The document provides an overview of IKEA's strategic development history and outlines a strategic analysis for its future direction. Part 1 analyzes IKEA's past strategies including its low cost, high quality approach and international expansion. Part 2 conducts external PESTEL and Porter's Five Forces analyses of the furniture industry as well as an internal SWOT analysis of IKEA. Part 3 will identify strategic options and make recommendations for IKEA's future strategic path.
The project analyses the importance of branding for Ikea and can help us to find out about IKEA's SWOT analysis and the STP process for Ikea. It also gives information on Ikea's Vision and Mission and Ikea's Marketing Mix, Ikea's Pestle Analysis, Ikea's Five Forces Model, Ikea's History and Ikea's Products and Services.
IKEA was founded in 1943 by Ingvar Kamprad in Sweden. It is known for its flat-pack furniture and focus on affordable, functional design. IKEA publishes an annual catalog and has expanded to over 267 stores in 44 countries. Its vision is to offer well-designed home furnishings at low prices so that many people can afford them. IKEA is also committed to environmental sustainability and social responsibility.
International Business Strategy of IKEASungwhan Kim
IKEA has been able to reduce the price of its furniture by outsourcing production to low-cost regions like Eastern Europe and Asia. It maintains close relationships with over 1,400 suppliers, with the majority located in China and Poland. IKEA owns the rights to its product designs and minimizes costs through outsourcing all production activities while developing extensive supply chains abroad. It also established Swedwood as a subsidiary supplier with advanced production facilities, mainly in Eastern Europe, to further reduce costs. In China, IKEA planned to open 10 stores by 2010 to reflect Chinese apartment layouts and offer rare home delivery given low car ownership rates.
IKEA is a global furniture retailer founded in Sweden in 1943. It has grown from a one-man mail order business to over 300 stores worldwide serving over 699 million visitors annually. IKEA pursues a strategy of low-cost leadership by designing furniture for efficient production, packaging, and transportation. It encourages customers to assemble products themselves, helping keep prices low. IKEA has found success using standardized products, economies of scale, and a large global supply network to maintain low prices despite expanding internationally.
IKEA was founded in 1943 in Sweden by Ingvar Kamprad with a vision of providing well-designed, affordable home furnishings. In the late 1950s, IKEA began focusing solely on furniture and pioneered a new retail model of flat-packed furniture that customers assemble themselves, keeping costs and prices low. This innovative strategy enabled IKEA to grow rapidly and become the world's largest furniture retailer, with 287 stores globally by 2011 and annual sales of $24.7 billion. The document discusses IKEA's past growth and potential future strategic positioning as furniture retailing continues to evolve.
- IKEA is a Swedish multinational group that sells ready-to-assemble furniture, appliances, and home accessories. It was founded in 1943 and is headquartered in the Netherlands.
- IKEA's vision is to offer well-designed, functional home furnishing at low prices so that the majority of people can afford them. It has grown from a one-man mail order business to over 300 stores worldwide serving over 699 million visitors annually.
- IKEA sources materials globally, with top suppliers in China, Poland, Sweden, Italy, and Germany. It pursues a strategy of cost leadership through standardized, low-cost products while allowing some local product customization and marketing adaptations across its stores.
This slide was prepared by me, for my term paper presentation on IKEA's operations management.
Slide comprises of a brief company overview with its mission & vision, global outlet locations, product lines, key aspects of operation functions, swot and conclusion.
All information were collected from secondary sources.
IKEA has been successful for over 70 years due to its strong company culture centered around founder Ingvar Kamprad's values of affordability, functionality and accessibility. Kamprad instilled a process-oriented culture that encourages continuous self-improvement, innovation and egalitarian treatment of employees. Storytelling about IKEA's history and values helps maintain a cohesive culture across its global operations.
The project analyses the importance of branding for Ikea and can help us to find out about IKEA's SWOT analysis and the STP process for Ikea. It also gives information on Ikea's Vision and Mission and Ikea's Marketing Mix, Ikea's Pestle Analysis, Ikea's Five Forces Model, Ikea's History and Ikea's Products and Services.
IKEA was founded in 1943 by Ingvar Kamprad in Sweden. It is known for its flat-pack furniture and focus on affordable, functional design. IKEA publishes an annual catalog and has expanded to over 267 stores in 44 countries. Its vision is to offer well-designed home furnishings at low prices so that many people can afford them. IKEA is also committed to environmental sustainability and social responsibility.
International Business Strategy of IKEASungwhan Kim
IKEA has been able to reduce the price of its furniture by outsourcing production to low-cost regions like Eastern Europe and Asia. It maintains close relationships with over 1,400 suppliers, with the majority located in China and Poland. IKEA owns the rights to its product designs and minimizes costs through outsourcing all production activities while developing extensive supply chains abroad. It also established Swedwood as a subsidiary supplier with advanced production facilities, mainly in Eastern Europe, to further reduce costs. In China, IKEA planned to open 10 stores by 2010 to reflect Chinese apartment layouts and offer rare home delivery given low car ownership rates.
