Business Model

KEA case study Question 1 Investigate Kike’s business model and sources of competitive advantage as depicted in the case. Why do you think it has been so successful In the fragmented furniture industry? What do you conceder to be Kike’s main weaknesses? To answer question one I will split the question Into three parts. Beguiling by investigating Kike’s business model and sources of competitive advantage. Then going on to address why It has been so successful In the fragmented furniture Industry. An finally explaining Kike’s main weaknesses. Kike’s business model and sources of competitive advantage

Business model Being one of the largest furniture companies in the world KEA must be doing things right. By analyzing the case study we can see KEAS strategies within its business model which have created such a successful business. Kea has a very unique business model. It starts with how they design there furniture products In the factory’s to ensure money is saved at the earliest stage with the saving being passed on to the consumer. For example the furniture will be produced with the construction and size in mind so it’s effective for transportation packaging and production .

KEA understand that the majority of Its customers will be price conscious but are still expecting a decent standard and stylish looks. They know the challenges its customers face when shopping for furniture and congeal customers tent to Like a showroom to be able to view the item erect before purchasing. They also like minimal tots ready in store for the customer to take home. KEA utilizes a clever showroom design which almost forces the customer to view all Kike’s different departments.

This showcases everything on offer while the customer walks round as a result they an see and potentially pick up other items they had not originally visited the shop for. Kea keep a large volume of the same article in order to keep costs down. Kea also put a lot of time into developing materials. They try to keep the cost low and environmentally friendly again passing the savings on the the customer. In china they took advantage of the abundant materials in the country and opened up their own plants processing the wood to cut importing costs.

KEA have expanded from their home in Sweden to over 37 other countries mainly in North America Asia Australian and Europe. No other competitor has achieved growth in this way. Kike’s unique way of sales, production and distribution have meant its been globally welcomed. KEA has been made to adapt to meet the customers need s when entering different countries it always makes the changes to meet with local practices. Competitive advantage One of Kike’s main mission objectives is to offer low prices to their customers.

By cutting costs but retaining a well manufactured finished product they keep prices low and the customer is happy and returns. To keep costs low they have chosen to use lat pack furniture allowing the customer to take the furniture items home without needing expensive delivery. KEA offers good services to it costumers to retain competitive advantage. By keeping up a good customer service reputation they know that customers feel comfortable shopping there. From my personal experience they are very good with returns and helping customers chose the right items for their exact needs.

This leads on KEA having good brand image which is a key competitive advantage. If a customer has been using KEA in their home country and moves broad there is a high chance they will be able to continue shopping with KEA and will feel at ease furnishing there new home . KEA is known for high quality with exceptional design which binned with its good prices means customers stay happy. Keeping up to date with styles and changing styles when entering different markets around the world enables KEA to retain competitive advantage anywhere in the world.

An example of this is larger beds when entering the USA. Within the KEA shops there is a massive variation of different products from bathrooms to kitchens and everything you need to fill pretty much every room. As a customer it is a one stop shop for furniture and homeward. When shopping at KEA customers know they are buying updated products with new innovative styles. A large customer base with variations of products to suit different price ranges allows KEA to appeal to wide variety of customers. Why has KEA been so successful in the fragmented furniture industry?

I believe a combination of KEAS unique business model which allows it to have broken in to a substantial amount of diverse markets allows the business to grow and adapt Kike’s main weaknesses The flapjack furniture has been listed as a competitive advantage but it is also a weakness. Certain consumer groups might find having to build their purchased furniture to much hassle and prefer to buy a ready made piece. Alto KEA is in over 37 countries it only has 301 stores which is a relatively small amount.

This can mean customers are to far away to travel to KEA especially in places such as China where not as many people own cars. The store layout has has some criticism especially in the USA where the customers didn’t want to have to walk around the maze like horror and requested shortcuts to the checkout. The Swedish design does not appeal to to other markets. Differences such as size and style needed to be changed which cosseted money. In the USA they thought the flower vases were drinking cups. The advertising they use could be better there is very little television adverts or online adverts which could be utilized.

Alto the furniture is stylish it is not built to last a lifetime which can put some customers off. Question 2 With use of relevant globalization and internationalization models analyses and evaluate Kike’s internationalization strategy. What do you conceder to be the key opportunities and threats facing KEA at the end of the case study? Within my answer to this question I am going to break the main question into three parts. Firstly listing the relevant global and internationalization models. Secondly Analyzing Kike’s internationalization greatest.

Thirdly analyzing the opportunities and threats facing ‘KEA. Relevant global and internationalization models Hecklers-Olin model Uses the countries most abundant materials to produce products. For example Bamboo in china to make furniture. The most abundant material is the main material used when making the product. They then export the finished product therefore saving money and sustaining the local economy. Kea fit into this model as they utilities the abundant material they however don’t export from china they sell within the country.

