Ikea Case Study Solution

 

CASE TEACHING NOTES

Will We Still Love IKEA? Kevan Scholes

1. Introduction Everyone has heard of Ikea – whether you love or hate their products. It remains one of the best modern examples of what the Hybrid strategy actually means and why it is difficult to imitate. However it requires considerable management effort to sustain this strategy, and there is a constant danger of drifting into a stuck in the middle! position – being out"flanked! by both low priced and differentiating competitors at the same time.

2. Position o t!e C"se #he case study is concerned with business"level strategy – specifically the issue of  positioning $o $orr generi genericc compet competitiv itivee strate strategie gies% s% as discus discussed sed in &ection &ection '.( in )hapte )hapterr ' of  Exploring Strategy. It Strategy.  It is particularly useful in exploring the difference between a hybrid strategy $&ection '.(.*% and being stuck in the middle! $&ection '.(.+%.

#. Le"rnin$ O%&ectives #he case is designed to help students understand in detail what is meant by a hybrid strategy, why it can be difficult for competitors to imitate and what needs to be done to sustain such a  position and avoid being stuck in the the middle!.

'. Te"c!in$ Sc!e(e  Ikea is most likely to be used as a basis for plenary discussion rather than small group work. Howe Ho weve ver, r, it is po possi ssibl blee to se sett up st stud uden entt gr grou oups ps to repr repres esen entt different   comp competitor etitorss when answering questions $ii% and $iii% below. or example, you could assign students with companies from each of the competitor categories identified in the five bullet points in the section of the case study entitled Ikea!s competitors!.

). *uestions or +iscussions #he following questions can be used - "

 

Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual

i%

Expl Explai ain, n, in detai detail, l, the aspe aspect ctss of Ikea Ikea strate strategy gy that that make make it a  Hybrid   strategy $see &ection '.(.* and igure '.'%

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Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual

ii% hy is this strategy strategy difficult difficult fo forr competito competitors rs to imitate/ imitate/ iii% hat are the dangers dangers of a hybrid hybrid strategy and how can can managers guard ag against ainst them/

,. C"se An"l-sis 6. 6.1 1

Th The e hybr hybrid id str strat ateg egy y at Ik Ikea  ea 

or a h!"rid strateg! to #or$ it must o%%er  simultaneously    simultaneously &&'' •

(i%%erentiat (i%%eren tiated ed )ro )roduct duct %eature %eatures s that are *alued *alued "! a signi%ica signi%icant nt num"er num"er o% customer customers s com)ared to the lo#')rice com)etitors+

"nd •

Prices lo#er than the di%%erentiated )roducts o%%ered "! other com)etitors+

he case stud! sho#s ho# I$ea has success%ull! %ollo#ed a h!"rid strateg!+ I$ea’s dierent dierenti"ted i"ted roduct e"tures #hich e"tures #hich hel)ed them do "etter than the -lo#')rice onl!’ com)etitors com)etito rs include&' •

Selling a li%est!le and not .ust )roducts o%% a shel%+ his is sustained consistentl! through man! as)ects o% the customer e/)erience &' •

ontem)orar! designed )roducts #ith a connecting -theme’+

•

or)orate "randing in store colours+

•

onsistent store la!out+

•

ange o% )roducts is e/tensi*e  unusual in lo# )rice stores+

•

3se o% the catalogue+

•

ommitted sta%% #ith "etter $no#ledge, )ro*iding "etter ser*ice+

I$ea’s lo/ rices are rices are under')inned "! cost management #hich is "etter than com)etitors #ith di%%erentiated )roducts &' •

hoice o% materials and designs that are chea) to manu%acture+

•

Selection o% manu%acturers+

•

Scale o% o)eration 4man! more stores5+

•

lat )ac$ reduces trans)ort costs %or "oth the com)an! and the customer+

•

Lo# cost "eha*iour "! senior managers 4e+g+ econom! class air tra*el5+

•

 6n 4almost o"sessi*e75 culture o% %rugalit!  dri*en "! the )ersonal )ersonal *alues o% the %ounder 4Ing*ar 8am)rad5+

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Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual

6.2 6.2

Wh Why y is th this is dif diffi ficul cultt to imit imitat ate? e?

he %irst thing to )oint out to students is how long  it  it has ta$en I$ea to achie*e such a strong )osition+ his sho#s that it is di%%icult to create a trul! success%ul h!"rid strateg!+ :o#e*er once achie*ed this means that com)etitors com)etitors #ill, in turn, %ind it di%%icult to imitate+ Pe Perh rha) a)s, s, the most di%%ic di%%icult ult as) as)ect ect o% a h!" h!"rid rid strat strateg eg! ! is the need to "e clear clear a"ou a"outt the com)etences under)inning the "asis o% di%%erentiation, and then to reduce the costs in areas that do not criticall! under)in these "ases o% di%%erentiation+ ;! so doing it ma! "e a"le to reduce costs "elo# that o% com)etitors #ithout .eo)ardising its "asis o% di%%erentiation+ or e/am)le, I$ea #or$ed hard on reducing reducing o*erh o*erheads eads and distr distri"ut i"ution ion costs costs and "argaining "argaining hard #ith su))liers++ :o#e*er the! still continued #ith the hea*! cost o% 191 million catalogues  a -lu/ur!’ su))liers in the e!es o% their -lo# )rice onl!’ com)etitors+ Students should also identi%! the %act that this h!"rid strateg! is no# reall! -the I$ea #a!’ o% doing "usiness  in other #ords in is ingrained in the organisational culture+ his is the $e! %actor #hich ma$es a strateg! di%%icult to imitate+ 6. 6.3 3

Da Dang nger ers s in in th the e fu futu ture re

In  principle  principle the  the ans#er to this or other com)anies entering that s)ace+ In %act, the casualties in the recession tended to "e these lo# )rice o)erators 4such as MI5+  6t the other end di%%erentiators di%%erentiators ma ma! ! im)ro*e th their eir cost man management agement

In summar!, ho#e*er success%ul is a com)an! or a conce)t, the! cannot sit on their laurels+ ;usiness histor! is littered #ith those that did

? © Pearson Education Limited 2011

 

Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual

@ © Pearson Education Limited 2011