In the following research essay, the IKEA organization as a cost-leader with a mixed strategic approach will be analysed. For exposing and identifying the strategy it is important to understand background and history. Therefore, a brief overview will be given. Afterwards, the IKEA way of reducing costs will be described to underline potential strategic positions. Furthermore, key strategic issues, facing IKEA as it seeks to generate and sustain competitive advantages will be identified. In order to analyse IKEA?s strategic position, theoretical frameworks and concepts will be used. Likewise, these frameworks will be critically evaluated in adaptation to the case. Finally, the IKEA strategy will be categorized and a general strategic approach will be highlighted.
Table of Contents
1. INTRODUCTION
2. OVERVIEW OF THE COMPANY IKEA
2.1 Company Profile of IKEA
2.2 History of IKEA
3. THE ‘IKEA WAY’ - CREATION OF LOW COSTS
4. IDENTIFYING THE STRATEGY OF IKEA
4.1 Porter’s Five Forces
4.2 Porters’ Generic Strategies
4.3 Bowman’s Strategic Clock
4.4 Internationalization of IKEA
5. IMPLICATION OF THE ANALYSIS
6. CONCLUSION
Objectives and Research Focus
This research paper examines the business strategy of IKEA, focusing on its unique position as a cost-leader that integrates a mixed strategic approach. The primary research goal is to identify and categorize IKEA's competitive strategy within the furniture industry by applying established theoretical management frameworks.
- Analysis of IKEA’s cost-leadership model and value chain efficiency.
- Application of Porter’s Five Forces to evaluate competitive environment.
- Examination of competitive advantages through Porter’s Generic Strategies.
- Strategic classification using Bowman’s Strategic Clock.
- Assessment of IKEA’s internationalization and market expansion approach.
Excerpt from the Book
The ‘IKEA WAY’ - CREATION OF LOW COSTS
Basically, retailers copy the concept of the best competitor. Ingvar Kamprad did it totally different. (Kling & Gotemann, 2003) It can be expressed in one of the company’s slogans: “First, IKEA designs the price tag; then they buy in bulk, which they transport in flat packages. And then you assemble.” (Ikea, 2004g) Today, flat-packages and other IKEA methods can be seen in competitive furniture stores, but no one has been able to copy the entire ‘IKEA way’. Traditional furniture retailers target middle and upper-middle-aged people. IKEA clearly focused on young people and families who furnish their first home. Over the year’s, customers who consider price as an important factor became the target group. The market message is: “Not for the rich, but for the smart”. (Der Spiegel, 2003. p.61) IKEA’s business concept is ‘Low prices with meaning’. (Ikeas, 2004d)
One of IKEA’s principals is to determine the price first without reducing quality. IKEA does not have its own manufacturing facilities, IKEA searches for appropriate subcontracted manufacturers worldwide. (Ikea, 2004d) Additionally, all tasks are centralized in Älmhult. (Ikea, 2004d) There is a worldwide network for business solutions, infrastructures, service and support. (Ikea, 2004d) IKEA has to find suppliers with two conditions: Good quality and low prices. It takes enormous care to find and evaluate these suppliers as well as to teach and prepare them to fit in IKEA’s business system. (Solomon, 1991; Walter, 2002)
Summary of Chapters
INTRODUCTION: This chapter introduces IKEA as a cost-leader and outlines the research objective to analyze its strategic position using theoretical concepts.
OVERVIEW OF THE COMPANY IKEA: This section provides a company profile and historical background, explaining the evolution of the organization from a small Swedish retailer to a global corporation.
THE ‘IKEA WAY’ - CREATION OF LOW COSTS: This chapter details the specific mechanisms behind IKEA's cost-efficiency, including product design, bulk purchasing, and the role of flat-pack furniture.
IDENTIFYING THE STRATEGY OF IKEA: This core section applies Porter's Five Forces, Generic Strategies, and Bowman’s Strategic Clock to categorize IKEA's competitive positioning and international approach.
IMPLICATION OF THE ANALYSIS: This chapter synthesizes the theoretical findings, suggesting that IKEA’s success is based on a hybrid strategy combined with a unique corporate culture.
CONCLUSION: The concluding chapter summarizes the main findings, reiterating how IKEA maintains its sustainable competitive advantage through its distinctive business model.
Keywords
IKEA, Cost-Leadership, Strategic Management, Porter’s Five Forces, Bowman’s Strategic Clock, Competitive Advantage, Value Chain, Internationalization, Flat-pack, Retail Strategy, Corporate Culture, Business Model, Global Expansion, Market Segmentation, Pricing Strategy.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on analyzing IKEA's business strategy, specifically how it functions as a cost-leader and maintains a unique competitive position in the global furniture market.
Which theoretical frameworks are used to analyze IKEA's strategy?
The author employs Porter’s Five Forces, Porter’s Generic Strategies, and Bowman’s Strategic Clock to evaluate the company's competitive position.
What is the core research question addressed in this work?
The research seeks to identify and categorize IKEA's strategic approach and explain how the company sustains its competitive advantage over time.
What methods were utilized for the analysis?
The study relies on a qualitative review of secondary data, including academic literature, company reports, and established strategic management concepts.
What does the main part of the document cover?
The main part covers the history of IKEA, the mechanics of its low-cost operations (the "IKEA Way"), and an application of strategic management models to the company's operations.
Which keywords best describe this work?
Key terms include Strategic Management, Cost-Leadership, Competitive Advantage, Value Chain, and Global Retail Strategy.
How does IKEA's "flat-pack" approach contribute to its strategy?
Flat-packing is a central pillar of IKEA's cost-saving strategy as it optimizes transport, storage space, and logistics, allowing the company to keep retail prices significantly lower than competitors.
What does the author conclude about IKEA's strategic positioning?
The author concludes that IKEA does not fit into a single traditional strategy box but rather operates a successful "hybrid strategy" that combines cost-leadership with differentiation.
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- Sven Rosenhauer (Autor:in), 2005, Profit is a wonderful Word, München, GRIN Verlag, https://www.grin.com/document/186562
