IKEA started its operations in 1943 as a mail-order business in Sweden. The company has developed into a global brand that provides furniture for homes and offices. The organization consists of a group of companies that design and sell ready to assemble furniture (Codogni, 2019). The brand has positioned itself to customers as having the most affordable and comfortable furniture compared to its competitors. The organization faces stiff competition from other multinational companies such as Target, Amazon, Walmart, Wayfair, Groupe SEB, and Bed Bath & Beyond. IKEA has been able to keep up with the competition due to several factors that the competitor cannot access.
IKEA has consistently offered the lowest prices on all its products. The low prices result from the economies of scale that the firm enjoys from the different businesses involved and the integration of technology in the business processes such as development, manufacturing, and marketing (Thomsen, 2018). IKEA can source products from all over the world where prices are competitive, thus getting the products at low prices. This is not available for other businesses such as Walmart, which rely on a few markets to source their products, such as China and India, where the products are expensive.
IKEA has maintained neutrality in their products whereby the products are not limited to a single culture or a country. This has enabled the brand to appeal to consumers from different cultures as their designs fit all cultures (Grant, 2016). This has not been the case with other competitors, such as Amazon, whose products are specific to one culture, not appealing to other cultures in the market. The products also lose their original aesthetic when translated to other cultures. The ability of IKEA to maintain the simple design enables the brand to attract customers across the world.
Maintaining a consistent business model and ambiance while adapting to local culture and taste levels has enabled IKEA to experience growth. IKEA provides products according to market preferences, such as offering on-site assembly services for markets such as India, where the do-it-yourself culture is not huge and provides American sizes for the American customers (Grant, 2016). This is not seen in other retailers such as Target, whose products are only adapted to the American customers. Therefore, the products do not fit the requirements of other international customers as they only fit one market. This keeps the IKEA products above their competitor products
The performance of IKEA is going to improve in the next five years. This is due to the clear set of strategies that will enable the organization’s expansion. The ability of the firm to offer the lowest prices compared to its competitors while offering excellent quality products will enable the expansion of its market. Maintaining neutrality will open up more product markets in other global markets as their products can fit in different cultures. IKEA will have to shift to increase its online presence to serve the smaller markets in the upcoming years. The online platform should have provisions for tutorials for markets where do-it-yourself culture is not available. According to the financial year 2021, IKEA has experienced growth despite the supply chain disruption by the Covid-19 pandemic (Brunner et al., 2021). The ability of the firm to maintain its growth during the pandemic will see the firm expand to new heights when the supply chain returns to normal.
References
Brunner, F., Gamm, F., & Mill, W. (2021). MyPortfolio: The IKEA effect in financial investment decisions.SSRN Electronic Journal. Web.
Codogni, M. (2019). IKEA effect in relations between start-ups and investors.Nowoczesne Systemy Zarządzania, 14(2), 53-63. Web.
Grant, R.M. (2016). Contemporary strategy analysis (9th Ed.). Wiley
Thomsen, S. (2018). Foundation ownership at IKEA. SSRN Electronic Journal. Web.