The paper 'Firms’ Competitive Behavior' is a great example of a Management Essay. The field of competitive dynamics has flourished in recent years, for a variety of reasons including serving as an important source of competitive advantage (Sea-Jin Chang and Jay Hyuk Rhee 2011: 1). But more so, offering a fine-grained approach to understanding what specific firms do when they compete with specific rivals (Chen and Miller 2012: 3). On the other hand, little deliberation has been given to these approaches. This study seeks to fill the existing gap in information by considering the competitive behavior with particular reference to IKEA.
To this end, its competitive standing will be examined against a background of generic competitive strategy models. The rest of the paper is structured as follows. Section two gives a brief background Information of IKEA, followed by a review of key terms (competitive behavior, strategy, as well as generic strategy models) in section three. The next section four presents a detailed analysis of IKEA’ s competitive advantage and its generic competitive strategy. Finally, the study concludes by stressing major findings drawn from the foregoing analysis. Background Information IKEA is a Swedish Multi-National Furniture Company (MNC) founded in 1943.
The name IKEA comes from the initials of the founder Ingvar Kamprad, I, and K, plus the first letters of Elmtaryd and Agunnaryd, which are the names of the farm and village where he grew up (IKEA 2012 web). It has a total of 231 supplies in 33 states the majority of them in Europe whereas the remaining is in the USA, Canada, Asia, and Australia. In the UK alone, IKEA currently has a total of 18 stores with an enormous supply center in Peterborough in Cambridge shire however the largest supply is in Wembley, north London. Against this background, it is worth analyzing how the firm continues to shine despite the world dynamic business environment but first, there is a need to understand the key terms.
The next section presents a review of competitive advantage and generic strategy. Key Concepts A competitive advantage is simply an advantage over competitors achieved by giving consumers greater value, either by lowering prices or offering greater benefits or service that justifies higher prices.
Porter argues that competitive advantage is all about being different that is, intentionally selecting a different set of actions to bring about an exceptional combination of values (Porter 1996; 64). On the other hand, Generic strategy is simply defined as methods used to outshine rival firms or companies. They are approaches to outperforming other firms in a business that involves generally cost leadership, differentiation, and focus (Porter 1998: 35) described in detail later in the following chapters. IKEA’ s competitive advantage and Generic Strategy Competitive advantage is shaped by mainly five forces namely: the threat of new entrants; bargaining power of buyers; the threat of substitute products or services; bargaining power of suppliers; and rivalry among existing firms where each area exerts a "force" on every player in a particular industry (Porter 2008: 26-27).
A firm, therefore, needs to be positioned appropriately in order to deal counter these forces. In this section, some of the methods used by IKEA in dealing with the aforementioned competitive forces will be highlighted.
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