Ikea Case Study

Question 1. With reference to the case study, provide one example with a paragraph of not more than 5 lines, which clearly illustrates a link between theory or concept drawn from at least 2 modules you studied. (Porter’ Generic Theory)

According to White, (1986), different strategies pose different administrative requirements which should be solved in different practices of internal organisation. It involves determination of a precise concept of strategy and tying it to the set of organisational attributes that can be adjusted to facilitate the efficient, low-cost implementation of the strategy (Porter, 1998). In which White uses Porter’s generic business strategies to fit these requirements.

Based on Porter, (1980), there are internal consistent generic strategies for creating a defensible position in the long run and outperforming competitors in an industry. In which it creates a strong competitive position of a business in a competitive environment primarily to the success and survive in the industry (Porter, 1998). IKEA is set as one of the firm that uses Porter’s Generic Strategy to run their business.

Porter, (1980), stated that there is a linkage between organizational characteristics and the generic business strategies of price and differentiation as an organisation requires either cost leadership or differentiation. Primarily, a cost leadership strategy focus on those variables that allow the organisation to achieve and maintain a low cost position as the competitive prices set by the market is acceptable (Porter, 1980). Vice versa of differentiation strategy, its attempts to increase the price component of the profit equation by offering customers something they recognise it as unique and for which they are willing to pay higher prices (Porter, 1980).    

Cost leadership strategy is popular among the manufacturing industry as the basic objective is being accomplished in the overall functioning policies. Cost leadership strategy requires hostile construction of efficient scale facilities, vital pursuit of cost bargains from experience, close-fitting cost and overhead control, avoidance of marginal customer accounts and cost minimisation like research & development (R&D), service, sales and marketing; and also advertising (Porter, 1980). IKEA focused on cost leadership strategy as it attracts the buyers to purchase the products due to its stylish furniture as well as the household accessories at a low price. According to the firm, providing a low cost product is always the priority to target the customer interest (Ferell & Hartline, 2010). In which IKEA has to compete with its competitors in terms of quality, service and other aspects that should not be overlook as they are the vital strategy to retain as well as to gain customers.

In order to sustain in a long term, IKEA’s marketing program has to continuously focus on product design, catalogues, adverting and public relations or promotions as these focal aspects are crucially important (Ferell & Hartline, 2010). Each focal aspect has its own role to play which they attract the consumer’s interest where most of these aspects are included in IKEA’s vision and mission value.

As IKEA is trying to make its further expansion to the U.S. market, cost leadership strategy has been taken into an account where the firm has to think of producing low cost furniture in order to compete with others like Walmart, Amazon and Asda. With the implementation of low cost strategy, IKEA is able to position itself to defends its firm against powerful buyers because the can exert power only to drive down prices to the next level which is said accordingly by Porter, (1980). It also enable the firm defends itself against the powerful suppliers by providing more flexibility to cope with input cost increases (Porter, 1980).