Reasons for IKEA Greatness - Case Study Example

IKEA COMPANY ESSAY Student’s Name: Course Code: Tutor’s Name: Date of Submission Reasons for IKEA greatness IKEA is a multinational company with its headquarters in Netherlands. It designs and sells the home and office furniture that is ready to assemble together with home accessories as well as kitchen appliances.1 Since it was founded, the company has been competitive in this industry to be the largest furniture retailer in the world. It has branches in more than twenty-five countries with revenue of more than forty billion Canadian dollars.2 Its success has been attributed to its business strategies which include cost leadership, differentiation as well as its marketing mix which has included successful market segmentation (Chopra, 13). The company's competitive advantages have also come from its ability to outdo their competitors in this industry by being cost conscious and innovative. This essay will analyse IKEA's competitive advantages and the reasons for its greatness. IKEA has been able to achieve value proposition through the delivery of some benefits to their customers. The company has been able to offer fashionable furniture and other home appliances at an affordable cost.3 This is a strategy where the company reduces their costs to attract more customers and at the same time maintain its profitability. IKEA has been able to perform above average in this industry due to the command it has in the industry. Selling their products at a lower cost than rival businesses makes the company make more sales and greater returns in the long run (Bartlett and Ghostal, 13). This does not mean that the business should reduce its prices lower than the production cost but reduce the production cost for it to be able to reduce the price of the product the strategy helps the company to give its customers good value for money.4 IKEA has been able to reduce the production cost by providing ready to assemble furniture and therefore becomes greater than its competitors (Askalany, 2017). The company has designed its products to offer quality products that are affordable to all classes of buyers. Differentiation is another strategy for making a business unique compared to others in the same industry. The uniqueness should be along a line that is valued by the customers. This means that the business should conduct considerable research to know some attributes that are perceived important by the buyers.5 Differentiation can be based on the company's products as well as the approach to marketing and the systems of selling the products (Byun, 146). IKEA has been able to produce peculiar furniture which can be assembled at home. This is a form of differentiation as other companies in this industry have not been able to do so (Giménez, 150). It has also been producing new products to cater for the changing lifestyles of its customers, therefore, attracting more customers and become more profitable. These products range from upholstered furniture, rattan furniture to coffee tables. They also sell wardrobes, beds as well as hall furniture. Products that are offered by IKEA are always different from its competitors and increase its competitive advantage than rival businesses making the company greater. This has been achieved through more efficiency and continued innovation with the help of customer engagement than their competitors.6 Lutz (2015) says that good marketing strategy is very important for a business to achieve competitive advantage. A good marketing strategy should combine the marketing goals from research and focus into a plan that is comprehensive (Kotler and Keller, 5). Adoption of a good marketing strategy increases the profitability of a business making it more competitive than others in the same industry. IKEA's marketing strategy incorporates a number of tools as well programs that aim at increasing the business competitive advantage. The company publishes a catalogue annually. The catalogue, as an important marketing tool for IKEA, is usually published in more than fifty editions, twenty-seven languages and serves more than thirty-five countries of the world.7 The catalogue has been using about 70 percent of the marketing budget annually.8 They are distributed to potential customers by mail and even in their stores. This has helped the company in reaching many buyers across the countries they operate (Xiaofei, 80). Due to the use of the catalogue, IKEA has managed to increase their customers and sales, therefore, increasing its competitive advantage more than its competitors hence its greatness. Šarić (70) argues that in the process of marketing IKEA has been using a loyalty card since 2009.9 This card is known as IKEA family and is offered for free by the organisation. Customers usually use the card in obtaining discounts on some products that are available in IKEA stores. With the card, customers are also given discounts on food bought from their restaurants (Šarić, 70). In addition, IKEA has also introduced a