IKEA is a global furniture retailer founded in Sweden in 1943. It has grown from a one-man mail order business to over 300 stores worldwide serving over 699 million visitors annually. IKEA pursues a strategy of low-cost leadership by designing furniture for efficient production, packaging, and transportation. It encourages customers to assemble products themselves, helping keep prices low. IKEA has found success using standardized products, economies of scale, and a large global supply network to maintain low prices despite expanding internationally.
IKEA was founded in 1943 in Sweden by Ingvar Kamprad with a vision of providing well-designed, affordable home furnishings. In the late 1950s, IKEA began focusing solely on furniture and pioneered a new retail model of flat-packed furniture that customers assemble themselves, keeping costs and prices low. This innovative strategy enabled IKEA to grow rapidly and become the world's largest furniture retailer, with 287 stores globally by 2011 and annual sales of $24.7 billion. The document discusses IKEA's past growth and potential future strategic positioning as furniture retailing continues to evolve.
- IKEA is a Swedish multinational group that sells ready-to-assemble furniture, appliances, and home accessories. It was founded in 1943 and is headquartered in the Netherlands.
- IKEA's vision is to offer well-designed, functional home furnishing at low prices so that the majority of people can afford them. It has grown from a one-man mail order business to over 300 stores worldwide serving over 699 million visitors annually.
- IKEA sources materials globally, with top suppliers in China, Poland, Sweden, Italy, and Germany. It pursues a strategy of cost leadership through standardized, low-cost products while allowing some local product customization and marketing adaptations across its stores.
This slide was prepared by me, for my term paper presentation on IKEA's operations management.
Slide comprises of a brief company overview with its mission & vision, global outlet locations, product lines, key aspects of operation functions, swot and conclusion.
All information were collected from secondary sources.
IKEA has been successful for over 70 years due to its strong company culture centered around founder Ingvar Kamprad's values of affordability, functionality and accessibility. Kamprad instilled a process-oriented culture that encourages continuous self-improvement, innovation and egalitarian treatment of employees. Storytelling about IKEA's history and values helps maintain a cohesive culture across its global operations.
The document discusses research conducted with prospective furniture buyers on their perceptions of DIY furniture assembly and different furniture brands. It also analyzes IKEA's marketing strategy, covering their product range, pricing, store placement, promotional activities and competitive landscape in the home furnishings market. Finally, it proposes communication objectives and promotional tools to introduce the IKEA brand in the Philippines.
Ikea Invades India - Market Research report on entry strategy in IndiaManeesh Garg
IKEA is considering entering the Indian market. India represents a large opportunity for furniture sales, with a growing middle class and rising incomes. However, the Indian furniture market is currently dominated by thousands of small, unorganized local players. IKEA would bring international design and quality standards to India, as well as its business model of low prices enabled by flat-pack furniture. A joint venture with a large Indian partner like AV Birla Group could help IKEA navigate the market successfully. Competitors in India range from local mom-and-pop shops to national retail chains, but none offer the one-stop shopping experience and globally recognized brand of IKEA.
Ikea struggled when it first entered the US market in 1985. It directly copied its successful European business model without considering important differences in American culture and consumer habits. This led to issues with its product assortment, lack of appropriate services, and an unfamiliar Scandinavian design aesthetic. Ikea's strategy needed to be revised to better adapt to the fragmented US furniture market in order to achieve its goal of high growth and 50 stores by 2013.
This document provides a summary of IKEA, the world's largest furniture retailer. It discusses IKEA's history, strengths such as low prices and flat packaging, weaknesses like limited product designs. It also analyzes opportunities for growth in Asia and online sales. Threats include economic concerns reducing disposable income. A PESTEL analysis examines the business environment. The document reviews IKEA's market position, competitors, and maintains the largest market share for furniture retailers.
IKEA is a Swedish multinational group of companies that designs and sells ready-to-assemble furniture (such as beds, chairs and desks), appliances and home accessories. It has been the world's largest furniture retailer since at least 2008.
This presentation briefly will elaborate how IKEA has adopting Porter's Five Forces and Value Chain Analysis in order to maintain its competitive edges over its rivals in furniture market all over the globe by providing good quality furniture at a lower price tag. Hence by bringing in innovative design, improved functionality, low cost operating expenditures and offering excellent quality at lower prices, IKEA's has proved to be a success.
IKEA was founded in 1943 in Sweden by Ingvar Kamprad with the goal of providing well-designed, affordable home furnishings. IKEA has since expanded globally and in fiscal year 2015 had total sales of €31.9 billion across 328 stores in 28 countries. Some of the challenges IKEA faces include maintaining low costs while expanding supply chains and addressing environmental and social responsibility issues across its global operations. To continue driving growth, IKEA is focusing on expanding e-commerce, unique store formats, and customizing products for local markets.
