Apple, Samsung and Bang & Olufsen stand out as exceptions among CE manufacturers, having delivered strong profits, sales and customer satisfaction over the last three years, Bailey noted. The common thread of their success is a focus on a fat-free and efficient supply chain. But they have deployed other strategies associated with Bailey’s definition of innovation as the delivery vehicle of great value.
Apple, which generated retail margin of about 17 percent last year, achieved success with its iPod and other products not by developing new types of products, but by developing new business models surrounding them. Apple and Bang & Olufsen, Bailey said, have also created successful retail outlets with a heavy customer focus, strong marketing campaigns and a direct channel that has produced a more predictable and manageable supply chain. “Apple made an investment in its direct channel,” said Sean Lafferty, IBM’s growth and innovation leader, global electronics industry. “The margin of the retail channel increases because they don’t have to discount.”
Among CE manufacturers, Bang & Olufsen scored one of the highest EBIT margins in 2005 with 11 percent, while Samsung followed with a strong 10 percent.