In other locations they have had ton outsource the manufacturing. In Europe they use cheap manufacturing plants in eastern Europe. This would be because alto Sweden had trees and forests its labor charges and general manufacturing costs are higher forcing KEA to outsource to save money. Lender hypothesis (Staff Bureaucrats Lender, 1961) Lender believed the more similar are the demand structures of countries the more they will trade with one another. Further, international trade will still occur between will be slightly specialized to create competitive advantage between the two nations.

For example KEA coming from Sweden having much the same preferences as the rest of Europe or USA needing larger beds / buying flower vase to drink from. Kike’s internationalization strategy KEA have used an organic growth approach to global growth. They have not used Rogers with smaller business or bought out other companies. They have grown due to a increase in customer base. They how however taken it upon themselves to move to different worldwide locations where they would not have had an existing customers and effectively started from scratch.

People in china would not have come across an KEA store unless they had traveled to a different continent. So advertising and promotion would have been from scratch. They have used aspects of both these models to internationalist there brand. KEA also has a franchising department which aids its globalization. As the franchiser KEA has the following main tasks: To expand Kike’s bunnies through franchising while retaining the KEA concept being its, pricing, individuality in its store design and its style.

To break into any global market ‘kea have undergone extensive market research for example when entering Switzerland they did extensive research but it appears they didn’t do so much in America. To analyses how the furniture giant broke into different global markets I have used main examples of America and China. These two very different locations gave KEA different challenges to overcome. USA The company initially tried to replicate its existing business model and products in the US but soon found It had to customize its products based on local needs. American customers, for instance, demanded bigger beds and bigger closets.

KEA had to make a number of changes to its marketing strategy in the US. The most drastic change was possibly to have to change the store layout to accommodate to the Americans who requested shortcuts to the checkout. China Before establishing themselves in China KEA understood Chinese apartments were small Customers required functional, modular solutions. The company made slight modifications to its furniture to meet local needs. The store layouts reflected the typical sizes of apartments and also included a balcony resolving the problem of high import taxes in China.

Opportunities and threats facing KEA Opportunities KEA has a number of opportunities firstly following the success of their global also expand its sales online. With location being an issue for some of its potential customers having on online store with conventional delivery methods might being more profitable business. KEA could also expand on there existing grocery and food arrest. Even possibly opening small local KEA stores offering these services . Another opportunity for KEA is to start a high end longer lasting range again to try to appeal to another market.

Threats Intensifying competition from online superstores such as Tests and Walter. They are offering online and in store cheap furniture. These shops are more localized compared with ‘KEA. The slowing of the first time buyers market. First time buyers are one of Kike’s main target audience. The economic regression and people not having cash to spend on thing which rant needed. In the recession people will focus on spending money on necessity such as food and healthcare rather than furniture and home comforts.

FedEx and UPS have developed similar business models in terms of the types of Airbus they operate. They have both decided to purchase older and remodeled airbuses to cater for their lower market segment. In these new upgraded aircraft, the two companies offer the low cost aircraft services in exchange of many traditional airline passenger services.

These low cost business model practices include; a single passenger class, single type of airplane like Boeing 737 which reduces cost of maintenance, that cost of training and servicing, minimized optional equipments that subsequently reduces cost of acquisition and maintenance, unreserved seats to encourage passengers to book earlier, flying to less costly airports and on off peak hours, good fare schemes, encouraging the use of direct flights, emphasizing the direct sale of tickets to eliminate extra cost to their clients, limiting personnel costs by allowing employees to do multiple works, and aggressive fuel hedging costs to reduce the cost of operation.

The concept originated from the United States in the 1990s and later spread to Europe and the rest of the world. The two companies adopted this business model to cater for the high demand of low cost and more flexible airline transport. The fact that low-cost carriers are very dynamic and mostly offer tickets in promotion, they have become very popular with middle-income group of the world population, hence posing a great threat to the traditional full service airlines. However, the two companies realized that the traditional full-service business still hold grip with the traditional travelers. Read about FedEx Stakeholders

The two companies strategic management analysis indicate that the older model of full service air transport is still holding to some traditional travelers hence the need maintain them. This is why they continue to operate the new airbuses to carter for a particular market segment. The need to diversify for the two companies helped them stay afloat in the market between 2001 and 2003 when the aviation industry was rocked by terrorism and war. The airline companies which only depended on full service business model cold not compete effectively during this period

Conclusion

The needs of the customers play a role in every business model taken by any ambitious businesses.

