Focused-Low

Cost
Strategy:
IKEA
Prepared by:
Ali Alromaihi 202020021
Atheer Alansari 202010014
Amina Bucheeri 202020027
Badreya Alqadhi 202010105
Noora Kaladari 202020029
 Table of Contents

01 02 03
INTRODUCTION STRATEGIC PLAN STRATEGIC GOALS
EXAMINATION

04 05 06
STRATEGY INDUSTRY ANALYSIS OVERALL JUDGMENT
& JUDGEMNT
Introduction

01 Brief about IKEA

 Introduction about
IKEA

IKEA nowadays owns

IKEA focuses on simple The first opening of the
more than 400 stores
designed furniture with a store in the Kingdom of
worldwide with an annual
focused low-cost Bahrain was in 2018 as
revenue of 41.9 billion
approach, which created a the biggest branch
Euros(approximately17.
threat to other furniture opening in the GCC
8 billion Bahraini Dinar)
businesses who attempted a region (BSB Group,
in the current year
boycott of the company in 2018).
(statista, 2021).
the 1950s (IKEA, 2021).
Strategic
Plan
Examination

02 Vision, Mission & Objectives

 Vision/Mission
Statements
Current Statement Positive Elements Weaknesses

• Innovative
• Not future focused
“To create a better everyday life for the many • Flexible
• Vague
Vision people”. • Memorable
• Broad in subject
• Very graphic

• No sign that the company

• It describes its purpose and it present
focuses on people interest in
“To offer a wide range of well-designed, functional business
respect of what kind of design or
home furnishing products at prices so low • Specific language which gives IKEA a
Mission that as many people as possible will be able to unique identity
furniture they prefer or
customising it as per their
afford them”. • Good quality furniture design
requirement, etc
• Low prices
• No focus on the service aspect

It can afford to do so , because

IKEA is globally known.

(IKEA, 2021)
 Values

Values

Caring
Togetherness Cost Simple Renew & Different Give
for Lead by
consciousness design improve approaches & take
people & example
responsibilities
planet

(IKEA, 2021)
Strategic
Goals

03 Strategic & Financial Objectives

Strategic & Financial
Objectives

Strategic Objectives Financial Objectives

Reduce operation cost Expand and find new

by renewable Energy markets through franchise
Growth Product variety setup

Preserve good image and Diversify IKEA’s income by selling

Cost effectiveness profitability to seek more food and other materials created
equity investors for IKEA retailers
Strategy

04 Evidence from Literature

Focused-Low Cost Strategy

CRAFTING & EXECUTING STRATEGY: THE QUEST FOR COMPETITIVE

ADVANTAGE: CONCEPTS, TWENTY THIRD EDITION
 Focused-Low Cost Strategy

Author & year Evidence from Literature

 IKEA has pure strategies which are cost leadership, differentiation and focused strategy.
Foray (2018)
 The focus strategy is divided into two variants, these are cost focused, and differentiation focused.

 Found that although the prices are different compared to the early days, IKEA is famous for its focus
Hultman et al., (2012) low-cost strategy which remains at the heart of IKEA’s business model.
 A number of the unique elements of the IKEA business model are related to the necessity for active
supply management, and this focus on the low cost is reflected in many of them.

 The study concluded that IKEA business strategy refers to Porter’s business generic strategy. Namely,
these are differentiation, low-cost focus and focus strategy.
Wadud (2018)  With respect to the low-cost strategy, it is primarily used for middle-to-low-income consumers who
do not have a lot of money to spend on household furniture. As this strategy differentiates IKEA from
other stores, IKEA sets a low price for all of its products in this strategy
Industry
Analysis &
Judgment