This case study is about a multinational company which sells ready to assemble furniture and home accessories. According to the economics records as at 2008 this is the world largest furniture retailer. (Forbes, 2013)
This report describes about the main strategies which IKEA use to approach to different markets with different consumers and with them IKEA has evolved into the largest furniture retailer in the world with approximately 300 stores in 38 countries and revenues topping $21.5 billion in 2009. Its top countries in terms of sales include Germany, 16 percent; United States, 11 percent; France, 10 percent; United Kingdom, 7 percent; and Italy, 7 percent. (Business week, 2005)
According to the final decision IKEA has made a different way of shop for furniture with the time develops and it has reach to the expectations of its customers according to their expectations.
Finally, in the conclusion of the report shows the final view of the researcher about the finding regarding to the IKEA strategies throughout the research and final judgment which make about the given case.
IKEA is the world's largest furniture retailer founded in Sweden in 1943. It sells flat-pack furniture and home goods through its 301 stores across 37 countries. IKEA pioneered affordable yet functional design through cost-cutting like flat-packing and using its trademark style guide. It aims to improve everyday life through well-designed, affordable home products while maintaining sustainability and positive social and environmental practices.
IKEA is a global furniture retailer known for its flat-pack furniture and affordable prices. It operates 330 stores across 40+ countries. The document discusses IKEA's history, vision, and marketing strategies. Key points:
- IKEA cuts costs through modular design, self-assembly by customers, and sourcing from long-term partners. This supports its overall cost leadership strategy.
- It develops complementary services like in-store restaurants and play areas to manage demand and make waiting more enjoyable.
- IKEA's global expansion strategy standardizes operations while customizing some elements for local cultures. It has grown rapidly by maintaining quality as it enters new markets.
IKEA is a Swedish furniture retailer founded in 1943. It has annual revenues of $37.6 billion from 340 stores in 28 countries. IKEA cuts costs through supply chain control, bulk purchasing, efficient design, and requiring customers to assemble products themselves. Their target market includes young professionals and families. While IKEA has adapted stores and products for different cultures, their DIY model is not as successful in Asia. Moving forward, IKEA could further expand in emerging markets like China and India.
This document provides an overview of IKEA, including its business, vision, mission, strategy, history, and PESTEL analysis. Some key points:
- IKEA is an international home products company that sells ready-to-assemble furniture and home accessories.
- Its vision is to create a better everyday life for many people. Its mission is to offer well-designed, affordable home goods.
- It follows strategies of low prices, quality products, and flat-pack furniture packages for low-cost shipping.
- IKEA has expanded globally since its founding in Sweden in the 1940s. It now has over 400 stores worldwide.
Comparison of Marketing Mix of IKEA in Four CountriesFatima Arshad
Report Contains Marketing Mix of IKEA. In this report there is comparison of 4Ps of IKEA in Four Countries i.e Sweden, UK, China and India.
This report is result of the efforts of four people.
(1) IKEA was founded in 1943 in Sweden by Ingvar Kamprad and is now the world's largest furniture retailer, operating 267 stores in 44 countries. (2) The company's vision is to offer a wide range of well-designed, functional home furnishings at low prices so that many people can afford them. (3) IKEA has grown significantly over the years and now employs over 104,000 people worldwide, reaching customers through their large catalog and stores known for their self-assembly furniture and coordinated room displays.
This document is a case study analysis of IKEA, the largest furniture retailer in the world. It provides background information on IKEA's history, vision, mission, objectives, organizational structure, and financial analysis. The case study analyzes how IKEA became successful by pioneering affordable flat-pack furniture and applying a low-cost business model. It also summarizes IKEA's financial growth from 2009 to 2010, with increases in net income, revenue, and gross profit driven by new store openings and sales growth.
Ikea, building a sustainable supply chain Radu Acalfoaie
IKEA strategy is to control and coordinate the value chain from raw material, production and range development to distribution in the stores. Their vertical integration including the backward integration of the manufacturing arm Sweedwood and extension of their activities from furniture factories to control raw materials, saw mills, board suppliers and other component factories.
They have used life cycle analysis of products through the supply chain to determine purchasing, manufacturing and consumer strategies.
That makes the supply chain management one of the most important functions in the company and a triple-bottom-line approach has increased economic profit while reducing social and environmental loses.
IKEA triple-bottom-line approach consists from:
• Economy/profit
• Ecology/planet
• Equity/people
Inventory system and supply chain of IKEA multi national furniture industryHaider Sabir
IKEA has an inventory management system designed to support its vision of providing affordable home furnishings. It uses sustainable materials and negotiates long-term contracts with suppliers to keep costs low. IKEA stores products in flat packages and encourages self-assembly and retrieval to minimize handling costs. Inventory is managed through automated high-flow warehouses and manual low-flow warehouses. Logistics are outsourced to experienced partners to efficiently deliver products to IKEA's 355 stores worldwide.
