Porter's Generic Competitive Strategies
Porter's generic strategies tells how a company takes competitive advantage across its target market scope. There are three types of them.
1.Cost Leadership
2.Differnetiation
3.Focus (Cost-Focus & Differntiation Focus)
Cost Leadership Strategy:
Cost leadership, in basic words, means the lowest cost of operation in the industry. In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it
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The company offers home furnishings that combine good design, function, and quality with low prices. Ikea does this by offering low-cost, modular furniture (assembled by customers), using self-service as an alternative to having sales associates follow and pressure customers to buy. Ikea displays its products in room-like settings so that customer can view different combinations of furniture, eliminating the need for assistance from sales associates or decorators to visualise the setting and reducing employee costs. Customers also pick up their own purchases to reduce the company's costs. Finally, stores address the needs of shoppers (e.g., extended hours and in-store childcare) while they
According to Parnell, Porter’s generic strategy typology consist of a “basic economic assumptions about cost versus differentiation, and the whole notion of focus and market orientation but this strategy has some limitation” (2014). This strategy typology helps to simplify a complex industry by identifying and emphasizing the key strategic factors. These factors are low-cost with focus, low-cost without focus, differentiation without focus and differentiation with focus.
IKEA is a Swedish furniture retailer that sells good-quality and affordable furniture to the consumers of the mass-market. Its procurement policy is to establish long-term relationship with suppliers. IKEA expands globally. Marrianne Barner is the new business area manager for carpets at IKEA. IKEA just signed a contract with the Rangan Exports which is an Indian carpet supplier forbidding the use of child labor. The vision of IKEA is “To create a beter life for the majority of people which is the basis of its strategic orientation.” The mission statement of IKEA is “To offer a wider range of home furnishing items of good design and function at prices so low that the majority of
This approach is in line with Michael Porter's theory that there are three major strategies companies can adopt to gain competitive advantage:
Cost advantage: by better understanding costs and constricting them out of the value-creating activities. Main focus of this strategy also known as cost leadership is to offer goods and services at lower cost than the competitors. To follow this strategy a company also consider these approaches- tight cost control, economics of scale in production and also cost minimisation.
Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.
IKEA which has been providing stylish and inexpensive furniture for decades has established a competitive advantage that has contributed to its global market saturation around the world, making them the world’s largest furniture retailer. By staying true to its mission, executing its business plan, and strategically picking its markets, IKEA has provided people around the world with quality products at affordable prices. In the more recent past, IKEA has maintained an advantage over its competitors via an assortment of innovative techniques. Some of these more interesting concepts include an increased social media presence targeted around providing customers a media to share rooms and redecorating ideas around IKEA’s products and the introduction of a customer take-back program for used furniture (Interbrand, 2014).
IKEA main strategy was to design functional furniture that was easy and inexpensive to build, receive it disassembled at stores, and display it on the show room floor with detailed explanation ticket to abolish traditional salesperson assistance. Staffs were available for enquiries, but the customers could freely select between orders, pick up, transport and assemble their own selections. In fact, this strategy creates a mutual beneficial between Ikea and customer. Ikea
There are four main business strategies that can be used they are Cost leadership strategy, Differentiation strategy, Focus strategy (low cost) and Focus strategy (differentiation). We can use Porter’s generic business strategies to understand the difference in these strategies.
IKEA is more than a furniture store they are a company driven by values (IKEA, 2014). The company seeks to make their consumers lives easier by providing them with modern, innovative, inexpensive products which they use to tackle daily home activities. IKEA Group has 298 stores in 26 different countries (IKEA, 2014). The company’s vision is “to create a better everyday life for the many people” (IKEA, 2014, para 1). Using innovative techniques for creating, producing, and marketing their products IKEA can provide consumers with durable products for reason...
IKEA sells the whole concept linked to a lifestyle. A world of people with sophisticated taste and awareness of the latest and best trends and designs.
Tanwar, Ritika. (Nov. - Dec. 2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management, Volume 15, Issue 1, pp 11-17. Retrieved 1 May 2014 from http://iosrjournals.org/iosr-jbm/papers/Vol15-issue1/B01511117.pdf?id=7380
IKEA is a multinational company that sells furnishings and furniture. It is founded in 1943 in Sweden by Ingvar Kamprad. The company focused on furniture retailing at the early stage of the business and started to design its own product in 1955. The first IKEA store was opened in Almhult (Sweden) in 1958 (Woodham, 2004). The company has experienced growth ever since, by 2016 IKEA had 390 stores in 48 countries (IKEA, 2016). Since the company was founded its pricing strategy has mainly been low cost. IKEA is known for providing a wide range of low-cost, functional and well-designed products. However, because of the scale and size of the business, maintaining the standards and quality of the products has the potential to become
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
Market opportunities for breakfast cereals is vast, some segments of the market have been neglected, most notably that of the over-50’s. Insightful presentations were given at the “Older, Richer, Wiser” Conference that would suggest the over 50’s market segment is targetable.
Marketing is a vital component in the success of businesses. Smaller businesses rely on business advertising, expenses, knowing if the business is networking with the right people, or joining the best organisations which lead to success (EStartup business blog, 2010). Marketing concentrates on customers and what the customers want. Customers are the source of sales and profits. Many small businesses are faced with remarkable hardships due to not developing the right marketing plan (EStartup business blog, 2010). To help these businesses a more appropriate or better marketing plan needs to be designed. Small business internet marketing services can help businesses develop and thrive in a highly competitive market. For the highest quality internet marketing services, hiring an online marketing company to design a customized internet marketing campaign may be advantageous for some businesses (EStartup business blog and contributors, 2010). Identified will be the role that marketing plays in a successful business demonstrated by use of two examples, the importance of developing a marketing plan, and ethical and legal issues that surround marketing practices (EStartup business blog, 2010).