Business Strategy of IKEA, Dell, 7-11 Companies Case Study

Introduction

Competition in the business environment continues to increase with the development of technology, increase in internet connectivity and expansion of the market bases. Several international companies expand their market bases and develop more consumer-friendly goods and services in order to cope up with the competition (Cory 46).

Several business ideas take centre-stage as businesses strive to remain relevant in the market under such circumstances. Companies continue to develop innovative ideas in the production sector to maintain their customer base as well as win the market bases of their competitors. In the wake of increased technological advancement and communication development, the pressure of maintaining the market bases keep rising in the business world.

Sustainability of businesses depends upon the ability of the firm to supply the right quantity of goods with high quality to the right customer base at the right time. For this reason, the competition in the supply chain of goods and services proves to be more vital in sustainability than the competition between individual companies.

Supply chain competitive advantage depicts the capabilities of a company to develop strong, sustainable, and defensible position over its rivals in the market (O’shannassy 175). In order to achieve this, there is need for adequate market information for the business entity to conquer the rivals. Numerous practices continue to arise in the competition sector as creative firms aim to stump their authority in the markets.

Dell Inc

With the aim of maintaining the market base, the company developed a mechanism of understanding the specificities of consumer needs and developing goods that are purely satisfy such needs. For example, the needs and demands for individual users of computers vary widely with the needs of computers for companies and other organizations.

Understanding the specific needs of each consumer group and developing computers and other electronic gadgets from those particular needs provide the basis for which Dell has a competitive edge over other computer application manufacturers.

Most multinational companies in the computer applications and electronic sector tend to assume that the needs and demands of their products are constant regardless of the part of the world they target. However, Dell understands that developing market demand statistics for a particular region in the world require an in-depth understanding of the consumer needs in such areas (Buchanan and Simmons 1).

In such context, the development of customized goods for the consumer becomes relatively easy given that they understand their demands and needs. Therefore, Dell enjoys more customer information thus improving its chances of consumer satisfaction. This helps in tightening the grip they already have in the market base.

Production of goods from Dell Company begins from an order by consumers. The production team receives an order and develops a document with detailed description of the kind of machine the consumer needs. In this document, the unique configurations and settings as per the consumers’ descriptions help in the assembly and manufacture of the good using Dell diagnostics.

This is contrary to other firms that manufacture their goods, send to the market, and let the consumers extract their needs from the company’s own configurations. In such a setting, the ability of consumers to enjoy the services of such goods greatly decreases, thus leading to low quantity of sales (Buchanan and Simmons 2).

In the Dell production unit, a system of aftersales service is in place. In case a good develops a problem, the buyer simply calls the company, and the production team draws diagnosis from the document developed when ordering the machine in question.

Buchanan and Simmons in their article note further that supply chain in the business world provides a great opportunity for profit maximization (3). In the liberal markets and the capitalist world, the supply of goods goes through a system of chains passing through several intermediaries before reaching the final consumer. If the number of intermediaries is high, the profit margins greatly reduce. For this reason, Dell has a fixed number of suppliers in the market. This helps in cost reduction thus leading to increased revenue.

IKEA

The Swedish largest furniture supplier IKEA was founded more than seventy years ago; the mission of this company remains the development and supply of cheap furnishings to consumers. In order to maintain the supply of cheap furniture to the large customer base, IKEA management teams developed several strategies.

For example, the use of low priced raw materials, the purchase of supplier capabilities, and development of strong supplier relationships form the basis for success of this firm. In the production segment, the firm replaced the use of more expensive oaks with the use of less expensive but high quality pines for teak woods. This helps in reducing the costs of production while maintaining the quality of goods produced (Buchanan and Simmons 4).

Consolidation of suppliers is important in the success of businesses. IKEA resorted to highly efficient suppliers of materials to engage in long-term business in order to reduce the cost of production. To enhance consolidation, Vietnam has been IKEA’s main source of raw materials for the production segments.

This consolidation of supplies ensures efficiency in the transport, procurements, and accountability in the raw materials sector. Even though the risks of engaging one supplier are high, the reliability of the suppliers plays an important role in the success of the business.

