IKEAs business model and sources of competitive advantage Essay

IKEAs business sample and sources of competitive advantage - Essay ExampleWhat is best about IKEAs furniture is that although it is cheap, yet it is smart and durable. IKEAs business model is based on maintaining down in the mouth cost structure so that it push aside continue to deliver its promise of low price and good type lifestyle to its customers. IKEA has very cautiously managed to keep its cost structure low by practicing a fewer strategies. For instance, it has chosen suppliers from different separate of the world and maintained strong and long term relationship with them by offering them office facilities and technologies to continue out their business smoothly. IKEA focuses on efficiency though long production runs so as to decoy investors and bring down the cost structure. The raw material needed for the manufacturing of furniture is chosen carefully without any(prenominal) interference of third party expensive wood is replaced by less expensive and good quality raw material. To further reduce its cost structure, IKEAs furniture arrives at the stores in disassembled parts in flat packaging along with instruction manuals this not only lowers the transportation costs alone offers calm down of handling to the customers. Unlike other stores in the category, IKEAs stores are located in the outskirts and only few are owned by the company. Franchising is a good option for lowering the cost structure and IKEA has taken it up religiously. Moreover, IKEA ensures that it does not rely on one supplier for the manufacture of a single product. ride an example, for an IKEA chair, the seat is supplied by a manufacturer who is in one corner of the world, legs come from a supplier from another corner and nuts and screws are supplied from totally different regions. IKEAs furniture designs are essentially Norse with little or no modifications. These designs are considered outclass and accepted widely in non Scandinavian countries equally. However in some regions the customers exhibit displeasure towards Scandinavian designs because the items do not fulfill their cultural and personal needs. Apart from all the good steps taken by IKEA to maintain cost leadership, at that place is still room for weaknesses which must be addressed to as to strengthen the brand image. Although IKEA has expanded its trading operations in major territories of the world for earning more revenues but it has failed to understand is that every country has different culture, demand, smack and most of all, legislations which it has to abide by. Since these factors vary from country to country, it has come to IKEA as a big challenge to incur the customer and countrys requirements while maintaining cost leadership. Because IKEA promises low priced furniture to its customers, innovation is not seen more because bringing in new designs can disturb the cost structure. Sometimes IKEA fails to understand that one coat fits all cannot hold in the line of furnit ure. Scandinavian designs might be appealing to countries in the atomic number 63 and nearby but cannot please the Americans in the same manner. The stores of IKEA are located outside the cities as per the low cost strategy. This causes the customers to travel long distances so they prefer to make purchases from nearby stores. We have learned from the attached case study that IKEA has chosen cost leadership to be its core aim and strategy but only this one factor is not enough for its survival. It has to have more points of differentiation because when other competitors in the industry bring their prices down and offer quality and superior customer service, then chances are in all probability that customer loyalty and brand image of IKEA will drop