Ikea (Canada) Ltd. 1986 (Condensed)

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IKEA (Canada) Ltd. is a furniture operations company that offers “quick assembly” furniture with 15% lower price than its competitors. IKEA’s success brought imitators, such as Sears. In order to analyze IKEA’s competitive position in the Canadian Furniture Industry as well as Sears competitive threat, a model of competitive rivalry was used.

IKEA and Sears both compete against each other in multiple markets across Canada, they both have market commonality and resource similarity. The Sears catalogue has almost the same format of an IKEA catalogue, and they both offer knock-down, self-assembled line products which allows the customers to create particular designs. In addition, the price for Elements’ products in Sears seemed almost identical to IKEA prices. They both go closely to the supplier in marketing, research, design and development, production standards and production planning. Some of the suppliers of the Elements line for Sears were from Sweden, which is the same as IKEA, but it didn’t show that they had any suppliers in common. It’s evidently that both of the market commonality and resource similarity are very high between those two companies.

The market commonality and resource similarity can influence the drivers of competitive behaviour. The awareness of IKEA to recognize the degree of imitation by Sears is very high. High awareness enables IKEA to understand the consequences of Sears’ actions and responses. IKEA has a high motivation to respond Sears’s imitation. In order to protect IKEA’s position in the furniture market, IKEA has a philosophy to dealing with the copyright. IKEA would like to make a new model to replace the stole one rather than bring a lawsuit. Furthermore, IKEA has the ability to attack or respond to Sears’ actions. Since they both hold the similar resources, the ability to attack and respond is similar. IKEA should consider all important issues before taking action or respond to Sears.

First-mover incentives,...
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