This document discusses IKEA's business model and sources of competitive advantage. It describes IKEA as a global furniture retailer founded in Sweden in 1943 that designs and sells ready-to-assemble furniture and home goods. IKEA pursues a cost leadership strategy through sourcing components globally, manufacturing efficiently, and minimizing inventory costs. Its strong supply chain and global network of stores and distribution centers are key competitive advantages. IKEA has found success by targeting young customers and making furniture accessible and affordable while also creating an enjoyable shopping experience. However, weaknesses include a lack of customer focus and product innovation.
Global Strategy andOrganizationGlobal Strategy andOrgani.docxwhittemorelucilla
Global Strategy and
Organization
Global Strategy and
Organization
c h a p t e r
Learning Objectives
In this chapter, you will
learn about:
> IKEA’s Global Strategy
Furniture retailer IKEA is a Swedish company that has transformed itself into a
global organization over the past three decades. Ingvar Kamprad founded the firm
in Sweden in 1943 when he was 17 years old. IKEA originally sold pens, picture
frames, jewelry, and nylon stockings—any product that Kamprad could sell at a low
price. In 1950, IKEA began selling furniture and housewares. In the 1970s, the
company began expanding into Europe and North America. IKEA’s philosophy is to
offer quality, well-designed furnishings at low prices. The company designs “knock-
down” furniture that the customer purchases and then assembles at home. Designs
implement functional, utilitarian, and space-saving features, with a distinctive Scan-
dinavian style.
IKEA Group sales for the fiscal year 2006 totaled 17.3 billion euros, mak-
ing IKEA the largest furniture retailer in the world. Its stores, usually located in
major cities, are mammoth, warehouse-style outlets, with each stocking approxi-
mately 9,500 items, including everything for the home—from sofas to plants to
kitchen utensils.
IKEA is now owned by a Dutch-registered foundation controlled by the Kam-
prad family. Its corporate offices are in the Netherlands, Sweden, and Belgium.
11
312
1. The role of strategy in
international business
2. The integration-responsiveness
framework
3. Distinct strategies emerging
from the integration-
responsiveness framework
4. Organizational structure
5. Alternative organizational
arrangements for international
operations
6. Building the global firm
7. Putting organizational change in
motion
CAVUMC11_312-343hr 10/15/07 11:26 AM Page 312
Product development, purchasing, and warehousing are concentrated in Sweden.
Headquarters designs and develops IKEA’s global product line and branding, often
in close collaboration with external suppliers. Approximately 30 percent of the mer-
chandise is made in Asia, and two-thirds in Europe. A few items are sourced in
North America to address the specific needs of that market, but 90 percent of IKEA’s
product line is identical worldwide. Managers at IKEA stores feed market research
back to headquarters in Sweden on sales and customer preferences.
IKEA targets people all over the world, with a focus on families with limited
income and limited living space. This global segment is characterized by liberal-
minded, well-educated, white-collar people—including college students—who care
little about status and view foreign products positively. Targeting a global customer
segment allows IKEA to offer standardized products at uniform prices, a strategy
that minimizes the costs of international operations. IKEA seeks scale economies by
consolidating worldwide design, purchasing, and manufacturing. It distinguishes
itself from conventional furniture makers that s ...
IKEA is considering entering the Sri Lankan market through both online and offline channels. It plans to partner with John Keels Holdings to establish a joint venture. An analysis of Sri Lanka's political, economic, social, and technological environment shows opportunities for IKEA's expansion. Porter's five forces model indicates moderate competition from local furniture brands. IKEA will position itself as providing high-quality, affordable products. Both social media marketing and traditional advertising will be used to promote the brand and generate sales through online and brick-and-mortar stores.
The document discusses research conducted with prospective furniture buyers on their perceptions of DIY furniture assembly and different furniture brands. It also analyzes IKEA's marketing strategy, covering their product range, pricing, store placement, promotional activities and competitive landscape in the home furnishings market. Finally, it proposes communication objectives and promotional tools to introduce the IKEA brand in the Philippines.
Ikea Invades India - Market Research report on entry strategy in IndiaManeesh Garg
IKEA is considering entering the Indian market. India represents a large opportunity for furniture sales, with a growing middle class and rising incomes. However, the Indian furniture market is currently dominated by thousands of small, unorganized local players. IKEA would bring international design and quality standards to India, as well as its business model of low prices enabled by flat-pack furniture. A joint venture with a large Indian partner like AV Birla Group could help IKEA navigate the market successfully. Competitors in India range from local mom-and-pop shops to national retail chains, but none offer the one-stop shopping experience and globally recognized brand of IKEA.
