Competitive advantage of IKEA Essay

INTRODUCTIONIn this modern hyper emulous market situate, a familiarity must be a powerful competitor to survive. A friendship must possess a powerful arranging in rule to become a powerful competitor. But what proposes a good outline for the company?A good business dodge would be that to dispatch a private-enterprise(a) gain over other competitors. So what is a competitive return? And how company merchant ship be able to conduct a competitive advantage over other competitors? This essay would at present discuss what a competitive advantage is and how a company move build a competitive advantage over other competitors in the same industry by using two furnishing stores, Ikea and Courts as examples. competitive ADVANTAGEDefinitionA company is said have competitive advantage over its competitors when the company earns profits that argon above the convention average in the industry where it competes.Types of competitive advantagesAccording to Michael Porter, there atomi c number 18 two basic types of competitive advantage, namelyCost Advantage- A exist advantage is the might of the steadfast to deliver the same product or services at demean comprise than competitors. This advise be arrive atd by means of with(predicate) using economies of scale, production efficiencies, low labor be or develop access to raw strong and etc.Differentiation advantage- A preeminence advantage is the ability of the slopped to deliver products or services that atomic number 18 different from the product mix of competitors. Due to the added apostrophizes in achieving specialisation for theproduct or services, differentiated products or services are much marketed at premium damages.Model of hawkish AdvantageSource www.quickmba.comCompetitive advantage derives step up of repute a crocked is able to clear for its buyers that exceeds the buckrams approach of creating it. Value is what buyers are willing to pay, and master cling to stems from offeri ng lower monetary values than competitors for equivalent benefits or providing singular benefits that push down the price sensitivity of the buyer. Value can be achieved though utilizing the firm resources and capabilities that would then become core competencies of the particular firm. The core competencies created will provide the firm to scene either as a terms attraction or differentiation leader in the industry and this will in turn create value for the buyers which will become the firm competitive advantage in the industry.Resources and capabilitiesA firm needs to possess resources and capabilities that are better than its competitors in order to develop a competitive advantage over them. Any competitive advantage will disappear if the competitors can easily imitate what the firm was doing.Resources are assets of the company that its competitors cannot easily acquire. about examples of a firm resource include the firms reputation, faithful customer base, patent and tr ademarks and strong branding.Capabilities refer to the ability of the firm to make the most of its resources. One good example of the capabilities of a firm is the ability to carry out a winnerful market campaign.The combination of twain capabilities and resource will become the distinctive competencies of the firm. The competencies will allow the firm to achieveinnovation, efficiency, quality and customer responsiveness. The core competencies created will allowed the firm to position either as a cost leader or differentiation leader in the industryCost advantage and differentiation advantageA firm will position itself as a cost leader or differentiation leader in the industry found on the distinctive competencies formed using its resources and capabilities which become the firm competitive advantage against other competitors.Value creationValue is created by firm through performing a series of value creating activities that Porter set as the value bowed stringed instrument. Th e value chain comprises 4 supporting activities (procurement, technology development, human resource and firm infrastructure) and 5 primary activities (inbound logistics, operation, outbound logistics, market as well as sales and service). On top of the firm own value creating activities, the firm operates in a value system of vertical activities including those of upstream suppliers and downstream channel members. In order to achieve competitive advantage, a firm must perform one or more value-creating activity that is more superior correspondd to other competitors. Superior value is created through lower costs or superior benefits to the buyers.IKEAProfileIkea, the Swedish article of furniture giant was founded in 1943. It is the worlds largest furniture retailer that sells stylish but inexpensive Scandinavian designed furniture. It has returns in 35 countries, including Singapore. The company is, perhaps, one of the Worlds most successful international retailing firms opera ting as a globular organization ground on its unique concept that the furniture is sold in stripe down form that are to beassembled by the customer at home.Ikea mission statementIkeas mission is to offer a immense range of home furnishing items of good design and function, excellent quality and durability, at prices so low that as many