IKEA is one of the most successful and largest furniture retailers in the world, which sells self-assemble furniture, home decoration and daily necessities. It was founded in Sweden in 1943 and has been triumphant for 73 years. How did IKEA operate and grow during such a long period? What were the strategies they used to maintain the success?
Based on Porter’s Generic Strategies, which were proposed by Michael Porter, IKEA mainly follows the “Cost Leadership Strategy”. IKEA seeks for suppliers who could manufactures well-designed subassemblies at the lowest costs and customers need to assemble the products themselves. This method could save delivery costs for both producers and customers. It allows manufacturers reducing a lot of costs as soon as customers could pay for the products on a much lower price with high quality and therefore, to receive different segments of customers. This is also IKEA’s “Focus Strategy” on low costs. With the competitive price, the company could receive a vast market and easily won the business.
Besides, IKEA follows “Differentiation Strategy” to some extent. Basically, the company innovated the way people purchase furniture. Every IKEA stores is a unique building with the noted brand symbol and style. Compared to other furnishing retailers, IKEA shows their products in prototype rooms which are miscellaneous and stylish. It provides various choices and suggestions for customers to decorate their rooms. In some areas, people regard strolling in IKEA stores as an entertainment because of its fashionable designed furniture and easeful homelike environment. As a result, IKEA could easily receive their potential customers. Meanwhile, the company focus on producing high-quality products with competitive price, which is another differentiation compared to most of the firms in the industry.
Moreover, IKEA obeys the “Focus Strategy” on differentiation. For instance, in IKEA stores in China, customers can find lots of Chinese traditional designed furniture, which is well-satisfied for Chinese customers’ decoration demand.
To be summarized, IKEA follows all of the Porter’s Generic Strategies and it does not “Stuck in the Middle”. As the firm separates the strategies into different business aspects. IKEA found the rule and that’s why they received a hugh success in the industry.
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References:
http://thebusinesstrategy.blogspot.ca/2013/03/ikea-more-than-low-prices.html
http://www.quickmba.com/strategy/generic.shtml
https://en.wikipedia.org/wiki/IKEA
http://franchisor.ikea.com/the-ikea-concept-2/
http://www.businessinsider.com/ikeas-strategy-for-success-2015-1
By JUNLING LIU
Student No. 35908169