Ikea struggled when it first entered the US market in 1985. It directly copied its successful European business model without considering important differences in American culture and consumer habits. This led to issues with its product assortment, lack of appropriate services, and an unfamiliar Scandinavian design aesthetic. Ikea's strategy needed to be revised to better adapt to the fragmented US furniture market in order to achieve its goal of high growth and 50 stores by 2013.
This document provides a summary of IKEA, the world's largest furniture retailer. It discusses IKEA's history, strengths such as low prices and flat packaging, weaknesses like limited product designs. It also analyzes opportunities for growth in Asia and online sales. Threats include economic concerns reducing disposable income. A PESTEL analysis examines the business environment. The document reviews IKEA's market position, competitors, and maintains the largest market share for furniture retailers.
IKEA is a Swedish multinational group of companies that designs and sells ready-to-assemble furniture (such as beds, chairs and desks), appliances and home accessories. It has been the world's largest furniture retailer since at least 2008.
This presentation briefly will elaborate how IKEA has adopting Porter's Five Forces and Value Chain Analysis in order to maintain its competitive edges over its rivals in furniture market all over the globe by providing good quality furniture at a lower price tag. Hence by bringing in innovative design, improved functionality, low cost operating expenditures and offering excellent quality at lower prices, IKEA's has proved to be a success.
IKEA was founded in 1943 in Sweden by Ingvar Kamprad with the goal of providing well-designed, affordable home furnishings. IKEA has since expanded globally and in fiscal year 2015 had total sales of €31.9 billion across 328 stores in 28 countries. Some of the challenges IKEA faces include maintaining low costs while expanding supply chains and addressing environmental and social responsibility issues across its global operations. To continue driving growth, IKEA is focusing on expanding e-commerce, unique store formats, and customizing products for local markets.
This case study is about a multinational company which sells ready to assemble furniture and home accessories. According to the economics records as at 2008 this is the world largest furniture retailer. (Forbes, 2013)
This report describes about the main strategies which IKEA use to approach to different markets with different consumers and with them IKEA has evolved into the largest furniture retailer in the world with approximately 300 stores in 38 countries and revenues topping $21.5 billion in 2009. Its top countries in terms of sales include Germany, 16 percent; United States, 11 percent; France, 10 percent; United Kingdom, 7 percent; and Italy, 7 percent. (Business week, 2005)
According to the final decision IKEA has made a different way of shop for furniture with the time develops and it has reach to the expectations of its customers according to their expectations.
Finally, in the conclusion of the report shows the final view of the researcher about the finding regarding to the IKEA strategies throughout the research and final judgment which make about the given case.
IKEA is the world's largest furniture retailer founded in Sweden in 1943. It sells flat-pack furniture and home goods through its 301 stores across 37 countries. IKEA pioneered affordable yet functional design through cost-cutting like flat-packing and using its trademark style guide. It aims to improve everyday life through well-designed, affordable home products while maintaining sustainability and positive social and environmental practices.
IKEA is a global furniture retailer known for its flat-pack furniture and affordable prices. It operates 330 stores across 40+ countries. The document discusses IKEA's history, vision, and marketing strategies. Key points:
- IKEA cuts costs through modular design, self-assembly by customers, and sourcing from long-term partners. This supports its overall cost leadership strategy.
- It develops complementary services like in-store restaurants and play areas to manage demand and make waiting more enjoyable.
- IKEA's global expansion strategy standardizes operations while customizing some elements for local cultures. It has grown rapidly by maintaining quality as it enters new markets.
IKEA is a Swedish furniture retailer founded in 1943. It has annual revenues of $37.6 billion from 340 stores in 28 countries. IKEA cuts costs through supply chain control, bulk purchasing, efficient design, and requiring customers to assemble products themselves. Their target market includes young professionals and families. While IKEA has adapted stores and products for different cultures, their DIY model is not as successful in Asia. Moving forward, IKEA could further expand in emerging markets like China and India.
This document provides an overview of IKEA, including its business, vision, mission, strategy, history, and PESTEL analysis. Some key points:
- IKEA is an international home products company that sells ready-to-assemble furniture and home accessories.
- Its vision is to create a better everyday life for many people. Its mission is to offer well-designed, affordable home goods.
- It follows strategies of low prices, quality products, and flat-pack furniture packages for low-cost shipping.
- IKEA has expanded globally since its founding in Sweden in the 1940s. It now has over 400 stores worldwide.
Comparison of Marketing Mix of IKEA in Four CountriesFatima Arshad
Report Contains Marketing Mix of IKEA. In this report there is comparison of 4Ps of IKEA in Four Countries i.e Sweden, UK, China and India.
This report is result of the efforts of four people.
