Ikea Case
IKEA
1. Explain, in detail, the aspects of IKEA strategy that make it a Hybrid strategy.
IKEA is clearly a follower of a “strategy clock” approach, which is characterised by two distinctive features: it is more focused on low prices to customers, not only low costs to organisation, and its strategic decisions are made to create the balance between price/cost leadership and differentiation, creating unique benefits and features that provide competitive advantage.
Home furnishings market is highly segmented with mostly local competition of the several kinds: multinational furniture retailers, companies specialising in just a part of furniture product range, non-specialized retailers where furniture as part of their product range and small companies/producers.
IKEA strategy is characterised by cost saving, where managers fly economy and share rooms in the hotels, salaries are hardly generous, advertising is done in-house, their offices do not look like typical offices of a multinational companies due to fanatical devotion to cost cutting. With this cost cutting urge, the company is capable of offering prices much lower than the competition. Such pricing strategy makes IKEA deliberately focusing on younger people and middle class buyers, those who do not wish or cannot afford buying expensive furniture. IKEA is well aware of who are their key-customers, which is 25-50 years old people, majorly families with kids. Thus, there is a certain focus on a segment, which is another part of hybrid strategy, although IKEA is claiming they are for everyone.
Although IKEA designer will always sacrifice the design to lower cost (if a requested chair came up at a price of 12 pounds instead of 10, it will be re-designed), IKEA’s concept is to offer designed products. They have in-house designers who give a lot of attention to personalisation of interiors, due to traditional importance of home decorations for the Swedish people, who spend most of the time at their homes.
1. Explain, in detail, the aspects of IKEA strategy that make it a Hybrid strategy.
IKEA is clearly a follower of a “strategy clock” approach, which is characterised by two distinctive features: it is more focused on low prices to customers, not only low costs to organisation, and its strategic decisions are made to create the balance between price/cost leadership and differentiation, creating unique benefits and features that provide competitive advantage.
Home furnishings market is highly segmented with mostly local competition of the several kinds: multinational furniture retailers, companies specialising in just a part of furniture product range, non-specialized retailers where furniture as part of their product range and small companies/producers.
IKEA strategy is characterised by cost saving, where managers fly economy and share rooms in the hotels, salaries are hardly generous, advertising is done in-house, their offices do not look like typical offices of a multinational companies due to fanatical devotion to cost cutting. With this cost cutting urge, the company is capable of offering prices much lower than the competition. Such pricing strategy makes IKEA deliberately focusing on younger people and middle class buyers, those who do not wish or cannot afford buying expensive furniture. IKEA is well aware of who are their key-customers, which is 25-50 years old people, majorly families with kids. Thus, there is a certain focus on a segment, which is another part of hybrid strategy, although IKEA is claiming they are for everyone.
Although IKEA designer will always sacrifice the design to lower cost (if a requested chair came up at a price of 12 pounds instead of 10, it will be re-designed), IKEA’s concept is to offer designed products. They have in-house designers who give a lot of attention to personalisation of interiors, due to traditional importance of home decorations for the Swedish people, who spend most of the time at their homes.