IKEA’s competitive strategy
IKEA ranks at number forty as the world’s most valuable brand, it has been in the market for sixty-five years since its founding in Sweden. Its competitive strategies, marketing strategies, and operational strategies have contributed to the success of the furniture company. This paper will discuss the strategies used by IKEA that help to its success.
.IKEA’s competitive strategy is mainly focused on the low pricing of its products through its pricing strategy. Another competitive strategy they use is coupling the low prices with high-quality goods, which is hard to find in most companies obsessed with profit and end compromising on the quality. Its large variety of goods and regular update of its products also contribute to its competitive strategy. The company uses its supply chain management system to ensure the cost-effectiveness of its business model. The customer-friendly brand image also plays a significant role in its competitiveness. Its marketing strategy is exceptional with its furnishing products. It is advertised through the marketing mix, where the company mixes both digital marketing and in-store branding to achieve its best results.
Additionally, it makes use of promotional techniques such as promotional catalogs, digital marketing, and social media marketing.IKEA’s operational strategy aims to offer a wide range of home furnishings with good design and function with excellent quality and durability at a cost that everyone can afford. IKEA’s operational strategy is designed to cope with large volumes due to the high repeatability and specialization of the products. The operations need to create a low to medium since the company offers standardized and well-defined products. The target groups young adults and small and medium-income families with and without kids and philosophy of style without the expense. The marketing strategy and the operative strategy are aligned with the competitive strategy since they are both a source of competitive advantage. The operational plan of IKEA offers a competitive advantage through the way it organizes its stores. Its stores act as warehouses since they are built for browsing, making the shoppers pro-consumers. Consequently, the marketing strategy aims to increase sales by focusing on how the company can make more profit than its competitors.
The operational process has similarities in the inputs such as raw materials, knowledge, capital, equipment, and time in the transformation of the raw materials into goods and services. The latter is done through four V’s: Volume, Variety, Variation, and Visibility. Firstly, the volume of operation determines how the IKEA business is organized; standards and procedures are made depending on the repeatability of the task as well as how the work is systemized. These systems determine how each part of the job is done to provide the company with a low-cost base. IKEA has a high volume of output, more labor, more systemization, and each staff member completes less and more specific task s, which results in fewer unit costs. Variety denotes the dimensions that give the difference between standard goods and services V’s non-standardized provides flexibility. IKEA has standard products that attract lower prices and therefore increases flexibility; that is why their furniture is famous worldwide.
On the other hand, a variation addresses changes in the contrast between the business model and the impact it has on the costs and volume as the business itself addresses variety. IKEA has a profound difference in its marketing strategy, which allows predictability and, consequently, lower operations costs. This is because they offer a self-service approach where the customers spend time sampling and viewing the furniture displays and then collect it. After collection, the customers then assemble the products when they get home, reducing the cost of having customized furniture to the standard pricing. Lastly, the visibility dimension refers to customers’ ability to see and track their experience or orders through the operations process. A high visibility dimension, such as that of IKEA, allows customers to track their packages in the retails stores over the counter or online. The high visibility dimension helps IKEA save on operational costs.
A supply chain is a sequence of decision making and execution practices and materials, information, and money flows that aim at meeting the final customers’ needs. It takes place between different supply chain management. It involves not only the manufacturers and the supplier but also the logistics, such as retailers, transporters, consumers, and warehouses. It may also affect new product development, marketing strategies, operations, finances, customer service, and distribution. Generally, the chain of supply is mostly similar; it begins with the suppliers, then the manufacturers, distributors, retailers, and finally, customers in that order. Therefore supply chain management is the management of how the above process from the raw material to the final product is sold to the consumers. Supply chain management helps the company gain a competitive advantage over other businesses if well executed. IKEA procurement system has been one of the best with the purchasing process, having dropped by 35% since they concentrate all the buying power for a category. They only work with a few high volume suppliers instead of many small suppliers, and their company is process-oriented. They minimize the usage of raw materials and use recyclable and sustainable raw materials that are mainly sourced from developing countries such as China, Vietnam, and Malaysia. The company uses a cost per touch inventory tactic where the client retrieves furniture by themselves hence reducing inventory costs. The stores are located in ineffective places to reduce the cost of delivery while it makes use of all the staff through job design. It entails the use of the in-store logistics personnel to handle inventory management; they ensure the efficient flow of goods within the IKEA stores until the deliveries are made. In the storage facilities, IKEA uses the high-flow and low-flow facilities to dive down its cost-per-touch.
Conclusively, IKEA has earned its name due to its unique business ideas, competitive, marketing, and operational strategies that set it apart from its rest. The company does not compromise on quality and offers the best prices in the market for its target market.