IKEA Business Strategy and Competitive Advantage: Capitalising on IKEA Concept

IKEA Business Strategy and Competitive Advantage IKEA business strategy is built upon the IKEA concept. The IKEA Concept starts with the idea of providing a range of home furnishing products that are affordable to the many people, not just the few. It is achieved by combining function, quality, design and value – always with sustainability in mind. The IKEA Concept exists in every part of the company, from design, sourcing, packing and distributing through to business model.[1]

 

The following points constitute integral elements of IKEA business strategy.

1. Offering the lowest prices. Cost effectiveness is one of the solid bases of IKEA competitive advantage. The global furniture retailer is able to offer low prices thanks to a combination of economies of scale and technological integration into various business processes.

2. Increasing variety of products. Great range of products also belongs to the list of IKEA competitive advantages. There are 9500 products across in IKEA portfolio and the company renews its product range launching approximately 2,500 new products every year.[2] The company is also increasing its presence in food and catering industries.

3. International market expansion strategy. The home improvement and furnishing chain has traditionally engaged in new market development in an aggressive manner. IKEA Group operates 422 stores in 50 markets around the world.[3] 19 new IKEA stores opened in 2018 alone.[4] Additionally, IKEA has 22 Pick-up and Order Points in 11 countries, 41 Shopping Centres in 15 countries and 38 Distribution sites in 18 countries.[5]

 4. Benefiting from strategic alliances. The global furniture retailer benefits from strategic alliances to a maximum extent and the formation of strategic alliances is placed at the core of IKEA business strategy. The list of the most successful collaborations include partnership with Apple to explore the possibilities of Augmented Realityas a tool for home-furnishing, partnership with LEGO for new product development and partnership with Adidas in knowledge sharing about customer behaviour. Experience and competency in the formation of strategic alliances can be specified as one of the most important IKEA competitive advantages.

Currently, IKEA is in the middle of transformation of its business model that made it successful in the global scale. Specifically, for many decades IKEA business strategy was largely based on having giant out-of-town warehouses, where shoppers pick their own furniture and then build it at home. But now it is looking increasingly at city-centre stores, online shopping, home delivery and assembly, and more radical ideas such as leasing furniture and selling on websites such as Alibaba[6]

IKEA Group Report contains a full analysis of IKEA business strategy. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on IKEA. Moreover, the report contains analyses of IKEA leadership, organizational structure and organizational culture. The report also comprises discussions of IKEA marketing strategy, ecosystem and addresses issues of corporate social responsibility.

IKEA-Group-Report

[1] The IKEA Concept (2019) IKEA, Available at: http://www.ikea.com/ms/en_US/this-is-ikea/the-ikea-concept/

[2] Sustainability Report FY 2018 (2019) IKEA

[3] IKEA Facts and Figures 2018 (2019) IKEA, Available at: https://www.ikea.com/ms/en_US/this-is-ikea/facts-and-figures/index.html

[4] IKEA Facts and Figures 2018 (2019) IKEA, Available at: https://www.ikea.com/ms/en_US/this-is-ikea/facts-and-figures/index.html

[5] Group Yearly Summary (2016) IKEA Group

[6] Milne, R. (2019) “Inter Ikea’s Torbjorn Loof: making the vision clear” Financial Times, Available at: https://www.ft.com/content/6b250c0a-2486-11e9-b329-c7e6ceb5ffdf