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International Retailing as Embedded Business Models

As retailers internationalise they interact with diverse socio-political-economic environments and the activities, processes, behaviours and outputs underpinning their business models evolve over time and space. Retailers are not passive, and through managerial agency they interpret the environment to compete and further their own commercial aims. Consequently, mutual interaction with the host environment means that changes may also occur in the established institutional norms in a market. Most existing studies have focused on the implications of territorial embeddedness for internationalising retailers. In this paper we also consider the societal and network forms of embeddedness identified by Hess, and illustrate how retailers transfer, negotiate and adapt their business model as they embed themselves in different institutional environments. A case study of IKEA is used to illustrate the synthesis of these two frameworks.


Introduction
Internationalisation is a core element of business strategy for many retailers. Retailers from a variety of sectors, governance forms and scales of operation are involved. There are particular challenges faced by retailers in internationalisation because of the physical location of networks and local operational relationships which exist at the interface of production and consumption.
Over the past four decades most academic studies of retail internationalisation (see for examples, Hollander, 1970;Goldman, 1981;Treadgold, 1990;Burt, 1991;Dawson, 1994Dawson, , 2007Helfferich et al., 1997;Gielens and Dekimpe, 2001;Rugman and Girod, 2003;Alexander and Doherty, 2010) have viewed implementation from a broad market perspective with the incoming retailer and the host environment taken as generic entities.
More recent studies of what needs to be adapted, why adaptations might be considered and how they are achieved have more nuanced considerations that explore particular retailers and different institutional environments. There has also been recognition that rather than simply being passive responders to the host environment, retailers may themselves be agents of change in that market, using their business model to shape the market to the strategic and operational advantage of the retailer. Thus, Lowe and Wrigley's and Gamble's use of 'hybridisation' (Lowe and Wrigley, 2010;Gamble, 2010), Dicken's distinction of 'firming places' and 'placing firms' (Dicken, 2000; and the market driving concept (Tarnovskaya, 2007;Tarnovskaya et al., 2008) have generated discussion on the way retail firms change the market and also adapt to it in complex ways. The former binary distinction of market standardisation or adaptation is no longer appropriate.
We build on these emerging themes by considering the internal aspects of the retail business model, its components, dynamics and outputs, and those aspects of the host environment which may determine (or be determined by) the behaviours and activities of retail organisations. In doing so, we draw on the concept of embeddedness which has many different interpretations across a range of disciplines, for examples see Dacin et al., (1999) and Heidenreich (2012a;2012b). The aim is to explicate how the concept of embeddedness can provide a better understanding of the process of retailer internationalisation and particularly, via consideration of the components of the retail business model, the operational implementation. By focusing on the internationalisation of IKEA, we seek to build on and extend the view of Hess (2004) that embeddedness as 'a concept has to be spatial-temporal, incorporating the formation and change of social structures in time and space. ' (p181) The structure of the paper is as follows. First we discuss embeddedness and its applications within retailing. Then we consider the business model concept and what this means in retailing. Thirdly, we synthesise the two concepts through a case study of IKEA. Finally we provide a conclusion, evaluation and pointers for the development of this research agenda.

