Great article, Vaibhav! You laid out a really interesting argument. I can see how in the absence of competitive forces, monopolies might have more freedom to plan and execute their long term strategy, which could in theory, lead to positive outcomes. I’ve heard the same argument used in favor of certain authoritarian regimes (for example, in a NY Times op-ed, Chinese Venture capitalist Eric Li argues that the stability afforded by the Chinese political system ushered in a generation of growth and prosperity that propelled China’s economy to its position as the second largest in the world – http://www.nytimes.com/2012/02/16/opinion/why-chinas-political-model-is-superior.html?_r=0).
That being said, I tend to agree with Vincent that competition leads to better outcomes. A company can only self-regulate for so long, before complacency sets in. I’d love to hear from you the causes of EIC’s eventual downfall.
Yael, thanks for the thoughtful question! You bring up a good point about the competitive threat arising from e-commerce. IKEA actually does have a website, where customers can order products online. However, most of its sales still come from in-person purchases and surprisingly, from its paper catalogue (what is this, 1950!?).
I think despite the inconveniences, IKEA’s remote location, massive warehouses, and maze-like layouts actually attract customers. People go there because it’s fun! And furthermore, part of IKEA’s strategy is to inspire purchases through creative displays and bulk packaging… folks might use Wayfair for occasional one-off purchases, but for massive shopping sprees and redesigns, nothing comes close to IKEA’s selection, prices, and designs.
Lastly, given the fact that most of IKEA’s real estate is privately owned by the company or contracted under a long term lease (50-100 years), I don’t think they have much to gain from moving into the online space exclusively. Perhaps we’ll see a move towards digital, but in my opinion, the stores are here to stay.
Great choice, Aaron! Trader Joe’s is a wonderful company – I should know, because I used to work there! I think you hit the nail on the head when you talked about the role that hiring and recruitment plays in Trader Joe’s success. Not only does the store manager interview each job applicant prior to hiring, but they also make each job applicant take a written math test as part of the interview! That’s a pretty high bar for a grocery store. Once hired, Trader Joe’s puts its employees through rigorous job training, including shadowing, sign-offs, and rotations (like you mentioned). When I was 16, they actually sent me to a regional Trader Joe’s L&D conference for up-and-coming leaders – free of charge! Overall, Trader Joe’s is a wonderful place to work and an even better place to shop. All the food is 100% guaranteed – you don’t like it, you bring it back for a full refund. In my opinion, at the core of Trader Joe’s success is its emphasis on people and customer satisfaction. There’s a lot that we can learn!
Kathy, thanks so much for sharing! This seems like a great business idea and also a fantastic example of smart business practices leading to success. I’m always excited to learn about businesses that put employees’ welfare at the forefront of their strategy. It sounds like Munchery is successful not despite, but BECAUSE of the fact that they pay their chefs well, provide reasonable schedules, and maintain an overall quality workplace. Like you said, the low capital- and real estate expenditures help too. Looking forward to seeing more businesses like this succeed!