Demos, Chung and Beck stated in their paper “ The New Strategy and Why It Is New” (2001) that the traditional approach of strategy to create and protect long-term defensible competitive advantage in the marketplace no longer holds in the new millennium. Their arguments were based on three revolutionary sources of business upheaval: 1) New and disruptive technologies; 2) Deregulation and globalization; 3) Capital markets. These revolutionary changes in global and sectoral economies have converted the traditional linear value chain into a “three-dimensional value constellation”, “where both threats and opportunities can arise more easily in almost any one of a firm’s competencies or capabilities”. To solve this problem, traditional ways of developing strategies must be changed. They further pointed out the way out in the changing environment that “traditional strategies aimed only at shaping and protecting long-term positions need to be supplanted by a focus on continuous transformation, to forge capabilities required to win the next game …” This paper agrees on this point of view and will combine this new strategic thinking with practice by analysing two worldwide successful multinationals: IKEA and Canon, to demonstrate how the new strategy functions and determines companies’ success in the new millennium.
Table of Contents
1. Introduction
2. Literature Review
3. The New Business Strategy in Practice: Case Studies
3.1 Ikea
3.2 Canon
4. Conclusion
Objectives and Key Themes
The primary objective of this paper is to examine how traditional business strategies, which prioritize long-term positioning, are becoming obsolete due to rapid market transformations. It explores the transition from traditional value chains to dynamic value constellations and investigates how successful multinational corporations adapt their strategies to remain competitive in a landscape defined by technological disruption, globalization, and efficient capital markets.
- The impact of technological, political, and financial upheavals on modern business environments.
- The limitations of traditional "competitive advantage" in a rapidly changing global economy.
- Strategic adaptation and continuous transformation as requirements for long-term survival.
- Empirical analysis of IKEA and Canon as case studies in shifting from price-focused to customer-value-focused strategies.
Excerpt from the Book
3. THE NEW BUSINESS STRATEGY IN PRACTICE: CASE STUDIES
IKEA, founded by Ingvar Kamprad in Sweden in 1953, is worldwide the most successful company in designing and selling inexpensive furniture and accessories in over 40 countries (Mark, 2001). It came into the Swedish market as an innovative furniture seller and a rule breaker. In the early 1950s, furniture retailers in Sweden were all small firms, purchasing furniture to customer specifications and placing an order with the manufacturer only after receiving a commitment from the customer. Furniture was expensive and bought in sets, such as a dining room suite, and credit was the most important tool of doing business (Cheadelberg, 2002). IKEA entered into the Swedish market with large showrooms outside cities, large parking places and relatively high-quality products, and offered however the option to buy one piece of furniture at a time. Furniture usually came in boxed kits, which must be picked up by the customers. It is technically possible for consumer to assemble easily at home, sometimes even with a single screwdriver (Stear, 2002). IKEA’s old strategy was to possess long-term cost leadership. Its products were priced 30 percent to 50 percent below the fully assembled furniture in the competition (Mark, 2001). The company innovatively turned the ready-to-assemble concept into the company’s practice. Huge amounts of cost were thus reduced by putting the consumer in the middle of the value chain.
Summary of Chapters
1. Introduction: This chapter introduces the three revolutionary sources of business upheaval—disruptive technology, globalization, and capital markets—and argues that traditional long-term strategic positioning is no longer sustainable.
2. Literature Review: This section reviews foundational strategy theories, including those of Porter, Mintzberg, and Ohmae, and contrasts these traditional views with the modern necessity for rapid, continuous strategic adaptation.
3. The New Business Strategy in Practice: Case Studies: This chapter analyzes how IKEA and Canon have transitioned their business models to focus on customer value and technological integration to maintain market relevance.
4. Conclusion: The concluding chapter synthesizes the findings, emphasizing that firms must be future-oriented and capable of continuous transformation to navigate the turbulence of the new millennium.
Keywords
Strategic Management, Competitive Advantage, Business Upheaval, Globalization, Value Constellation, IKEA, Canon, Technological Innovation, Strategic Adaptation, Customer Value, Capital Markets, Corporate Strategy, Market Dynamics, Business Transformation
Frequently Asked Questions
What is the core subject of this paper?
The paper examines how the traditional approach to business strategy is being challenged by three revolutionary sources of upheaval: disruptive technology, deregulation/globalization, and the efficiency of capital markets.
What are the central themes discussed?
Central themes include the transition from linear value chains to value constellations, the transience of competitive advantage, and the necessity of moving from price-focused strategies to customer-value-focused models.
What is the primary research goal?
The goal is to demonstrate through corporate examples that continuous adaptation and transformation are now essential for maintaining market success in a highly uncertain global environment.
Which scientific methods are applied?
The author uses a qualitative research approach, combining a literature review of strategic management theories with a multiple-case study design focusing on IKEA and Canon.
What does the main body of the text cover?
The main body evaluates the theoretical shifts in strategy and provides in-depth case analyses of how IKEA and Canon have successfully adjusted their operations to respond to global competition and changing consumer needs.
How can this work be characterized by its keywords?
The work is defined by terms such as strategic adaptation, business upheaval, competitive advantage, and corporate innovation, reflecting its focus on modern strategic challenges.
How did IKEA change its strategy to combat competitive threats?
IKEA shifted its focus from pure cost leadership to creating deeper customer value by introducing new services, like in-store child care and restaurant facilities, and diversifying into new business lines like the "Swedish Inn" hotel chain.
In what way did Canon leverage technology to streamline its business?
Canon migrated its internal and external communication infrastructures to the Internet, using intranets and extranets to replace costly, inefficient paper-based distribution with faster, environmentally friendly digital solutions.
- Quote paper
- Yanhui Zhang (Author), 2003, Three Revolutionary Sources of Business Upheaval and the New Business Strategy, Munich, GRIN Verlag, https://www.grin.com/document/39037
