Report: Analyzing Competitive Strategies of Netflix and IKEA Companies

This report provides a detailed analysis of the competitive strategies employed by Netflix and IKEA. It begins with an overview of Netflix, examining its evolution from a DVD rental service to a global streaming giant, and analyzes its competitive landscape using Porter's Five Forces, SWOT analysis, and strategic decisions regarding content creation. The analysis highlights Netflix's strengths in data-driven decision-making and its ability to adapt to market changes, while also acknowledging its vulnerabilities. The report then shifts to IKEA, exploring its cost leadership and focus strategies. It examines IKEA's business model, emphasizing its commitment to providing affordable, stylish furniture and its innovative approach to customer engagement and supply chain management, referencing Porter's Generic Strategies and value chain analysis to elucidate IKEA's competitive advantages. The report concludes by summarizing the key findings and comparing the distinct strategic approaches of both companies, offering valuable insights for business students and professionals alike.

Competitive Strategy

Netflix
Netflix was created by Reed Hastings in 1997. The principle was humble: Hastings trusted
that he could influence the high-performance ethos and data-drivenness personified by tech
businesses to prosper in the DVD-rental-by mail industry. For quite some time, Netflix had
dominated the DVD rental market when compared to its competitors. With the onset of the
millennia where online streaming and content became king, Netflix was quick to respond as
per the decision of Hastings. He separated the DVD rental (Qwikster-later on) and the online
streaming content business. The target was to simply capture the market to become the best
global entertainment distribution business.
And so, it became. Today when compared to its competitors Netflix has 36% capture on
market compared to HBO and Hulu. When Hastings separated the streaming service and
rebranded the DVD rental business with increased monthly subscriptions, there was a furore
– it led to the loss of subscribers. It debilitated the brand appreciated by subscribers chiefly
for its effective client favourite database expertise and fee arrangement. Amazon posed a
challenge by offering customers to view content instantly for a small price. More such
competition was beginning to show up and Netflix had to maintain its competitive advantage.
Also, the rising content cost presented itself as an opportunity from which HBO and
Showtime were gaining. Netflix needed its own exclusive matter. That would allow it to
bring back lost value to Netflix and allow long-term growth. In 2017, Netflix has over 40
million subscribers across the globe and over 1 billion hours of TV shows and movies every
month (Grant, 2016). Porter’s five forces model analysis shows us that
1. Risk of new entrants – high (Apple, Amazon, Hulu, YouTube)
2. Menace of substitutes – high (Apple TV, Hulu)
3. Negotiating power of customers – high (lots of choices)
4. Negotiating power of suppliers – high (content king) (Walker et al., 2017. pp 1-19)

5. Strength of rivalry – high (low entry barriers and presence of big players)
6. Complementors – high (Microsoft, Roku, Vizio etc.)
The simple SWOT analysis reveals that –
Strengths – data, experience, amount of shows plus movies
Weakness – costs fixed, debt high, inflexible systems
Opportunities – Europe, NEM, all original content
Threats – dynamic technology, price rises, highly competitive market (Rao, C.B., 2017.)
An eminent issue as evident from the analysis is that for Netflix, threats of all five forces
were high and Netflix was stuck between powers. Netflix strategy was to penetrate markets
by building strategies around excellent services and competitive prices. Focus largely on
building their own content to maintain the competitive advantage. That’s the reason when we
think of Netflix – Orange is new black, House of Cards etc. come to our minds but if we
think of Amazon or HBO, we draw a blank. They went with the stream only content while
profiting off the DVD rental for the next 5 years. It also thrived by steadying its high
convenience dispersal approach as well as creating more conglomerates to create impeccable
hardware stage for its software. Netflix has associated itself with various other companies for
even more growth to have a stronger hold on market. They even recently stated that they
would like to see themselves in all gaming consoles, Blu-Ray players and internet TVs
(McGrath, R.G.,2013).