(1) IKEA was founded in 1943 in Sweden by Ingvar Kamprad and is now the world's largest furniture retailer, operating 267 stores in 44 countries. (2) The company's vision is to offer a wide range of well-designed, functional home furnishings at low prices so that many people can afford them. (3) IKEA has grown significantly over the years and now employs over 104,000 people worldwide, reaching customers through their large catalog and stores known for their self-assembly furniture and coordinated room displays.
This document is a case study analysis of IKEA, the largest furniture retailer in the world. It provides background information on IKEA's history, vision, mission, objectives, organizational structure, and financial analysis. The case study analyzes how IKEA became successful by pioneering affordable flat-pack furniture and applying a low-cost business model. It also summarizes IKEA's financial growth from 2009 to 2010, with increases in net income, revenue, and gross profit driven by new store openings and sales growth.
Ikea, building a sustainable supply chain Radu Acalfoaie
IKEA strategy is to control and coordinate the value chain from raw material, production and range development to distribution in the stores. Their vertical integration including the backward integration of the manufacturing arm Sweedwood and extension of their activities from furniture factories to control raw materials, saw mills, board suppliers and other component factories.
They have used life cycle analysis of products through the supply chain to determine purchasing, manufacturing and consumer strategies.
That makes the supply chain management one of the most important functions in the company and a triple-bottom-line approach has increased economic profit while reducing social and environmental loses.
IKEA triple-bottom-line approach consists from:
• Economy/profit
• Ecology/planet
• Equity/people
Inventory system and supply chain of IKEA multi national furniture industryHaider Sabir
IKEA has an inventory management system designed to support its vision of providing affordable home furnishings. It uses sustainable materials and negotiates long-term contracts with suppliers to keep costs low. IKEA stores products in flat packages and encourages self-assembly and retrieval to minimize handling costs. Inventory is managed through automated high-flow warehouses and manual low-flow warehouses. Logistics are outsourced to experienced partners to efficiently deliver products to IKEA's 355 stores worldwide.
This document discusses IKEA's business model and sources of competitive advantage. It describes IKEA as a global furniture retailer founded in Sweden in 1943 that designs and sells ready-to-assemble furniture and home goods. IKEA pursues a cost leadership strategy through sourcing components globally, manufacturing efficiently, and minimizing inventory costs. Its strong supply chain and global network of stores and distribution centers are key competitive advantages. IKEA has found success by targeting young customers and making furniture accessible and affordable while also creating an enjoyable shopping experience. However, weaknesses include a lack of customer focus and product innovation.
Global Strategy andOrganizationGlobal Strategy andOrgani.docxwhittemorelucilla
Global Strategy and
Organization
Global Strategy and
Organization
c h a p t e r
Learning Objectives
In this chapter, you will
learn about:
> IKEA’s Global Strategy
Furniture retailer IKEA is a Swedish company that has transformed itself into a
global organization over the past three decades. Ingvar Kamprad founded the firm
in Sweden in 1943 when he was 17 years old. IKEA originally sold pens, picture
frames, jewelry, and nylon stockings—any product that Kamprad could sell at a low
price. In 1950, IKEA began selling furniture and housewares. In the 1970s, the
company began expanding into Europe and North America. IKEA’s philosophy is to
offer quality, well-designed furnishings at low prices. The company designs “knock-
down” furniture that the customer purchases and then assembles at home. Designs
implement functional, utilitarian, and space-saving features, with a distinctive Scan-
dinavian style.
IKEA Group sales for the fiscal year 2006 totaled 17.3 billion euros, mak-
ing IKEA the largest furniture retailer in the world. Its stores, usually located in
major cities, are mammoth, warehouse-style outlets, with each stocking approxi-
mately 9,500 items, including everything for the home—from sofas to plants to
kitchen utensils.
IKEA is now owned by a Dutch-registered foundation controlled by the Kam-
prad family. Its corporate offices are in the Netherlands, Sweden, and Belgium.
11
312
1. The role of strategy in
international business
2. The integration-responsiveness
framework
3. Distinct strategies emerging
from the integration-
responsiveness framework
4. Organizational structure
5. Alternative organizational
arrangements for international
operations
6. Building the global firm
7. Putting organizational change in
motion
CAVUMC11_312-343hr 10/15/07 11:26 AM Page 312
Product development, purchasing, and warehousing are concentrated in Sweden.
Headquarters designs and develops IKEA’s global product line and branding, often
in close collaboration with external suppliers. Approximately 30 percent of the mer-
chandise is made in Asia, and two-thirds in Europe. A few items are sourced in
North America to address the specific needs of that market, but 90 percent of IKEA’s
product line is identical worldwide. Managers at IKEA stores feed market research
back to headquarters in Sweden on sales and customer preferences.
IKEA targets people all over the world, with a focus on families with limited
income and limited living space. This global segment is characterized by liberal-
minded, well-educated, white-collar people—including college students—who care
little about status and view foreign products positively. Targeting a global customer
segment allows IKEA to offer standardized products at uniform prices, a strategy
that minimizes the costs of international operations. IKEA seeks scale economies by
consolidating worldwide design, purchasing, and manufacturing. It distinguishes
itself from conventional furniture makers that s ...
