Beat Box Inc.

A cardboard company

Background
In 1952, Matthias Brehme founded a company producing cardboard shoe boxes. Main clients were family-owned shoe manufacturers based in Germany and Northern Italy. In 1975 his son, Andreas, took over the company expanding the product portfolio from solely shoeboxes to all types of boxes and package solutions. The company was renamed from Brehme & Son to Beat Box Inc. In the early eighties, as part of an innovation program, Andreas Brehme developed a unique concept of boxes. The concept is based on a traditional Japanese folding technique, whereby a box can be created from a single piece of cardboard, without cutting or sealing. This process enables them to reduce the production lead time resulting in decreased (labor) costs and increased production capacity. Within a few months, Andreas had designed and produced a prototype and invested in new production process to manufacture and sell those boxes. Within a month of producing the prototype, Beat Box received a pre-order for 3000 units by a large German shoe manufacturer. Subsequently, Beat Box grew rapidly in Germany and soon had demand from the rest of Europe. Apart from shoe manufacturers, orders were also placed by logistic companies. To continue this growth, they developed an additional selling feature in that retailers could request the boxes in a number of different sizes, shapes and colors. In the 1990s interest in the new type of boxes had developed in the U.S. and China to such an extent that the company set up operations in both locations.

Organization Overview
Staffing of the Board Andreas Brehme is the chairman and Chief Executive Officer. Other family members are on the Executive Board which has remained fairly stable with the exception of a new Chief Operating Officer, Oliver Berthold, who joined Beat Box 6 months ago. Oliver was brought into the company partly to deal with the problems of returned orders and global scrap levels, although he has limited experience in this area. Andreas is aware of the new requirements in corporate governance but does not know where Beat Box stands, as they currently do not have an audit committee nor a remuneration committee. Beat Box is owned by the Brehme family. Andreas holds 51% of the shares. The 49 remaining percents are divided among the other Brehme relatives. The founders of Beat Box have always valued the contribution of their employees. As a family enterprise, Beat Box is as grants clear responsibilities to its staff and has a culture of long term and truthful client relationships.. In order to fulfill its responsibility to its employees, extensive social services (such social security, pensions, etc.) have been established for the staff. A flat organizational structure across all departments means that employees have the chance to develop their skills, whilst short paths for decision-making give the individual the opportunity to experience a great deal of responsibility, individuality and flexibility.

Current operations Beat Box now has global sales of $1.7 billion and employs over 5,000 people. The European market accounts for about 40% of these sales with both the US and Chinese markets representing about 30% each. The main headquarters is located near Hamburg, Germany and all the Executive Board members are based here. To meet a sales target of $2 billion (and profit target of $250 million) by next year, the Board has decided to focus on growing the U.S. and Chinese markets and also to expand into Australia, India and Brazil. To achieve this objective Beat Box recently licensed its trademarks to other parties in Brazil who manufacture and distribute boxes. The parties are required pay royalties for using the trademark based on the sales volumes.Beat Box has the opportunity to acquire an Australian company that has patented a design for takeout meal paper boxes. Management are concerned that they do not have sufficient knowledge of the food market. For example, quality criteria/ requirements for food packaging, competitors and market size, etc.

Products
Besides the standard packing solutions, Beat Box has developed two unique patented concepts: B-Box Based on a traditional Japanese folding technique, the B-Box is created from one single piece of cardboard, without cutting or sealing. Beat Box is supplying the BBox into a wide range of industries, especially the shoe and fashion industry, including Adidas, Nike and Elite. Brehme recently hired designers who will work with the client to customize the boxes, by coloring and decorating the boxes. Management hopes to leverage off the success in the fashion industry to the more luxurious brands such as Prada, D&G and Louis Vuitton and increase sales of Bboxes by 40% in the next 12 months. Powerbox Beat Box is closely collaborating with a state-of-the-art environmental paper mill which produces exceptionally high-quality cardboard. Recently the paper mill developed a more powerful type of cardboard. Together with Beat Box Inc. a new packaging has been developed, called the Powerbox. No formal agreement was put in place at the outset of the collaboration with the papermill. A legal case is now ongoing in Germany to determine the rights of the papermill in relation to the profits made from the Powerbox sales. Last month a well known newspaper published an article about the materials used in the Powerbox. Competitors of Beat Box claim that an environment unfriendly type of glue is used to strengthen the cardboard.