Objectives and values

Vision

Ekornes shall be one of the most attractive brand suppliers of home furniture in the world.

Values, Ekornes shall:

1. be known for its honesty, credibility and consistency towards customers, suppliers, shareholders and employees
2. be perceived as dependable, efficient and well-run
3. be recognised for its care of customers, suppliers, shareholders and employees (Ekornes cares)

Business Concept, Ekornes shall: 

1. be a leading brand-name supplier of home furniture in the domestic and international market
2. offer products that in price and design address a wide range of consumers
3. develop and manufacture products that are exceptional in comfort and function
4. base its marketing on the company’s own brand names
5. have dealers as direct customers
6. give dealers good margins, and thereby becoming one of their most profitable suppliers
7. be market leader in its niche (Scandinavian reclining chairs)
8. give shareholders a good long-term profit
9. be an attractive employer

Objectives, Ekornes shall:

1. have a return on total booked assets of min. 25%
2. have a return on sales of min. 15%
3. have an asset turnover of min. 1.7 times
4. have an equity ratio of min. 40 – 50%
5. have a gross margin in the Stressless® business segment of min. 49%
6. have a gross margin in the Svane® business segment of min. 40%
7. have a gross margin in the Ekornes® Collection business segment of min. 40%
8. have an annual growth of 5 – 10%

Increased gross margins shall be a result of product development, optimisation of the collection, prices, volume and productivity growth in the factories.

Currencies

It is our aim to secure calculated rates of exchange on various currencies and to create a balance between our most important currencies. We shall continue to endeavour
to reduce the exposure connected with our USD volume by purchasing in USD. There is an additional need to purchase in other currencies. Exchange rate exposure connected with the value of overseas assets shall be covered by loans of a corresponding value raised in the relevant currencies.

Explanations

Total Assets:  Total assets as they appear on the balance sheet in the consolidated annual accounts.

Return: Profit before financial expenses = Operating profit + interest income + other financial income.

Return on sales: Profit before financial expenses in % of sales.

Return on total assets: (Profit x 100) : Annual av. tot. assets

Gross margin:  ((Sales – Variable costs) x 100) : Sales

Market and Customer strategy

Ekornes shall endeavour to be the most profitable supplier to dealers and shall be perceived as reliable and efficient.

The Ekornes brands shall be seen to represent the most attractive choice in the defined consumer group and the product areas.

Ekornes shall be the leading brand supplier in the industry, with attractive product and marketing concepts.

The Ekornes brand names are: Ekornes®, Stressless®, Svane®, Sacco® and Kiddo®. Each brand shall have its own clear identity and content. Ekornes shall always be linked with the individual brand name, as guarantor and consignor of the brand.

Ekornes shall be market leader, setting the tone for home furniture in Norway and being an important supplier in Scandinavia. Ekornes shall be an important niche supplier
in international markets.

Ekornes shall price the products so that consumers feel they are getting value for money.

Ekornes shall, in all markets, distribute its brands through solid, selected dealers. These may be chains or independent dealers.

Marketing in shops shall be based on studio solutions. The purpose is to better communicate the product benefits and brand profile and to facilitate and streamline the work of shop sales staff. Ekornes® studio shall be the most profitable and attractive part of the individual shop.

Marketing shall be based on product concepts. In terms of design, the inter-dependence between Stressless® recliner, Stressless® sofa and Ekornes® Collection sofa shall  be used as a competitive edge resulting in increased sales. This shall give particular growth in international sales of Stressless® sofa and Ekornes® Collection sofa.

Selectivity, market concept and product concept shall form the basis for establishing agreed dealer relations that bind the dealers and Ekornes. This type of «partnership» with the individual dealer should be formalised in a format that suits local market conditions. The purpose is to give the individual dealer the motivation and self-interest to invest in Ekornes’ brand marketing. In all its marketing activities Ekornes shall combine brand building with sales-generating marketing.

Ekornes’ market concept is based on the physical core product with its advantages relating to function and use and a developed total product is built around this. A number of differentiated additional advantages are then built around the total product, including brand marketing, studio solutions in shops, focus on the dealers’ profitability, training programmes for shop sales staff, selectivity, delivery time and precision, product concept and Internet presentation.