In the business world, building long-term relationship and partnership is basic for successful business life. IKEA enjoys this kind of relationship with most of the suppliers of the furniture they sell. Such relationships occur through great working partnership with the suppliers.

IKEA gives financial and business advice to their suppliers on how to find the best raw materials and produce at cheaper costs. Often the business firms would engage different kind of suppliers depending on the cost. However, developing a partnership in which one party engages in offering financial advice to the other on ways of minimizing costs is difficult (Buchanan and Simmons 5).

Most firms would consider this as an excess baggage in the production chain thus would opt out for established suppliers at relatively higher prices. However, IKEA enjoys providing advice to the suppliers on the best production methods and cost minimization procedures. In such situation, the suppliers often stick with IKEA leading to sustainability in the production and supply of furniture to the market.

IKEA also offers consumer choice production system. In the display segment, there exist catalogues developed in artistic designs of the trending furniture styles. Therefore, customers can enjoy the display and choose from the catalogue the kind of designs they need. It is from these choices that IKEA gives direction to the suppliers to deliver.

This method helps in reducing the number of in-store furniture displays. Similarly, consumers have the liberty to make choices of their preferred furniture designs rather than picking from the already manufactured designs available in the stores. This helps in consolidation of the customer base, as well as reducing the quantity of investment held by furniture at the display stores (Buchanan and Simmons 5).

The marketing strategy put in place by the company encourages consumers to spend more time in the showrooms thus increasing the chances of purchases. Having understood the consumer purchasing behavior, IKEA developed an aesthetic interior design with great ambience in which the customers enjoy a walk through. The arrangement of the furnishings and the furniture in the storerooms gives consumers desire to make more purchases (Torekull and Kamprad 247).

The store’s unique floor space plan encourages shoppers to walk through the entire set-up with ease. Similarly, children playgrounds fitted with toys and baby-sitting facilities are available within the stores. This ensures that parents have ample time to shop without interference from their children.

Most business firms do not offer such facilities, as they require more expenses. Clearly, this is a great step towards gaining competitive advantage over competitors. However, IKEA masters the needs and aspirations of different kinds of customers and puts them into consideration in the plans and designs of the store chains across the world.

Seven-Eleven Japan

Seven-Eleven is the leading retailer chain in food products such as rice balls, bread, pasta, and box lunches in Japan. Company has mastered the art of technology use, especially in the credit card and e-commerce sectors to boost their services to consumers. Customers can easily make orders via the internet and pay bills using the credit cards, thus ensuring convenience and efficiency.

This coupled with the fact that, Seven-Eleven offers its service on a twenty-four hour basis, the consumers easily access the goods at cheaper cost with ease (Buchanan and Simmons 5). The sustainability of this advantage lies upon the employment of efficient technologically well-informed experts to ensure success.

Given the high number of consumers in the market, the company’s ability to supply products as per the market demands becomes difficult. In order to counteract this, Seven-Eleven developed a high-level of manufacturer relationship, as well as supply relationships. Even though this meant sharing information with the supplier competitors, it proved successful in market conquest. Exclusive relationship between the company and vendors plays an important role in the market capitalizations.

With the aim of maximizing production and supply to the consumer, engagement with individual vendors became hectic and costly. The company, therefore, encouraged the vendor to form a cooperative society to consolidate the costs and revenues of the business (Buchanan and Simmons 7).

The Japanese Delicatessen Food Cooperative Society is responsible for focused working, improved standards of productions and protection of the vendors against other competitors. Putting together the work forces ensures quality and efficiency in productions and distributions of the food products to the customers.

Question Responses

In the current competitive business world, several companies continue to build competitive advantages over their rivals through the sales and distribution segments. The choices of supply chains and distribution channels help such companies develop high levels of consumer demand goods thus increasing their sales.

Most companies engage in understanding the common consumer trends and the dynamics with which they evolve in order to develop a successful competitive distribution channel (Johnson and Scholes 78).