This principle holds to all sectors of the economy where the businesses rely mainly on the customers’ needs and satisfaction so that they can cut a niche in the market share and survive the turbulence in the market dynamics. This is the basis in which the two companies, FedEx and UPS have set their business models, operating on both low cost refurbished aircrafts and at the same time new airbuses, Boeing 737 or Airbus 320 series. Bibliography Gross, S. (2007): Handbook of Low Cost Airlines – Strategies, Business Processes and Market Environment, Berlin Gottfredson, S. (2005): Strategic sourcing for business Review, Harvard Business Review, Chicago

1. Introduction In recent years, more and more companies focus on their business model. Compare with traditional business model, a new business model can provide some completive benefits and lower costs to companies. It means the innovation of business model can bring companies much profit. Therefore this paper report focus on different kinds of new business model in social network industry, and analysis the benefits of Facebook’s business model. In the first section, this paper report will give a definition of business model.

It will include what are business model, and the importance of business model. Moreover, through business model canvas theory, paper report given some suggests about how to design companies’ business model. Then, this report provided a system of special examples in relative industries such as Google, Amazon, Groupon and Skype. Through these examples, paper report analyzed the importance and successful of business model. At last, paper report examined Facebook’s business model in two fields: revenue streams and customer strategy. 2. Business model 2. 1 Definition of business model

In terms of the most rudimentary level, Stewart and Zhao (2000) approached that ‘‘business model as a statement of how a firm will make money and sustain its profit stream over time. ’ (Stewart DW, 2000) It means business mode is the way of how company earns money and keeping their customers. However, at the operational level, business model could be described an architectural configuration. It will focus on the company’s internal process and helping firms design a kind of structure. This structure enables firms to create value and attach customers. Michael M, 2005) Furthermore, at the strategy level business model also include the firm’s market position, growth opportunities, competitive advantage and sustainability. 2. Decision of business model When a company decides their business model, a large number of fields should be considering. Such as firm’s vision, value configurations, stakeholder relationship and target customers. When a firm wants to design their business model, they will consider some main points and ask some questions such as: How to select their target customers and How to captures profit? (Michael M, 2005)

Moreover, manager also should pay attention to some other key points. This picture showed the business model canvas in firms. (Business Model Alchemist, 2011) When firm design their business model, they should consider of their customer segment, revenue streams, cost structure, key resource, customer relationship, key partnerships, channels and key activities. All of these can help manager capture, understand, design, analysis and change their business logic. 3. Use of business model Business model can be defined as a conceptualization of a firm’s money earning logic.

And it will assume 4 categories of function: sharing, analyzing and prospects of business models. (Alexander. O. , 2004) ? Understand and share Business model is a kind of tool to help firm share and understand their business logic. Business can simplify some complex and abstract consequences, and make stakeholders to understand it easily. Therefore business model will improve the understanding, visualization, communication and business logic sharing. ? Analyze Business model also could be contributed in analysis of business logic of a company.

It could be used to identify relevant measures to follow, observe the change they faced with and compare their competitive advantages with other companies. ? Prospect Furthermore, another contribution of business model is helping firms to prospect their further development trend. Through the simulation and the analysis of business model portfolios, firms will have an ability to foresee innovation and increase readiness for the future. 2. Business model in relative industry 3. 1 Business model of Amazon. com Amazon has a very famous business model about their online book store.

Their business changed from a simple book store to the largest online retails. Actually, Amazon chose the perfect product lines for e-commerce to provide some connivance to their customers. Through their excellent distribution channel, Amazon making their customer book products online, and using postal system deliver products to their customers’ address. This business model make Amazon can save their fixed cost because they did not need to pay high overheads. In one term, they did not to pay a premium rents to ensure their store in central locations. In another term they can not pay salaries to sales representatives.

Therefore they can sell their products for a lower price. (Amazon. com, 2011) 3. 2 Business model of Google As one of the profitable company, Google have an excellent business model. Although Google provide service for free, yet their profitability is higher than other company. Actually Google’s product is not their web page but their users. As similar as the traditional media, advertisers are Google’s main customers and they will pay Google for their advertisements in Google’s web page. However the different is that Google’s income will be decided by user’s behavior.

Depend on their successful model “Google adwords”, advertisers will pay for every time Google’s user clicked their advertisements in Google. Moreover, if a key word connects with a large number of advertisers’ products, advertisers can through the way of ‘Pay for Performance’ to improve their rank. This service will bring some extra income to Google. 3. 3 Business model of Skype Skype is another good example for feermium business model. Every register user can use their free basic service such as calling other Skype user online. Because of the zero barriers to entry, the users of Skype are growing constantly.