Ekornes shall actively conduct individual consumer marketing. Direct consumer influence is an important strategic element in strengthening the position in the consumer market and in relation to dealers. Ekornes shall individually and together with dealers influence the consumers throughout the purchasing process. The decision-making process in shops shall be made easier by means of the expertise of studio and shop sales staff. All marketing shall refer to dealers.

Ekornes shall deliver within the  confirmed delivery time. Dealers and consumers shall perceive the delivery time as competitive. Defined warehouse collection with fast delivery time may be actively used in the marketing.

Allocated advertising shall be handled so that dealers and consumers find the business process fast, efficient and simple. Complaint handling shall consolidate the dealers’
and consumers’ perception of Ekornes as a reliable supplier.

The Ekornes® school shall be further developed and represent an attractive training programme to shop sales staff. Its purpose is skills building and prioritisation of Ekornes products. The Ekornes® school shall be perceived as a positive contribution to dealers in all markets.

Ekornes shall have full control over use of the company’s brand name on the Internet. Ekornes shall use the Internet to inform and influence consumers throughout the purchasing process and to direct them to the nearest dealer by attractive, informative presentation of the individual dealers on Ekornes’ web site. The Ekornes web site shall not contain prices. The individual dealers may present Ekornes products on their own web sites following agreement and approval by Ekornes.

Ekornes shall actively protect its brand names by registering them and following them up in current and potential countries. This also applies to Internet domain registration. Infringement shall be actively followed up.

Up to and including 2005, Ekornes’ main growth shall be through further development of the markets in which it is already established. During this period the following new
markets shall be developed: Italy, Portugal, parts of Eastern Europe and Asia.

Ekornes shall supply products of a quality that complies with a defined quality standard. The quality standard hall satisfy the market’s requirements.

Production Strategy

The product concepts shall be based on standardised processes, individual products and components. In terms of production, large volumes of each component will be emphasized, which will form the basis of low unit costs. Vital elements of our market strategy include competitive delivery times, delivery precision and flawless products, for which the factories have primary responsibility. Daily production routines shall be based on the following principles:

1. Control and management of the product flow and progress. The order based part of the production will be planned and monitored on a day to day basis.
2. Product shortfall can occur and is taken into account at the planning stage, but not in the actual production process.
3. Serial production of components, assembly by customer order.
4. Operators shall, where possible, be given the opportunity to participate in planning and prioritisation relating to the current production process.
5. Focus on optimisation of lead times in production shall provide an overview, simplification and good use of space and capital.
6. Each production unit is required to set up daily production targets (no. units), delivery precision (%) and delivery time (no. days). Customers shall perceive the delivery precision and time as good. The factories in north-western Norway shall co-ordinate themselves so that delivery precision and time are as close as possible. Efforts shall be made to establish a uniform measurement system for evaluating delivery precision.
7. A process of organised continuous improvement shall be in place, based on department committees, factory comittees etc. This does not change the manager’s responsibility for improvement work.
8. Systems for employee training shall be further developed in order to achieve increased flexibility and productivity in production. It is recognised that expertise must be constantly updated in order to best exploit computer systems and complicated technical equipment.
9. Time and motion studies shall be carried out on all operations. Payroll systems shall be linked to productivity trends, measured against these «standard times». The standard times shall also be used in calculation and planning.
10. In conjunction with PD, we shall also work continuously towards developing methods and solutions.

Investment strategy

Ekornes should annually invest an amount that corresponds to average group depreciation. The aim of the investments, and also organisation development and capacity expansion, is to develop top international competitiveness and at the same time focus on safe, environmentally sound workplaces. The investments shall elevate Ekornes to a technological level at the very top of the industry. At the same time, the focus on technology shall make Ekornes an attractive workplace
for all its employees. Investments shall also be made to achieve annual growth targets. There will be an emphasis on investments in the Ikornnes Stressless® factory. It may be relevant to make investments of a structural nature.

Product developmenbt Strategy

Through its continued product development of branded goods, Ekornes shall seek to establish products that can be marketed as complete concepts, with a focus on
comfort, function and design. Ekornes’ products and their specific functions shall enable us to stand out from the competition. The product advantages shall be genuine
and cover the needs of dealers and consumers. This applies to all products.

Use of designers shall ensure that the general public perceives the products as attractive.

Stressless® products are international. Product development shall be based on this and shall also focus on improved consumer-friendliness. The PD process shall also allow high productivity and rational production.

