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Ikea Case Essay

688 words - 3 pages

IKEA’s competitive advantage is its unique designs of products. Products are designed to reflect the clean Swedish lines. These designs although may appear simple, but are IKEA’s trademarks. They are hard to imitate, and they are unique to the company. IKEA tries to differentiate its product from competitors’ by offering unique designs and high qualities, but at a lower price. Its designs are not everybody’s favor, but IKEA has been successful to identify and target a segment of the market who are interested in its designs.

One of the company’s strengths is its strategy to design a product, after surveying the market and finding the right suppliers. That enables the company to know in advance at what price point it is going to release a product, how much margin the company should have and forecast a cost. Therefore when the company is looking for suppliers, it knows about the type of suppliers, and where it should be looking for. That is one of the strengths that gives IKEA ...view middle of the document...

The other weakness is the company’s resistance to become a public company. Their ration is that the stock market imposes short-term pressures on IKEA and would not be good. IKEA thinks that stock market prevents the company from taking bold decisions. A public company has access to more capital, and its existence is more guaranteed comparing to a company that is being held private. To solve its existence dilemma, IKEA has implemented an unusual corporate structure. The effectiveness of such an unusual approach is not clear. Although the founder of IKEA has resigned from day-to-day control of the company, but he is still working as a consultant to IKEA. The leadership and future advancement of the company could be in jeopardy.

IKEA’s strategy is to lower the cost. The company’s attempt to establish priorities for product lineup, and survey the competition to set a price point that is 30% to 50% below that of rivals, and eventually find the right suppliers who can provide medium to high quality material at a lower price, indicates that the company has a strategy to increase its margin by lowering the cost.
It appears that IKEA devotes a considerable amount of time to research and development. It researches the market, set priorities, and surveys the competition. All of these activities are to design a product which is distinctive and unique, and its price is lower than those of competitors. IKEA outsources more than 90% of its production. Therefore, production is not a focus point for IKEA. The company’s strategy to open its own retail stores is part of its strategy. It gives its customers the chance to see the full lineup of its products in one place. By organizing and decorating its stores in a distinctive style, mostly colored in blue and yellow, which imitate the Swedish flag, indicates that marketing and sales is one of IKEA’s strategies and it is an important part in the company’s value chain. Customer service does not appear to be an important part of the chain value for IKEA. Most of its products are self-assembly, and they are intended to be replaced more often, comparing to traditional style furniture that usually last longer and sometimes are passed down as a heritage.

Bibliography:
Hill, C. W. L., & Jones, G. R. (2010). Strategic Management. (9th ed., pp. C333-C340). Mason, OH: South-Western Cengage Learning.

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