The Competitive System Of IKEA

IKEA’s low-cost structure is the very essence of their success. It keeps the company profitable while other competitors struggle to survive in the market and the weakened economy. IKEA has continued to see positive revenue growth. Their other competitive advantage is treating the environment with care and concern. They are rated in the top 100 companies to work for by Fortune magazine and by offering a fun work environment for employees to maintain

Growth plans and opportunities. Presently, IKEA aims to open 10-20 new retail outlets annually, with forecast of double sales target in a timeframe of five years. These targets can be accomplished through strict control functions and monitoring of inventories to ensure keeping costs at the minimum (Kelly, 2010, p. 3). In fact, in spite of inflation rate and rising cost of raw materials and fuel, IKEA has managed to reduce its average costs by 0.8% in FY2012 (“IKEA Group,” cited in “Strategic Supply,” 2013, p. 4).

Also known for product innovation, use of renewable materials (75%) and “smart” use of raw materials (90% recycled/reclaimed waste products in energy production) IKEA has promoted its growth and popularity primarily related to branded image. (http://businesscasestudies.co.uk)

New product or service design and development supports operations management as it allows for product flexibility and caters for customers changing preferences in products. Products must be updated and improved depending on the markets demands to keep up with customer’s wants and needs and to retain businesses competition. This results in an increased amount of sales and profits.

To summarize, IKEA has its own key differentiation in the market: low prices, high volumes, global sourcing presence, Scandinavian design, distribution concept with flat pack and the way to set out the stores and

IKEA is one of the most successful furniture retailer who dedicated to sell flat pack of furniture, accessories, and bathroom and kitchen items around the world. It is well-known as a global phenomenon and its famous statement that “Our vision is to create a better everyday life for the many people”. IKEA has a clear and consistent concept in providing low price, value for money furnishings with a full range of choice. Its philosophy in the core value of cost efficiency along with IKEA's competitive strategy, which influences the performance objectives of operations in company. IKEA shows an excellent performance in achieving cost competitive advantages

IKEA's strategy is derived from environmental conditions; the Swedish company's understanding before customers want functional furniture, the attractive and modern design, and affordable, with immediate availability. The furniture has lost its status as a heritage object, to become a universal object of consumption.

IKEA’s vision is to design a better life at home. Making it affordable as possible so that many people could have admirable furnishing. IKEA use function, quality, design and value to obtain their customer needs. IKEA learn to synchronise the contingency of the supplier and needs of the customers. Using that strategy to sustain the low prices. In order to gain a good condition of a product, IKEA go in for highly automated production. Together with mass producing and keeping long-term relationship with the supplier, IKEA is able to prolong their vision and aim to serve their customers. (Ikea.com/sg)

A different approach about Ikea’s success is given by Sara Kristofferson in her book Designed by Ikea, London 2014. In the first chapter, Kristofferson refers to the relationship between the swedish goverment and Ikea.

IKEA being a global brand is still very heavily reliant on its revenues from European countries as compared to international stores in USA, Asia and Middle East.

IKEA is recognized as one of the reputed brands of Sweden, operating in the segment of ready-to-assembled furniture’s, fittings, appliances, and many others designed accessories and equipments. Although it entered in this segment in the year 1943 in Sweden but very quickly it expanded its operations in the markets of China as well. It is mainly due to its modern architectural stylish designs and eco-friendly nature. This helped Ikea to improve its brand image and profitability by almost 50 percent as compared to previous years. This proved extremely effective for Ikea to enhance its customer bases and reliability in the market among many other rival players (Inter IKEA

As pointed out in Ikea's mission statement, the company is in business to produce high quality products at a low cost. This would support a

Ikea’s approach to ‘DIY’ has been a massive success and they’ve built a strong based on this unique experience, and best of all, its affordable! Due to their approach to business Ikea is “The world 's largest furniture retailer by sales” (Mollnos). Ikea’s furniture allows room for creativity within the space being designed. Their affordable prices are ideal for the average consumer. Ikea has a fruitful way to bring in a younger crowd based on the success of their Instagram account. The account shows rooms transformed from dull and cluttered to organized and inviting. Being able to view real average people who have transformed their homes with affordable, modern furniture is an excellent move for Ikea. When shopping at an Ikea store, the products displays are meaningful and products that coordinate are placed together. This proves to be successful when additional furniture is purchased.

IKEA’s strategy before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.

In the development of fast-growing retail markets, IKEA can capture the additional share in Asia and Eastern Europe.