In this current assignment, the chosen case study is 2 which depends on IKEA. This company is known for its furniture, kitchen items, home appliances and many more products. Its current revenue is 4460 Euros in 2021 (Statista, 2023) [Refer to Appendix 1]. After analysing the competitive priorities of IKEA, Porter's five forces analysis is done to know its competitive position in the global market. Moreover, strategic opinions are suggested by using an action plan.
Competitive Priorities of IKEA: A Strategic Audit
As a world leader in the home goods and furniture sector, IKEA strategically places a high priority on competitive advantages in four main areas: affordability, quality, delivery efficiency, and adaptability. The company's worldwide sourcing procedures, flat-packaging approach, and effective supply chain all demonstrate its dedication to being a low-cost leader. IKEA offers goods at reasonable costs without sacrificing quality by cutting production expenses and streamlining business processes. IKEA prioritises quality over other factors in its competitive strategy, as evidenced by its emphasis on creative and practical design and the use of sustainable materials (Al-Zghool, 2020). The organisation's commitment to ecological accountability corresponds with consumer demands and enhances its sustained competitiveness. IKEA's global supply chain and logistics network guarantee prompt and economical product distribution in terms of delivery performance. Delivery efficiency is increased by the self-service concept, which lets consumers retrieve things from the warehouse. Furthermore, IKEA has embraced e-commerce and digitization to provide flexibility in reaching customers, and projects like augmented reality improve the whole shopping experience (Eka and Caraman, 2020). IKEA has become the market leader by carefully striking a balance between these competing demands. It offers high-quality, reasonably priced products that are delivered quickly, with an emphasis on sustainability and adaptability.
Porter’s five force analysis
Porter's five forces are dependent on five pillars to evaluate the competitive environment of any company. These five pillars are the bargaining power of suppliers, bargaining power of customers, competitive rivalry, threat of new entrants and threat of substitutes (Hintoro and Wijaya, 2021). Firstly, the Bargaining power of suppliers is comparatively high in the case of IKEA if it tries to expand its growth outside Europe. In the case of global expansion, global suppliers have to be chosen and in the beginning, they have to invest a huge amount in the supplier. That is why IKEA has to find a reasonably rated supplier in this case. Secondly, the bargaining power of customers is also high in this case as customers are the most essential stakeholders to IKEA. Customers can easily switch from one company to another if they get decent quality at reasonable pricing. Hence, to grab a huge customer base in the global market, IKEA should use a promotional pricing strategy (Anastasiu, Gavriş and Maier, 2020). Walmart, Amazon, and many more market giants are already present outside Europe, even in any corner of the world. Hence, the competitive rivalry of IKEA is medium as it also has a strong base internationally. Though the market giants are present, with product quality and assurance, IKEa can easily grab the market. The threat of new entrants and the threat of substitutes both are low in the scenario of IKEA if it steps out of Europe. IKEA already grabs a huge market demand from the public and that is why any new brand has to invest a lot of time to alter this place (Isabelle et al., 2020). In this same way, the product quality also matters and any substitute brand cannot alter the quality of IKEA. The global market already has this sense [Refer to Appendix 2].
Strategic Expansion Beyond Europe: Leveraging IKEA's Competitive Advantage for Feasible, Acceptable, and Suitable Growth Initiatives
The first strategy which IKEA can adopt in the international market as per the previous demonstration is related to its pricing. As in the global market, there are many companies which can visualise an attractive rate to the customers, IKEA should first adopt a promotional pricing strategy to enhance its growth. In order to launch a new product or modified product, the price should be low in comparison with others (Ali and Anwar, 2021). In this case, IKEA does not think about getting a huge profit. After creating a strong customer base regarding this product, IKEA can easily enhance their price to get more profit as at that time, it has a strong customer base. Customers already know of the quality of its products and can genuinely trust them. This strategy also can help to enhance the acceptability in the global market.
In the case of suitability, IKEA should focus on customer-centric marketing theory. As per this theory, customers are only the focus of business and any company can do whatever their customers want (ASLAN, 2021). In the case of IKEA, they only do not have to focus on the pre-product delivery procedure, they also have to focus on post-delivery. If they can listen to their customers regarding any issue during the post-delivery period for a certain month and rectify it as soon as possible, they can easily grab the trust. It will be helpful to IKEA to enhance its growth outside of Europe as well [Refer to Appendix 3].
