Minicase

The chapter focuses on IKEA to exemplify value innovation in the furniture retailing industry.

What might this same concept of balancing differentiation and low costs look like in the automotive industry? The number of automotive firms that use a highly differentiated business strategy is quite large and probably easy to distinguish. Brands such as Rolls-Royce, Porsche, and Land Rover all focus on providing value-added features for affluent individuals willing to pay more for the products they want.

Low-cost leaders are also pretty easy to identify. Brands such as Kia and Hyundai offer several models that many consumers consider of acceptable quality for the price.

When Chrysler and Daimler merged, the goal was to build a blue ocean strategy by leveraging the differentiation of Mercedes-Benz (Daimlers brand) with the low-cost manufacturing experience of Chrysler. However, what resulted was a firm that found itself squarely stuck in the middle with a higher cost structure and reduced value added than either firm had prior to the merger. Daimlers subsequent spin-off of Chrysler resulted in a loss of $3 billion.

In recent decades, Toyota would be considered a successful value innovator in the automotive industry. Toyota has been able to use lean manufacturing and other operational efficiencies to drive a lower cost structure than many of its competitors. At the same time, it has generally maintained a differentially superior reputation for reliable high-quality cars with a good set of features that many consumers will purchase.

Now apply these examples to the value and cost trade-offs depicted in the VC chart, which is a synthesis of Exhibits 6.3 and 6.4 from the book. This figure shows positions of competitive advantage and disadvantage.

What key questions does the balanced scorecard address?

Check All That Apply

A. How do customers see your company?

B. What must your company excel at?

C. Can your company continue to improve and create value?

D. How do we look to our shareholders?