IKEA Dr. Okan Geray 1. Explain, in detail, the aspects of Ikea strategy that make it a Hybrid strategy. COST LEADERSHIP IKEA’s strategy is based on selling high-quality, Swedish designed, self-assembly furniture products at low price. The IKEA business idea is: ‘We shall 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. ’ IKEA targets price-conscious young couples and families who are willing and able to transport and assemble furniture kits.
The low-price strategy, seeks to achieve a lower price than competitors while maintaining similar perceived product or service benefits to those offered by competitors, price is not appealing unless, it represents good value for money. This is where IKEA is able to make a real difference. IKEA is committed to having a good relationship with their suppliers and so they are able to purchase good quality, economically produced designs that are bought in bulk to keep costs down.
By making all their furniture’s flat packed they cut down on transportation and assembly costs as well. Achieve cost leadership through multi-level competitive advantage on supply side with low cost logistics and large retail units in suburban areas allow them to sell products 20 to 40% cheaper than other competitors. The company is able to achieve a competitive advantage by delivering value to customers based on both product features and low price.
Hybrid Strategy Ikea
DIFFERENCIATION * Marketing, IKEA is focused on segmentation of its target: the middle-class population of all age groups Product range * Logistics , Furniture is flat back * Product range. 2. WHY IS THIS STRATEGY DIFFICULT FOR COMPETITORS TO IMITATE? 3. What are the dangers of a hybrid strategy and how can Ikea managers guard against them? A hybrid strategy seeks simultaneously to achieve differentiation and low price relative to competitors.
The success of this strategy depends on the ability to deliver enhanced benefits to customers together with low prices whilst achieving sufficient margins for reinvestment to maintain and develop bases of differentiation. IKEA has looked towards emerging markets e. g. China for growth. Further adaptation to products has been necessary – including pricing strategy. Income levels of consumers are lower and stores needed to be located within the cities as car ownership is lower. IKEA has experienced greater competition from national brands.