magazine that is published annually. Sometimes, this magazine has been seen as a supplement to the catalogue and the card because it has more than 500, 000 subscriptions since 2007.10 Creativity and innovation have played a very significant role in making IKEA a great company. It has been able to do better than its competitors in the industry due to the continued innovation of the company's management and employees. The introduction of restaurants in IKEA stores is such an innovation.11 It has helped in maintaining customers who come to shop as they can access food in the company’s restaurants (Strand, 70). The prices of the restaurant's products are also to the buyers. Other than the restaurants in their stores, the organisation is also planning to open stand-alone restaurants. This innovation is making the company enjoy a variety of competitive advantages than its competitors and this is continually making the company great. Innovation has also played other roles in making the company great. Online marketing in IKEA also is another innovation by the company that is helping in reaching many and variety of customers (Bartlett, 50). Due to technological advancement, many customers all over the world have access to the internet. IKEA's online presence has made the customers identify what they need through the internet and also place orders through it and their homes.12 The improved distribution network by the company all over the world will help the customers receive what they want in time. This strategy has been very significant in making the company great than its customers. Embracing the technology has managed to make companies achieve their goals and objectives just like IKEA (Kotler and Keller, 9) Marketing communication cannot be left behind when analysing the factors that build the IKEA brand. It has helped in building a good relationship with the customers (Askalany 2016). The relationship has been made better through the IKEA concept where the company is committed to the design of their products as well as the value of consumers.13 They also have the appealing range of products covering all functions in their home (Chopra, 3). The increased variety of products offered at IKEA has also made customers to prefer buying from IKEA since they can get everything under the same roof.14 They have also been successful in reaching many customers with the help of a variety advertising media ranging from the internet marketing, catalogue as well as different print media, radio and television.15 In conclusion, IKEA is a multinational company that has been successful in being the best in its industry. There have been factors that have helped the company in becoming the best provider of services in more than thirty-six countries of the world. It has been in the forefront to provide their products at a lower price than its competitors, therefore, giving their customers value for money. IKEA has also been successful in using differentiation strategy where their products have been unique in the market and this attracts more and more customers than rival businesses. Innovation in the company has also played a significant role in making the company great. This has been evident from their marketing strategies as well as communication to attract more and retain the current customers. Their online presence has also made the company increase its profitability due to reaching many customers at the comfort of their homes. Bibliography Askalany, Anthony (2016, may 18). IKEA: Competitive advantage and creating value, Linkedin, accessed on May 28, 2017, from https://www.linkedin.com/pulse/ikea-competitive-advan Bartlett, Christopher and Ghostal, Sumantra, Transnational Management: Text, Cases, and Reading in Cross-Border Management (3rd ed.). Pennsylvania, McGraw-Hill, 2000. Byun, Jae-Woong. "Value-based Services for Sustainable Business: A Case Study of IKEA." Journal of Distribution and Management Research 14, no. 3 (2011): 147-66. doi:10.17961/jdmr.14.3.201108.147. Chopra, Riddhima, IKEA case study, 2009 December 31, GAPRO9RM085 Giménez, Josep Francesc Valls. "Case Studies in Innovation to Produce Lower Prices: IKEA, ING DIRECT, Mercadona and Privalia." Beyond the Low-Cost Business, 2013, 145-82. doi:10.1057/9781137277534_5. Lutz, Ashley (2015, January 15). Ikea's Strategy for Becoming the World's Most Successful Retailer, Business insider, accessed on May 28, 2017 from http://www.businessinsider.com/ikeas-strategy-for-success-2015-1?IR=T Kotler, Philip and Keller Kevin, Marketing Management (12th ed.). Upper Saddle River, NJ: Pearson Education, 2006. Šarić, Saša. "Theoretical Model of Internal Characteristics to Create Competitive Advantages through Clusters." Competitive Advantages through Clusters, 2012, 63-95. doi:10.1007/978-3-8349-3554-0_3. Strand, Robert. "Scandinavian Cooperative Advantage: The Case of IKEA." World Humanism, 2013, 63-80. doi:10.1057/9781137378491_5. Xiaofei, Zhao. The dilemma of foreign furniture company in China, New Economy Weekly, 16 (2005): 84-85 Read More