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Unit 4: External Assessment

The Business Idea: The IKEA business idea is to offer a wide range of home furnishings Notes
with good design and function at prices so low that as many people as possible will be
able to afford them. And still have money left! The company targets the customer who is
looking for value and is willing to do a little bit of work serving themselves, transporting
the items home and assembling the furniture for a better price. The typical IKEA customer
is young low to middle income family.
The Competition Advantage: The Competition Advantage Strategy of IKEA's product is
reflected through IKEA's success in the retail industry. It can be attributed to its vast
experience in the retail market, product differentiation, and cost leadership.

IKEA Product Differentiation: A Wide Product Range The IKEA product range is wide
and versatile in several ways. First, it's versatile in function. Because IKEA think customers
shouldn't have to run from one small specialty shop to another to furnish their home,
IKEA gather plants, living room furnishings, toys, frying pans, whole kitchens – i.e.,
everything which in a functional way helps to build a home – in one place, at IKEA stores.
Second, it's wide in style. The romantic at heart will find choices just as many as the
minimalist at IKEA. But there is one thing IKEA don't have, and that is, the far-out or the
over-decorated. They only have what helps build a home that has room for good living.
Third, by being coordinated, the range is wide in function and style at the same time. No
matter which style you prefer, there's an armchair that goes with the bookcase that goes
with the new extending table that goes with the armchair. So their range is wide in a
variety of ways.
Cost Leadership: A wide range with good form and function is only half the story.
Affordability has a part to play – the largest part. A wide range with good form and
function is only half the story. Affordability has a part to play – the largest part. And the
joy of being able to own it without having to forsake everything else. And the customers
help, too, by choosing the furniture, getting it at the warehouse, transporting it home and
assembling it themselves, to keep the price low.

Questions
1. Do you think that IKEA has been successful to utilize Porter's Five force analysis?
Give reasons.

2. Where do you think can IKEA improve?

Source: www.echeat.com
4.3 Industry Analysis

Each business operates among a group of firms that produce competing products or services
known as an “industry”. An industry is thus a group of firms producing similar products or
services. By similar products we mean products that customers perceive to be substitutes for one
another.

Example: Firms that produce and sell textiles such as Reliance Textiles, Raymond,
S. Kumars etc. belong to the textile industry.
Similarly, firms that produce PCs, such as Apple, Compaq, AT&T, IBM, etc. belong to the
microcomputer industry.

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