Case Study: IKEA Q1. Critically discuss the purpose and application of the following two models, and highlight the differences between them: According to Michael Porter competitive advantage can be gained by the use of three major strategies. The first is the cost leadership, second the differentiation of the product and the third is choosing the small segment for competing and concentrating. Narrowing the segments causes a better scope for the competitive strategy. Thus a leader with low cost, provided that the quality is delivered has a market advantage. The product must be standard, but may of the no-frills kind. With this cost factor the company will try and seek to become special in the market using a strategy of product differentiation. Thus the insistence would be on uniqueness of the product, something that differentiates or creates a separate entity in the minds of the customer. Thus the firm generally must also choose the identity and the attributes 'in which to differentiate it that are different from its rivals.' (Johnson; Scholes, 1997, p. 47) Once the strategy of differentiation is done the focus on the market segment is important. In reality all this ought to happen simultaneously and this brings about the market segment that can be captured and retained. If the market segment is not clear and if the narrow competitive scope is not created inside the industry, and thus all these are the various wings of the strategy which according to Porter will ensure
IKEA is a world famous furnishing company known for selling Scandinavian-style furniture and other home-based goods. The company has over 230 stores, with operations carried out in over 42 countries with well over 70 000 employees. The stores themselves can occupy 410 million shoppers per year. It is a Swedish based company built on the idea of offering a wide range of well-designed, functional home furnishing products such low prices, that a majority of people will be able to afford them. The IKEA group is currently solely owned by the INGKA Foundation through a holding company, unlisted on any stock exchange.
IKEA stores have been present in five big areas in the world which are North America, South America, Europe, Russia, Asia and Australia as of 31 December, 2014. IKEA group have stores located in 42 countries which include Australia, China, Taiwan, Malaysia, Singapore, Denmark, France, Germany and etc. IKEA group sell their products in to these 42 countries with their domestic currencies such as Australian Dollar (AUD), Yuan (RMB), Taiwan New Dollar (TWD), Malaysian Ringgit (MYR), Singapore Dollar (SGD), Danish Krone (DKK), Euro (EUR) and etc. The reason of using domestic currency is because this is easier for the customers to buy IKEA products in their country.
In 1985 Michael Porter surmised that a market can be subjected into different strategies, thus, three variations of competitive advantage were born. The differentiation strategy is the focus for the purpose of this paper. Furthermore, the differentiation strategy in its most exposed form is a strategy that places prominence toward the brand name and advantage is the prestige that follows. This type of angle draws in a specific high-end consumers which in turn sets its corner of the market apart from its competition. Additionally, in this advantage there is a uniqueness perceived by the consumer, industry wide. The differentiation strategy is distinct in attributes indescribable by price but all the same customers are more than willing to pay a premium for the product or service. Firms that are successful in this advantage are fully equipped with a product development team high in creativity and innovation. Additionally, this strategy is only able to be an advantage if a firm is able to access an unlimited amount of research.
Michael Porter has proposed three generic strategies that provide a good starting point for strategic thinking: overall cost leadership, differentiation, and focus (Keller and Kotler, pg. 51). These strategies are guides to start researching how to market a particular product or service. Overall Cost consist of developing strategies to give advantage over competitors. Differentiation is creating uniqueness for a brand giving the brand its own identity. Focus will Identifying a niche market that a firm can dominate by better meeting market needs than its competitors.
IKEA is using a different operation strategy from their competitors. The operation of IKEA has to cope with large volume because their products are highly repeatability and specialised. The variety of products the operation needs to create is low to medium as they offer
IKEA communicates these statements through its advertisement and encourages the customers to experience thee IKEA concept; we are building the IKEA brand. The IKEA brand is the sum total of the emotional and rational values that consumers associate with the IKEA trademark and the reputation of our company. The brand image is the result of over 50 years work by IKEA co-workers at all levels all over the world.
Most players in the furniture industry remain highly focused on their respective domestic markets. The localization of furniture has become a norm in most countries due to domestic preferences and demand for low cost. The king of the Swedish furniture industry decided to break the custom and decided to go global with IKEA.
The debate about standardization and adaptation for international markets has continuously attracted more attention from multinational companies for several years. The case of IKEA has however tried to help me in understanding the argument involving these two marketing strategies as applied in the international markets.
By operating the business in Thailand (foreign market), IKEA adopt the strategy called “Think Global, Act Local” in the sense that IKEA maintains, applies and upholds their core values and cultures in their practices, while learning to adapt and understand the Thai culture and the Thai market in terms of needs, desires and wants of Thai people in general in order to survive and succeed.
IKEA is one of the leading furniture manufacturers and marketers in the world. With its 361 stores worldwide and 164.000 employees IKEA is a very important global furniture company in the world. The company made EUR 30.1 Billion revenue in 2014.(IKEA) The company also made EUR 3.3 Billion net income in the same year, and the company aims to make EUR 50 Billion revenue until 2020.(Gustafsson)
TLMBA 2012-2014 Strategic Management Final Exam Ana Tomaz – 153 012 155 1 Furniture retailing market Japan 50% China 17% Latin America 2% 8 €/inh. Brasil 65% 400 Bi euros in 2012 Others 2% Asia 18% EU 25 45% NAFTA 33% 210€/inh. Imports 9,5% 165€/inh. Imports 32%( 20% from Asia and 5% from Europe) 1 – Furniture retailing business analysis and its KSF Macro Environmental Analysis 2 Furniture retailing market Schools, hospitals, hotels and churches
The aim of this report is to analyze ‘IKEA’ as a company and produce a tactical plan. To make an evaluation on the international marketing activities of the IKEA through the use of various marketing techniques including PEST and SWOT analysis and will conduct critical analysis of the existing international marketing strategies and issues facing ‘IKEA’ and how they can enter into India and Indian market, and will discuss about possible recommendations and solutions that the company can should employ and how these should be applied to enter new market and run the business with a new strategy followed by the conclusion.
In PEST analysis, we will look into what will be affect by the business environment. It includes political environment, economical environment, social environment and technological environment.
IKEA was founded in Sweden by Ingvar Kamprad in 1943. IKEA has been established around the world in 26 different countries. Within these countries IKEA has a total of 303 stores. This business is effective in adapting to change through the use of the four key business functions; operations, finance, marketing, and human resources.
The points of the Porter's Diamond are described as four broad attributes. And these attributes promote or impede the creation of competitive advantage.