Competitive Strategy

This paper discusses the competitive strategy used by organizations, based on the case study of IKEA Melbourne. It also covers the cooperative strategy used by IKEA, competitive dynamics of the industry, and more.

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Competitive strategy

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Executive summary:
This paper contains the discussion of the Competitive Strategy used by the organizations, and
this discussion is based on the case study that is IKEA Melbourne (Case 10). This paper further
stated the competitive dynamics of the industry within which the firm(s) compete. In Context of
this Firm, Cooperative strategy is used. This strategy is used by the firms for achieving their
objectives with the cooperation of the other firms such as strategic alliance and partnerships,
instead of competing with them.

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Contents
Introduction:...............................................................................................................................................4
About the company:....................................................................................................................................4
About cooperative strategy:........................................................................................................................4
Co-operate strategy of the IKEA:.................................................................................................................6
Competitive dynamics of the industry:........................................................................................................7
Conclusion:..................................................................................................................................................8
References:..................................................................................................................................................9

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Introduction:
Maximum number of firms in the present world engaged in the co-operative strategies for
achieving their business goals, because this strategy is considered as an attempt made by any
organization for the purpose of achieving its strategies with the cooperation of the other firms in
the form of strategic alliance and partnerships. In this firms co-operate each other for realizing
their goals, instead of competing with each other. It must be noted that in this global economy,
there are number of strategic alliances which have international scope (elearn, n.d.).
This paper defines the co-operative strategy in context of the case study that is IKEA Melbourne
(Case 10). It must be noted that, IKEA is also intended to adopt the international corporate-level
strategy in Melbourne, and it seems that this strategy fits the best. This paper defines the
meaning and scope of this strategy in connection with the stated case study. There are number of
reasons which are stated below because of which IKEA adopt this strategy.
Structure of this paper includes the brief discussion of the company, discussion of the Cooperate
strategy, cooperate strategy in context of the IKEA, and competitive dynamics of the industry
within which the firm compete. Lastly, a small conclusion is provided for concluding the
important facts of this paper.
About the company:
IKEA is the Netherlands-based Swedish company, and this company extends its business in
almost 44 countries across the globe which includes US, the UK, Russia, the EU region, Japan,
China and Australia. This company is considered as the largest furniture retailer across the globe.
This company announced different expansion plans for the east coast of the Australia, and open
almost 9 stores in the east coast (IKEA, 2014).
Corporate structure of this company was constructed in such a way as it prevents the takeover
and also provides protection to the business from taxes. Therefore, it can be said that structure of
this organization is complicated in nature and this is the arrangement of not-for-profit and for
profit organizations. The IKEA provides unique shopping experience to the customers and this

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experience is accompanied with the low price and solid quality modern designs, and the
approach of do-it-yourself (DIY) products (IKEA, n.d.).
About cooperative strategy:
A business level cooperative strategy is the strategy under which two or more firms work
together for the purpose of attaining some common goal. In this business organizations share
their resources and capabilities with each other for the purpose of ensuring competitive
advantage in the way of new product and services. It must be noted that, firms not only shares
the resources and capabilities, but they also share costs in context of the new product.
This strategy helps he business organizations in diversifying their business and attain flexibility
in context of the diversifying operations and also strengthens their position as compared to their
competitors. This strategy also provides the facility of the growth and performance
improvisation. It must be noted that, there are different types of business strategy which includes
Joint Venture, Horizontal integration, vertical integration, Conglomerate diversification, etc
(University of Birmingham, n.d.).
There are number of advantages which are offered by the cooperative strategy to those
organizations which lacks particular competencies, knowledge or resources, and it also enables
such company to secure these with the links to other companies possessing complementary skills
or assets. This also provides the easier access to the new markets and ensures opportunities for
business organization for mutual synergy and learning. It is proved that cooperative strategies are
reliable for facilitating the international expansion of the business. There are number of reasons
because of which this strategy becomes important part of the business:
 There are number of firms which lack full set of resources and capabilities and required
to achieve their target, as this strategy help the firm in this situation.
 These strategies allowed the partners to develop that value for their firms which they
cannot develop on individual basis.
 Organization can reduce the uncertainty in context of environment by aligning the
stakeholder interests at both inside and outside of the organization.
 A new source of revenue can be developed by the organization through this strategy.

