IKEA & PROFLOWERS “Reconfiguring Industry Value Chains to Create Competitive Business Model”

GROUP MEMBERS M997Z229 Damar Pambudi M997Z234 Ricardo M. Dukha Jr. M997Z217 Do Nguyen Yen Nhi M997Z247 Nguyen Tan Nhat Duy M997Z243 Hyacintha Faustino

IKEA Is a swedish furniture company, well known for it’s brightly coloured furniture Requiring customers to assemble their furniture for themselves Has 270 stores in 24 countries. Products are offered in a very competitive price

IKEA Was founded in Almhud Sweden, 1943 by Ingvar Kamprad Elmtaryd Agunnaryd When it started IKEA sold pens, wallets, picture frames, watches etc In the late 1940s furniture was added to its products To create a competitive advantage, IKEA decided to reconfigure the furniture value chain

IKEA The reconfiguration value chain gives IKEA several advantages : less cost of maintaining manufacturing facilities Cost savings from the outsources and delivery service Creates wide market segments Unique features stores

Proflowers It was started by Jared Schutz Polis in 1997 offeres free online greeting cards It was launched in 1998 Is an online retailer sells & ships all occasions - fresh flowers Is a subsidiary of Provide commerce that sells and ships fresh fruits baskets, steak and seafood & fresh desserts

Proflowers Created a competitive advantage by reconfiguring its value chain By contracting with a global network of flower growers and suppliers Simply eliminating steps in traditional value chain Provides lower prices products for the customers Approaching customers with the value of the “freshness factor”

The Business models of IKEA & Proflowers

“In everyday language, a model is a plan that’s used to make or describe something.” Do IKEA & Proflowers have a plan that will meet the customers need?

Proflowers First, Provide Commerce marketplace is a proven e-commerce platform that consistently delivers fresh, high quality products direct from the supplier to the customer. Through the network of suppliers, theyhave eliminated multiple intermediaries from the legacy supply chain, thereby realizing significant cost advantages and higher margins.

Proflowers

IKEA The IKEA product range is wide in several ways. First, it's wide in function: you'll find everything you need to furnish your home, from plants and living-room furnishings to toys and whole kitchens. Second it's wide in style. The romantic at heart will find just as much as the minimalist. And finally, by being coordinated, the range is wide in function and style at the same time, and at all times. No matter which style you prefer, there is something for everyone. 

IKEA They are constantly trying to do everything a little better, a little simpler, more efficiently and always cost-effectively. All IKEA units play an important part in creating our low prices which we are then able to offer our customers. Using flat-packs and customers' willingness to assemble products themselves enable us to reduce labor, shipping and storage costs. Distribution and purchasing of IKEA Group has about 31 distribution centres in 16 countries, supplying goods to IKEA stores. It has about 45 trading service offices in 31 countries. This enables us to develop close relationships with our 1,350 suppliers in 50 countries.

IKEA They produces wood-based furniture and wooden components, manufacturing units in 11 countries mostly in Europe. IKEA stores display the product range in room settings, offering customers inspiring home furnishing solutions. To help keep prices low, IKEA stores buy and transport products in bulk, are located in less expensive areas and take advantage of the self-service and assembly concept.

Core Competencies of IKEA

IKEA’s core competency IKEA has focused its strategy on core competencies that have been leveraged as part of a strategy to sustain profitability. The company develops its capabilities as a global retailer by adding value to the supply chain (thoughtful product design, local sourcing and low-cost distribution hubs). Constructing a low-cost business model that enables consumers to reap the benefits of high quality design furniture at some of the lowest prices available. Building strong brand equity through unique promotions and pioneering advertising campaigns that recognize diversity

IKEA’s core competency Developing a unique business culture designed around a good lifestyle for employees and customers. Corporate social responsibility that is dedicated to environmental, labour, and ethical business practices. IKEA’ core competencies have helped its efforts to attain a sustainable business model in the United States (US) as it continues opening new stores throughout the region.

Ikea's strategy IKEA successfully handles all aspects of marketing, sales, employee relations, product development, and supply chain management, creating a vivid picture of how management theory can work successfully when approached with a consistent and clear strategy. Its winning strategy includes global sourcing of components, accessible suburban stores, quality products with sophisticated European design at a low cost, and in-store amenities, such as coffee shops, restaurants, and day-care facilities. IKEA’s low-cost business model allows it to offer quality furniture and home accessories at 25 per cent to 50 per cent below its competitors.

