Question

1. What is a trade-off according to Porter?
2. Why are trade-offs important?
3. Why is it essential to make trade-offs?
4. Give examples of trade-offs in the airline industry and Taiwan Semiconductor.
5. What are the trade-offs IKEA made compared to traditional furniture retailers. Talk about product design, product variety, in-store service, delivery and store design, flat packs.

Answer 1

Porter suggested that trade-off is essentially deciding what not to do, to deliver the service you want to provide your customers, in a way its still diffrentiated and difficult to copy by competition.

One easy to understand examples for trade off will be that a company can either compete on price or on quality, its not logical to compete on price while delivering high quality products.

Making trade-offs creates a focus for the product and services company is providing and helps create a brand image.

IKEA Example:
IKEA is know to provide varied product and designs at the lowest of the prices, in exchange for lower service. IKEA's customers directly collect the product flat packed from stores/warehouses and assemble themselves at their premises.

Airlines Example:
Trade-offs that airlines need to make is in terms of low fringe benefits in exchange of faster turn arround at cheaper prices. Airlines who choose to not provide food, are able to provide cheaper and faster services. Example: Indigo airlines