Describe the key elements of IKEA's globally successfully business model. What are the sources of IKEA's competitive advantage? 

 

The key elements of IKEA's globally successful business model is solving the worst part of  buying furniture. Before Ikea e?isted! people saw furniture as an investment for the ne? years. This resulted in a lot of an?iety and indecision. They created products that were nicely designed! if not particularly durable! that were intended to be used immediately and disposed of  when they wore out or! more likely! when the user had moved on to a different taste level or purchasing strata IKEA's sustainable competitive advantage comes from several sources including but not limited to operational efficiency, brand image, strong supplier network, large product line, and cost leadership. As a home furnishing brand, IKEA has grown into the world's most famous company which has sincerely focused on providing a superior customer experience through a differentiated franchise-based business model at whose core are the customers and their preferences.

Step-by-step explanation

Lower Prices:

Lower prices are the leading source of competitive advantage for IKEA. Just like Walmart, IKEA's pricing strategy also works great. The company has been able to secure its leadership position through its pricing strategy. However, it is also why customers love IKEA around the world. Lower prices, however, do not mean that the company offers low-quality products.

On the other hand, the products made by IKEA are of good quality. The pricing strategy of IKEA is targeted at the middle-class segment of consumers who form the largest part of its customer base globally. Its pricing strategy is also what differentiates the brand from its competitors. The company offers a large range of home furnishing solutions at quite affordable prices.

Brand image:

IKEA has maintained a customer-friendly brand image which is also a key source of competitive advantage for the brand. By focusing on superior customer experience and higher customer satisfaction, the company has achieved a distinct position for itself in the global home furnishing market. Apart from being a customer-friendly and ethical brand, IKEA is also known as an innovative business.

Apart from its pricing strategy and wonderful design of home furnishing solutions, the company's focus on customer service has led to a stronger reputation in the market. Since competition is heavy in the industry, maintaining a strong reputation and brand image becomes all the more crucial for the home furnishing brands. IKEA's marketing strategy has also helped it build a distinct identity and achieve a competitive edge over the other brands.

Cost efficiency:

Cost efficiency is also a key source of competitive advantage for IKEA. Despite its low-cost pricing strategy, the company has a highly profitable business model. Apart from the operating model of IKEA, its supply chain also plays a key role in ensuring the cost-effectiveness of its business model. However, it does not mean that the company sources low-quality raw materials. The quality of its products is still good.

All these factors combined with innovative design have together helped it create a highly efficient, sustainable, profitable and cost-efficient business model which offers it a competitive edge over the rival brands. Cost efficiency is one of the core sources of sustainable competitive advantage for IKEA which benefits worldwide from the high demand for its affordable home furnishing products

Marketing:

IKEA's marketing strategy is also a source of competitive advantage for the brand of home furnishing products which has established itself as a consumer-friendly brand that sells products at affordable prices. Just as in the other aspects of its business like supply chain, manufacturing, and design, the company has adopted innovative practices in the area of marketing as well. The company mixes digital marketing with in-store branding and advertising to achieve the best results.

Using social media, the company has been able to grow customer engagement rates. Apart from that the company also uses AI and virtual reality to engage customers and offer them a differentiated in-store experience

Supply chain:

IKEA's success can also be attributed to a large extent to its successful supply chain management. A strong supply chain and distribution network is like the backbone of a brand and in this area, IKEA is highly effective. An efficient supply chain is essential not just to gain a competitive advantage and to maintain your competitive edge but also to retain your leadership position in the industry.

IKEA's supply chain plays a key role in ensuring the cost-effectiveness of the brand and that the company is able to continuously bring good quality products at affordable prices to the market for its customers.

Design, quality, and range of products:

What really differentiates the IKEA brand from the others in the market is its large range of great quality products, modern and impeccable design of products and its ability to awe its customers by continuously replenishing the wardrobe with home furnishing solutions that the modern generation loves. When it comes to design, IKEA is nearly unequaled and has a great team dedicated to the design of new products and furnishing solutions.