Embeddedness Within International Retailing
That the retail activities of international retailers take different forms in different countries is unsurprising. Granovetter (1985) argued that the economy is an 'instituted process' based on a dynamic institutionalized social order. These social orders and institutions will clearly be country specific. According to the Granovetterian view, 'Embeddedness was first interpreted as the involvement of firms in social relations, the characteristics of which, through the embeddedness relations, became manifested in how firms organise and operate. Influences from the various social relations affect the way economic actors think and behave, often without their noticing it.' (Oinas, 1998: p198).
The Granovetter perspective has become accepted as the basis for many studies, for example Tzeng and Uzzi (2000); and Heidenreich (2012a;2012b). Accepting this view implies that the societies in which an international retailer operates influence the operating systems and processes of that retailer within each local market economy.
However, the fundamental role played by retailing in society generates both a response to and a shaping of the social order. Retail firms exert pressures to make changes to the social order, which are beneficial to the retailer's objectives. The result is the different outcomes of activity of a retailer in the different economies in which it is present over time and space, in the latter case at several scales (Wood et al., 2014). Every retailer is deeply embedded in its home society and has to become similarly embedded in the host market when it internationalises. Although embedded in social order, retailing is, almost exclusively, a forprofit element in an economy. In competing, managerial agency is used to undertake purposeful actions to respond to and to change not only the social order but also economic relationships. In both re-active and pro-active ways the retailer is deeply embedded in the local market in which it operates and thus variants of its underlying business model are evident in these different markets. Granovetter (1992) makes a distinction between relational embeddedness, based on dyadic relationships, and structural embeddedness, based on a social network with multiconnectivity of relationships (Moran, 2005). Both are relevant in international retailing with the network of relationships in structural embeddedness being particularly important and complex. Zukin and Di Maggio (1990) distinguish cognitive, cultural, structural and political embeddedness. In each type a different mix of institutions is involved, and in the context of international retailing the different types will have different relative roles in the markets involved. Halinen and Törnroos (1998) suggest six types of embeddedness: temporal, spatial, social, political, market and technological, which are argued as relevant to business networks irrespective of sector of economic activity. All of these studies, whilst considering the types and dimensions of embeddedness, are of a generic and conceptual nature, as Fletcher and Barrett (2001), point out, 'Although there have been a number of conceptual studies in the area of embeddedness and business networks, empirical research in the area of embeddedness of networks in an international context is sparse' (p563). They use a case study to focus on the mechanisms and dimensions of embeddedness within a business network paradigm and identify the presence of embeddedness within social, technological, regional, infrastructural, institutional, and market networks. The conclusion to be drawn from these studies is that embeddedness takes place in multiple networks that link the firm into its supportive social order. In different social orders and market economies the network structures will differ and the processes of embeddedness will reflect these differences.
Building on these earlier studies Hess (2004) argues the need for clearer definitions and extends the idea of spatial embeddedness beyond its general interpretation as passive territorial embeddedness in business networks. A focus on the complexity of the spatial element of embeddedness relates the concept directly to international retailing. Hess identifies three 'fundamental categories of embeddedness' (p178) as: societal embeddedness, network embeddedness and territorial embeddedness. All three are relevant to the study of international retailing.
Societal embeddedness relates to the history and societal foundations of the organisation involved. Hess likens this to a 'genetic code' of the organisation. 'Societal embeddedness also reflects the business systems idea of an institutional and regulatory framework that affects and in part determinates an actor's behaviour.' (Hess, 2004: p177). The institutional framework in which the firm operates creates a set of values and norms that influence the vision and culture of the firm. This framework however is not deterministic. For Hess societal embeddedness is generated both by the external environment and by internal agency of the organisation. In the context of retailer internationalisation, societal embeddedness can be construed as the 'genetic code' of the retailer as developed in its home market, with this code being transferred to a new market society as the organisation extends its sphere of operations.
Transference, rather than adaption, is a dominant process in societal embeddedness as the organisation expands. An important feature of societal embeddedness is the constant evolution in the home operations of the organisation, with these evolutionary traits transferred to a foreign operation. The 'genetic code' is modified as new instituted markets are added and also as influential actors, for example the CEO, change internal agency relationships. In international retailing, societal embeddedness involves a process of transfer of the culture and values of the firm.
Network embeddedness relates to the 'structure of relationships among a set of individuals and organizations regardless of their country of origin or local anchoring in particular places.' (Hess, 2004: p177). 'Network' has to be considered in its non-spatial meaning.
Network embeddedness involves inter-organisational and inter-personal relations, both formal and informal. Negotiation is a dominant process in network embeddedness. It encompasses the negotiated value chain of the retailer including its network of customers and suppliers, in addition to the various networks linking the firm into the commercial culture of the market. For retailing some networks are bounded by the country of retail operations, some are inter-country networks, whilst other networks are non-spatial in form. As the network expands and contracts and as members of the network use knowledge to re-negotiate relationships and their positions, power roles change and network embeddedness evolves.
