Case $2$: IKEA well implemented Strategy

IKEA, a global furniture retailer, follows the focused cost leadership strategy. Young buyers, after style at a low cost, are Ikea's market segment. For these customers, the firm offers home furnishings that combine good design, function, and acceptable quality with low prices. IKEA's business model relies on highvolume sales, allowing it to earn the profits that keep the costs low for customers. According to the firm, low cost is always in focus. This applies to every phase of their activities.

IKEA emphasizes several activities to keep its costs low. For example, instead of relying primarily on third$-$party manufacturers, the firm's engineers design low$-$cost$,$ modular furniture ready for

assembly by customers. It also positions its products in room$-$like settings. Typically, competitors' furniture stores display multiple varieties of a single item in separate rooms and their customers examine living room sofas in one room, tables in another room, chairs in yet another location and accessories in another area.

In contrast, IKEA's customers can view different living combinations $($complete with sofas, chairs, tables and so forth$)$ in a single setting, which eliminates the need for sales associates or decorators to help the customer imagine how a batch of furniture will look when placed in the customer's home. This approach requires fewer sales personnel, allowing IKEA to keep its costs low.

A third practice that helps to keep IKEA's costs low is expecting customers to transport their own purchases rather than providing delivery service.

Though a cost leader, IKEA also offers some differentiated features that appeal to its target customers, including in$-$store playrooms for children, wheelchairs for customer use and extended hours. Stores outside of IKEA's home country of Sweden have 'Sweden Shops' that sell Swedish specialties such as herring, crispbread, Swedish caviar, and gingerbread biscuits. IKEA believes that these services and products are uniquely aligned with the needs of its customers, many of whom are young, are not wealthy, have children and shop at odd hours because of work schedules. Thus, the focused cost leadership strategy finds the firm offering some differentiated features with its low$-$cost products.

The investment in forests is part of IKEA's commitment to being climate positive. The company has stated its objective to reduce more greenhouse gas emissions than the entire IKEA value chain emits by $2030$ while continuing to grow its worldwide business.

$1.$ What is IKEA's business model? Where on the value chain the company makes its money?

$2.$ Which activities can be considered strengths $($core competencies$)?$ Can they be labeled distinctive competencies?

$3.$ Do you agree with the belief of IKEA that offering some differentiated features such as different services and Sweden products are uniquely aligned with the needs of its customers?

$4.$ Rather than IKEA's commitment to being climate positive; why do you think the firm has invested in forests?