Ikea's strategy IKEA’s sustainability comes from taking a measured approach to its expansion into the US by opening a single store at a time in a particular area to more effectively focus on getting the operations established in a manner which makes the most sense in terms of cost, training, and overall financial controls.

Ikea's strategy IKEA is requiring the US consumer to do change how they shop. The company “directs customers to shop in the store instead of ordering online—noting that customers’ willingness to pick up and assemble items is critical to IKEA’s ability to give customers the lowest-cost items with an element of fashion and style.”

The pioneer in low-cost model In looking at its low-cost model, this seems to be a key strategy within today’s global business environment and IKEA was one of the companies to pioneer this type of model well before airlines and other industries began to evolve their business models. Everything that IKEA does involves carefully examining the true cost involved in that particular product or process, including the design, sourcing, and operational expenses involved. Whilst low-cost is important, IKEA believes that it has the capability to be a low-cost leader without sacrificing quality or compromise its corporate social responsibility. This is what has been termed as a lifecycle solutions approach, which “recognises all these costs and makes it easier to see the real, total cost comparisons between different systems options, as well as to exploit their advantages.”

The pioneer in low-cost model One way in which IKEA has been able to do this is by creating a “global organisation that provides infrastructure, service and support to its various business units and suppliers and helps them to identify and implement the most cost-effective technology available.” This has led to a value-added supply chain that IKEA has capitalised on to maintain low costs whilst further growing its operations. IKEA map of the world

Business model efficiency of Proflowers

The Traditional Flower Industry Value Chain (all, or most, steps completed by different companies) ProFlower’s Reconfigured Flower Value Chain (ProFlowers e-commerce platform enables the process) Flowers delivered to customer via FedEx or UPS Grower Importer (distributor) Wholesaler Retailer Customer Grower Customer

Business Model Motivation The customer Fresher Higher Quality Wider selection The grower (or supplier) Increased margins Broader customer reach Better inventory management

ProFlowers Approach The way ProFlowers has made its approach work is by contracting with a global network of flower growers and suppliers via FedEx or UPS This approach results in a considerable savings by eliminating steps in the traditional flower value chain The savings ProFlowers captures are in part passed along to its customers through lower prices

Fast Flower Delivery & Easy Payment They offer overnight flower delivery for those who need it quick. They even offer same day flower delivery. From the second your order is placed, their team works quickly to review and fulfill it. They also make buying flower easy. Send flowers with Paypal, Visa, MasterCard, American Express, Discover Card, Diners Club, and JCB.

“Freshness Factor” ProFlowers freshness guarantee on deliveries is unparalleled - It promises freshness for seven days after your arrangement arrives or it will be replaced! That’s how serious it is about bringing you freshness, quality and value.

Application Questions Which industries, other than furniture and flowers are ripe for business model innovation? Discuss how a start up or an industry incumbent could benefit by reconfiguring its industry value chain in this manner

On the left of the chart above you have the supply-side issues On the right the demand-side ones Different companies perform to different levels in each of the essential component areas of a business model

Intel has access to chip design and manufacturing technology that is only marginally differentiated from its competition However, they have excelled at partnerships with PC manufacturers, Microsoft and retailers by embedding themselves into the value chain and in the consumer’s mind

Apple’s design abilities are an example of capabilities that others find hard to replicate In Media you could pick Pixar with its CGI animation skills Challenge : Create skills to support their clients in the other component areas of new business model framework if they wish to truly add value and differentiated).

Cisco is the daddy of supply-chain configuration. Wal-Mart is the master of the cost model. For example, their trucks always drive with headlights on because they’ve worked out that the cost of fewer accidents outweights the extra fuel consumption. They recycle boxes and palettes while others are throwing them away. You don’t get to keep the hanger when you buy a t-shirt from them, as it goes straight back to the rack.

By moving to the Web, Dell achieved a distribution model that outpaced rivals. As a by-product of build-to-order their supply chain was leaner and more agile, requiring less inventory and working capital Gillette manages to maintain a customer relationship through the razor handle/blade system , which they then extend into adjacent markets like shaving cream and deodorant to achieve premium margins.

By bringing together searchers and advertisers in a unique way, Google became the master of the revenue model In terms of finding new customer segments, Easyjet was the great pioneer of low-cost short-haul flights in Europe

CONCLUSION Competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders 2 main types: Differential advantage when the pdts or services totally differs from its competitors and are seen as better Cost advantage, for goods produced and sold at a lower price than competitors There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers.