CASE TEACHI NG 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 generic competitive strategies% as discussed in &ection '.( in )hapter ' of Exploring
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 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.
However, it is possible to set up student groups to represent different competitors 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, 9
th
Edition, Instructors Manual
i% Explain, in detail, the aspects of Ikea strategy that make it a Hybrid strategy $see &ection
'.(.* and ,igure '.'%
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Pearson Education Limited 2011
Johnson, Whittington and Scholes, Exploring Strategy, 9
th
Edition, Instructors Manual
ii% .hy is this strategy difficult for competitors to imitate/
iii% .hat are the dangers of a hybrid strategy and how can managers guard against them/
,. C"se An"l-sis
6.1 The hybrid strategy at Ikea
or a h!"rid strateg! to #or$ 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$ea has success%ull! %ollo#ed a h!"rid strateg!+
I$eas 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 &'
0ontem)orar! designed )roducts #ith a connecting -theme+
0or)orate "randing in store colours+
0onsistent store la!out+
1ange o% )roducts is e/tensi*e 2 unusual in lo# )rice stores+
3se o% the catalogue+
0ommitted sta%% #ith "etter $no#ledge, )ro*iding "etter ser*ice+
I$eas lo/ .rices are under')inned "! cost management #hich is "etter than com)etitors #ith
di%%erentiated )roducts &'
0hoice 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! 2 dri*en "! the )ersonal *alues o% the %ounder
4Ing*ar 8am)rad5+
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Johnson, Whittington and Scholes, Exploring Strategy, 9
th
Edition, Instructors 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 2 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 2 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 <uestion is *er! sim)le+ In )ractice it can "e more di%%icult to
manage&'
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$el! to "e
heightened during a recession+
=r the conce)t %ails to -tra*el as the com)an! glo"alises 2 the! ha*e alread! made
mista$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
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Pearson Education Limited 2011
Johnson, Whittington and Scholes, Exploring Strategy, 9
th
Edition, Instructors Manual
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Pearson Education Limited 2011