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 Firm growth is ensures through this strategy.
 It also helps the organization by enhancing their speed of responding to market
opportunities, technological changes, and global challenges (Nielson, 2003).
It must be noted that, use of these strategies differentiates as per the market type, and this is
stated below:
Slow-cycle markets- this strategy is used for entering those markets which restrict the new
entrants and also help in establishing the franchises in the new markets in easy and speedy
manner. Through this, firms get the better understanding of the market conditions and also gain
knowledge in context of the relationships with key stakeholders.
Fast-cycle markets: in context of these markets, this strategy help the firm with excess
resources and promising capabilities to achieve the objective which required to change markets
and to gain rapid entry into new markets.
Standard-cycle markets: alliance between the large firms with economies of scale is likely to
combines the complimentary resources for the purpose of gain market power. This alliance
allowed the firm to learn new business techniques and technologies (Hajarian, 2004).
Co-operate strategy of the IKEA:
In Australia, IKEA operates almost five massive stores on the east coast of Australia, and these
stores provide almost 24% jump in revenue to $649.97 million for the 12 months. Although it
can be said that it becomes incredibly popular and profitable in Australia. In Australia, this
company adopts slow store expansion strategy in the early years of their expansion and from last
few years only put its foot on the accelerators (Greeblat, 2013). It must be noted that this
company entered in the Australian market almost 30 years ago, and by 2011, IKEA had almost
three east coast stores. Later company made number of land deals and construct new outlets.
IKEA also launched online sites for providing new shopping experience to the shoppers of
Australia, and company also enhance its floor space for the purpose of devoted to its eclectic line
of Scandinavian groceries from which shoppers can choose Swedish delights such as marinated
herring, sprats, chocolate, crackers or, of course, the famous meatballs. IKEA opened almost 4

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stores in the Melbourne, and for this purpose these companies invest in the land (Insider retail,
2017).
It must be noted that this company is known for its competitive approach and also for its
innovative creation results. Limited amount of products are produced by this company and it
mainly depends on its network of suppliers. Expansion done by IKEA reflects number of
challenges for this company in Melbourne such as challenge related to the distribution, adaptions
to the future necessitates and regular adaptations to the distribution structure. One more
challenge which is faced by the IKEA in future is the people with higher education prefer
updated computer technology such as maximum customers prefer to place their order of
customized design of furniture through online site launched by company. All these challenges
are also considered as big opportunities for the IKEA also and in case company deals with these
challenges in better way than it can result in competitive advantage for the company.
For dealing with all these challenges, it is necessary for the company to alliance with those
organizations which hold expertise in these areas. Strategic alliance can be the best strategy
which is choose by the organization for ensuring competitive advantage in Melbourne and
expand its operations in this market.
Generally five types of modes are used by the organizations for entering into the international
market that are exporting, licensing, strategic alliances, acquisitions and new wholly owned
subsidiary. IKEA preferred the mode of is new wholly owned subsidiary. In other words, IKEA
is a privately-owned company and whenever this company enters into a new market, it generally
binds its own retail space and implements a global international strategy. Wholly owned
subsidiary is the company in which common stock of the company is owned another company
which is known as parent company. In this company, no minority shareholders are there and the
subsidiary stock of the company is not traded publically. Through this IKEA directly invest in
the market of Melbourne. However, it can be said that this company had number of advantages
and disadvantages such as it allowed the IKEA to get maximum control and highest potential of
returns, but it is costly and involved high amount of risk. IKEA adopt this strategy because need
for global integration is high, and through this company secures stronger presence in the markets.