Moves by a retailer into new markets will affect the dynamics of intra-network relationships and change many aspects of network embeddedness. Many of the studies in the industrial networks literature (Håkansson and Ford, 2002;Håkansson et al., 2009), consider network embeddedness implicitly but do not place it in a wider embeddedness context. These studies of networks rarely consider societal embeddedness and territorial embeddedness.
Territorial embeddedness relates 'to the extent to which an actor is 'anchored' in particular territories or places' (Hess, 2004: p177). This aspect of embeddedness is not totally distinct from societal embeddedness as the social order underpinning societal embeddedness has a territorial context but the emphasis in territorial embeddedness is on adaption processes rather than transfer activities. Distinguishing territorial embeddedness from societal embeddedness is useful in the context of retailer internationalisation as it emphasises the adaptions that an international retailer has to make in response to local institutional structures in each of its markets. Different geographical markets require different adaptive responses and actions by the retailer. For the retailer all territorial markets are different and each requires some degree of adaption. The distinction between territorial embeddedness and societal embeddedness is further illustrated by Taconelli and Wrigley's (2009) dissection of territorial embeddedness into adaptions to consumer markets and consuming cultures, logistics and supply networks (although here there is interaction with network embeddedness), and real estate markets and regulations on rights of establishment. Territorial embeddedness therefore has a definite spatial dimension with the scale of geography also being relevant as indicated by Wood et al, (2014).
Underpinning the typology proposed by Hess is an implicit perception that embeddedness is more a response by the firm to its social-economic-political environment rather than a shaping of that environment by the firm. Using Hess's approach in the context of international retailing requires consideration of the very active role that many retailers have in shaping the socio-commercial order. The processes of transfer, negotiation and adaption within the three categories of embeddedness therefore involve the dialectics of mutual interaction of the retail firm with society, network and territory.
By far the majority of empirical studies on embeddedness focus on firms in the production sectors; few explore services and even fewer explicitly explore retailer embeddedness.
Important exceptions are the studies of Wrigley and Coe together with their colleagues. This relative lack of interest in using embeddedness as a framework for understanding the activity of retailers is surprising since retailers whether operating a single outlet or a chain of 10,000 outlets are, as agued above, intimately embedded in a social order and a market economy comprising a social, economic, spatial and temporal ordering of institutions. Whilst even in a domestic situation there are spatially related institutional differences in operating stores in, say, Leeds compared with London, or Milan compared with Palermo, a consideration of embeddedness is particularly useful in the case of international retailers. In such cases managing the contrasts between the social order of home and, often multiple, host social orders becomes critical to firm performance.
In several related studies Wrigley et al., (2005), Coe and Lee (2006;, Lowe and Wrigley (2010), and Wood et al., (2014) have used the Hess framework, and particularly territorial embeddedness, to explore the localisation practices of Tesco in South Korea and the USA. Coe and Lee (2013) showed the ''deepening' of Samsung-Tesco's territorial embeddedness in South Korea pertaining to format innovation, the development of supply networks and the broadening base of retail and cultural services offered' (p330). These studies, and others that imply territorial embeddedness by using the term 'glocalisation' (for example Matusitz and Forrester, 2009;Matusitz and Leanza, 2009;Matusitz and Reyers, 2010;Dupuis and Fournioux, 2006;Chinomona and Sibanda, 2012), show the potential value of the concept of embeddedness but they also point to the need to interpret it in ways relevant to retailing. For example, Wrigley et al., (2005) argue that retailers exhibit 'an unusually high level of investment in embeddedness in host markets, and it is this high degree of embeddedness which, in our view, is critical in distinguishing the retail TNC from its manufacturing counterparts' (p440). In making the concept relevant to retailing it is also important to see embeddedness operating at different scales in the market. Wood et al., (2014) point to this multi-scalar aspect of the concept in their study of Tesco in Asia. Markets in retailing have an important local context, particularly for the consumer, alongside regional and national dimensions that impinge on the managerial processes in internationalisation.
Whilst accepting the importance of territorial embeddedness, nonetheless, it is important to consider how Hess's other types of embeddedness are also relevant to retailing.
For the international retailer the activities associated with the three types of embeddedness can be seen to operate in different ways for different retail sectors. There are differences in the process of embeddedness for organisations involved in, for example, food and grocery retailing from those in the retailing of fashion apparel or electronics. Strategic and operational practices differ by sector of retailing, reflecting\or reflected in the underlying business model.
For example, the balance between retailer branding and manufacturer branding within the product range is different. In electronics and toys, manufacturer branding has remained very strong so manufacturer networks are important to a retailer in becoming embedded in a market. In fashion apparel the retailer has greater control over the brand and how the brand is presented in the market (Moore et al., 2000;Burt and Mavrommatis, 2006), so the retailer rather than the supplier has control over network embeddedness with the retail brand also being an essential part of societal embeddedness. The food and grocery sector is in an intermediate position with a balance sought between retailer brand control and the retailer acting as an 'agent' for manufacturer brands (Kumar and Steenkamp, 2007). In this case territorial embeddedness is important in building a local brand range offer for local consumers. Branding is one example of sectoral differences, there are others associated with different aspects of the respective sectors as illustrated in Figure 1. Network Territorial

