IKEA’s Coherence in the Furniture Industry
In our readings this week, we learned that there is a difference between capability and coherence. Many companies have capabilities, few are coherent. So to find a company to write about I thought of all of the companies I’d ever bought something from, all of the places I’d ever shopped, all of the back-end suppliers that provide the inputs for the companies I buy things from, and after all that I still couldn’t come up with a company that I felt was “coherent.” I guess this aligns with the articles assertion that few companies really are coherent. Then I remembered a section of one of the articles that mentioned Wal-Mart’s coherencies and its strategy to not include big furniture pieces or other items that do not have high turnover and it hit me- IKEA. Today, IKEA is the Wal-Mart of furniture. It is able to provide customers with well-designed, quality products at a low cost. “IKEA has become a market leader in the furniture industry because of its ability to provide superior product at an affordable rate; backed by a strong customer support system.”
I was fortunate enough to find IKEA’s Activity System to provide a visual display of its capabilities and how they integrate to create its core competencies.
Each nodes represent a series of mutually reinforcing processes or activities in which IKEA engages to expand their capabilities. Each competency (in blue) is a strategic competitive advantage that IKEA has over other furniture retailers. However, once all five are considered together, it becomes clear that IKEA has a business strategy and competency model that is near impossible to replicate.
Although the figure above mentions several competencies– Customer self-delivery and assembly, self-selection by customer, and complete line of furniture to furnish home, scalable furniture deigns, and low manufacturing costs – I feel it is pedagogically prudent to focus on only one: Scalable furniture designs. IKEA designs all of its furniture in house. It does this to reduce manufacturing costs, but also to enable compatible furniture lines. This is a market niche that IKEA has been able to capture that few others, if any, have been able to. Unlike many companies who choose to focus on growth, IKEA has honed in on and perfected its current capabilities so that it can maintain its competitive edge in the industry in which it has chosen to compete. However, with the emergence of value product lines, especially after the recession, how will IKEA make sure that its position in the market does not begin to slip?