Combines Michael Porters Generic Competitive Strategies Marketing Essay

Combines Michael Porters Generic Competitive St stepgies merchandising EssayIKEA contacts competitory advantage below the salute leadership system by producing at the lowest possible cost. Wherever possible, under this schema IKEA impart reduce costs at every stage of the appraise chain and either keeping lower tolls or charge warring prices resulting in relatively high profit margins.IKEA cuts costs constantly and is ever asking its makers to render the least costly suppliers. IKEA also, seeks to offer prices much cheaper and bum very wider audience. Therefore, to be qualified to achieve required margins. preeminence systemIn the polariation schema, IKEA look for warring advantage by offering products that are perceived to be different and better than competitors products by customers payable to its unique characteristics, e.g. quality of the products.Focus StrategyThe focus dodge has devil variants i.e. Cost Focus and Differentiation Focus. This is where IKEA focuses on a narrow ingredient of the market. This is where IKEA focuses on a narrow segment of the market and applies a Differentiation strategy.IKEAs Hybrid StrategyIKEA uses a combination of these strategies in achieving its vision which isIts phone line ideaThe part of the cost leadership strategy that IKEA adopts is that part aimed at producing at the lowest possible cost, so they can charge as low a price as possible to principal(prenominal)tain their free-enterprise(a) advantage.For the preeminence strategy, IKEA focuses on quality designs. However, the IKEA does non do this, so they could charge a premium price. They do it to promote their flaw. The differentiation focus strategy is also used in some segments of the market. For example, they produce customized plastic mats to punctuate the year of the rooster in China.Functional level strategy defines different live ons within the blood line unit, such as sales, accounting or production, which digest towards the success of the moving in level strategy. This contribution provide differ from function to function, but the boilersuit aim will be to support the oerall strategy. If the strategy is to be a cost leader, then production will be integral in achieving cost advantages. Therefore, Functional strategy refers to the strategy of individual subdivisions linked to achievement of business goals. For example, a Marketing department of a firm may have promotional or envision strategy, while a finance department will have a credit control insurance policy.Similarly, IKEA has functional strategies aimed at achieving its vision and business ideas. For example, under the Marketing function, IKEA increased its distribution channels by opening 19 fresh retail outlets in 2006. This is to support its business product strategy. In the US, by the end of 2010 the number of IKEA outlets is expected to be 50, in comparison to 25 in 2006.To support its crossing strategy, IKEA is determined to ensure thatThis policy applies to the look and development and well as the purchasing functions of the company.The customer light of IKEA is that the company offers quality products at affordable prices. Going shopping at IKEAs is treated more exchangeable an event to be looked forward to by the customers, rather than a task which needs to be completed. The following quotes gift how IKEA is seen by many peopleIf it wasnt for IKEA, most people would have no access to affordable contemporary design.IKEA makes me free to become what I emergency to be.Half my house is from IKEA and the nearest store is six hours away.Every time, its voguish for less money.IKEA is addressing the needs of most customers. Customers buying behaviour usually exhibit price sensitivity, with the average shopper constantly smell for bargains or discounts. On the new(prenominal) hand, these same customers would look for a higher quality product over what they perceive a lower quality product where both cost the same almost alship canal.IKEA is perceived as providing to the needs of the modern and composed as well as those with aspirations for the finer things in life. There appears to be a strong bond as parents are generally gentle leaving their children in the shops playroom while they go about shopping, which pass water a trust.As it mentioned above, the IKEA strategy is a crossbreeding strategy, which incorporates elements of cost leadership, differentiation and differentiation focus strategies.IKEA brand is very strong, most competitors do not possess the strengths that IKEA does and, which are important in achieving a hybrid strategy.Consequently, IKEA is able to attract good quality of customers and even better is able to gemination its quality and price ranges globally. It also has economies of scale and a strong research and development team constantly looking at innovative ways to meet its business objectives. Therefore, for the strategy to be imitated, the distinctive make outncies of competitors must be strong, they must have the resource to deal with any potential price wars, and they must also have the capabilities to react to changing orthogonal environment.The main panics of IKEA come from its external environment. IKEAs threats can be measured with PESTEL, Porters Five Forces and trick out analysis.Political, relates to the influence of government legislation and