The paper “ IKEA's Innovation Process, Difficulties for Competitors, and Measures to Maximize Profits” is a fascinating example of a case study on business. Globalization has made it possible for businesses to compete not only on a local market but on a global scale. As business aims at gaining a competitive advantage, there has been an increased demand for improvement of operations of the business so as to appeal the customers to choose the business instead of the competitors. In an effort to improve business operations thus profit, business managers have invested a lot in innovation strategies.
This paper will use the IKEA business as a case study discussing the innovative process and lessons learned. The lessons learned will also be used to discuss why the business has been more successful and why it would be challenging for competitors to adopt the factors. IKEA is a privately held multinational group of companies that retails home products. The company sells and designs flat pack furniture, accessories, and bathroom and kitchen items (Bilton, 2010). IKEA has opened retail branches around the world operating in 5 continents namely Europe, North and South America, Africa and Asia.
Founded in the year 1993 by a 17-year-old Ingvar Kamprad, the company is owned by Stichting INGKA Foundation (Baraldi, 2008). The company was regarded as the world’ s largest furniture retailer in the year 2008 and it generated revenue of 29.293 billion euros in the year 2014 (Henderson et al, 2014). More than 147,000 employees have been employed in the retail stores that the company operates in the five continents (Bilton, 2010). While starting the company, Ingvar's innovative idea was to offer high-quality products at prices lower than that of competitors.
This was through applying simple cost-cutting tools that would ensure that the quality he had branded his company was not affected. He knew his target population was mostly hardworking but poor people who lived in Smaland. The vision of IKEA is to create a better everyday life for many people (Rodenberg, 2007). Innovation processThe ownership of IKEA is quite complicated where it is owned and operated by an array of non-profit organizations and other profitable organizations. The corporate structure of IKEA is divided into two divisions, the operations, and the franchising.
Most of the stores operated by IKEA in the over 36 countries it operates in are owned and operated by INGKA holding, a non-profit organization whereas the other stores are run by the franchisee (Baraldi, 2008). INGKA holding is fully owned by Stitching Ingka Foundation also a non-profit foundation that Kamprad established as a way to exempt tax. To further complicate the corporate structure of IKEA, every of its store pays a 3% franchise fee to IKEA Systems, a company that owns the IKEA trademark and concept (Baraldi, 2008). Kamprad based the idea of starting IKEA by creating a demand for those practical products that solve essential human needs.
The products IKEA produces are meant to be used in activities essential for human survival such as sleeping, eating, and storage purposes (Strecker, 2009). The organization's innovation can be also be analyzed by discussing the various factors that make IKEA unique from its competitors. The designing of products by IKEA is different from the one competitors use in that it is meant to guarantee the cheapest price possible.
While other producers justify the price tag of an item by emphasizing the design, IKEA makes sure the design fits into the budget of low-income earners (Henderson et al, 2014). For a model to be approved for production, great consideration is paid on the ability of the product to meet the need of the buyer. It makes sure that the low prices do not affect the competitiveness of their products as compared to other highly-priced products that are justified by the product design (Morabito, 2014).
IKEA also adopts an appealing style in presenting their products where most of them are transported in flat packs and can be assembled at the customer’ s home (Schermerhon, 2010). The design not only appeals in style but also minimize the transportation costs associated with transporting fully assembled goods. The cheap cost of goods and other related costs make the products affordable to many people increasing the customer base.