Competitive Advantage Ikea

Introduction

In developing competitive advantages firms develop Operations Strategies.

Fig 1 lists the different perspectives that influence the formation of operations strategies in a firm.

Fig 1

Among the four perspectives, market requirement Perspective helps a firm to decide what would be the right priority between its performance objectives (Cost, Quality, Speed, Dependability and Flexibility) to meet the market requirement.

Some of these performance factors would contribute directly and significantly to win business for the firm; those are the Order Winners.

Some other performance factors need to be above a particular level just to be considered by customers, though they would not win business for the firm.

The remaining factors are known as Less Important Factors as they do not produce competitive benefit as OW or OQ but they influence other parts of the operation. It is important that a firm be able to meet the order qualifiers and excel on the order winners.

In the following sections, the operations strategies of four firms (Cadbury, Ryan Air, Ikea and Nokia) are described. Their OQ and OW are evaluated and the strategies are compared and contrasted.

Competitive Position of Ikea in Global Furniture and Furnishings Stores Channel

[source: Euromonitor International] Fig 2

[source: Euromonitor International]

Table 1

Fig 3

Order Winner

Cost (Selling Price)

Quality (Value for money, Perceived Quality)

Flexibility (New Product)

Ikea's mission statement is to offer a wide range of home furnishings items of good design and function at prices so low that majority of people can afford to buy them.(Ikea.com, 2009)

It attracts customers by offering standard quality products at cheaper prices.

The Ikea customers perceive the products as Value for Money. Since, Ikea follows a 'Destination Retailing Model', customers expect a wide range of products. So New Product development is vital for its success.

Order Qualifier

Quality (Performance)

OPERATION STRATEGY (Mass production process)=>cost reduction=> Low selling Price

Fig 4

(Ikea.com)

OPERATION STRATEGY (Innovative Product Design) => cost reduction=> Low selling Price

Ikea Products are very simple in design, thus with detailed instructions it is easy for the buyer to assemble saving Ikea the assembly costs and time.

Ikea innovated knocked down furniture. Such unassembled furniture could be stored in warehouse in flat pack boxes. Thus it saves lots of storage cost.(Lean Manufacturing Principle) Moreover flat pack boxes are mostly not bulky and could be collected by the customers directly from the warehouse. Thus it has made possible instant delivery of the furniture to buyers who prior to IKEA, had to wait weeks for a piece of new furniture.

Flat packs vastly reduce the shipping cost from factory to shopfloor since the volume of an unassembled product, is considerably less than assembled one, thus increasing the 'filling rate' of the container in which it's transported.

At IKEA, distribution is all about making the route from the manufacturer to the customer as short as possible. For minimizing costs in transportation, Ikea invested