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 $or $or 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 Howeve ver, r, it is possi possibl blee to set set up stud studen entt grou groups ps to repr repres esen entt different competitor competitorss 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%
Explain, in detail, the aspects of Ikea strategy that make it a Hybrid strategy $see &ection '.(.* and igure '.'%
Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual
ii% hy is this strategy difficult for competitors to imitate/ iii% hat are the dangers of a hybrid strategy and how can managers guard against them/
,. C"se An"l-sis 6.1
The hybrid strategy at Ikea
or a h!"rid strateg! to #or$ it must o%%er simultaneously &' •
(i%%erentiated )roduct %eatures that are *alued "! a signi%icant num"er o% customers 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 dierenti"ted roduct e"tures #hich hel)ed them do "etter than the -lo#')rice onl!’ com)etitors 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+
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onsistent store la!out+
•
ange o% )roducts is e/tensi*e unusual in lo# )rice stores+
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3se o% the catalogue+
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ommitted sta%% #ith "etter $no#ledge, )ro*iding "etter ser*ice+
I$ea’s lo/ 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+
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Scale o% o)eration 4man! more stores5+
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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 *alues o% the %ounder 4Ing*ar 8am)rad5+
Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual
6.2
Why is this difficult to imitate?
he %irst thing to )oint out to students is how long 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 #ill, in turn, %ind it di%%icult to imitate+ Perha)s, the most di%%icult as)ect o% a h!"rid strateg! is the need to "e clear a"out 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 o*erheads and distri"ution costs and "argaining hard #ith su))liers+ :o#e*er the! still continued #ith the hea*! cost o% 191 million catalogues a -lu/ur!’ 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+ 6.3
Dangers in the future
In principle the ans#er to this
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•
•
•
6 continuing danger is that the com)an! %ails to continue to "e tough a"out the di%%erentiating %eatures and cost management+ here is a )articular danger that, #hen 8am)ard e*entuall! lea*es, the culture #ill start to %lounder+ So, succession )lanning is the $e! to this 4there is little a"out this in the case5+ 6nother danger is that the mar$et mo*es a#a! %rom this )articular conce)t %or the usual reasons o% changing incomes, demogra)hics and li%est!les+ his #orr! is li$el! to "e heightened during a recession+ =r the conce)t %ails to -tra*el’ as the com)an! glo"alises the! ha*e alread! made mista$es on that %ront+ he $e! to these t#o %actors is good mar$et research and some %le/i"ilit! around the core conce)t+ he! ma! also "e out%lan$ed "! -lo# )rice’ o)erators, im)ro*ing their )roduct %eatures and>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 MI5+ 6t the other end di%%erentiators ma! im)ro*e their cost management
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
Johnson, Whittington and Scholes, Exploring Strategy , 9th Edition, Instructor’s Manual
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