regulations on a business.Economic, how economic factors analogous interest rates, inflation and exchange rates affect businessesSocial, refers to social trends and includes things like change in consumer taste and fashion and demographical changesTechnological, level of automation and the rate of technological advancement and the impact on businessesEnvironmental, relates to how businesses are impacted by environmental factors such as global climate changeLegal, health and safety lawsPorters five forces, is a tool used to probe how competitive pressure impact on businesses, i.e. the consequence of competitive rivalry, barriers to entry, buyer power, supplier power and the availability of substitutes.SWOT, summarises the key issues from the business environment and the strategy capableness of an organisation that most likely to impact on the strategy development.In IKEAs case, the main potential threats come from three of these factors, i.e. Economic, Social and Competition.In legal injury of economic factors, the global recession has significantly reduced business growth as customers have less disposable income and are consequently consumption less. With limited income, consumers prefer to spend only on necessities in general, and saving. Many governments abnormal by the recession have been putting stimulus packages in house partly to encourage consumer spending.As far as the social threat is concerned, due to a collapse of the housing and mortgage market which started the downward spiral into global recession, the amount of first time buyers, who are mainly IKEA customers, has considerably reduced.From a competitive point of great deal, there is the threat the extent of competitive rivalry will put at risk IKEAs strategy. For instance, it has to compete with major competitors Target Corporation and Kmart in US, Fly in France and Nitori Co. in lacquer. Furthermore, increasingly buyer power will increase as disputation increases demanding canvass of price or even design. This could potentially hurt the IKEA brand.IKEA must constantly analyse its internal and external environment to determine what the business is at for any given point in time and to come in what needs to be done going forward. For the internal analysis, IKEA must analyse its resources and capabilities with a view of making improvements as appropriate. They must always seek to ensure that their resources and capabilities are superior to those of their competitors to reduce the threat of imitation, which would eliminate their competitive advantage. In terms of the resources, they could look at the following with a view of identifying strengths and weaknessesFinance what is the state of the business in terms of profit and loss, property flow and the balance sheet position?Marketing they must expand to revaluate their marketing strategy. for exampleAre the products priced adequately?Is the roll out of new stores meeting growth targets?Promotion how successful have the gift initiatives activities been? ingathering how environmentally friendly and are they to meet with any challenges?Operations IKEA could review the strengths and weaknesses of their machines, method of operations and materials used to produce furniture.Management as the unwrap is an old man now, this is a significant area that needs looking at. Is the management in place currently skilled enough to achieve objectives?Staff assess their motivation, their training needs and contribution to the success of the company, for example.An external audit should then be performed by analysing PESTEL SWOT is to determine the opportunities and threats facing IKEA from the external environment. Subsequently, IKEA should then be in a position to determine how it can use its key strengths, minimize weaknesses, take advantage of opportunities and pleasure over threats to achieve a competitive advantage through its hybrid strategy.The greatest challenges facing IKEA can be outlined below opening into new markets and segments in US and JapanEnvironmental challengesCulture and determineAs we know, IKEA over the last few years expanding in Japan and US markets. These are two countries where it has recorded failure in the past. For instance, in the US, according to them they did not listen to the needs of the customers and employed a hybrid strategy. With time, they realized that the Americans needed larger sized products which they subsequently corrected. In Japan, they miscalculated sentiment the Japanese were interested in low price products when t heir interest was in quality. It would be interesting to see how they fare in the next 10 years for these reasons, especially with the high level of competition from Target Corp. and Nitori Co.IKEA is perpetrate to meet environmental challenges.Another big challenge is internal in nature. The owner and founder Ingvar Kamprad instilled a lot of the values that is currently beingness pursued today. A lot of the top brass are act to his philosophies. With the passage of time however, the culture of IKEA which has delivered such great success will decrease. In the next 10 years, it is important that whoever is driving the business operates in line with its core values, as the brand is one of its discriminating strengths. This brand was built on the back of the core values and business idea. each threat to that may mean a threat to the entire business as a whole.