Great article Xavi! I think like you mentioned IKEA’s business model focuses on reducing variability in terms of their designs and keeping a limited amount of styles, colors and features that make things easy to assemble for the customer but also allows them to better control their inventory. As you mentioned and Marissa noted above, because they are able to carry a limited amount of options and all their items are able to be deconstructed and held in a box, IKEA can stack items in their warehouses efficiently and hold a large volume of furniture items at each store location. This better ensures that items will be instock for their customers and ties into their operating model of being a one stop shop for all household furniture needs and ties to the supplier model you mentioned in the post.
I have been really surprised that there has not been a competitor in this low cost and decent quality space. A big complaint about IKEA furniture has been its lengthy and difficult home assembly process and its lack of high quality materials. There is a new startup that might soon disrupt the IKEA business model. Greycork is a new company that focuses on making higher quality and more long term furniture at even lower costs than IKEA. The new company identified that the younger generation tends to move at least a few times to different apartments throughout their 20s and 30s and want furniture that will last them through this process but that is easier to build and store. Their furniture is made out of higher quality materials like solid ash wood and fiberboard and the biggest competitive advantage is that the furniture is meant to be built in under 5 minutes! Additionally, the furniture is designed to have a few connectors and also ships directly to you in a lightweight box. This allows greycork to lower inventory holding costs and extracts similar operational efficiencies as IKEA but has more customer value in terms of cost and time savings. It will be interesting to see if new companies can optimize this business model and finally create a better alternative to IKEA in the near future. Please check the Business Insider link to Greycork if you are interested! http://www.businessinsider.com/theres-a-new-cheaper-alternative-to-ikea-2015-8
Great article Azeem! I think Shake Shack’s rapid expansion in the fast casual space is truly impressive. I read recently that Shake Shack is expanding most heavily in the Middle East including new locations in Lebanon, Quatar and Dubai. I wonder what aspects of this market particularly are beneficial to their specific business model and how they choose their international location targets. Additionally, we have discussed the difficulties of maintaining and preserving operational efficiencies but most importantly brand value when expanding too quickly. I would be interested to know what Shake Shack is doing to ensure that they are able to scale their idea effectively internationally without losing brand equity.
I recently read another article on the company that stated that because Shake Shack focuses so heavily on reliable and high quality products that they tried to move from frozen crinkle fries to fresh fries. However, there was a lot of variability in the fresh potatoes that were delivered to the store and the customers actually preferred the taste of the frozen fries so they switched back to frozen fries. This was an example where the financial benefits actually were aligned with the qualitative data, however I am sure that as expansion continues, there will be difficulties in making operating decisions that completely tie with the business model and mission. I look forward to seeing how Shack Shake handles these issues and further improves their operational strategy.