Food and Grocery
Transfer of established practices and methods for buying and sourcing The concept of embeddedness can therefore be used to develop a framework for gaining a better understanding of the activity of retailers when they enter and subsequently develop in a foreign market. Embeddedness is not only a process of managerial agency of the retailer in this situation but also a state of mutual interaction between the retailer and the social order in which the market operates including the networks of which the retailer is a member. This two way process generating embeddedness is very evident when considering retailers international activities but it has had limited consideration to date. Exploration of the reflective process involves consideration of the ways that a retailer changes the social order and market as they become increasingly embedded. To explore this process requires an understanding of the business model of the retailer.

Business Models in Retailing
The second strand in our consideration of international retailing is the business model used by the retailer for its international activities. The business model provides: "the blueprint of how a company does business. It is the translation of strategic issues, such as strategic positioning and strategic goals into a conceptual model that explicitly states how the business functions" (Osterwalder et al., 2005: p 4).
The business model links strategy to implementation and is the basis of competitive advantage. As such the business model exploits different forms of embeddedness in generating a competitive offer to consumers. Several retailers within a sector may seek to satisfy the same broad customer needs through similar product and service strategies, but they will do so through different business models and apply these models using different interpretations of the forms of embeddedness. By framing retail internationalisation within a business model conceptualisation we can identify the different relationships and activities relevant to a retail business and begin to understand how these influence, and are influenced by, different categories of embeddedness and related processes.
First developed formally in the late 1950s and early 1960s, the concept of a firm's business model became a popular topic in the business literature in the late 2000s (for example Amit and Zott, 2002;Magretta, 2002;Hedman and Kalling, 2003;Afuah, 2004;Giesen et al., 2007;Chesbrough, 2007Chesbrough, , 2009Johnson et al., 2008;Richardson, 2008;Casadesus-Masanell and Ricart, 2010;Dunford et al., 2010). Most definitions refer to a business model as being the logic by which an organisation creates and delivers value (Osterwalder and Pigneur, 2010;Zott and Amit, 2010;Baden-Fuller and Morgan, 2010;Sorescu et al., 2011;Bock et al., 2011;Zott et al., 2011). Casadesus-Masanell and Ricart (2010) distinguish between the business model, which they consider as the logic of the firm, the way it operates and how it creates value for stakeholders; business strategy, which involves the choice of business model through which a firm will compete; and business tactics which entails the choices open to the firm in applying the business model. They conclude that a "business model is a reflection of a firms realized strategy" (p96; original emphasis).
Sorescu et al (2011) take a more integrated view and invoke a role for stakeholders other than the firm. As such, this definition is more useful for considering firm level behaviour: "A business model is a well-specified system of interdependent structures, activities and processes that serves as a firm's organizing logic for value creation (for its customers) and value appropriation (for itself and its partners)" (Sorescu et al, 2011: p54) With this definition it is possible to consider what comprises a business model and how the concept of embeddedness relates to it. Osterwalder and Pigneur (2010) provide a generic framework comprising nine elements commonly found in the business model literature ( Figure 2). These elements are grouped into i.) value proposition; ii.) customer facing elements; iii.) resource and infrastructure elements; iv.) financial elements. The model is embedded in an institutional environment that influences its application.
Central to the business model is the value proposition or offer. This is aimed at satisfying customer needs and values, and comprises the bundle of products and services provided by the organisation. This represents the value creation purpose of business activities. Three elements of the framework can be viewed as customer facing: customer segments, which identify who value is being created for; customer relationships, including service activities and interactions with customers; and channels, determining how customers are reached and how channel activities are integrated and managed. The resource and infrastructure elements, sometimes termed the 'eco-system', comprise: key resources, which are both human and financial, and may be physical or intellectual; and key activities, which consider how resources are applied to provide the value proposition. These resources and activities involve partnerships -the networks, alliances and inherent interactions and behaviours necessary to leverage the value proposition. The final consideration is the financial relationship between the income generated by revenue flows arising from the customer facing elements and the costs of managing the resources and performing the activities to deliver the value proposition. 12

Cost Structure Revenue Stream
What are our costs? What will customers pay for?
How is our cost base configured? (fixed costs, variable costs) How do we generate revenue?
How efficient is the organisation? (economies of scale or scope) Adapted from Osterwalder and Pigneur (2010) Applying a generic business model to retailing requires consideration of whether there are particularities associated with retailing: such as the mix of products and services, the need for vertical and horizontal coordination, and the numerous daily face to face transactions etc. (Dawson, 1994(Dawson, , 2007, that should be accommodated in the model. One common component of business model conceptualisations is the idea of output -in effect the execution of the value proposition in the Osterwalder and Pigneur framework. There has been considerable debate over several decades (for example McClelland, 1966;Douglas, 1975;Bucklin, 1972;Achabal et al., 1985;Betancourt, 2004;Dawson, 2005) over what constitutes output in the retail sector. Dawson and Mukoyama (2014) suggest that the output of the retail business is the 'place of transaction'. This is an extension of the established concept of the retail format and may be a physical store (for example hypermarket, department store, boutique) or a virtual place (for example on-line retailing). In creating a 'place of transaction' the retailer also interprets a format concept to create its own retail formula(e). The formula is the execution of the value proposition that is specific to a retailer via a range of activities, relationships and behaviours, and thus encapsulates the competitive advantage of that retailer.
Through a specific combination of retail format and retail formula, international retailers present themselves differently to customers in different markets.
An important way of distinguishing and identifying a specific retail formula to consumers is through branding. The retail brand is concerned with packaging the benefits and value(s) that a retail formula creates for consumers and is a means of communicating these values. The brand makes overall promises to customers about what value(s) the format and formula can deliver (low prices, convenience, status, etc.). The retail brand is a fundamental part of a retailer's value proposition (Burt and Davies, 2010). International retailers may employ brand extension strategies to communicate similar underlying values across a range of formats and formulae, or multiple branding strategies to distinguish at one level between different formats (eg convenience store, supermarket, superstore) and at another level

The IKEA Case
We use the case of IKEA to illustrate the interaction of a retailer's business model with the concept of embeddedness in the retail internationalisation process. A single case study approach is used in order to provide depth to the analysis within the space constraints of an academic paper. The single case study approach is widely accepted as a valid research design for this type of study (George and Bennett, 2005;Yin, 2009;Tokatli, 2014).
Throughout most of this material IKEA has been characterised as a 'global retailer', with a standardised operating ethos and the same market position worldwide.
We draw on this extensive academic literature, company materials and documents, and a programme of interviews with IKEA executives at Head Office and in selected country markets, including the UK, China, USA, Japan and Australia. In total 25 executives were interviewed, some more than once. Interviews were conducted in Swedish and English, varied in length between 1-3 hours and were recorded. The interviewees were all, with a few exceptions, senior managers with considerable leadership experience in IKEA. All were working in the retail business, in positions where they could influence and define business strategy at country, region and in some cases Group level. Those interviewed, therefore, had an overall grasp of the IKEA business model, rather than just specific operational functions.
Anonymity was promised, hence quotes are not attributed to individual respondents.
In the following discussion we utilise the Osterwalder and Pigneur business model framework to explore for IKEA the three categories of embeddedness identified by Hess (2004). We consider the different elements of the business model sequentially through the three lenses of societal, network and territorial embeddedness. Some activities in the business model reflect more than one form of embeddedness so the forms of embeddedness are not totally discrete but are sometimes interlinked to create the totality of the embeddedness of IKEA in its local market.

