Is LARGEST = LEADING? For this largest furniture retailer, it surely has a leadership advantage…

Tuesday: Return Driven Strategy FROM THE DESK OF MILES EVERSON: As someone with over 30 years of experience in the business and consulting industries, one of the things I've found to be a game-changer in managing my team is Return Driven Strategy (RDS). If you’re not yet familiar with this, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these principles help businesses achieve high levels of performance. Today, let's delve deeper into another aspect of the 9th tenet of RDS: Engage Employees and Others. Are you ready? Keep reading below to know what sets this multinational business conglomerate apart in its industry. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

Is LARGEST = LEADING? For this largest furniture retailer, it surely has a leadership advantage… What is the first thing that comes to your mind when you hear or read about “IKEA”? Do-it-yourself goods? Ready-to-assemble furniture? Mass produced, customizable, and affordable housewares? Before becoming the largest furniture retailer in the world, IKEA began as a mail-order sales business in 1943. Then, in 1948, the Swedish company started selling furniture and eventually opened its physical store in 1958. The first IKEA stores outside Sweden opened in Norway in 1963 and Denmark in 1969. From the 1970s to the 1980s, more IKEA stores opened across Europe. The succeeding years saw a further expansion in North America, the Middle East, South East Asia, and other parts of the world. Key Elements in the Business Strategy of IKEA Today, IKEA has become a multi-industry and multi-sector business. As we’ll discuss today, the success of this organization can be attributed to specific business strategies and tactics that revolve around offering well-designed and functional products at affordable prices. Let’s look at these strategies through the lens of Professor Joel Litman and Dr. Mark L. Frigo’s Return Driven Strategy (RDS)… IKEA’s Product and Pricing Strategies in the Context of RDS’ Tenet 2 (Fulfill Otherwise Unmet Customer Needs) Fundamental to the marketing strategy of IKEA is a selling proposition centered on offering a wide range of well-designed and functional home furnishing products, appliances, and accessories that are affordable to the mass market. For starters, note that the company’s flagship products are ready-to-assemble furniture. This strategy provides the company and its customers key advantages, which include easier storage, shipment, and lowered costs. What else? IKEA builds on the flexibility, customization, and mixing and matching of furniture modules. The ready-to-assemble characteristic of its products has also allowed the company to capitalize on mass consumer culture while remaining sustainable. As for pricing… Remember that affordability is part of IKEA’s selling proposition. Based on the prices of its products, the company utilizes a mix of penetration pricing strategy, price leadership, value-based pricing, and cost-plus pricing strategy. If we look at these things through the lens of RDS’ Tenet 2, we can see that IKEA fulfills its customers’ otherwise unmet needs by offering products that appeal to people’s varying preferences and ease of purchase. … and not only that! The company has also integrated other pricing considerations that revolve around value-based pricing and cost-plus pricing strategy to support its unique selling proposition. Because IKEA is the largest furniture retailer in the world, it has a price leadership advantage that allows it to determine prices in the market. IKEA’s Placement Strategy in the Context of RDS’ Tenet 3 (Target Appropriate Customer Groups) IKEA reaches its target market by determining and utilizing the most effective and efficient distribution channels. These center on global retail operations, which enable the company to reach global customers. IKEA’s retail stores typically occupy large floor areas to showcase the entirety of its product offerings. These stores are either located in outside cities or within city centers to make them relatively accessible to the public. What’s more? IKEA implements a variety of store designs and considerations depending on the geography of a particular location. For example: In some countries with limited land area and planning restrictions, retail stores serve as display galleries and provide pick-up services in which customers would have to make in-store or online reservations. Central to the purpose of IKEA’s business strategies is the realization or fulfillment of its major selling proposition or the “IKEA Concept”—offering well-designed and functional home furnishing products that are affordable to the public. By capitalizing on mass production and mass consumption, the company has achieved a reputation for being a high-volume furniture retailer, targeting appropriate customer groups and making sure these customers would transact with their local IKEA stores repeatedly. — If you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out “Driven” by Professor Litman and Dr. Frigo. Click here to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm. Hope you found this week’s insights interesting and helpful.     What makes you want to stay at a company in the long term? Learn more about the factors that make employees engaged and want to stay in a firm in next week’s article!