There are a lot of furniture companies
out there that carry numerous styles, great quality and affordable price. But
being a college student who’s on budget, IKEA is definitely my number one
favorite furniture store to shop at. I adore their styles, and especially their
budget friendly price.
IKEA
is the world’s largest furniture store. IKEA’s competitive advantage includes
its creative design achieved in low costs. IKEA products are based on the
concept of democratic design that attempts to achieve an effective integration
of form, quality, function and sustainability for a low price.
In
Porter’s five forces model, five competitive forces determine industry
profitability, which are bargaining power of suppliers, threat of substitute
products, bargaining power of customers, threat of new entrants into the
industry, and lastly rivalry. After doing some research, here is IKEA Porter’s Five Forces:
1.
Bargaining
power of suppliers: The bargaining
power of suppliers is considerably low. Suppliers
do not have substantial bargaining power as there many options available to
IKEA around the world. There are numerous factories around the world with the
capabilities and resources to form partnership with IKEA. However, IKEA do form
long-term relationship with its suppliers.
2.
Threat
of substitution: is low because IKEA offers many
products and services that can substitute the demand for furniture, home
appliances other products.
3.
Bargaining
power of customers: is strong because there are a lot of
competitors including global furniture retailers as well as, local furniture
producers.
4.
Threat
of new entrants into the industry: There is little
threat from new entrants. The requisite expertise is difficult to replicate and
financial investments are significantly high
5.
Rivalry: There is significant competition in the
discount furniture market with companies like Wal-Mart Stores, Target, Sears,
Home Depot, Pottery Barn, other local stores.
Value Chain
Primary Activity
·
Inbound
Logistics: IKEA employs in-store logistic personal to handle inventor
management. They are the one who ensure an efficient flow of stocks.
IKEA Group has 1,046 home furnishing suppliers located in 52 countries.
·
Operation:
Operations are conducted in four divisions: franchise division, retail center
division, property division and finance division. Operations in more than 38
countries; 208 company operated stores in 26 countries, remaining stores
operated by franchisees. IKEA minimize touches by reducing process of moving,
shipping, and loading of product. 60% of manufacturing takes place in Europe
because IKEA does not manufacture its own products
·
Outbound
logistics: Transportation of products is done by
customers. Customers select the furniture, retrieve the packages themselves and
take it home; therefore IKEA saves fuel and stocking costs. In 2013, 212
million copies of IKEA catalogues were printed in 29 languages
·
Marketing
and sales: Targeting mainly families with lower
income, students and singles. There are lots of inspiring ideas and realistic
room settings at showroom. Market halls gathers items according to categories
enable customers to easily compare and choose. IKEA also publishes an annual catalog as their main marketing tool, distributed in stores and by mails.
·
Services:
IKEA has very limited level of customer services according to the chosen
business strategy and low number of sales assistants in stores. IKEA offers
Ikea family loyalty card, financial service and 100 days return policy.
 |
It is apparent that IKEA chose to
pursue cost leadership as their strategy to be its attractiveness. IKEA has chosen to mostly enter markets through wholly-owned
subsidiaries in order to maintain their brand image. This strategic decision has enabled IKEA to maintain a
competitive advantage, and earn
above average returns due to leadership in the market.
CAN YOU DO AN UPDATE ANALYSIS DUE TO BREXIT IN UK?
ReplyDeleteTHANK YOU