IKEA
IKEA, found in 1943, is a world-renowned furnishing corporation alleged for vending
Scandinavian-style furniture and other household merchandises. The establishment has over
230 stores, with setups in above 42 countries with thriving and over 70, 000 employees. The
stores by themselves can house 410 million consumers per year. It is a Swedish established
firm built on the notion of offering an extensive array of classy, efficient household
furnishing merchandises at such low costs, that most individuals will be capable to afford
them. IKEA consumers are aggressively engaged in the shop experience as the IKEA theory
trusts on consumers to pick, gather, move and build IKEA products themselves. It has been a
triumphant organization for over 70 years.
Based on Porter’s Generic Strategies, IKEA largely shadows the “Cost Leadership Strategy”.
IKEA pursues dealers who could build finely designed subassemblies at the lowermost prices
and clienteles’ want to build the merchandises themselves. This technique might prevent
distribution costs for equally manufacturers and patrons. It permits creators dropping a lot of
prices as soon as patrons could compensate for the merchandises on a much lesser price with
great value and consequently, to obtain diverse sections of consumers. This is moreover
IKEA’s “Focus Strategy” on low prices. With the economical price, the business could obtain
a huge sooq and effortlessly won the business. Further, IKEA obeys "Differentiation
Strategy" to a certain extent. Essentially, the business revolutionised the way individuals
procured furniture. Each IKEA store is a sole structure with the renowned product symbol
and style. Paralleled to other furnishing stores, IKEA displays their merchandises in sample
quarters which are mixed and fashionable. It offers numerous ranges and ideas for patrons to
beautify their accommodations. In certain areas, people favour walking in IKEA stores as an
amusement because of its designer planned furniture and homely atmosphere. As an effect,
IKEA could effortlessly collect their prospective customers. Meanwhile, the establishment

concentrates on manufacturing high-quality merchandises with inexpensive rate, which is
additional variation unmatched to a maximum of the organizations in the trade. Furthermore,
IKEA follows the “Focus Strategy” on variation (Wagner and Hollenback, 2014). For
example, in IKEA stores in China, clients can discover lots of Chinese conventionally
planned furniture, which is satisfactory for Chinese customers’ beautification mandate. The
value chain analysis of IKEA (Peteraf et al., 2014) discloses that the company has been able
to get and uphold a competitive advantage throughout owing to cost leadership (and letting
directory charges to be guaranteed for a year), applying price control mechanism (i.e.,
recognising decent value substitute materials, dealing with alternative traders, stock chain
management, manufacturing calibrated and differentiation/novelty built on market-sensing
and acclimating to customers' requirements and likings) and evolving long-term relations
with merchants. IKEA, thus, pertained onward and backward incorporation (West et al.,
2015). IKEA keeps patrons with more than just low charges, contemporary stuff; other
welfares comprise toughness, outstanding, receptive customer service, and environment-
friendly merchandises. Extraordinary quality, groundbreaking products, sensible cost,
sturdiness, rapid assurances/warranties, well-trained, approachable staff, minimalism and
consideration to detail are the crucial features of IKEA's conception of consumer value. To be
concise, IKEA respects all Porter's Generic Strategies and it does not get “Stuck in the
Middle”. As the company disconnects the policies into diverse trade traits. IKEA discovered
the tenet and that’s why they got mammoth triumph in the business (Hinterhuber and Lioza,
2014. 57(3),413-23).

References
Books
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
Rao, C.B., 2017. Competitive strategy. Notion Press.
McGrath, R.G., 2013. The end of competitive advantage: How to keep your strategy moving
as fast as your business. Harvard Business Review Press.
Wagner III, J.A. and Hollenbeck, J.R., 2014. Organizational behaviour: Securing
competitive advantage. Routledge.
Peteraf, M., Gamble, J. and Thompson Jr, A., 2014. Essentials of strategic management: The
quest for competitive advantage. McGraw-Hill Education.
West, D.C., Ford, J. and Ibrahim, E., 2015. Strategic marketing: creating competitive
advantage. Oxford University Press.
Journals
Walker, R., Walker, R., Jeffery, M., Jeffery, M., So, L., So, L., Sriram, S., Sriram, S.,
Nathanson, J., Nathanson, J. and Ferreira, J., 2017. Netflix Leading with Data: The
Emergence of Data-Driven Video. Kellogg School of Management Cases, pp.1-19.

Hinterhuber, A. and Liozu, S.M., 2014. Is innovation in pricing your next source of
competitive advantage?. Business Horizons, 57(3), pp.413-423.