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Above stated facts, clearly describes the need of IKEA because of which they adopt cooperative
strategy for the market, and this strategy allowed them to get competitive advantage of online
shopping in the market.
Competitive dynamics of the industry:
IKEA is considered as largest retailer of the furniture across the globe and the industry in which
this company competes is the retail industry. Competitive dynamics is considered as the analysis
of the competition at the action and response level for the purpose of predicting, how a firm will
act or react against any opponents. In other words, it is the term which is used for describing the
actions and reactions of the firm which is taking part in the competitive environment of the
business. Competitive dynamics of the retail industry in context of IKEA are defined in this
section of the report.
Currently, retail industry is the industry which witnessed most intense rivalry across the globe,
and these major advances in the production, technology, and distribution allowed the participants
in the retail industry to use their resources for the purpose of developing new resources and
strategies which are faster as compared to their business competitors. Retail industry highlights
the three major forms of the rivalry (Aguirregabiria & Mira, 2007). These forms include the
focus on the rivals of the competitors, attract and develop the potential customers, and also
competing for sales to the customers which are shared between the two or more number of the
competitors. Lastly, in this firms captured the rivals of competitors who involves offering such
product or service which is better that the product or service offered by the competitors. Firms
can also provide similar products or services at more affordable prices to the consumers as
compared to their competitors (Beresteanu, Ellicksony & Misra, 2010; Dhar & Ray, 2000).
Conclusion:
After considering the above facts, it can be said that cooperative strategy is the most useful
strategy in the present business environment because it provides number of advantages to the
firm and opportunities. Cooperative strategy makes it easy for the organization to entry in the

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international market. It helps the business organizations in diversifying their business and attains
flexibility in context of the diversifying operations and also strengthens their position as
compared to their competitors. This strategy also provides the facility of the growth and
performance improvisation. There are number of reasons because of which IKEA’s intended
international corporate-level strategy in Melbourne, and this strategy fits the best. IKEA
preferred the mode of is new wholly owned subsidiary. In other words, IKEA is a privately-
owned company and whenever this company enters into a new market, it generally binds its own
retail space and implements a global international strategy.
References:
Elearn. Chapter 7: Cooperative Strategy. Available at:
https://elearn.uta.edu/bbcswebdav/users/jmcgee/Syllabus/Content/Syllabus%20and%20Course
%20Content/pdf/Chapter%2007.pdf. Accessed on the 29th May 2018.

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University of Birmingham. Cooperative Strategy. Available at:
https://www.birmingham.ac.uk/postgraduate/courses/taught/business/msc-ib-modules/
cooperative-strategy.aspx. Accessed on the 29th May 2018.
Nielson, B. (2003). Cooperative Strategies and Alliances. Journal of International Business
Studies, volume 34(5):489-491.
IKEA. Welcome inside our company. Available at: https://www.ikea.com/ms/en_ID/this-is-
ikea/about-the-ikea-group/index.html. Accessed on the 29th May 2018.
Aguirregabiria, V. & Mira P. (2007): Sequential Estimation of Dynamic Discrete
Games,Econom, volume 75, pp 1-53.
Beresteanu, A. Ellicksony, P. & Misra, S. (2010). The Dynamics of Retail Oligopoly. Available
at: http://www.pitt.edu/~arie/PDFs/SMdynamics.pdf. Accessed on the 29th May 2018.
Dhar, T. & Ray, S. (2000). Understanding Dynamic Retail Competition through the Analysis of
Strategic Price Response Using Time Series Techniques. Available at:
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.6383&rep=rep1&type=pdf.
Accessed on the 29th May 2018.
Hajarian, (2004). Cooperative Strategy. Available at:
http://www.hajarian.com/mosharekati/44285--ch09notes.pdf. Accessed on the 29th May 2018.
Strand, R. (2013). Scandinavian Cooperative Advantage: The Case of IKEA. Available at:
https://www.researchgate.net/publication/304807170_Scandinavian_Cooperative_Advantage_Th
e_Case_of_IKEA. Accessed on the 29th May 2018.
IKEA, (2014). IKEA Australia announces major expansion plans. Available at:
https://www.ikea.com/au/en/about_ikea/newsitem/2014_02_canberra_news. Accessed on the
29th May 2018.
Insider retail, (2017). Ikea to revamp Melbourne location. Available at:
https://www.insideretail.com.au/news/ikea-to-revamp-melbourne-location-201709. Accessed on
the 29th May 2018.
Greeblat, E. (2013). IKEA aims for $1b in local sales. Available at:
https://www.smh.com.au/business/ikea-aims-for-1b-in-local-sales-20130908-2tdz6.html.
Accessed on the 29th May 2018.