Societal Embeddedness: identifying and transferring the genetic code
Societal embeddedness is reflected in the historical foundations of the retail organisation.
This creates a 'genetic code' which underpins the core business model for IKEA (Figure 3).
When a retailer internationalises, moving from the home market where the business model evolved into a new market, the extent to which the core business model transfers becomes a fundamental issue. In broad terms, IKEA seeks to transfer most elements of the underlying business model into new markets. A long established value proposition, is reinforced by a strong corporate culture, specific governance systems and a uniform approach to customer relationships and channels. The core business model is, however, not fixed over time and space, and evolves as embeddedness processes occur. Retailers are 'living' organisations with behaviours, interpretations and attitudes built up within an organisational context over a significant period of time. As retailers interact with diverse socio-political-economic environments, their business activities, processes and outputs evolve.

The Value Proposition
IKEA's target customer group is the mass market and the provision of good quality furniture of Scandinavian design at an affordable price. IKEA's value proposition follows closely from the formulation of the original business idea: "The IKEA vision is to create a better future for the many people. This is made possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible can afford them" (www.IKEA.com) Lindqvist (2009)

Consumer Facing Elements
The value proposition is delivered to the 'many people', through a range of societally embedded customer facing elements ingrained in IKEA's genetic code. The focus on cost minimisation yielding low prices is underpinned through the 'we do our part, you do your part' DIY formulation evident in several aspects of customer relationships and engagement.
IKEA provides the product in the store, and then customers have to complete a number of tasks (selecting, picking, transport and assembly) to maintain low prices.
Reinforcement of the cultural origins of IKEA is important in emphasising the individuality of the brand (Lindqvist, 2009 In retailing, the store format and formula are the means of making the offer available. The ideal IKEA concept is a single store format comprising around 30,000 square metres of floorspace on two floors, typically located outside the city centre, with a large parking lot. Externally the IKEA store is highly visible with the blue and yellow colours of the Swedish flag. Inside, customers are first directed to the upper level containing furniture displayed in room settings typical to that market plus the restaurant, they are guided via floor markings through product displays until descending to the lower level containing smaller home furnishings (referred to as the market hall), the storage for the self-service products (the warehouse) and checkouts. Also on the lower floor are the Swedish food shop, the Småland crèche and the information desk where additional services can be purchased or merchandise returned. The design concept behind this store layout is central to IKEA's cultural existence.
Regular commercial reviews provide audits of consistency and adherence to the core concept across countries and stores (Jonsson and Kalling, 2007). This represents a vigorous transfer process creating a societally embedded, but evolving, concept that is then the subject of network and territorial embedding into disparate markets where some adaption takes place.

Resource and Infrastructure Elements (Eco-System)
IKEA has established an internal network of organisational units designed to implement the IKEA concept. In the early 1980s the Group was reorganised to separate the retail concept from the retail operation. The Inter IKEA Group, ultimately owned by the Leichtenstein based Interogo Foundation, was formed to "ensure continuous improvement and a long life of the IKEA concept". This separation was intended to protect the IKEA concept and provide financial independence allowing investment in both "good and bad times". Consequently all stores are now franchises of Inter IKEA Systems which owns the IKEA concept and a pilot store in Delft. All stores pay a franchise fee of 3% of sales to Inter IKEA Systems for use of the concept. As the concept holder, Inter IKEA Systems acts as the 'overseer' responsible for five tasks: expansion via franchising; improving the concept; transferring know-how to retailers and monitoring and protecting the concept. Inter IKEA Systems operates across all markets. This governance structure is transferred into new markets and controls any expansion in existing markets.
"Among international retailers I think we will see a trend towards a different ownership structure than the traditional limited company. It does not have to be the way we have set it up in IKEA but it needs to be a structure that has more patience than delivering a profit the next month." (interview respondent) The retail operations are independently managed by the IKEA Group (INGKA Holding and subsidiaries), which is the main franchisee. INGKA which was formed as a vehicle into which stores were transferred when the franchise system was set up, operates the majority of stores (318), with a further 12 external franchisees operating the remainder (46). The IKEA Group also provides functional management for the organisation including production (IKEA Industry, previously Swedwood, which operates 44 production units in 11 countries); purchasing and logistics (IKEA Supply); product and range development (IKEA of Sweden); food services and retail store operations.
Processes and systems are designed to reduce costs and to keep prices low. The principle of target pricing drives a process approach underpinning all of IKEA's activities. Product development and sourcing policy starts with a target sales price, and then activities are managed to source the product at that price (Torekull, 1998). Every product is deconstructed.
By taking into account not only the functioning of the product but also the ease of packaging, transportation and assembly, standardised processes and systems deliver lower costs throughout the supply chain, as well as potentially leading to easier assembly by customers.
IKEA's concept is transferred through formal codification in manuals detailing how things are done and how to stay true to the IKEA concept. Circa 75 manuals act as vehicles to transfer values and embed them in the host markets. Jonsson (2007Jonsson ( , 2008 identifies three types of knowledge important to maintaining the IKEA concept: corporate knowledge -how IKEA works and behaves; market knowledge -insights from the markets in which it operates; and internationalisation knowledge -expertise in how to enter and develop new markets. Formal and informal knowledge management and knowledge sharing mechanisms (Jonsson and Elg, 2006;Jonsson and Kalling, 2007;and Jonsson and Foss, 2011) are important internal elements in brand and culture transfer.
One of the key soft resources in any organisational business model is organisational culture. This is grounded in the societal embeddedness of the organisation. One way to make a brand a living concept is through establishing a core set of corporate values and spreading these throughout the organisation (Salzer, 1994). This has been fundamental to the development of an IKEA organisational culture. At the heart of IKEA's corporate value set is the 'Testament' and the associated efforts made to educate employees ( Aspects of the business model are transferred directly into the markets when IKEA enters and then provide a framework that defines the conditions for development in the market. The transfer of knowledge and values is a core process in creating societal embeddedness.  creation and embedding of the store network is also important for customer relationships providing an opportunity to reinforce relationships with each new store opening which are major events in the locality. Furthermore from a consumer perspective as the store network develops so awareness of IKEA increases, consumers become more aware of the differences from existing market offerings, and become more literate in reading and understanding IKEA as a concept. The embedding of the chain store network is an important aspect in the negotiation between IKEA and consumers about the values on offer and the values gained in the customer relationship.

