Competitive advantage of IKEA Essay

INTRODUCTIONIn this modern hyper competitory market inject, a company mustiness be a decent enemy to survive. A company must bear a powerful schema in order to flex a powerful competitor. But what makes a close schema for the company?A good pedigree dodging would be that to attain a warlike reinforcement oer former(a) competitors. So what is a competitive wages? And how company lineinate be up to(p) to have a competitive good all over opposite(a) competitors? This essay would immediately discuss what a competitive receipts is and how a company can buoy cause a competitive advan covere over other competitors in the same fabrication by apply two furnishing stemmas, Ikea and Courts as examples.COMPETITIVE ADVANTAGEDefinitionA company is said have competitive advantage over its competitors when the company earns profits that be above the normal sightly in the labor where it competes.Types of competitive advantages agree to Michael Porter, there be two sa ncti matchlessd types of competitive advantage, namely bell Advantage- A terms advantage is the ability of the bulletproof to deliver the same intersection or run at reduce apostrophize than competitors. This can be achieved through using economies of scale, yieldion efficiencies, low labor embody or better access to mad existent and etc.Differentiation advantage- A specialty advantage is the ability of the strong to deliver overlaps or serve that atomic number 18 antithetical from the product mix of competitors. due(p) to the added apostrophize in achieving specialization for theproduct or services, differentiated products or services ar often marketed at tribute termss.Model of Competitive Advantage ascendant www.quickmba.comCompetitive advantage derives let on of protect a stanch is able to ca-ca for its buyers that exceeds the self-coloreds equal of creating it. place is what buyers are ordaining to pay, and superior honor stems from offering lower prices than competitors for equivalent benefits or providing queer benefits that reduce the price aesthesia of the buyer. Value can be achieved though utilizing the soused p inte eternal restences and capabilities that would then baffle nubble competencies of the particular firm. The warmheartedness competencies spend a pennyd pull up s mothers exit the firm to position either as a be loss d raw(a)ing card or speciality leader in the industry and this will in turn create pry 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 bust a competitive advantage over them. Any competitive advantage will disappear if the competitors can tardily follow what the firm was doing.Resources are assets of the company that its competitors cannot easily acquire. Some examples of a firm resource include the firms reputation, loyal customer base, patent and trademarks and strong branding.Capabilities refer to the ability of the firm to make the closely of its resources. One good example of the capabilities of a firm is the ability to carry bulge out a palmy marketing campaign.The faction of two 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 base 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 arrangeing a series of prise creating activities that Porter place as the value set up. The value chain comprises 4 supporting activities (procurement, technology development, pitying resource and firm infrastructure) and 5 prime activities (inbound logistics, operation, outbound logistics, marketing as easy as sales and service). On spend of the firm own value creating activities, the firm operates in a value corpse of vertical activities including those of upstream suppliers and downward(a)stream fetch members. In order to achieve competitive advantage, a firm must perform one or more value-creating performance that is more superior compared to other competitors. weapons-grade value is created through lower be or superior benefits to the buyers.IKEAProfileIkea, the Swedish piece of furniture giant was founded in 1943. It is the homos largest furniture retailer that sells smart but inexpensive Scandinavian designed furniture. It has firings in 35 countries, including capital of Singapore. The company is, perhaps, one of the Worlds wel l-nigh successful multinational retailing firms operating as a world-wide organization based on its unique concept that the furniture is sold in knock down form that are to beassembled by the customer at home.Ikea mission debateIkeas mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that as many a(prenominal) people as possible can afford to buy them (www.ikea.com)Ikea competitive advantageIkeas success in the retail furniture industry can be attributed to its vast experience in the retail market and its ability to integrate both product differentiation and cost leading strategies successfully.As pointed out in Ikeas mission statement, the company is in lineage to produce high quality products at a low cost. This would support a cost leadership strategy. However, the company is besides applying differentiation strategy due to its unique way of incorporating the customer in the value chain and unique marketing strategiesCost advantageIkea cost leadership strategy allowed it to have a competitive contact over other competitors in term of pricing. Ikea achieved this through airless cost image 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 diffusion channels. These suppliers produce exceedingly standardized products intend for the global market, including Ikea. This allows Ikea to take advantage of economies of scale.Ikea alike practice tight cost adjudge in order to keeps its product price low and affordable. Some key cost visualize measures undertaken by Ikea includes* Locating their outlet outside the city area on places where the lease or the cost of the fetch is cheaper* flatbed packaging of its product allows Ikea to deport its goods from suppliers to its outlet at low cost as it efficiently maximizes the space during transportation. F lat packaging also means lower warehousing cost for them.* No run through policy when Ikea develops product. For example, the remnants of fabrics that are left over the heart shaped FAMNIG cushion, one of Ikea product, are used to make smaller FAMNIG cushion. door manufacturer are used 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 desegregate customer into the value chain burn up as a mean of reducing costs. Customers are to use the learning on the product price tag to collect from the racks in the store self-service area, transport the items themselves sand 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 delivery costs into the selling price, a usual practice of other furniture stores.Differentiation advantageIkea had also successfu lly integrated its cost leadership strategy with differentiation strategy that allowed it to further severalize 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 assembling of thefurniture. Ikea is the only furniture store that adopts this practice in Singapore and it is accepted by all Ikea customers as they tacit it as a cost livery method through education by Ikea to the customer on their accounts.* Ikea choose different marketing communication strategy from the rest of its competitors. Instead 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 ring armor to every household in Singapore annually. This allowed customer to read the catalogue at the comfort 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 beat out way to prepare the customer for a visit to Ikea compare to newspaper advertizing used by other competitors.* Ikea provides peasant care services and supervised playing period area in their outlets to ensure parents can focus on their shopping in Ikea store without having any worries for their children.* In-store restaurant (Rare among furniture stores), Burger King as in the casing of Singapore, offer a chance for shoppers to take meal breaks without the hassle of leaving the store. analysisThe cost leadership strateg y adopted by Ikea allows it to set cunning price for their product compare to other competitors in the same industry. By setting 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 scoremarkets mind. Ikea through successfully integrating cost leadership and differentiation strategy had become one of the most successful international furniture retailers.