BUS301: Strategic Management - In-depth VRIO Analysis of IKEA

This report presents a VRIO (Value, Rarity, Imitability, Organization) analysis of IKEA, examining the company's strategic capabilities and competitive advantages. The analysis delves into IKEA's distribution system, distribution policy, pricing strategy, innovation, inventory management, and shopping experience, evaluating each factor based on the VRIO framework. The report highlights IKEA's valuable and organized resources, such as its innovative business model, democratic design, and strong brand recognition, contributing to a sustainable competitive advantage. The analysis also acknowledges areas where IKEA faces challenges, such as the imitability of its pricing strategy. The report references key academic sources to support its findings and provides a comprehensive overview of IKEA's strategic position within the furniture industry. The report emphasizes IKEA's ability to redefine roles within the value chain and leverage the skills of its co-workers to generate innovative designs.

Business Management and
strategic management
1 | P a g e

Table of Contents
VRIO analysis of IKEA...............................................................................................................................3
Analysis.......................................................................................................................................................3
References...................................................................................................................................................6
2 | P a g e

VRIO analysis of IKEA
VRIO TABLE FOR IKEA
Factors Valuable Rare Inimitable Organized Competitive
Implications
if Exploited
Distribution
system
Yes Yes Yes Yes Sustainable
Competitive
Advantage
Distribution
Policy
Yes Yes Yes Yes Sustainable
Competitive
Advantage
Pricing
strategy
Yes No No Yes Competitive
Parity
Innovation Yes Yes Yes Yes Sustainable
Competitive
Advantage
Inventory
management
systems
Yes No Yes Yes Sustainable
Competitive
Advantage
Shopping
experience
Yes No Yes Yes Sustainable
Competitive
Advantage
Analysis
Valuable
Yes, it allows IKEA for differentiating itself from various competitors due to an innovation of
the business model as well as value chain that permits the company to produce that type of
democratic design. The combination of the democratic design along with the cost leadership
culture helps in evaluating the desired growth of the firm to a large extent. Considering the value
3 | P a g e

chain it is difficult for the firm to find cheap materials that can make them the loose sight of
quality affecting the rand image of the firm. The value chain depends on their respective
supplier’s capability for opening new stores if they cannot offer sufficient materials. The rise in
the demands for the IKEA's products throughout the competitive market areas concerned helps
the firm in responding to the various threats present within the market segments. The value chain
of IKEA provides unique links between the suppliers and the customers for maintaining a two-
way relationship with the company. IKEA also provides technical advice in order to work as per
the satisfaction level of the customers.
Rare
Yes, it has the rare designing processes. It has been seen that as compared with the competitors
no one has managed to get the easy designing processes like that of IKEA. This easy designing
makes the customers enjoy while working for the organization. Therefore, it is considered as to
be rare as to have the excellent combination of quality, price as well as designing in any other
competitor’s store along with the entire shopping experience. Furthermore, the strategic
capability model adopted by the firm has helped in evaluating the brand recognition by
minimizing the risks of unacceptability from the various stakeholders (Rothaermel, 2015).
Innovation is one of the strengths of the firm that helps in differentiating the capabilities of the
organization as compared with its respective competitors. IKEA has achieved success in
producing latest and innovative designs of the products as per satisfaction level of the customers
and this is seen to be rare among the other competitors within the concerned competitive market
areas.
Inimitable
It has been evaluated that the competitors will always within the experience curve. On the other
hand, if the competitors have the right combination of the skills, time and money along with the
corporate culture then they can easily imitate it within a certain amount of time. The firm has the
hybrid position which provides them the desired competitive advantage to differentiate with the
other furniture stores. The pricing strategy is not considered as to be inimitable when compared
with all its other competitors. Yes, there are issues associated with many other organizations
which do not have the desired resource or capability in order to enhance the selling of their
respective products within the market segments concerned. The sustainability strategy of the
4 | P a g e

organization reflects the focus of the firm on being ecological as well as inspiring people for
doing so. They are seen to have the ‘people and planet-positive strategy' which also provides
strong internal competition among the employees to bring the best designs and enhance the
quality of the products as per the satisfaction level of the customers (Simenstad & Johnsen,
2017).
Organizational Applicable
IKEA held a strong presence as well as brand recognition that has helped in evaluating the
desired growth of the firm in many other countries. It is vital for the firm to be hyperdynamic in
managing the different cultures throughout different parts of the world that can turn into threats.
There are few of the cultures which do not work for the firm but participate in their respective
value chain. IKEA has succeeded to do this in many countries like in Saudi Arabia. Higher
engagement of the respective customers within their supply chain as well as their strong
relationship with the respective suppliers. Considering the resources and capabilities, the firm is
capable to exploit the potential of its resources and capabilities in order to receive the full
competitive advantage. The core competence IKEA is their desired ability to redefine the roles of
their respective key participants within the value chain which also provides the required design
for living. Leveraging the skills of the respective co-workers of IKEA helps in enhancing their
potential capacity to come up with adequate designs.
5 | P a g e

References
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Simenstad, M. K., & Johnsen, E. S. (2017). AF Gruppen-valuation and the case study on
economic moats (Master's thesis, BI Norwegian Business School).
6 | P a g e