Resource and Infrastructure Elements (Eco-System)
In considering IKEA's entry into Russia and China, Ford et al., (1998) discuss the importance for retailers in particular, of having good relationships with the network of key stakeholders in these markets including local suppliers, political actors, bureaucrats, interest groups and the media, to create a position in the marketplace. Networking capabilities become a key organisational asset as does the ability to integrate resources at the different spatial levels (global, macro and micro) of the network in which IKEA operates.
IKEA's strategy of sourcing from low-cost countries to reduce prices emerged in 1961.
IKEA was frustrated by Swedish furniture manufacturers who, under pressure from other retailers, refused to sell their products through IKEA. The response was to develop contacts in Poland and the IKEA global sourcing strategy was born. Although production costs in Central Europe were low, technical upgrading was required so an approach that fostered supplier development emerged. This took the form of long term negotiated strategic commitments (Baraldi, 2008;Ghauri et al., 2008), which increased network embeddedness for example in the Polish transitional economy of the 1990s (Dawson, 2001). Sourcing has always focused on large volumes of standardised products to maintain low prices, however, a recent trend is a return to local (regional) market sourcing due to increasing costs and lengthening lead times (Ivarsson and Alvstam, 2010). The increase in chain scale at regional level enables purchasing economies to be negotiated at that level. Regional offices increasingly source within their own regions, reducing distribution costs, and responding to environmental agendas. This move to regional sourcing involves regional embedding of the network of suppliers rather than centralised global sourcing.

"One central part of the IKEA business model for a long time has been centralised sourcing, meaning that rather than sourcing locally, you centralise sourcing and buy big volumes that you then ship to the different markets around the world. In the case of China we understood fairly quickly, … that sending the products around the world would not be a very good solution. Sending stuff from Eastern Europe to China could take for ever with Chinese customs and transport times, adding costs in a market
where we had to slice cost to get the Chinese to buy in our stores not just look around in the store. So we had to look for local suppliers, we had started doing through our buying office before we opened the Shanghai store but with that store in operation that work had to intensify. In order to maintain a low enough price level in China we source more locally here than for any other market in the world" (interview respondent) Whilst Overall, IKEA's technological support to suppliers is extensive. Alvstam, (2010, 2011) distinguish between on-going, regular support via IWAY (IKEA way on purchasing home furnishing products) and QWAY (IKEA Supplier Quality Assurance Programme), and longer-term strategic support. The IWAY code of conduct, implemented in 2000, is in effect a CSR policy, detailing standards and principles that suppliers must adhere to (IKEA Supply AG, 2008). All IKEA suppliers must comply with IKEA standards, national laws, and international conventions on basic working conditions, child labour and other social and environmental conditions. Suppliers also have to prepare action plans for meeting these criteria (Edvardsson et al., 2006;Jonsson and Foss, 2011;Tarnovskaya, 2007). Regular supplier support includes provision of product designs and technological specifications, feedback on product performance, support to improve existing technology, and training programs etc. Strategic support involves technical consultation on product characteristics to master new technology; advice on production layout and organisation; and advice or financial assistance to obtain raw materials, components and equipment. This strategic support requires IKEA to negotiate a deep embeddedness into the supplying firms.
Relationships with supplier networks are not the only ones that need to be negotiated in the host market. Each IKEA store is akin to a medium-sized business with 400-600 employees serving millions of customers every year. Consequently a new IKEA store usually has a huge local impact on traffic, road networks, and infrastructure (Hrelja et al., 2012). Pütz (2011) highlights the competing goals and objectives, and power and governance relationships at play when such a large and visible investment is under consideration. Negotiations with public agencies for planning permission affects the speed with which the store network can be embedded into the market and may entail adjustments to the store format, such as multilevel stores taking up less space as in the UK. In this case activities to enhance network embeddedness operate alongside those of territorial embeddedness associated with the institutional environment.

