Competitive advantage of IKEA

Essay by patrickhowC, November 2006

download word file, 6 pages ( 10 KB ) 4.1 3 reviews

INTRODUCTION

In this modern hypercompetitive marketplace, a company must be a powerful competitor to survive. A company must possess a powerful strategy in order to become a powerful competitor. But what makes a good strategy for the company?

A good business strategy would be that to attain a competitive advantage over other competitors. So what is a competitive advantage? And how company can be able to have a competitive advantage over other competitors? This essay would now discuss what a competitive advantage is and how a company can build a competitive advantage over other competitors in the same industry by using two furnishing stores, Ikea and Courts as examples.

COMPETITIVE ADVANTAGE

Definition

A company is said have competitive advantage over its competitors when the company earns profits that are above the normal average in the industry where it competes.

Types of competitive advantages

According to Michael Porter, there are two basic types of competitive advantage, namely:

Cost Advantage- A cost advantage is the ability of the firm to deliver the same product or services at lower cost than competitors.

This can be achieved through using economies of scale, production efficiencies, low labor cost or better access to raw material and etc.

Differentiation advantage- A differentiation advantage is the ability of the firm to deliver products or services that are different from the product mix of competitors. Due to the added costs in achieving differentiation for the product or services, differentiated products or services are often marketed at premium prices.

Model of Competitive Advantage

Source: www.quickmba.com

Competitive advantage derives out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or...