IKEA has focused its strategy on the core competency of sustaining profitability through a low-cost business model. This model allows IKEA to examine the true cost involved in a specific product or process, including the design, sourcing, and operational expenses involved. While growing its operations, IKEA has also capitalized on maintaining low costs.
IKEA believes that it can be a low-cost leader without sacrificing quality or compromising its corporate social responsibility. To generate low cost savings IKEA uses a flat packing process that allows more merchandise to be shipped and stored between distribution centers. The company wants customers to understand that their role is not to consume value, but to create it. IKEA has been able to modify the value chain approach by integrating the customer into the process and introducing a two-way value system between customers, suppliers, and IKEA’s headquarters. Through this, the company is able to create a supply chain that is differentiating and growth enabling, which allows IKEA to operate efficiently.
IKEA’s core competencies have also helped to accomplish a sustainable business model in the United States. IKEA has a strategy that leverages its unique core competencies, resources, and distinct capabilities over furniture retailers in the United States. Although IKEA faced challenges in understanding the American culture in terms of furniture, it was able to sustain itself through the competency of consumer intelligence. The business model allowed IKEA to align with what customers wanted.
IKEA was able to strengthen its sustainability by offering something unique to the American consumers. The company captured the idea that shopping should be an experience and changed the way an American consumer shopped. IKEA created a destination that included playgrounds, restaurant with good food, showroom effects, and a relaxed environment for shoppers. The company also ensured sustainability through continuing to build a brand and positioning itself.
The concept of IKEA became a niche in the marketplace. In terms of concentrating on consumer satisfaction IKEA established a true core competency. This simplistic and effective strategy allowed IKEA to maintain a low-cost structure while focusing on value for customers around the world in a way that has also sustained profitability.
Good implementation means that an organization coordinates resources and capabilities anduses structure, systems, processes, and strategic leadership to translate a deliberate strategy intoa realized strategy and to positive bottom-line results (Carpenter & Sanders, 2009). Organizational structure can affect strategy implementation because if the people, the market, or the systems aren't ready to be implemented then it can affect the execution of a strategy itself. The way information flows and the way decisions are made also an important aspect in successfully implementing a strategy.
It's also important to recognize the right people need be aligned in the right positions. Some contradictions between levers could be the difference between cultures among business and how people recognize success and accomplishments. These all-important aspects could greatly affect globalization. It's important to differentiate between rewards and people and tailor specifics based on location and culture. It's also important to the tailor the strategy to the culture and coordinates the flow of information and structure in order to implement a successful strategy.
FAQs
IKEA has focused its strategy on the core competency of sustaining profitability through a low-cost business model. This model allows IKEA to examine the true cost involved in a specific product or process, including the design, sourcing, and operational expenses involved.
What is IKEA focused low cost strategy? ›
IKEA's transnational strategy is inspired by the idea of combining high quality with low prices. This way the company aims to produce furniture that is both functional and affordable. IKEA is the largest furniture retailer in the world.
What are the core competencies of a business model? ›
Core competencies are the defining products, services, skills and capabilities that give a business advantages over its competitors. Put another way, business core competencies are competitive advantages that no competitor can reasonably offer or replicate.
What is the core strategy of IKEA? ›
IKEA employs a mix of strategies, including affordability, sustainability, innovative product design, experiential in-store marketing, and a strong online presence to reach and engage its target audience.
What are the 5 core competencies examples? ›
They address five broad, interrelated areas of competence and provide examples for each: self-awareness, self-management, social awareness, relationship skills, and responsible decision-making.
What are the core competencies to the core products? ›
Core competencies are used to develop core products. These products may not be sold directly to consumers but are used in products that are sold to consumers. For example, Microsoft's operating system may be considered a core product.
What is IKEA low cost and differentiation strategy? ›
IKEA's hybrid strategy
IKEA's strategy aims to achieve a competitive advantage by producing at the lowest cost. It allows the company to charge lower prices and increase profitability. To achieve its goals, IKEA cuts costs and is always looking for the least costly suppliers.
What is the low cost strategy model? ›
A pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share.
How does IKEA keep costs low for customers? ›
Flat packs keep transport costs down which lowers prices for our customers. They also make it easier for people to take products home themselves. Once the products are home, customers can play their part in keeping prices low by assembling them.
What are the three 3 characteristics of core competencies? ›
4. Determine the Criteria for Your Core Competencies. There are three criteria that each of your competencies must meet. Accordingly, the core competency should be a rare one, it should be hard to imitate, and it should offer superior value.
6 Key Steps to Selecting Core Competencies
- Begin with your Mission and Vision Statements. ...
- Understand your Business. ...
- Draft Your Core Competencies. ...
- Validate your Core Competencies. ...
- Preach the Core Competencies. ...
- Implement the Core Competencies.
One of the key factors in IKEA's success is its store location, which can often be away from the town centre and have lower overhead costs due to lower rent and property taxes. This allows them to pass those savings on to their customers, resulting in lower prices and more competitive offerings.
What is IKEA's key to success? ›
IKEA's success also lies in its low prices and how it engages and seduces customers. While affordability is a crucial factor, IKEA goes beyond that. The company offers a comprehensive customer experience that differentiates it from typical furniture stores.
What does IKEA need to improve? ›
Climate change is a major issue that big corporations like IKEA need to evaluate. Their process of improving their sustainable image has begun by selling and using solar panels as well as beginning to eliminate one use plastic products.
What is Ikeas' competitive advantage? ›
IKEA's strategy aims to achieve a competitive advantage by producing at the lowest cost. It allows the company to charge lower prices and increase profitability. To achieve its goals, IKEA cuts costs and is always looking for the least costly suppliers.
What is the vision mission and core values of IKEA? ›
„To create a better everyday life for the many people, this is the IKEA vision.” Our mission as a business is „to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Our vision also goes beyond home furnishing.
What companies have strong core competencies? ›
Core Competencies Example
- Apple is a very successful company that operates in the consumer electronics industry. ...
- Another example of a successful company that has strong core competencies is Netflix. ...
- Another core competency is Netflix's subscriber base.