Territorial Embeddedess: anchoring and adapting the business model in place(s)
The concept of territorial embeddedness has been the main focus of previous studies of retail internationalisation. In the case of IKEA, the issue to consider is the extent to which territorial embeddedness has influenced the original genetic code of the business model or the extent to which the retailer has, itself, shaped behaviours in the host market ( Figure 5).

Value Proposition
The fundamental value proposition is maintained as far as possible within local markets. One might argue that the general approach is to minimise territorial embeddedness with respect to the underlying value proposition. The ideal is to create 'IKEA in Japan' rather than 'IKEA Japan'.
"If you let every IKEA country in the world create their own national specific IKEA, the business model and hence the competitive advantage of IKEA would be lost. Sounds simple? It is an everyday struggle to maintain this because it means constantly saying no to initiatives in the different markets as it would in the end erode the business model" (interview respondent).
Nonetheless the concepts of value and design differ across the major culture realms. For example, the interpretation of 'value for money' has to be nuanced to accord with local levels of spending power, with IKEA products being more aspirational in lower income markets.
This was evident in Poland in the early 1990s and is also seen in China this century.

Consumer Facing Elements
Although in all its markets IKEA aims for the mass market (the many people) in some markets socio-economic conditions result in a changed reciprocity between the value proposition and target consumer segments. In China for example it is extremely difficult for IKEA to offer 'affordable prices'. Products are easily copied and versions offered at lower prices which IKEA cannot match.
Additionally Chinese consumers associate foreign brands with high prices and high quality.
Although IKEA promotes a low\affordable price position, this price level is beyond the mass of the market and the message creates confusion. Consequently in order to be embedded, the target customer segment in China emerges as the younger, predominantly female, middle class rather than the intended 'many people' (Wei and Zou, 2007).
Similarly when establishing stores in China and returning to Japan IKEA recognised that the underlying DIY concept was alien in Asian markets: "There where so many things that were different about China and the Chinese market, and we did some very classical mistakes and the most apparent was assuming that it is the same in China as it is in Europe. …. it turned out that most households do not own a screwdriver, let alone have any skill in assembling furniture. If you needed to do something like that in your home in China, you hired someone to do it for you rather than do it yourself." (interview respondent) This disconnect is further reinforced when the furniture is perceived as being an 'expensive' foreign brand. Indeed, the entire IKEA shopping experience was alien: walking around a store, selecting and carrying away things themselves, and then transporting purchases home and assembling them. IKEA have always argued that the core DIY concept is sacrosanct as it 28 Variations to product range from foreignness) Local media core range But with awareness of local socio-economic Some services (delivery, -cultural sensitivities assembly) introduced

Key Resources Channels
Use of IKEANs to Store adaptation transfer knowledge -locally relevant room settings, different price position, HR policy engaging multi-level store format, locals -local market in-city\urban area locations knowledge

Cost Structure
Revenue Stream Micro management of cost minimisation High volume low cost is so central to the IKEA value proposition. However, in China changes were needed to embed the concept in the local market and gain customer acceptance. These changes included introducing transportation, delivery and assembly services. At first these were offered free of charge but later fees were introduced. Many of these services are now offered in other IKEA stores around the world.
The addition of customer services in some markets is an illustration of the adaption of the standardised concept in order to generate territorial embeddedness. IKEA claims that most elements, for example the store, products and catalogue are highly standardised, and it is mainly with respect to the local (in-country) communication where most adaptation is seen.
Although there are certain guidelines over what to communicate in relation to the IKEA brand concept, it is accepted that local management needs to find ways to make the brand relevant in the local market. This is most evident in the local advertising and marketing activities: "IKEA has the same value proposition around the world, basically we say the same things to customers living here in Sweden as we say to consumers living in Tokyo or in Shanghai. But we need to say it in different ways that works in different cultural settings. The tone of voice in equal minded Sweden need to be different from that used in hierarchical Japan." (interview respondent).
Although the basic template for every IKEA store is the same, there are also adaptions that generate territorial embeddedness. The five room settings that greet the customer on the second floor provide a local feel. One dimension to this is that they should be the same size and set up of a 'normal' house/apartment in that market, giving customers a feel for how IKEA can help in terms of furnishing a typical home. Accordingly, the room settings differ by market.
"…., in China and especially in Shanghai you will find a set-up of how to furnish our balcony with IKEA furniture, in the UK, many room settings will have a mantle piece reflecting that many UK homes have fireplaces, in the Osaka store in Japan you will find an earth quake beam going straight through the living room, reflecting the living space for many Japanese, in Australia the room settings are very large and have large furniture due to the fact that the Australians have the biggest living space of all." (interview respondent) The room settings are refined and further adapted as territorial embeddedness increases.
Other examples of territorial embeddedness are found in the product assortment and catalogue. Whilst the general assortment of an IKEA store is the same around the world -comprising around 9,500 items of which approximately 2,000 are new products introduced every year (Ivarsson and Alvstam, 2010) -not every store in every market carries every product. There is some range variation to reflect the local market. For example, in the USA beds had to be described as 'king', 'queen' or 'twin' rather than by dimensions, and some sizing issues also arose with kitchenware items originally deemed to be too small for American tastes; in Asia the largest PAX wardrobe systems are not part of the offer, as they would not fit into a normal sized apartment; and in Russia sofa-beds feature more prominently to maximise usable space in the home. In these markets, local management will choose those parts of the IKEA assortment that fit the design and size of homes in their respective markets. However, no unique market specific products are added to the range. All products have to be part of the core IKEA assortment. The rationale is that by keeping to an 'IKEA' branded assortment and not adding other products, there is a unique product offer which remains distinctive. The emphasis on being different from local competition but also being the same everywhere is an important feature of customer interaction in IKEA. This results in some constraints on the extent to which adaption and territorial embeddedness can occur.
The catalogue is a core element in customer relationships and is available in all markets.
However, the practicalities of distributing it to large numbers of households, particularly in very densely populated markets, entails some adjustment to the catalogue distribution strategy. Abridged catalogues may be distributed to reflect the local neighbourhood structure.
"International expansion is always a battle between sticking to what got you thereand changing and adapting when expanding. Take the IKEA catalogue in China. Without the tradition of post-boxes and being over a billion people -and more than the combined population of the Nordic countries in the Shanghai area -the catalogue as a +100 pages print matter maybe is not the smartest marketing tool in that part of the world, while it is the marketing tool in Europe. Still there is a way to adapt here; the catalogue in China is much thinner and distributed mainly through the stores and not individual mailboxes" (interview respondent) The advent of the internet and mobile technologies has changed the relationship between the store and catalogue. These channels provide alternative or complementary options for customers to view the product range and gain décor ideas and may prove to be more appropriate and cost effective in some markets: Ghauri et al., (2008) and Elg et al., (2011)  Unusually, the first country manager for IKEA Japan was not an established IKEA manager, but an outsider who understood Japan (rather than IKEA). This approach had never been seen before in IKEA, clearly an adaption specific to the Japanese market to enable a deep territorial embeddedness.

