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Transcript of Ikea presentation
Costs: Extensive research and development and design in order to focused on quality at minimal cost.
Ikea has managed to achieve this core competency by switching a majority of production from Europe to China.
Innovation:Using new material that contribute more to a sustainable environment and are less costly and using newest way of packaging, handling and transporting materials.
Keep focusing on their advertising to ensure their products and value continue to be at the fore front of the everyday person as a consumer of choice.
Will we still love IKEA ?
by the "A Team" 29.10.13
Ingvar Kamprad, born in 1926, founded Ikea at age 17.
Initially sold a variety of goods. In 1947, Kamprad introduced furniture into product line.
In 1951, all other product lines discontinued to focus on furniture.
Affordable and varied home furnishings
“World’s largest retailer of home furnishings
Ikea 's vision, mission and values
To create a better everyday life for many people
To offer a wide range of well-designed, functional home furnishing products
at prices so
low that as many people as possible will be able to afford them”
Their values form a pattern and are usually referred to as doing things “
the IKEA way.”
Togetherness and enthusiasm
Constant desire for renewal
Cost-consciousness applied in all areas of the IKEA® operation
Willingness to accept and delegate responsibility
Humbleness and willpower
Leadership by example
Daring to be different
Striving to meet reality
The importance of constantly being “on the way”
Ikea 's key resources
Stores 298 in 26 countries
Total sales EUR 27 billion
Products About 9,500 in the range
Suppliers 1,084 home furnishing suppliers in 53 countries
Store visits 690 million
Web visits more than 1 billion
Catalogues 187 million printed in 22 languages
IKEA Food EUR 1.3 billion yearly turnover
Strong brand reputation for his Scandinavian design.
World largest furniture retailer.
Young management team
Ikea 's Strategy Model
A company needs to have a strategic vision and strategy on how they will provide their products to the consumers and which areas of the market that they wish to concentrate on.
Cost leadership is concerned with providing products to the market at the lowest possible cost.
Those low cost base allow those companies to consistently deliver higher profits than their competitors.
Differentiation is all about doing something different within the market, creating products or services that consumers want and are willing to pay a premium for.
One of more difficult combinations of strategy is cost leadership with differentiation, this being because of the conflicting nature of the two strategies, one seeking to minimize costs as a result of cost leadership whilst the other seeking to add costs of value-added differentiation.
To do both, to drop costs whilst increasing revenue would imply conflict: IKEA is one of the few companies that have managed to make this strategy work successfuly, building ever greater value products within an intense market, with increasing amounts spent on product research and design.
Ikea vision, mission and values
Ikea key’s resources, capabilities and competences
Ikea’s Strategy model
The difficulties of using such a strategy
The dangers of a Hybrid strategy and how managers can guard against them
Ikea 's capabilities
Ikea provide value to customers by offering quality product as low as possible.
RARE: High Scandinavian design product and style of live at low cost to better people life.
Ikea has a competitive advantage because of their brand and product which they produce massively and manage to reduce their cost. Competitors will find difficult to imitate quality and low price.
Production has stayed the same but in order to keep a competitive advantage Ikea has relocated his production to China .
Ikea 's capabilities
Tend to develop a unique business culture around a good lifestyle for employees and customers.
The group develops its capabilities as a global retailer by adding value to the supply chain.
IKEA social responsibility is dedicated to environmental, labor, and ethical business practices.
IKEA’ core competencies have helped its efforts to attain a sustainable business model in the world as it continues opening new stores throughout.
Difficulties for the competition
Ikea Hybrid strategy is difficult to imitate by competitors for the fact that the company is worldwide known over 50 years.Ikean could be the considered as one of the reason that competitor MFI failed. Ikea traded in UK in 1987 and quickly expanded its operations with the same focus on self assembly furniture.MFI's products were targeted to value oriented customers with the Hygena brand, whereas Ikea's combination within the Hybrid strategy of differentiation, with a high quality product and design and low cost is rare and not easy for any competitor to challenge them effectively.
The dangers of a Hybrid Strategy
"Stuck in the Middle"
by trying to follow both low cost and differentiation strategies in the same time, companies could fall between two stools. It is often the result of a lack of clarity in formulating a competitive strategy designed to deliver competitive advantage.
Also the customers needs within a narrow competitive segment may become more similar to those of industry-wide customers as a whole.
At some point, for example the need' of IKEA's customers for stylish furniture may diminish , although their desire to buy relatively inexpensive furnishings may not; byy consequence ikea's customers might buy from other low cost competitors.
Ikea could and need to upkeep their game and be on top of their strategy to avoid such speculations.
How managers can guard against these dangers
Managers need strategy clarity: choose generic strategy they are pursuing and stick with it, which Ikea has manage to do across each store they are opening.
Managers need to know the firm's position and competitive advantage in that industry: Ikea has been successful in reducing cost of production while maintaining high differentiation and value on their products. Ingvar Kamprad got into low cost supply very early buying direct from small local producers.
Ikea concentrates on building differentiation on the basis of its marketing, product range and stores operations but low customers expectations on service levels allow cost reduction because customers are prepared to transport and build its products used as an entry strategy in a market with established competitors.
Ikea uses scales advantages to combine relatively low prices with differentiated Swedish design.
Mikael Ohisson in sep 2009, Ikea's new CEO said:"We know that many of our customers have less money to spend and our low-price concept is therefore more relevant than ever"
What is the future for IKEA business Hybrid strategy ? Based on the current market Ikea is the world largest furniture retailer. In one hand Ikea has successfully been able to develop a diverse product portfolio over 50 year which their main business and strength is undoubtedly designing, manufacturing and selling furniture. In an other hand the brand has understood they need to diversify, in shop with restaurant, cafe serving swedish food but also operating in joint venture recently in march 2013 with the Marriott Hotel group to provide the furniture and the design for 50 hotels development sites within Europe over the next 5 years.
At a global expansion Ikea has been extremely successful although in Asia, Ikea has failed with their products bringing design and cheap product which consumer didn't adhere because they believe in quality and high price tag. The same for putting swedish food in the store which customers were not interested to buy because of the difference of taste in their culture. There is a challenge for IKEA to provide the same consistent product across the globe. Ikea could to pursue their success looking at alternative strategy such as the diversification which they have started.
2. Strategic Purpose and Capability
[PPT]IKEA's core competency