Competitive dynamics of IKEA India

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Executive summary
Competitive dynamics have emerged as one of the powerful tools in strategic management
that considers predicting and explaining competitive interactions between rivalry companies
and impact these interactions have on organisation’s performance. It is significant for
international companies to develop a good relationship with customers as well as
management to pursue success in this competitive market. This report has been prepared to
analyse competitive dynamics of IKEA in India to evaluate global and competitive strategies
utilised by the company to remain ahead in furniture and home furnishings related market.

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Table of Contents
Executive summary....................................................................................................................1
1. Introduction............................................................................................................................1
2. Background information........................................................................................................2
3. Competitive forces that determines IKEA’s profitability......................................................2
3.1. Bargaining power of suppliers.........................................................................................3
3.2. Bargaining power of customers.......................................................................................3
3.3. Threats of new entrants...................................................................................................3
3.4. Threats of substitute products..........................................................................................4
3.5. Competitive rivalry within the industries........................................................................4
4. Generic competitive strategies adopted by IKEA..................................................................5
4.1. Cost leadership................................................................................................................5
4.2. Differentiation.................................................................................................................5
4.3. Focus................................................................................................................................6
5. Conclusion..............................................................................................................................6
References..................................................................................................................................6

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1. Introduction
The term competitive dynamics is a study based on rivalry and competitive edge
present among specific and interrelated firms. According to Schumacher (2016),
“Competitive dynamics can be analysed in the domain of the action, the reaction, the attacker
the responder, and the environment”. The attributes that are known to impact organisational
performance and contributes to complexity shows that they impact overall firm’s objectives.
The competitive dynamics model consists of motivation, awareness and capability that
represents key drivers of business competitive behaviour and that can also be called as key
determinants of interrelated business rivalries. Other components that can impact on firms’
rivalries are firm size, past performance, age for awareness or marker dependency (Zucchini
& Kretschmer, 2011). This forms the primary objective behind preparing this report to
analyse competitive dynamics and observe how international companies utilises this
technique to stay ahead in global business environment. For this, competitive dynamics of
IKEA in India will be evaluated by application of conceptual models to study and understand
the theoretical models of competitive dynamics while applying them in real world
performance of IKEA.
2. Background information
The concept of IKEA’s business has always remained in offering well-designed and
functional home furnishings at affordable prices so that large number of customers can afford
it easily. This concept has even made the IKEA one of the most popular brand worldwide
where the company holds more than 235 retail stores spread across 30 countries employing
more than 1,10,000 workers (Harapiak, 2013). In the year 2007, IKEA was ranked 42nd by
Business Week Magazine among top 100 global brands. In the same year, it was placed in
third position at Reader’s Choice Awards for global brands impacts awards. Although IKEA
shares no more than 10% of market in the country’s it operates in, still it has been able to
achieve success in global markets due to public awareness regarding IKEA brand. IKEA’s
global expansion strategy was also determined due to success of its products in home country