Discussion and Conclusion
In the analyses of international retailing there has been considerable debate on the dialectics of 'local versus global' in terms of strategy. This has mirrored a much more extensive debate in the international business literature. Within retailing it has become clear that the global v.
local discussion is at a much too coarse a level of abstraction. This paper has attempted to deconstruct the nature of the operation of an international retailer by considering the nature of the embeddedness of the retailer in a new market, linking this to the various components of the business model. Applying this synthesis to the study of IKEA shows a particularly strongly rooted societally embedded business model that nonetheless is adjusted as IKEA becomes embedded in new markets. With respect to societal embeddedness, there is a clear transfer of the core value proposition and the activities and behaviours associated with customer facing and resource and infrastructure activities. These combined elements of the IKEA business model provide a distinctive proposition and branded retail formulae. Edvardsson and Enqvist (2002) recognise in their study of IKEA that "a strong service culture, based on the logic of values that make sense inside the company as well as outside, is a strong driving force." (p182) In IKEA the creation of network embeddedness occurs through negotiated relationships with many stakeholders. There are relationships with the suppliers of products who are required to IKEA's strong value proposition means that the scope for radical adaption to create territorial embeddedness is constrained. Other firms in other sectors, particularly if the item sold is worn or eaten, are likely to undertake more adaption to become territorially embedded.
Nonetheless IKEA still adjusts its sales formula, consumer communication methods and messages in order to resonate with local territorial socio-cultural traditions. The Jonsson and Foss (2011) distinction between the 'idea concept' and 'concept in practice' is a relevant framework here. They identify three phases of retail internationalisation: exploration, when the concept was evolving; exploitation, when a format and modus operandi was imposed on In applying the synthesis between frameworks of embeddedness and business model we are aware that IKEA is a unique firm in many respects. It is unique in the strength of its corporate vision, the relatively small number of stores for its scale of operations, the nature of relationships in its demand chain network and its governance structure. It has a unique business model. IKEA has been widely studied and it has generally been asserted that it makes few adaptions when it moves into new markets. A conclusion of our study questions this and shows that if we consider the different types of embeddedness related to the components of the business model then there is substantial adaption or adjustment in some aspects of IKEA's operations.
There are a number of areas where the current research approach could be developed. The different sectors of retailing have fundamentally different business models and have very different levels of investment in the three categories of embeddedness. Furthermore within these sectors individual firms have their own detailed business models. Not only is IKEA a unique firm but it operates in a retail sector (furniture and furnishings) with specific characteristics. Tokatli (2014) makes a strong argument for the power of substantive case studies as a research design to elicit new insights and our study of IKEA supports her argument. We suggest that the approach of this paper be developed for other firms in other retail sectors. It has been suggested that retailer internationalisation in a firm can be seen, at a general level, as developing through a series of processes of entry, development with subphases of stabilisation, consolidation, control and domination, with review and withdrawal activity being interposed at any stage (Dawson 2003). The interaction between business model and embeddedness is likely to be different in these various stages and these differences could be explored. This would enable a longitudinal study of the dynamics of the approach to be considered. A further potential area for development is in using the approach to explore the different types of knowledge flows that occur within the business model and with the various forms of embeddedness. In these areas of potential study a deep case study approach would be necessary and this would be advantageous in illustrating how the approach can be used with firms with very different governance structures and in sectors other than home furnishing.