05 PESTEL, SWOT, Porter’s five

forces, Strategic Group Map &
Moves

PESTEL Analysis
P olitical
• For IKEA to spur, the political actions
and policies are critical for it success
since it operates in more than 40
countries.
• IKEA will be ready to initiate operations
with minimum effort if the government
is business-friendly.
• Global business organizations thrive in a
stable political environment
T echnological
• IKEA spends billions on research &
development as well as addition of first-hand
innovations all the time
• Development of robotic furniture that is able
to transform a small flat into a house or a
bedroom into a living area.
• Launched an e-commerce website for goods
sales
• IKEA products are still advertised in printed
brochures. instead, internet can be used
• Wu, Y. (2020, February). The Marketing Strategies of IKEA in China Using Tools of
PESTEL, Five Forces Model and SWOT Analysis. In International Academic Conference
on Frontiers in Social Sciences and Management Innovation (IAFSM 2019) (pp. 348-
355). Atlantis Press.
• Vergassola, I. (2019). Prerequisites and outcomes of glocalization of marketing
strategies by international retailers: the case study of IKEA and home depot in China.
E conomic S ocial
• GDP, per capita income, inflation, • Different cultures exist in
purchasing power, and other different countries, and what is
factors all have an impact on beneficial in one place may be
IKEA's operations which reflect not in another country
the purchasing capacity of • IKEA must adhere to local
consumers traditions while branding
• Raw material price fluctuations • IKEA must address the
especially during the pandemic problems of clients from various
countries
E nvironmental L egal
• IKEA has operation in more than 40
• IKEA working in the renewable
nations, therefore it is obliged adhere
energy sector as it plan use
to the laws of those nations. Any
renewable energy to generate power
legal breach might put IKEA in
for it stores.
serious complications.
• IKEA has invested heavily in
• Labor rights
developing countries to build
• Customer satisfaction is critical and
renewable energy infrastructure.
poor-quality items might jeopardize it
• IKEA is also attempting to
manufacture products that are made
up of Eco-friendly materials.
 SWOT Analysis
Strengths
• Leading global brand Weakness
• Strong financial position
• Good quality products at •Challenges in balancing between
low prices maintaining low prices and good
• Worldwide presence quality
• Targets several individuals •Store location not always accessible
• Reasonable prices
• Fancy product designs
• Creative store design
• Online sales
SWOT
Analysis
Threats
Opportunities
•Increased competitive pressure from
•Establishing strategic partnership with rivals’ brands
other famous brands •Economic factors due to recession
•Production in countries with low labor may slows down spending of
charges consumers

• Wu, Y. (2020, February). The Marketing Strategies of IKEA in China Using Tools of PESTEL, Five Forces Model and SWOT Analysis. In  International
Academic Conference on Frontiers in Social Sciences and Management Innovation (IAFSM 2019) (pp. 348-355). Atlantis Press.
• Vergassola, I. (2019). Prerequisites and outcomes of glocalization of marketing strategies by international retailers: the case study of IKEA and home depot in
China.
• Miller, B., & Smith, D. (2021). IKEA Strategic Management Plans in Europe. Journal of Strategic Management, 5(2), 1-7.
 Porter’s Five Forces Analysis

Bargaining power of suppliers: Low Threat from substitute products: Low

It’s hard for IKEAS competitors to offer
IKEA can switch from one
other alternatives with same quality,
supplier to another.
price, and alternatives.
Competitive
Rivalry

Bargaining power of buyers: Threat from new entrants: Low to

Moderate moderate
IKEA focuses too much on New entrants will need time, effort
attracting and retaining the and investment to grow and become a
customers. large and well-known brand.
Level of competitive rivalry: High
Hypermarkets and other brand stores sell furniture and create competitive threat
to IKEA.
 Strategic Group Map
High

Pottery
Barn The
D.Hous one
Pieces

Marina
Moderate
Price (BHD)

Home
Center
IKEA
Low

Homebox

Few Geography coverage (Size & branches) High

 Recent Strategic Moves

Taking advantage of
Keeping-up with technological capabilities
cultural and local by going online
events

Stratgic Moves

Pick-up services
Overall
Judgment

06 The group’s views on IKEA as a

whole
 Overall Judgment

Company’s closest
competitors

• IKEA holds a superior position when taking the price factor and concept
• It is one of the biggest furniture stores in Bahrain giving IKEA an advantage in the
coverage and geographic factor
• If rivals strategies were to act similarly to IKEA, the threat could be high if:
Relative competition
 Home box started strategies of such as giving great shopping experience ( making
a standalone big store and adding café/restaurant, child play and other facilities).
 Home center started lowering their prices or added to their lower range product
selections.
 Overall Judgment (Cont.)
Competitive strategy in competing successfully

IKEA distinguishes itself from its

In accordance with Porter’s
Generic Strategies, IKEA
has adopted a hybrid strategy
and successfully maximize
its competitive advantage.
This strategy comprises of
“Cost Leadership Strategy”
and “Product
Differentiation”.
3 3
competitors by offering a superior
shopping experience, a new lifestyle
concept, a larger product selection, and a
simultaneous service that entails consumer
participation.
1 1
2 2
IKEA looks for suppliers who can
produce well-designed
subassemblies at reasonable prices,
with customers assembling the goods
themselves.
 Sustainable Competitive
Advantage

01 02 03

Awareness of
Collaboration with local Enhancement of IKEA
environmentally friendly
suppliers advertisement
products
Any
questions?