Question
IKEA's Strengths Low Cost Structure IKEA's low cost structure has been the very essence of its success. Being that low cost measures are ingrained into IKEA's corporate DNA, the company does not have a hard time tailoring its operations around this business model. This model also pairs nicely with customers who appreciate IKEA's operating style. Further- more, IKEA's low cost structure has kept the company profitable while competitors, such as Pier 1 in the United States, are struggling. Despite the state of the economy, IKEA has continued to see positive revenue growth. IKEA has continued to use every possible ave- nue to maintain its low cost structure and competitiveness without compromising cus- tomer value. Corporate Culture IKEA values antibureaucracy in its operations, and strongly fol- lows worker and environmental protection rules. These tenets are codified in the com- pany's code of conduct know as "The IKEA Way." The company's culture is based on the core values of togetherness, cost consciousness, respect, and simplicity. Kamprad once said, "Work should always be fun for all colleagues. We all only have one life; a third of life is work. Without desire and fun, work becomes hell." To ensure the com- pany culture is upheld, the company looks for very specific traits in potential employees. IKEA's managers look for people who "display a desire to learn, motivation to do things better, common sense, and the ability to lead by example." The company believes in keeping employees happy by engaging in activities throughout the year that promote well being and job satisfaction. These are all reasons that IKEA has been ranked in For- tune magazine's annual list of "100 Best Companies to Work For" on many occasions. Do-It-Yourself Approach IKEA maintains its low-cost business model by creating a different furniture shopping experience. IKEA supplies customers with all possible mate- rials needed to complete their shopping when they enter the store (that is, measuring tape, paper, and pencils). The floor has showrooms displaying IKEA furniture with mul- tiple accessories that will accentuate the style. With this approach, customers do not have to be bothered with salespeople who work on commission. Customers can pick and choose among the different options of accessories that they would like to use with furni- ture. Many customers appreciate the feeling of accomplishment that comes from doing things for themselves. For those customer who do not like the DIY approach, IKEA offers assembly services and home delivery options Added Amenities Although IKEA is not set up as a traditional furniture store, the company does provide several added amenities. IKEA rents car racks that customers can use to get bulky items to their homes. IKEA also provides child-care services to 498 Part 5: Cases give parents time to shop. Once their children are in a safe place, parents will delegate more time to browsing and purchasing IKEA furniture and accessories. The company also provides restaurants in some of its stores to encourage customers to stay a little lon- ger. Offering breakfast, lunch, and dinner, the restaurants also generate strong profits for the company each year. Customers can also schedule consultations with professional here to search
Explanation / Answer
1.
The key competitive advantages are:
Its offerings are differentiated and the DIY concept needs to be popularized more.
They are low cost and the over all DIY is way cheaper than the traditional furnitures and the quality is really good but there is lack of awareness and the concept is still not popular.
So they need to have more exerience stores, which will act as learning centres that will demonstrate their competitive advantage and educate the customers.
So DIY is the approach that needs to be put in the strategy of concept selling at experience stores with the low cost approach.
Once they are popular the prices can be readjusted as per the demand and market factors.
2.
Value is way more important for Ikea's success, they have made DIY their differentiation and with the value they have built the brand image.
So Value is the reason for the brand image they have and the reason for differentiation.
Currently in US market the value is not fully explored and so the Brand image is more important and to they will have to built their strategy based on that and then utilize that to create more value and from a low cost push strategy to a value based pull has to be transitioned.
3.
They need to be more popular and have brand awareness, so the alternate approach will be to offer parking in stores.
Have partnerships with handymans to help traditional users build their DIY furniture, at a cheaper cost and hence appeal the mass not just the advanced. This will broaden the base and market will become more welcoming.
4.
This is not a corporate fit, as the standardization will be lost and additional customization will be added due to local taste and local designs will have to be custom prepared.
Now with this approach the costs will go much higher, which means they will have to charge the customers more so their low price approach will be diluted to accomodate local tastes and DIY will also suffer as the whole set will have different make approach and quality might suffer.
Hence, that is not sustainable.