Final answer:
IKEA's competitive advantage is supported by innovation in product design, aggressive marketing, and efficient cost structure, not solely on exploiting low-cost manufacturing which is combined with an external supplier network.
Step-by-step explanation:
IKEA's competitive advantage extends beyond simply low-cost manufacturing. The retail giant strategically leverages innovation in product design and functionality to cater to consumer preferences and to stay ahead of competitors. Fostering relentless innovation, as emphasized by Samsung's CEO Gregory Lee, can provide a critical edge that translates into above-normal profits. IKEA also employs aggressive marketing strategies to strengthen its brand and attract customers, supporting its position in the market.
To maintain cost advantages, IKEA explores efficiencies in its production model, much like Amazon, which has thrived by undercutting competitors' prices. However, IKEA's dependence on external suppliers is also a factor in its operations that can impact its cost-efficiency and agility. Competitively, companies that can produce cheaper or superior products, like Amazon and IKEA, not only increase their profits but also contribute to overall economic gains by providing consumers with more value for their money.