Miller fluctuated over the years as compared to its competitors HNI and Steel case.In 2008, the debt to equity ratio for Herman Miller was above 80 percent and rose approximately to 100 percent in 2009, whereas this ratio was just about 61 percent and 57 percent for HNI and Steel case respectively in 2008 and about 58 percent in 2009 for both competitors. This indicated that almost 100 percent of Herman Millers assets were financed by debt or creditors which implied that the Company has high level of leverage and risk, while its competitors had roughly 50 percent of their assets financed by the owners.However, Herman Millers ratio significantly dropped in 2010 to about 40 percent which was below its competitors who almost maintained their position over the years. In 2012, 70 percent of Herman Millers assets were financed by debt. In general, although the company debt to assets ratio is still high in relation to its competitors, the financial performance of the company is improving after the financial crisis. However, the Company needs to further reduce the amount of debt resulting to the decrease of risk this is because it may affect the companys endurance in the long-run.Figure 3. 3. 2 HMIs debt to equity ratio versus its competitors ratio A debt-to-equity ratio measures the amount of debt a company uses to fund its business for every dollar of equity it has. In other words, it is a measure of a companys ability to pay back its obligations. Generally companies with less debt equity ratio are less risky than the companies with high ratios. As we can see from the graphs, Herman Miller Inc. has the highest ratio over the year in relation to the other companies. For instance, its ratio fluctuated significantly over the years which were at 32. 7 and 94. 91 in 2008 and 2009 respectively. This susceptibility be due to the effect of the financial crisis, which caused the company to increase its debt financing heavily. Also, this indicates that the company had substantial high amount of debt as compared to equity which can endanger the long term survival of the firm since the company may not be able to generate enou gh cash to satisfy its debt obligations. Meanwhile, debt to equity ratio for HNI and Steel case was roughly lower than 2, which was acceptable for large public companies.For Herman Miller, however, this ratio sharply dropped over the next years to just about 8. 62 in 2010 and 2. 37 in 2012. In contrast, its competitors still can maintain their ratio below two over the next years. In order to improve this ratio, Herman Miller had sold its putting green stock and tried to lower the mount debt financing, this can be seen by the amount of long-term debt decreasing. This implies that the companys financial performance has been improving after the financial crisis.In terms of leverage, overall, it can be said that the performance of the company has been improving over the years and regaining its position in the furniture market after the economic downturn. Although it may not do well as compared to its competitors in terms of financing the debt and equity, there is a sign of improvement and effort in positioning its self in the market industry in U. S. iv. Activity Ratios Figure 3. 4. 1 HMIs Inventory turnover ratio versus its competitors ratio The inventory turnover is commonly used to measure the operational efficiency in managing its assets.Based on the figure 4. 1 illustrated above, in 2009, Herman Miller Inc. has the highest ratio compared to other years. This high ratio could indicate two conditions, such as whether the company has strong sales during the year or it has an ineffective get activity. However, it is perceived that the company did have strong sales proven from the lowest level of inventory and high sales revenue which are seen in the annual report during the year. While in 2010, Herman Miller Inc. s turnover ratio drops significantly compared to the other years.Its cost of sales for the year has the lowest and showed a decrement of 24% from previous year which simultaneously contribute to low ratio as well as indicating the lack of effectivenes s particularly in bend its inventory into sales. One of the reasons is that it could be due to the recession which highly affected the company, and hence making them to reduce the cost of sales. However, Herman Miller Inc is getting better in turning its inventory into sales proven from the increment of its ratio by year. Additionally, compared to competitors, the position of the ratio shown for Herman Miller Inc. is located somewhat in the middle.Steelcase is somewhat faster in turning their inventory into sales compared to others. In contrast, HNI has the lowest rate. This proves that Steelcase is more effective in managing its operational assets. Figure 3. 4. 2 HMIs Average collection period versus its competitors ratio Average collection period is the number of days it takes a company to collect its account receivables. As illustrated from the figure 4. 2 above, Herman Miller is getting better in obtaining its receivables shown by the average days taken which was from 58 days i n 2008 and 34 days in 2012. This demonstrates that Herman miller Inc. onstantly improve its credit policy effectiveness confirmed by a dramatic slump by years.Comparing to other competitors, originally HNI was the most effective company in managing its credit term policy, as the company only took 38 days in collecting its account receivables compared to Steelcase or Herman Miller. However, the company ended up to be the highest rate at 2012 showing that it is not effective in evaluating companys credit policy. As a result, when a company possesses a lower average collection period, it is seen as optimal as it indicates that the company does not take very long to turn its receivables into cash. . HMIs current strategies an issues of need to change its strategies during poor economic conditions The current Herman Miller strategy which focuses on growth strategy, through innovative products and related diversification made the company to kick the bucket the Great Depression early in i ts history, multiple recessions in 20th century and in early 21st century the company recovered from the dot com bust and was able to continue expanding overseas. The furniture industry is an economically volatile industry. The office furniture segment of the industry was hit hard by the recession. intentness sales decreased 26. 5 percent during the 2009 economic downturn. However, because of the innovative and diversification, Herman Miller was able to outperform its competitors in terms of sales and profitability, during that time Herman Mills sales dropped by 19% which is relatively low in comparison with its competitors HNI Corporation and Steelcase which had dropped by 33 percent and 28% respectively. The furniture industry is at its maturity stage, thus Innovation is crucial to the companys survival. If Herman Miller continues to successfully innovate, it will enable them to compete in the market strongly.The industry had been negatively impacted telecommunication which had r educed the need office furniture. Yet, more employees were spending more hours in front of the computer screens than ever before. Because of Herman Millers effective innovation, they were able to respond to the need of ergonomically correct office furniture that had helped to decrease fatigue and injuries like carpal tunnel syndrome. In summary, the company does not need to radically alter its main strategy which focuses more on innovation and diversification as its the reason they were not dramatically hit by recessions and competitions among the rivals. 