It will be more feasible for IKEA if they can improve their digital marketing procedure. These days, only the product photo, review and pricing are not essential on the website. Customers also want to know about each and every single detail of the product. The diameter, length, wooden quality, height, weight, and many more details should be written on the website. Also, with the help of Artificial Intelligence, IKEA can visualise the look of the product if the customer scans a place to set it (Hartanto, Firmansyah and Adhrianti, 2022). This facility is already up to mark on Amazon and many websites.
An action plan for implementation
Objectives | Activities | Resources | Significance | Timeframe |
Promotional pricing strategy | IKEA should cover the market to know about the existing brand's pricing. After that, they should offer lower prices by minimising the profit range. | A surveyor who can survey the market silently. It will help IKEA as its competitors cannot know about its strategy. | The competitive growth is obvious in this case and it will help to enhance the position of the company outside of Europe (Yasa et al., 2020). | In the next month, it should be done. |
Customer-centric marketing theory | The customer’s demand should be known to IKEA by any social media post or poll (Camilleri, 2020). | They have to be active on social media and websites to read reviews. | It will increase customer satisfaction. | In the next two months, it should be done. |
Improvement of digital marketing | A new expert should be hired who has enough knowledge about new techs. | An attractive image, 360-degree visual and overall data of the products are enough as a resource (Darma and Noviana, 2020). | It will help the customers to know about the products which they will buy. | In the next month, it should be done. |
Table 1: Action Plan
After analysing the entire assignment, it can be concluded that Porter's five forces analysis helps to identify the global competitive position of IKEA. On the basis of this analysis, promotional pricing strategy, customer-centric market theory and modification of digital marketing are suggested. With the help of an action plan, this procedure is done as well.
Ali, B.J. and Anwar, G., 2021. Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision. Ali, BJ, & Anwar, G.(2021). Marketing Strategy: Pricing strategies and its influence on consumer purchasing decision. International journal of Rural Development, Environment and Health Research, 5(2), pp.26-39.
Al-Zghool, M., 2020. An evaluation of IKEA’s global position and marketing standing.
Anastasiu, L., Gavriş, O. and Maier, D., 2020. Is human capital ready for change? A strategic approach adapting Porter’s five forces to human resources. Sustainability, 12(6), p.2300.
ASLAN, R., 2021. Customer-Centric Marketing. Contemporary Business Techniques, pp.55-73.
Camilleri, M.A., 2020. The use of data-driven technologies for customer-centric marketing. International Journal of Big Data Management, 1(1), pp.50-63.
Darma, G.S. and Noviana, I.P.T., 2020. Exploring digital marketing strategies during the new normal era in enhancing the use of digital payment. Jurnal Mantik, 4(3), pp.2257-2262.
Eka, E. and Caraman, I., 2020. From bean to cup: Building competitive advantage through sustainable standards: A multiple-case study of the Swedish coffee industry.
Hartanto, Y., Firmansyah, M.A. and Adhrianti, L., 2022, April. Implementation Digital Marketing Pesona 88 Curup in to Build Image for the Decision of Visit Tourist Attraction. In 4th Social and Humanities Research Symposium (SoRes 2021) (pp. 589-594). Atlantis Press.
Hintoro, S. and Wijaya, A.F., 2021. Analisis Strategi Bersaing Pada Biznet Branch Salatiga Menggunakan Porter’S Five Forces. Jurnal Ekonomi Manajemen Sistem Informasi, 2(6), pp.729-738.
Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C., 2020. Is Porter's Five Forces Framework Still Relevant? A study of the capital/labour intensity continuum via mining and IT industries. Technology Innovation Management Review, 10(6).
Sarkkinen, E. and Pöyry-Lassila, P., 2020. Designing a digital tool concept for business-to-business dialogue using a customer-centric approach-Case food services. Revue Européenne d’Économie et Management des Services, 2020(9), pp.17-52.
Statista. (2023). IKEA annual revenue 2022 | [Online] Statista. Available from : https://www.statista.com/statistics/264433/annual-sales-of-ikea-worldwide/.
Yasa, N., Giantari, I.G.A.K., Setini, M. and Rahmayanti, P.J.M.S.L., 2020. The role of competitive advantage in mediating the effect of promotional strategy on marketing performance. Management Science Letters, 10(12), pp.2845-2848.
Source: (Statista, 2023)
Source: Author
Source: (Sarkkinen and Pöyry-Lassila, 2020)
