HON Shareholders Meeting

The first time Natalie talked to me was before class. She said, "My dad thought you might like to look at this." It was a pie chart of market share for the office funiture market. HON, ticker symbol HNI, was the second largest producer of office furniture in the US. HON is located in Muscatine, Iowa. "My dad is really good at econ," Natalie said.

Natalie's dad is the CEO of HON Industries, a fortune 400 company. On May 8, 2007, I heard Mr. Askren address the shareholders of record at the annual shareholders' meeting. I took notes to see how much 101 economics were discussed in his 45-minute presentation. Below are a few of the notes that I wrote down that command a share price of $50 with roughly 48,000,000 holders.

Forbes Magazine has recognized HNI as one of the best managed corporations in the US. Management is always looking for cost reducing innovations. One econ 101 concept that was applied was substituting a naturally grown agrimaterial for fiberglass. As the price of fiberglass increased, more of a substitute good was demanded. The use of fiberglass was not eliminated--just less demanded at every price than before.

The construction of housing and fireplaces are complementary goods. As the supply of houses decreased, raising the costs of building a home, the demand for hearth products decreased. Fireplaces make up about 50% of HNI revenues.

Mr. Askren mentioned a Split and Focus approach to specialization. In other words, the company let's workers work in the area that they will be the most effective. The econ 101 concept is comparative advantage. Workers specialize making more of a product then they could if their talents were diluted by performing many tasks. Specialization leads to more for less.

HNI is listed as the second largest office funiture producer in the US. Their goal is to be number one. The econ 101 concept is competition leads to a more efficient use of materials that matches the value society places on the materials. Competition leads to a more efficient use of land, labor, and capital closer to the alternate uses that the resources could be employed.

I want to thank Mr. Askren and Diana Stelzner for inviting my class to the annual shareholders meeting. In my next blog, I want to discuss how mergers and acquitions have help HNI reduce costs while gaining market share.