IKEA Case Solution
Threat of New Substitute
The threat of new substitute for company is low. One of the reason is brand image and an IKEA has successfully establish reputable brand image globally. The strategies of IKEA such as lower cost, innovative design, people and positive planning makes it differentiated in the competitive market. (Pratap, 2018)
Threat of New Entrant
The threat of new entrant is moderate too low to snatched the market share. They can enter the market with small scale but won’t affect the business of IKEA. To develop brand image in a competitive market consume time and huge amount of investment which won’t affect the IKEA international market image.
Entry of competitive rivalry
Entry of rivalry is moderate. The competition of market share is not that much in comparison to other industries but still IKEA had face huge competition to retain in the market with good market image.
Internal Analysis
Resources
In terms of resources IKEA plans to develop energy and resources independently, IKEA Group's has relatively boost the use and availability of timber from greater sustainable source. End of 2013, 32.4% of IKEA Group's wooden use become procured from sustainable source. And the organization deliberate to reach 50% via 2017 and 100% by using 2000, long time concern is expected within the future. For energy independence, IKEA enterprises has invested 1.5 euro billion to sustainable energy like wind farm, solar panels and biomass infrastructure. This investment by IKEA would follow the long lasting strategy of power saving and manufacturing the product at lower cost.
The IKEA’s strategy of low cost may leads the company towards the law suit. Because company is already famous for its cheap quality product even the social media is full of the bad comments on the product of IKEA. Even the customer got injured and some of them got died. IKEA has great market share and faces huge market competition, which makes it difficult for the IKEA to sustain in the market.
IKEA innovates its product in totally different way and differentiate it with new designs which attracts the customer towards itself. IKEA is famous for its inexpensive products, which makes it self-affordable for low wage customers. The company has to find the new way of designing its product with low cost and it is its true strength.
Competencies and Capabilities
IKEA’s center competency is its unique design capabilities. This functionality results in imparting customer’s terrific value for money. It is very tough for competition to compete with incredible layout at a completely low cost. Even if a competitor could suit IKEA’s design it wouldn’t have the ability to meet it on price. This is due to the economies of scale of IKEA’s worldwide distribution network. IKEA is expert in design differentiation which facilitates the customer to use all kinds of products that company manufacture.
The idea of IKEA became a niche within the marketplace. In phrases of concentrating on consumer pleasure IKEA established a real core competency. This simplistic and effective strategy allows IKEA to preserve a low-cost structure, which at the same time focuses on consumer’s preferences around the arena in a manner that has additional long term profitability. (Abrhiem, 2016)
IKEA is constructing a low-cost commercial enterprise version that enables the purchasers to acquire the blessings of high-quality design products at a number of the lowest charges available. Building sturdy brand fairness through specific promotions and pioneering advertising campaigns that recognize the diversity
Alternatives Analysis
| Options | Pros | Cons |
| 1. Owning More Forest | · Direct employees will manage the timberland through sustainable resources.
· This will help the company to trace the record of woods · This will help IKEA to acquire more FSC-certified wood. |
· Company need to invest more capital to cover the cost.
· This will also divide the management attention · The lease term can exceed from the new harvest time of woods · IKEA would be responsible for the land directly |
| 2. Driving higher procurement targets and standards | · It will help company to get FSC-Certified raw material
· This will help to link FSC-certified business and IKEA group · Company will get chance to gather the reliable material |
· This would increase the procurement cost of IKEA.
· This option will take more resources for management |
| 3. Using more Particleboard | · IKEA can get more Particleboard as compare to Solid wood.
· It will help IKEA to reduce the use of solid wood · The transportation of the company would also improve · The final products can be offered 20% cheaper than the solid wood made products |
· It can diminish consumers satisfaction
· Demand for particleboard is limited · It will require investments |
| 4. Use more Recycled wood | · It is a cheaper offer to opt for recycled wood
· Recycled wood is cheaper than practical board |
· It require high investment
· Collection of used wood for recycling can be problematic. |
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