3.Recommendation i. Reduced current emolument and incentive schemes There are several incentives that had been eliminated by Herman Millers management due to the economic downturn in 2009. The suspend of 401(k) contribution plans (saving contribution plan), cut-off 15 percent of current hands and 10 percent reduction in salary for remaining workforce had been implemented during the crisis.However the pay cuts was discontinued bec ause of Herman Millers quick turnaround. The company was stable starting the year 2011, but the selling, general, and administrative were the highest contribution of the operating expenses. Specifically, $3. million and $16. 6 million of additional operating expenses during fiscal 2011 due to the reinstatement of all of our employee benefits and employee incentive expenses (Herman Millers Annual state, 2011). The company believed that the large benefit and incentives had created motivated and skilful employees which are the key of its competitive advantage. Even though the company has increased in sales as compared to the year 2010, it is important to cut the costs by eliminating some of the less important incentives schemes and benefits such as $100 rebate on a bike purchase, concierge services and one-site services to name a few.Previously, the company had eliminated the 401(k) contribution plan so that they could stop providing some percentage on the employees contribution. It i s crucial since it could allow the company to save a significant amount of money in the long run (Richardson, 2009). It can be done by communicating the problems and issues which need to be addressed to the staff before they get out of hand. Address the problems proportionately and regular communication could make the staff be aware on their role to support the company throughout the economy downturn.By having it, the staff might accept the decision positively and provide effort to help the company to fully recover after the recession (Recession Business Cost Cutting, 2013). ii. Reduction in companys cost of sales According to Herman Millers Annual Report (2011), the increase in cost of sales for the year 2011 was due to the increase in sales volume that was driven primarily by cost leverage on higher production, which was partially offset by deeper discounting, higher employee benefit and incentive costs, and higher costs of key direct materials, most notably stigma and steel comp onents.Besides that, the cost of direct material increased as compared to previous years which there was increase in the cost of commodities and the increase in discounting, which has the effect of reducing net sales The costs of certain manufacturing materials used in producing finished products are sensitive to the volatility of commodity market price. The cost of direct labor and overhead were increased due to increase in product volume while the cost of freight expenses had increased during the year because of increase in product volume as well as increase in fuel costs in 2011.First testimonial to cut the cost of sales in terms of direct material is substituting lower cost material where possible to replace the expensive one and each tend should be considered for better decision. For example, the substitution of carbon steel to replace expensive stainless steel could reduce the cost but the corrosion protection might not last longer. This method should be applied if only the benefit from the substitution is higher than the cost of reduction in quality (Lewis, n. d. ). Second recommendation is by eliminating unnecessary product features to reduce cost.The company should produce a product that really suits customers preferences in buying their products. For example, the company should identify whether customers are buying its products because of their unique looks, lower price or high quality. If customers buy the products because of their lower price, unique features may not be needed (Lewis, n. d. ). Third recommendation which is the most effective one is by hedging the price of the steel through futures contract. According to Herman Millers Annual Report (2011) The company believes market prices for commodities in the near term may move higher and acknowledges that over time increases on its key direct materials and assembly components are likely. Consequently, it views the prospect of such increases as an outlook risk to the business (p. 34). By locki ng the price in the contract, it could eliminate any risk of price volatility (Hedging in intrust, 2013). For example, if there is a huge possibility that the price of steel will increase in a certain period of time. Due to that, the company will engage in future contract and lock-in the price for a specific period in the future.Regardless of increase in steel price, the company is legal to buy the commodity at a lower lock-in price as stated in the agreed future contract. Conclusion Herman Miller Inc. has implemented different strategies in order to improve its performance and expand its self in furniture market, such as diversified strategy, broad differentiation strategy, green marketing, product development and innovation. In addition, besides focusing on those strategies to achieve the business goals, the company also concerns about how it communicates and treat its employees. All workers as individuals ith special talents and potential can be considered as one of the healthy culture at Herman Miller since 1927 and the Company continued to generate respect for all employees and fueled the quest to tap diversity of gifts and skills held by all. According to one of the verse in chapter 42 of the Quran Those who hearken to their Lord, and establish regular Prayer who (conduct) their affairs by uncouth Consultation who spend out of what We bestow on them for Sustenance (Quran 4238) The verse above explains the importance of mutual consent in making a decision.Islam encourages Muslims to decide their affairs by consulting with those who will be affected by the decision. Thus, in the case of Herman Miller, it empowers its employees and nurture participative decision making so that the employees feel as part of the company. Surviving in matured furniture industry and the economic volatility such as recession, demand full cooperation from the whole organization. It is not easy to integrate the diverse nature of employees with different backgrounds and behavior s to achieve goal congruence.Thus, Herman Millers healthy culture leads to its employees readiness to accept any relevant decision by Herman Miller such as cutting their salaries as the employees work with Herman Miller and not just work for it. Furthermore, in term of design value, the designer team of Herman Miller always emphasized on quality, excellence, and the continual improvement of their products. At Herman Miller the products we made decade ago are still sold after today, and products we make today we will do for a decade to come. All in all, Herman Miller should pursue its current strategies and continue to expand those strategies such as product innovation, diversification and so on. We believe that these strategies have made and will make Herman Miller one of an outstanding and award agreeable Company. They will continue to provide the Company with the ability to renew and reinvent itself in the furniture market and outperform its rivals in the future. From the explana tion above, it gives us a broad view of how the companys long-term strategy and objective affects all their business from product design to decision-making process to the culture of the Company.