“Reconfiguring Industry Value
Chains to Create Competitive
Business Model”
• M997Z229 Damar Pambudi
• M997Z234 Ricardo M. Dukha Jr.
• M997Z217 Do Nguyen Yen Nhi
• M997Z247 Nguyen Tan Nhat Duy
• M997Z243 Hyacintha Faustino
• Is a swedish furniture company, well known for it’s
brightly coloured furniture
• Requiring customers to assemble their furniture for
• Has 270 stores in 24 countries.
• Products are offered in a very competitive price
• 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
• The reconfiguration value chain gives IKEA
several advantages :
 less cost of maintaining manufacturing facilities
 Cost savings from the outsources and delivery
 Creates wide market segments
 Unique features stores
• 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
• Is a subsidiary of Provide commerce that sells and
ships fresh fruits baskets, steak and seafood & fresh
• 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
• Do IKEA & Proflowers have a plan that
will meet the customers need?
• 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
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 livingroom 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.
• They are constantly trying to do everything a little
better, a little simpler, more efficiently and always costeffectively. 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.
• 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
• 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 lowestcost 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 costeffective 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
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
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
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
• 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
• 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 byproduct 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
• 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

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