All product development shall be geared towards sales in international markets. It is a goal to reduce the number of models, provided that existing ones can be sold in significantly greater quantities than at present.

The sofa collection shall be developed to become more international. The design shall be adapted to Stressless®, so that both collections can be sold through the same channels and stand out as parts of a producer concept.

Products and components shall be adapted to Ekornes’ production apparatus in terms of rational production and lowest possible unit cost. Investment capacity and technical expertise can be used, if necessary, to develop special production technologies in order to create competitiveness. Ekornes shall place considerable emphasis on having a fashionable and sought-after textile collection for sofa products. Collaboration with recognised textile suppliers shall be developed.

PD expertise shall be further developed in-house and also with monitored use of external environments.

Strategy for organisation and staff development

Considerable emphasis shall be placed on staff participation and staff responsibility in daily work. This shall be achieved by further developing existing consultative bodies. In this context, further development of department council (or corresponding) is central. The aim is for individuals to feel a genuine sense of participation in daily work. Co-operation between the management team and employees’ representatives shall be based on mutual respect and understanding. The management style shall be oriented towards cooperation and allow good, friendly relations.

Day-to-day personnel handling shall take place in the individual department. Personnel policy shall be as individual-oriented as possible, but based on a common
set of rules. There shall be a focus on working environment and of continuous training in the individual workplace.

Organisation development shall be characterised by the  clarification and definition of the individual’s areas of responsibility in relation to others.

The development shall still allow planning and production to take into account an overall development in the company, with regard to logistics, training, communication, computer tools etc. The development of flexibility (the individual can do more than one job) in the production departments shall continue. New employees shall be given a range of training to create understanding of how Ekornes functions (Basic module etc.). The company shall continue to work to increase expertise in current specialist areas.

Prioritisation of training measures shall mainly take place in the individual department. Skills gap analyses may be used in the prioritisation.

Programmes for continuous management training shall be established. Overall management skills in the individual department are important in creating a good personnel policy and a dynamic training organisation. The goal is to carry forward an environment and culture that provides participation and security and which encourages the desire and capacity for change, continuous improvements and increased competitiveness.

Technological development must continue, in order to create the required competitiveness, which means skills development is ongoing. At the same time, it is important to develop departmental assignments, which give the individual the greatest possible day-to-day manoeuvrability in relation to planning, decision-making and reporting. PISO 9001 certification shall be maintained at the factories in Norway and, if required, also extended to apply to the sales companies.

The salary systems shall promote productivity and help make the Ekornes workplaces attractive.

Information Strategy

Ekornes is subject to regulations from the Norwegian Stock Exchange regarding information that may affect the price of the Ekornes share. While taking this into account, it is our goal that all employees always should be well informed of the operational and financial situation of the company.

It is also a goal that employees are well informed about what is taking place in other parts of the company. The management team shall take steps to ensure that this information flows according to a certain system and that information is distributed according to a predictable system.

Ekornes should also be associated with honesty, openness and high business ethics. A separate plan has been drawn up for internal distribution of information. Information exchange with dealers and suppliers must be developed to promote mutual predictability and understanding for both parties’ strategy and pattern of action.

Ekornes shall further develop its IT-systems in order to improve the daily information flow between Group companies and central negotiation groups and suppliers. In its turn, Ekornes shall exploit the efficiency spin-off of the new IT-systems.

Ekornes’ in-house information and communication systems shall be continuously developed in order to promote increased productivity.

Environmental Conditions

Ekornes shall be seen as an environment-friendly company, committed to recycling waste and using environmentfriendly materials.

Ekornes aims to minimise health risks at its workplaces. Ekornes is willing to invest in order to avoid damage to the health and the environment.

Environmental information shall be included in product specifications etc. Ekornes shall not hammer environment arguments when marketing its products, but provide factual information and be seen as a responsible supplier.

Engagement in Infrastructure

Ekornes wants to be engaged in the infrastructure around the production units when this is considered to be economically viable.

Shareholders and Dividends

Ekornes will manage shareholders’ assets in such a way that the return measured as the sum of dividend and rise in share price is as high as possible over time. 30 – 50% of profit after tax shall be distributed as dividends, though taking into account necessary level of investment and pace of growth. The company shall make every effort to achieve stability in its dividend policy.

The management aims to maintain open communication with shareholders, with regular presentations to shareholders, stock brokers, investors and analysts.

Ikornnes, march 2003