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IKEA Generic and Intensive Strategies

The 21st century is known for intense competition across industries and among businesses.  Every brand that is at the top is there because it has built a strong competitive advantage. Without a competitive advantage, any brand will find it difficult to get ahead of its competitors. Ikea is a well-known home furnishing brand. Apart from low prices, it is known for its global presence and stylish furniture. Becoming a globally leading brand of furniture and home furnishing products requires some significant strengths and sources of sustainable competitive advantage. How IKEA has made it possible is through differentiation and by focusing on customer experience.

Michael Porter has outlined three strategies that can help brands build and sustain competitive advantage. These strategies are called generic strategies and include cost leadership, differentiation, and focus.  The third one is subdivided into two subcategories – cost focus and differentiation focus. These strategies can be used to achieve sustainable competitive advantage. Apart from these three generic strategies, there are four intensive strategies that can be followed to grow market share and brand’s customer base. What follows is a discussion of the generic and intensive strategies that IKEA has used to generate competitive advantage and grow its brand presence globally.

 

Generic Strategies followed by IKEA

The Generic strategy followed by IKEA is a mix of cost leadership and differentiation.

Cost Leadership:

Ikea has maintained low prices of products while also offering great quality which is especially very attractive for the millennial generation. Low prices help attract a larger number of customers from the middle and the upper-middle class. The millennial generation especially loves products that are of good quality, stylish but affordable. IKEA cuts down production costs and operating expenses to keep the prices low somewhat like the retail brands.

Differentiation:

Apart from leading in terms of costs, IKEA has also differentiated its business on a few other points. These points of differentiation are important because they lend a unique identity to IKEA and have made it an outstanding brand. To stand out among the crowd of brands is not an easy task. First of all, IKEA has focused on catering to the needs of the middle class which is quite a large customer base globally. The middle class wants good products at average or low prices. IKEA has been able to satisfy these needs of the middle class expertly. It makes products that are contemporary in style and don’t burn your pockets either. So, a brand that sells stylish and good quality products at affordable prices is definitely going to be the favorite of middle-class consumers. 

IKEA’ s product quality and affordability are a source of sustainable competitive advantage for the brand.  There are other factors too that differentiate it from the other brands and provide it a unique brand identity. IKEA is also known for its focus on customer service. Its stores are designed like mazes to provide a unique and smooth shopping experience which adds to the brand’s overall appeal. IKEA’s marketing strategy too is differentiated from competing brands. It makes use of product catalogs that are available online and offline and it has also started making use of AI to help customers find the right products easily. All these factors have enabled IKEA to generate and enjoy a source of sustainable competitive advantage.

Intensive strategies used by IKEA

There are four intensive strategies that can be used to grow a brand’s presence and to grow the customer base and market share. They are market penetration, market development, product development, and diversification.

Market penetration:

This is the strategy of selling more to the existing customer base. A brand makes specific products and gains attention by a specific strategy like quality or low prices. As it gains popularity people start buying more from it. This is how IKEA too managed to penetrate the market. It brought great quality products to the market at affordable prices.  Its products’ design and affordability made it famous and its sales grew.

Market development:

Market development involves selling to a new and larger customer base or entering new markets or geographical areas. With time, IKEA has been able to expand globally and enter new markets. However, entering new markets is not so easy because it is not always sure that you will be able to strike the same bond with customers in new markets too. IKEA too faced difficulties when trying to expand abroad. To overcome these difficulties, it experimented and innovated and was able to grow its popularity in overseas markets. This overseas expansion brought great new opportunities and extra sales for IKEA.  Today, there are 433 IKEA stores and the company serves a total of 50 markets through e-commerce. IKEA has expanded its customer base globally by understanding local people’s needs and tastes and catering to their preferences. Thus, you can see that market development is the main strategy used by IKEA for growth.

Product development:

This is another key strategy that IKEA has used to grow its customer base and sales. This strategy involves bringing new products or services to the market. IKEA is known for both product and design innovation. Over time, it has grown its product range a lot. Today, it sells a wide range of more than 12,000 products. That is quite a huge array of affordable home furnishing products. Thus, you can easily observe that IKEA has found faster growth by using the product development strategy. It is another major strategy which has helped IKEA find fast and profitable growth worldwide.

This was a discussion of the generic and intensive strategies used IKEA to grow its brand and revenue. It has become a leading global brand of home furnishing products through innovation and by making affordable and good quality products. Other focus areas are customer service and marketing that have helped it build customer loyalty. To become a leading brand requires a competitive advantage and IKEA has achieved that by using the right mix of cost leadership and differentiation.

CITE THIS.
APA.Pratap, A. (2020, February 26). Generic and Intensive Strategies of IKEA. Retrieved from https://notesmatic.com/2017/07/ikea-generic-and-intensive-strategies/
MLA.Pratap, Abhijeet. “Generic and Intensive Strategies of IKEA.” Notesmatic, 26 Feb. 2020, notesmatic.com/2017/07/ikea-generic-and-intensive-strategies/.

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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