IKEA is considering entering the Sri Lankan market through both online and offline channels. It plans to partner with John Keels Holdings to establish a joint venture. An analysis of Sri Lanka's political, economic, social, and technological environment shows opportunities for IKEA's expansion. Porter's five forces model indicates moderate competition from local furniture brands. IKEA will position itself as providing high-quality, affordable products. Both social media marketing and traditional advertising will be used to promote the brand and generate sales through online and brick-and-mortar stores.
OPERATIONS MANAGEMENT
7
OutlineIntroduction
Management is understood both in terms of its purpose, as those activities that take place to ensure that the primary company’s objectives, as outlined by its strategic plan, are accomplished. It is also understood as an assembly of senior employees answerable to performing this operation. Management can be better understood as all that is requisite to positioning a company in a way that will see into its long-term survival in a competitive industry. Again, an operations management model is a company’s way of expression on how it produces unique value.
The idea of operations management, just like strategic management, builds on this definition of strategic planning, recognizing that although planning is the prelude of operations management, it is insufficient if not followed by the deployment and implementation of the plan and the evaluation of the plan in action. Strategic management is a systems approach to identifying and making the necessary changes and measuring the organization’s performance as it moves toward its vision’. A company will realize its goals and vision if it applies operations management strategies with practice, forbearance, allegiance, hard work, and administrative learning. With each modification of the operations management plan, high-ranking employees will become better and more capable of deploying the plan, implementing updates, and evaluating organizational performance.
Market orientation is the basis of marketing. It sets on satisfying the market through an apprehension and reception to local needs. Those needs include final and intermediary customers, contenders and macro-environment. According to Narver and Slater (1990), market orientation leads to master operation. Because of the retail industry’s direct reach with the market and clients, it is logical to consider market orientation as a concept to evaluate the successes of IKEA and Tesco. This paper compares operations management of the two companies; it takes a closer look into marketing and corporate strategies. The paper further examines the appropriateness of the applied strategies and frameworks for each company in relation to its target customers and best practice. In so doing, this paper evaluates the mix of managing operations concepts and frameworks, which IKEA and Tesco apply to ensure their survival and market leadership.
Ingvar Kamprad Elmtaryd Agunnaryd (IKEA)
IKEA was founded in Sweden in 1943. It is a privately held, and deals globally in home products retailing handling pack furniture, accessories, and bathroom and kitchen products. The company distributes its products by its retail outlets. By this May (2010), IKEA had 313 shops in 37 countries. Most of these shops are in Europe, North America, Asia and Australia. The IKEA Group its own owns 276 shops in 25 nations. The rest 37 shops in16 territories are possessed and run by franchisees outside the IKEA Group. IKEA comprises of more than on.
IKEA has been the world's largest furniture retailer since the early 1990s. To make furniture affordable for many people, IKEA adopted a standardized marketing strategy and works with suppliers around the world. Initially, IKEA expanded successfully in Europe but struggled in the US, where products did not fit American needs and tastes. IKEA then localized its products and stores for each new market, such as making larger furniture for Americans. Today, IKEA pursues a cross-border strategy to balance low costs with strong responsiveness to local customer needs in global markets.
This document presents a strategic plan to help IKEA better reach the Silent Generation (those born between 1925-1945). Research methods included an online survey of 58 people, including 14 from the Silent Generation. Survey findings showed that most Silent Generation respondents lived alone or with one other, and over 1/3 found IKEA stores inaccessible. Price, quality and practicality were most important factors when buying furniture. Half found IKEA pricing good/excellent and over 1/3 said pricing was fair. The plan proposes improving store layout/accessibility, increasing help desks, developing new senior-friendly products, and implementing a marketing campaign to increase revenue from this demographic. The 3-phase plan will be implemented worldwide between
IKEA is a Swedish multinational group that manufactures and sells ready-to-assemble furniture, kitchen appliances and home accessories. It is the world's largest furniture retailer, with over 12,000 products sold in stores located in 35 countries. IKEA offers low-cost furniture and home accessories using a direct sales and flat-pack delivery model. It aims to provide affordable prices through efficient operations and sourcing materials in large volumes.
This document discusses IKEA's SWOT analysis and sustainable business planning. It provides background on IKEA's growth, product range, and vision for creating a better everyday life. The SWOT analysis identifies IKEA's strengths as its strong global brand and wide range of low-priced, functional products. Weaknesses include controlling quality and costs. Opportunities include growing demand for greener and cheaper products, while threats include social and market forces. IKEA uses strategic planning tools like SWOT analysis to improve strengths, opportunities, and address weaknesses and threats.