For example, Dell developed a coherent position in the PC’s by developing a telephone-based sales and an order scheme; it aimed at replacing the traditional distribution behavior in which the consumer derived their satisfaction from the company configurations. With the ability of individuals and firms to receive customized PC’s the supply and sales by the company improved.

The common goal of the three companies in developing competitive advantage in the market is based on consumer satisfaction and understanding at all levels in the supply chain. Dell in its contexts ensures that the consumer, whether individual or firms, get customized computers and electronics. IKEA, on the other hand, understands the consumers’ needs in the markets against the costs incurred in purchases.

For this reason, IKEA chain stores have catalogues from which the consumers can pick their desired designs for manufactures. Seven-Eleven, on its part, draws the service of internet as consumers make online orders for the foodstuffs they need. All the services are interrelated and ensure that the needs and designs of consumers form the basis for the entire supply. These moves have helped the three companies to develop a sustainable competitive edge over their rivals in the market.

According to Klein (319), competitive advantages developed by companies ensure sustainable success if they maintain the trend into the future. For this reason, the firms that develop competitive advantages must come up with measures to ensure their sustainability. Market production and supply sustainability depends on the ability of the firms to supply quality goods and service to the consumers.

In Dell’s scenario, the market capitalization strategy enables the firm to supply more customized computers and electronic to both individual and firms. Similarly, the document developed at the reception of an order ensures ease of telephone diagnosis of problem in the gadget thus developing a sense of warranty.

IKEA, on the other hand, with an aim of developing cheap and quality furniture to its wide customer base, embarked on acquiring cheap raw materials from Vietnam (Torekull and Kamprad 249). This proves to be advantageous to the firm since it has been receiving cheap and quality pines for production. The ability to produce more furniture at relatively low prices provides a basis for more sales thus increasing the chances of business sustainability.

Diversity in production plays an important role in maintaining the customer base, thus ensuring sustainability of the competitive advantage. For instance, Seven-Eleven employs a group of innovative individual responsible for analyzing the dynamic needs of the markets to ensure that production remain relevant to the market needs.

Developing a variety of goods and foodstuffs plays an important role in the success of Seven-Eleven. When the first quality packed-lunch joined the Japanese market from the firm, profits rose as the customers realized the packed lunch offered the same quality as homemade lunch (Ishikawa and Nejo 37). The number of people heading back home during lunchtime decreased as more individuals in the working class embraced the Seven-Eleven box lunches.

Conclusion

Business entities must supply products and services that satisfy customers’ needs in order to survive and prosper in the business world, as well as survive competition from their competitors. The competitive advantage of a firm arises from the differences between the value it offers to the customers and the cost with which such values arise.

Competitive advantage arises if the customers develop a perception about the superiority of a product or service over similar services. In such a circumstance, the customers’ purchasing power increases. Similarly, competitive advantage may arise when a firm totals costs of production and supply falls below those of the average competitors in the market.

Works Cited

Buchanan, Lauranne, and Carolyn Simmons. “Competitive Advantage through Channel Management.” Thunderbird 1 (2004): 1-7. Print.

Cory, Henneth. “Can Competitive Intelligence Lead to a Sustainable Competitive Advantage?.” Competitive Intelligence Review 7.3 (1996): 45-55. Print.

Ishikawa, Akira, and Tai Nejo. The Success of 7-Eleven Japan Discovering the Secrets of the World’s Best-Run Convenience Chain Stores. Singapore: World Scientific Pub., 1998. Print.

Johnson, Gerry, and Kevan Scholes. Exploring Corporate Strategy. 5th ed. London: Prentice Hall Europe, 1999. Print.

Klein, Jeremy. “Beyond Competitive Advantage.” Strategic Change 11.6 (2002): 317-327. Print.

O’shannassy, Tim. “Sustainable Competitive Advantage or Temporary Competitive Advantage: Improving Understanding of an Important Strategy Construct.” Journal of Strategy and Management 1.2 (2008): 168-180. Print.

Torekull, Bertil, and Ingvar Kamprad. IKEA: The Story of Ingvar Kamprad & IKEA, the World’s Leading Home Furnishing Company. New York: HarperCollins, 2005. Print.

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