Most of Skype’s users are stick to these basic free services, but there are some Skype’s users will pay for their extra services such as call to other people outside Skype. These premium users are large enough to support Skype’s profitable. (Telco 2. 0, 2011) Moreover, thanks to a large number of Skype users, some companies will like to advertise in Skype, these advertisements are another income source for Skype. 3. 4 Business model of Groupon Business model called ‘Group-buying’ as a new shopping pattern is very popular in all of the word.

It is comes from a website in the U. S. A called Groupon. This is a kind of platform that musters people who interest in the same product and make them to buy it together. In one term, Groupon muster customer together to improve their bargaining power, which will make customers buy something cheaper. In another term, it will bring scale effects to service provider, and it is a good way to do word of mouth marketing. In this process, service provider will pay some preparations of net profit in this group purchase to Groupon, and this is the main income resource of Group on. Craig. P, 2011) 3. Business model of Facebook 4. 1 Definition of Facebook’s business model As one of the biggest social network website, Facebook’s business model is absolute successful. In one term, Facebook is a platform to help people building and maintaining their social network. In another term, Facebook will become a big third party applications platform and provide some apps such as games to their users. 2. Facebook’s revenue streams In the graph, it will show the Facebook’s information flows (grey arrows) and revenue streams (black arrows).

It is clear that, Facebook has two kinds of income resource: advertisements and Facebook users’ paying in for addition services or entertainment. Facebook have two types of advertisement: Firstly they will put advertises in their webpage directly. Everybody who has a Facebook user account can do that from Facebook’s portal. Secondly, Facebook putting advertisements through Microsoft banners. Through this kind of advertisement brings more than 24o millions dollar to Facebook. (Adam H, 2011). Furthermore, another main revenue source of Facebook is their users.

As a big third party applications platform, Facebook cooperate with some apps developers and provide some useful apps and games. When people want to play it, they need to buy virtual money in Facebook. And then, they profit will be distribute by Facebook and apps developers. 3. Facebook’s customer strategic Because Facebook’s profits and information from their users, therefore users played an important role in Facebook. Therefore Facebook made many customer strategies to attach and keeping customers. Actually Facebook’s customer strategic always has slicks, just like Michael Huston said: “If you’re not on Facebook. om by now, then you’re either protesting it deliberately in an attempt to avoid doing what everybody else is doing, or you’re afraid that stalkers will use it to come after you. ” (Barton. Z. , 2011) Through their original users’ network, Facebook will encourage their inviting their friends and family members to register Facebook. That is the reason why Facebook’s users keep growing. 4. Conclusion From the above discussion, business model designed the profit pattern of firms. Through design their business model, firms will have a clear idea about their position in market and helping them defines basic business logic.

Moreover, the innovation of business model will offer competitive advantages to firms such attract consumers’ attention and saving firms’ fixed cost. Especially in social network industry, some successful business model such as Google, Groupon and Skype through their free online service to make profits from their users’ behavior. As similar as Facebook, through their third party applications platform and advertisement platform Facebook’s market share has a great growth in recent years. Furthermore, Facebook also have a good customer strategy and it helping them keeps their loyal customers.

How did Christine Taylor succeed in evolving the local dog-washing service she developed as a teenager into an international franchise business? Christine Taylor grew up as a child in a physical environment that allowed her to succeed. She worked in a bait and tackle business that was owned by her parents in which the only thing acceptable was hard work. This environment allowed her to study hard in school and create a drive within her to succeed. Through her studies and research, you decided that she wanted her business model to be a franchise with Aussie Pooch Mobile.

Christine felt that this will be the best way to grow and expand her business. She also knew that there is a market for her mobile dog wash business but it required bringing on the right people (franchisees), with a good business model that was low in fees and the processes & training offered by APM. She also believed that focused in a niche business and a great promotional strategy will allow Aussie Pooch Mobile to attract customers as well as new franchisees. Her use of designing the trailers to be a moving billboard will give her great word of mouth advertising.

The process and design of her business will enable franchisees to deliver both quality & efficient dog washing service. In planning for future expansion, what strategy should Christine Taylor adopt for APM and why? Australia is a large territory that will have pockets in which the population is very dense. Christine Taylor’s Aussie Pooch Mobile concept will only succeed in geographical areas that are highly populated and modernized. In order for her franchisees to have utilities hook up for water & electricity, she realizes that she must expand to suburban type landscapes.

Being in a populated area, this will allow word of mouth advertising that will foster new and repeat customers. Having the potential to make money will attract and recruit new franchisees to buy into APM’s concept. In looking at the charts provided, there is a lot of opportunity for APM to grow and expand successfully. However, they will need to move quickly because there are 19 other companies that offer comparable services that may seize the opportunity of growth first. Christine should first target the two larger populated areas than Queensland which will be New South Wales & Victoria.