Sunday, April 3, 2011

Blog # 2- Tarang Bhargava

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How is IKEA succeeding

As W. Chan Kim and Renée Mauborgne put it “Blue Ocean strategy is how to create uncontested market space and make the competition irrelevant”. The article “A fresh look at industry and market analysis” by Slater and Olson highlights strategic positioning in competitive markets via various strategies-

- Creating a market oriented organization

- Establish relationships with key customers and suppliers

- Creating a new market space

- Analysis of strategic options

Ingvar Kamprad’s company IKEA serves as a good example for an innovative company that created a new market space. It is renowned globally for its stylish design and nearly all its products are made for flat-packaging. This reduces shipping costs, reduces damage during transport, increases store inventory capacity and makes it convenient for customers to take the product home themselves. Some customers also find the read-to-assemble ideology exciting and thrilling. IKEA’s philosophy was simple that is it allows people with limited means to furnish their homes like rich people. IKEA deals with stylish but inexpensive furniture and this business model has been successful since its formation in 1943.

IKEA has a very loyal customer base. When a new IKEA store opens, its fans flock to the opening. In 2003, a couple even got married in an IKEA store in Canada. Though furniture retailers such as Walmart and Home Depot sell their products at cheaper prices, IKEA has more to offer than just stylish furniture. IKEA distinguishes itself from its competitors by offering a child-care facility and the popular Swedish café.

IKEA avoided head-to-head competition when it entered the US market. Its strategy was to make the consumer get rid of the old boring furniture and consider trendy products. Though it competed on price with giants such as Walmart, IKEA created a brand that is highly fashionable at a low price. Today, the brand exists with 313 stores across 38 countries mainly in Europe, North America, Asia and Australia and continues to expand. The IKEA brand is now synonymous with furniture.

Question-

1. Can Walmart or Home Depot create an image of stylish furniture at low price ? How can these competitors answer IKEA’s strategy?

Sources:

1. A fresh look at industry and market analysis by Slater and Eric Olson

2. http://www.brandchannel.com/features_profile.asp?pr_id=138

3. http://en.wikipedia.org/wiki/IKEA

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