people as feasible can afford to buy them (www.ikea.com)Ikea competitive advantageIkeas success in the retail furniture industry can be attributed to its Brobdingnagian experience in the retail market and its ability to integrate both product differentiation and cost lead strategies successfully.As pointed out in Ikeas mission statement, the company is in business to produce graduate(prenominal) quality products at a low cost. This would support a cost leadership strategy. However, the company is also applying differentiation strategy due to its unique way of incorporating the customer in the value chain and unique marketing strategiesCost adv antageIkea cost leadership strategy allowed it to have a competitive edge over other competitors in term of pricing. Ikea achieved this through tight cost control and production efficiencies.Under Ikeas global strategy, suppliers are usually located in low-cost nations, with close proximity to raw material and reliable access to distribution channels. These suppliers produce highly standardized products intended for the global market, including Ikea. This allows Ikea to take advantage of economies of scale.Ikea also perpetrate tight cost control in order to keeps its product price low and affordable. Some key cost control measures undertaken by Ikea includes* positioning their outlet outside the city area on places where the lease or the cost of the land is cheaper* right away packaging of its product allows Ikea to transport its goods from suppliers to its outlet at low cost as it efficiently maximizes the space during transportation. Flat packaging also means lower warehousing costs for them.* No waste policy when Ikea develops product. For example, the remnants of fabrics that are left over the heart molded FAMNIG cushion, one of Ikea product, are functiond to make smaller FAMNIG cushion. Door producer are uptaked by Ikea to make their table-top with the leftover raw material thus reducing production cost.In addition to tight cost control and production efficiencies, Ikea also bear customer into the value chain approach as a mean of reducing costs. Customers are to use the information on the product price tag to collect from the racks in the store self-service area, transport the items themselves back home and to assemble by themselves. The costs saved are passed back to the consumer in term of charging lower price for their product rather then including the labor costs and sales pitch costs into the selling price, a usual practice of other furniture stores.Differentiation advantageIkea had also successfully integrated its cost leadership strategy with differentiation strategy that allowed it to further distinguish itself from other furniture stores and develop a strong branding for the firm.Ikea differentiate itself from other competitors by performing the following* As mentioned earlier in page 6, Ikea incorporate customer into the value chain approach to reduce cost. Customers are to use the information on the product price tag to collect from the racks in the store self-service area, transport the items themselves back home and to do solicitation of thefurniture. Ikea is the only furniture store that adopts this practice in Singapore and it is recognized by all Ikea customers as they understood it as a cost saving method through education by Ikea to the customer on their inventorys.* Ikea adopted different marketing communion strategy from the rest of its competitors. sort of of choosing to advertise every weekend in the newspaper to reach out to consumer, which is the norm of most of the popular furniture stores in Singapore, Ikea main communication strategy lies in the complimentary catalogue mail to every menage in Singapore annually. This allowed customer to read the catalogue at the console of their home. Furthermore, the dimensions of the furnitures are indicates in the catalogue that allowed the customer to measure up their place for the furniture and come up with a systematic shopping list. Thus, the catalogue is the best way to prepare the customer for a visit to Ikea compare to newspaper advertisement used by other competitors.* Ikea provides child forethought services and supervised play area in their outlets to ensure parents can focus on their shopping in Ikea store without having any worries for their children.* In-store eating house (Rare among furniture stores), Burger King as in the case of Singapore, offer a chance for shoppers to take meal breaks without the hassle of leaving the store.SummaryThe cost leadership strategy adopted by Ikea allows it to set attractive price f or their product compare to other competitors in the same industry. By climb attractive price, it also reduces the price sensitivity of the consumer. The cost advantage is achieved by Ikea through tight cost control and production efficiencies. The differentiation strategy approach such as the Ikea catalogue, in-store restaurant, the incorporation of customer in the value chain and providing of child care services undertaken by Ikea helps to create a highly differentiated picture of Ikea in the targetmarkets mind. Ikea through successfully integrating cost leadership and differentiation strategy had become one of the most successful international furniture retailers.