IKEA and PRO FLOWERS Reconfiguring industry value chain to create competitive business models

1. IKEA and PRO FLOWERSReconfiguring industry value chain to create competitive business models Team CS Ľubka Michael Anja Emil Entrepreneurship and innovation

2. 1. INTRODUCTION • many companies have their standard business model that most participants follow • a strong tendency to follow these standards at the sametime is openingspace for new entrants which have new idea about business model which revolutionize way how products are sold • practice is defined as BUSINESS MODEL INOVATION

3. IKEA • Is a Swedish furniture company registered in the Netherlands, founded by Ingvar Kamprad • known for it’s bright furniture and approach of requiring form their customers to assemble their furniture for themselves • As of October 2011, IKEA owns and operates 332 stores in 38 countries, In fiscal year 2010, US$23.1 billion worth of goods were sold, a total that represented a 7.7 percent increase over 2009. • There were over 470 million visitors to IKEA's websites in the year from September 2007 to September 2008 A July 2013 media report speculated that IKEA is the world's largest consumer of wood after a finding that the company uses 1% of the Earth's wood supply

4. IKEA

5. IKEA recognition of the furniture value chains gives IKEA an advantages: the approach provides substantial cost savings for IKEA and also allows IKEA to target customers that is looking for a good value and doesn’t mind assembling the firm’s sales increase 21.7 % from 2007 to 2008

6. PRO FLOWERS Pro Flowers, later called "Provide Commerce", was started by Jared Polis in 1998. Provide Commerce also offers fruit, sweets and gift baskets direct from the supplier through its Gourmet Food Business Unit, but they also sell and ship fresh flowers for all occasions Like IKEA Pro Flowers also created competitive advantage by reconfiguring industry’s value chain In February 2006 Liberty Media Corporation purchased Provide Commerce, Inc. for a sum of $477 million in cash, at which point Provide Commerce became a wholly owned subsidiary of Liberty Media. today, ProFlowers is a major flower retailer in the United States

7. PRO FLOWERS

8. PRO FLOWERS The way Pro Flowers made it’s approach work is by contracting with global network of flower growers and supliers when an order is received by their website, appropriated flower grower is filling the order and shipping the flowers via UPS and Fed Ex This approach results in a considerable savings for the Pro Flowers by eliminating steps in traditional flower value chain Their innovation is crucial for the business where the merchandise needs to be fresh, so changing the traditional value chain beside cost savings, they made their service much better

9. 2. QUESTIONS Do you think that IKEA and Pro Flowers have plans that effectively describe what the firm offer to customers. How could these firm’s models be changed so they would be more appealing? Both firm’s by changing traditional value chain in their industries at the same time improved their service Therefore they have straightforward plan which is describing to their customers what they can get IKEA is offering stylish, modern furniture for a competitive price for the customers who don’t mind assembling that furniture. Furniture have good quality with possibility to buy it online and later change some parts of the furniture (color of the kitchen cupboard, glass board of the table etc.) Pro Flowers are providing fresh flowers with wide range of choice for every occasion directly to your home(service cannot be better)

10. Do you think that IKEA and Pro Flowers have plans that effectively describe what the firm offer to customers. How could these firm’s models be changed so they would be more appealing? • These models are revolutionary by itself and by changing the traditional value chain both firms made them more appealing for the customers and for them • At the same time both models made the service for the customers much easier and simple as it has to be • Changing the models these services can only be more complicated with a possibility to change the model which would look as an traditional one • Still, business environment and consumer behavior have tendency to change so it is important to follow them and adopt business model to make the perfect business fit

11. What is IKEA’s core competency? What are it’s strategic assets? Is there anything about IKEAS business model that makes what the company is doing hard to replicate? • IKEA dose not manufacture its own products, but works through a complex network of suppliers around the world to help company maintain its low-cost position. (1,800 suppliers in 55 countries.) • By providing the manufacturers with technical and financial assistance, IKEA establishes durable partnerships with furniture producers and suppliers. To secure suppliers and help suppliers develop, IKEA also has launched partnerships as joint owners in several countries including Poland, Russia, and China • In addition to using high volume runs to cut costs, IKEA always believed that costs are kept under control starting at the design level of the value-added chain. IKEA designers work closely with suppliers to build savings into the products by designing products that can be produced at a low cost. It sells most of its furniture as kits for customers to take home and assemble themselves

12. What is IKEA’s core competency? What are it’s strategic assets? Is there anything about IKEAS business model that makes what the company is doing hard to replicate? Designing and innovation..!IKEA's pricing, and catering to the local populous (race, income bracket, etc) all contribute to the success of IKEA. Attract people of all economic brackets but their key competency lies in their appeal with the lower-middle class communities. IKEA’s business model adopted some other companies(Seamens, B&Q, John Lewis, Argos) but for all of them it is hard to be successful because in every industry the most successful player would be the one who invented a new value chain first.

13. Supose that you are CEO of Pro Flowers and you have received an e-mail of a highly reputable rose grower who wants to know which business you adopted and why she has to part of it Pro Flowers are the first company which has adopted unique business model, and we are pioneer in our industry. By adopting our business model we succeeded to improve our service by offering only fresh and wide range of roses to each home within a country. We are choosing only the best rose growers in a country and we would be delighted to do business with you. By offering our service we would promote your product- roses and together we could make perfect business fit. We would like to remind you that most of the reputable rose growers are doing business with us and each day we are stronger and stronger.

14. How does Pro Flower business models motivate its customers and partners to participate in its business Contract growers are highly motivated because Pro Flowers has become major flower retailer within US so their market share is big From the same reason Pro Flower can only make their business with the reputable grower which has sufficient volume of stock Thais is the reason why for the Pro Flowers is much easier to be involved in a business with a major rose growers GENERALY attraction for the partners would be 9 of 10 For the customers it is even more simple PF is providing only fresh flowers to their customers directly to their home and it is hard to even imagine better service then theirs

15. 5. Which industries, other then furniture and flowers, are ripe for business model innovation ? In almost every business there is an opportunity to adopt business model by cutting cost or improving service, so opportunities are endles Change of a business model is most welcomed in industries with a complicated or complex value chain as retailing, shipping, logistics or trade where business is dependent on many contractors or partners The more business is simple the less it’s has a need for changing the business model

16. Why do you think IKEA hasn’t grown more rapidly? Not every customer want to assemble and to deliver furniture by them self There are furniture manufacturers which are cheaper then IKEA In world standards IKEA is not so spread around the globe (1’ store in Latin America in Dominican Republic, failure in Japan) In the beginning they had to adopt their strategies(Japan) and even now they are changing their business model and policies after failures (U.K. shipping scandal)