Question

Porter strategy for ikea essay

Answer 1

Pointers for Essay:

• Porter's Strategy - There are 4 competitive strategies:
  • Cost Leadership - No Frills; increase in profits by reduction in cost; high market share due to competitive prices
  • Differentiation Leadership - Unique product or service; product innovation; high quality of products and services; effective marketing and sale techniques
  • Cost Focus - cost specialization; focus in niche market
  • Differentiation Focus - differentiation specialization; focus in niche market
• Background of IKEA:
  • Self assemble furniture and home products retailer
  • Founded in 1943 in Sweden
  • Revenue of $45+ Billion
  • Presence in 433 Locations
• The main focus of IKEA is to make the furniture accessible to all at lower price and looking at their revenues they are a leader. Therefore, Cost Leadership is the strategy of IKEA. IKEA saves the cost by making the dismantled products which the customers carry themselves and assemble at their places. This also reduces logistics cost. Thereby allowing IKEA to undercut the competitors.
• IKEA also has a very strong differentiation point of having large stores in big cities and having dismantled furniture, which is a unique norm that is not followed by the furniture industry. This differentiates IKEA from its competitors a lot. Hence, IKEA also falls under Differentiation Leadership strategy group. IKEA has great marketing and sales strategy - Open large stores that act as landmarks, the placement of products in store is a well thought out strategy to maximize customer spends
• Therefore, IKEA belongs to the upper half in the Porter's Strategy. It is a leader in both cost and differentiation