Will We Still Love Ikea?
1. Explain, in detail, the aspects of Ikea strategy that make it a Hybrid strategy Hybrid strategy becomes very important and more and more popular as global competition increases. Companies which are using this strategy are more able to adapt quickly to environmental changes and learn new skills and technologies. It helps to produce products with differentiated features or characteristics that customers’ value and provide these differentiated products at a low cost, compared to competitors’ products.
Low prices and creation of value is IKEA’s winning strategy. Differentiation enables the company to charge premium prices and cost leadership enables the Swedish firm to charge the lowest competitive price. Thus, the company is able to achieve a competitive advantage by delivering value to customers based on both product features and low price. In a word, IKEA sells a wide range of functional and well-designed furniture at a very competitive price that majority of people can afford to buy.
IKEA really considers customer’s expectations (good quality products at low prices) and even succeed to add more value by involving them in the assembly of the furniture. IKEA targets middle class population, more precisely what Hogsted calls “Smart As”, the ones who buy wisely. The value of IKEA’s brand also appears through a cost-cutting culture or even a Spartan one. IKEA’s hybrid strategy cost reductions are available outside its differentiated activities (marketing, product range, logistics and store operations).
Achieve cost leadership through multi level competitive advantage on supply side with low cost logistics and large retail units in suburban areas allow them to sell products 20 to 40% cheaper than other competitors. IKEA’s customer expectations of service levels are low allowing for cost reductions as customers are prepared to transport and build their products. A unique cost structure flat pack (with a reduction of the storage space) gives IKEA as low cost distribution channel.
A global retail giant such as IKEA can achieve greater volumes than competitors so margins may be better because of its lower cost, allowing IKEA to sustain a low cost high quality advantage (through efficient production and logistics processes, JIT…. ). Moreover, the internal culture is dynamited by young and punchy managers (32 years old on average). IKEA’s “for the many” image as an oppositional brand, an outsider is also emphasized through leftist advertising, complete opposite of a luxury brand.
To conclude, IKEA’ combination strategy (differentiation and cost leadership) gives them a real, sustainable and distinctive competitive advantage compare to the other competitors. This unique and valuable concept provides the company a strong power regarding the competition 2. Why is this strategy difficult for competitors to imitate? V= Value of strategic capabilities Taking advantage of opportunities and neutralising threats: Ikea should be benefiting from trading down, the elimination of smaller rivals and new store openings. They key success is their FLAT PACK. – Value to customers:
Ikea is implanted over the world and so you can always find their product everywhere. It’s a reliable value for customers, as if you have to move abroad you ‘ll always find an Ikea store. Customers are involved in the assembly of their furniture which add value to ikea’s products. -Cost: They make cost reduction in logistics and store operations. By producing a large amount of products, they are able to realize economies of scale and so reduce their price. Also, we can see that the company cut costs by reducing their spending such as business trips, accommodation, and so on. for example: Managers fly economy and sometimes have to share hotel rooms. ) R=Rarity The world’s biggest furnishing retailer and the first implanted worldwide. IKEA is a really powerful brand. I=Inimitability They have simultaneously low price and differentiation strategy. The brand is accessible to everyone with a large range of prices and choices. This strategy is difficult to imitate because of a very high turnover of their products. The IKEA’s atmosphere and culture, inside and outside the company is special: everything can be done and bought.