Ikea Business Strategy

Topics: Strategic management, First-mover advantage, Firm Pages: 7 (2627 words) Published: June 27, 2011

The strategy of IKEA adopted was cost leadership strategy. The cost leadership strategy is an integrated set action taken to produce goods or services with feature that are acceptable to customers at the lowest cost relative to that of competitors. Firms using the cost leadership strategy commonly sell standardized goods or services to the industry’s most typical customers. IKEA sells a lifestyle that customers around the world embrace a signal they have arrived good taste and recognize value. “If it wasn’t for IKEA,” Wrote the British design magazine Icon, “Most people would have no access to affordable contemporary design.” The firm’s vision is “good design and function at low prices.” In fact that everyone like low price products and everyone like new and good design products. But the good design products seldom mark at low prices, but not many are affordable or want to pay much just for the furniture. So IKEA targets at this group people. Good design is IKEA’s competitive level of quality that creates value for customers.

To achieve its positioning, IKEA has put much effort on several ways. Firstly, IKEA sells good designed furniture at low prices. But how can IKEA make its product good design and lower its production cost? IKEA has a group of good designers in Sweden. They are responsible for product design and innovation. In order to lower the cost, other members work hand in hand in house production team to indentify the appropriate materials and the least cost suppliers. IKEA works overtime to find the right manufacturer for the right product. It has a big network of suppliers over the world and keeps in good relationship. As primary activities, inbound logistics (e.g., materials handling, warehousing, and inventory control) and outbound logistics (e.g., collecting, storing, and distributing products to customers) often account for significant portions of total cost to produce furniture. Research suggests that having a competitive advantage in terms of logistics creates more value when using cost leadership strategy than when comparing t using the differentiation strategy. Thus, cost leaders seeking competitively valuable ways to reduce costs may want to concentrate on primary activities of inbound logistics and outbound logistics. In so doing many now outsource the operations to low cost firms with low-wage employees (e.g., China). IKEA’s big products will usually be designed as a box packaged, which not only saves IKEA’s millions dollars in shipping cost, warehouse storage cost, but also enable shoppers haul their own stuff home. It is another way saves ilea’s delivery cost – get lower cost. Secondly, IKEA uses remarkable shop design. The blue-and-yellow buildings average 300000 square feet in size. The big showrooms let shoppers and scholars have a comfortable and rich environment enjoy shopping inside. IKEA practices a form of gentle coercion to keep you as long as possible. Right at the entrance, for example, you can drop off your kids at the playroom, an amenity that encourage more leisurely shopping. The stores is designed as a circle, you can see everything as long as you keep walking in one direction. Wide aisles let you inspect merchandise without holding up traffic. The furniture itself is arranged in fully access wised displays, down to the picture frames on nightstand, to inspire customers and get them to spend more. Besides, along its designed path shopping, one touch after another seduces the shopper, from the paper measuring tapes and pencils to strategically placed bin with items like pink plastic watering cans, scented candles, and picture frames, these are things you never knew you needed but at less than $2 each you load up on them anyway. That’s why you spend more money than you set out at the beginning. Thirdly, IKEA promotes by sending catalogues. It is produced different editors in different language for 28 countries; over 100 millions catalogues were circulated –...
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