The founder of IKEA, Ingvar Kamprad registered his firm 1943. In 1958 he opened his very first IKEA store in Älhult, Sweden. From that moment, IKEA have continuously expanded by invaded new countries and opening new stores. Today IKEA is one of the leading home furnishings brands in the world with more than 235 stores in more than 30 countries. From being a one man enterprise IKEA now have astonishing 110,000 co-workers and a turnover of over 20 billion Euros on a worldwide basis (IKEA website 2008). In this assignment I will start by describing IKEAs competitive strategy and strategic fit before I look into the competitive environment and how IKEA have positioned itself in the market and achieved its business strategy. Finally I will critically discuss whether opening smaller “IKEA Lite” shops is a good idea for IKEA or not.
2. Competitive Strategy
A company’s competitive strategy (also called business strategy) determines what customer segments a company aims to serve by its products and services. Establishing a competitive strategy can be seen as an iterative process where the company make decisions on where they would like to position themselves in the market and what set of resources and capabilities they need to develop to successfully do that, and what kind of resources and capabilities they already possess and where these characteristic can give the company a competitive advantage (Beckman & Rosenfield 2008). IKEA has targeted customers who seek stylish furniture at a reasonable cost. IKEA’s business idea is;
The company slogan – “Low price with meaning” refer to IKEA’s objective to offer tasteful, cleverly designed products at an affordable price without making the customer feel cheap. This clearly state IKEA’s emphasis on competing on price. IKEA is “for the many people” offering a broad variety of products and services. IKEA’s product range consists of about 10,000 furniture and household items for the bedroom, kitchen, living room, bath room and even garage and garden. Despite its enormous range of products, IKEA has limited the variety of styles offered in each product area. All stores also operate childcare facilities with playrooms where customers can drop off their children while doing their shopping and a café serving traditional Swedish food so that no customer would have to shop on an empty stomach. 3. Supply Chain Strategy and Strategic Fit
To achieve strategic fit, a company must ensure that its supply chain capabilities support its ability to satisfy the targeted customer segments. It requires consistency between the objectives the competitive strategy seeks to satisfy and the objectives and strategy of every functional unit within the company. This again is made up of various structural (e.g. vertical integration, process technology, capacity, facility) and infrastructural decisions (e.g. sourcing, business processes and policies, supply chain coordination, information technology and capability development) (Beckman & Rosenfield 2008).
Figure 1: Strategic Fit (Source: Beckman & Rosenfield 2008)
To achieve strategic fit the company would have to achieve the balance between responsiveness and efficiency in its supply chain that best meets the needs of the company’s competitive strategy (Qiu 2008). IKEA, with their focus on cost efficiency, would be positioned towards the left on the efficiency vs. responsiveness scale and need to design their supply chain to fit this strategy.
Figure 2: Modified version, efficiency vs. Responsiveness. (Source: Chopra & Meindl 2007) Cost efficiency pervades every part of IKEA’s value chain from product development to the end user. Product development and design is handled in-house with focus on aesthetics, functionality and especially cost efficiency. IKEA’s basic principle in development of new products is that the price tag is designed first. Deciding what materials to use where is of highly deliberate matter. High quality materials are used...
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