IKEA is a global brand with over 500 stores worldwide that sells affordable home furnishings. It carries over 9,500 products and had revenues of over $21 billion in 2008. IKEA uses a SWOT analysis to strategically plan its business. Its strengths include a strong brand known for low prices and functional products. Weaknesses include quality control and need for low costs. Opportunities exist in growing demand for greener and cheaper products. Threats include social and economic factors. IKEA addresses weaknesses and threats while capitalizing on strengths and opportunities to sustain growth.
Firm Strategy for Global or Multi-domestic OrganizationsAssignment Studio
Firms are utilizing and adopting several strategies as per nature of their business to accomplish mission and vision. In this report, several global strategies have been explored and the applications and practical implications have also been compared with a global firm. The operations of IKEA have been studied to see the outcomes of global strategy in its operations.
This document provides a summary of IKEA, the international home furnishings retailer, in 3 paragraphs:
IKEA is a privately held Swedish company that sells affordable, self-assemble furniture and home accessories through its 265 stores worldwide. It aims to offer well-designed, functional products at low prices through a flat-packed assembly model. IKEA was founded in 1943 in Sweden and has grown to over 100,000 employees with $36 billion in annual revenue.
IKEA focuses on simplicity and cost-consciousness throughout its operations. It works closely with over 1,500 global suppliers, particularly in China, to ensure low prices while maintaining quality. IKEA is also committed to environmental sustainability and social responsibility.
IKE
IKEA was founded in 1943 in Sweden and has grown to become the largest furniture retailer in the world. It achieves success through offering Scandinavian design at extremely low prices. IKEA visits consumers to understand local preferences and adapts products accordingly, such as adding deeper drawers for US wardrobes and more seating in California stores. While IKEA revolutionized furniture shopping through its self-assembly model and one-way store layout, drawbacks include potential quality issues and an overwhelming experience for some customers. IKEA continues to use market research and product differentiation to meet demands in local markets through a transnational strategy.
Assignment on Case- IKEA: DESIGN AND PRICINGanonymous
SUMMARY / BACKGROUND OF THE CASE
IKEA Swedish retailer
Dominates markets in 32 countries.
Corporate Mantra: “Low price with the meaning”
Good quality at a low price.
30-50% below competitors
Last 4 years – Retail prices reduced by 20%
IKEA is the world's largest furniture retailer known for its Scandinavian style flat-pack furniture. It has over 250 stores worldwide and offers around 9,500 products. IKEA uses a SWOT analysis to help achieve its sustainability goals. Some of IKEA's strengths that help it pursue sustainability include its global brand, vision of better lives for many, and strategic use of materials. IKEA sees opportunities in growing demand for greener products and focuses on solutions for sustainable living, resource use, and social responsibility.
How standardization benefits a business process and commercialisation?
What has allowed IKEA to be successful with a relatively standardised product and product line?
How does the experiential marketing approach help improve sales in Ikea?
Which features of ‘young people of all ages’ are universal and can be exploited by a global/regional strategy?
How does Corporate Social Responsibility (CSR) attract customers?
How does IKEA adapt its strategy for competing in international markets?
IKEA’s Social Initiative was created to manage the company’s social involvements on a global level. Why?
IKEA began as a small business started by Ingvar Kamprad in Sweden in the 1940s selling various goods. It began focusing solely on furniture in 1951 and opened its first furniture showroom in 1953. IKEA now has over 300 stores worldwide and has continued expanding into new countries globally. However, it also faces pressures like criticism over its UK store openings and a drop in profits attributed to expansion costs.
IKEA has achieved excellence through effective supply chain management and a focus on customer satisfaction. Key metrics include inventory levels, working capital, costs, quality, and innovation. IKEA uses large warehouses to hold over 9,500 products at low prices. It focuses on minimizing product touches to reduce costs by using self-service and flat-packed furniture. IKEA also promotes design through competitions and works to ensure quality standards are met by suppliers. Overall, IKEA's supply chain performance has contributed significantly to its global success.
IKEA is known for its low-priced, ready-to-assemble home furnishings. To stay competitive, IKEA embraced new technology and built a strong online presence. This report analyzes IKEA's online strategy, marketing programs, social media interactions, and wireframes from the perspective of 5 shoppers with different experiences. It also provides insights into 2 specific customer personas. IKEA's strategic focus on accessibility, affordability, and an engaging in-store experience has helped it become a global furniture competitor.
IKEA is the largest global furniture retailer operating in 41 countries with $32 billion in revenue in 2015. Founded in 1943 in Sweden by Ingvar Kamprad, IKEA originally sold pens and seeds from a shed. IKEA is known for its affordable Scandinavian designs through low prices and flat-packed furniture that customers assemble themselves. While IKEA has changed the way people shop for furniture through convenience and savings, their expansion has also led to some problems as customers must travel long distances and do the assembly themselves.
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1. Table of Content
1 Introduction.....................................................................................................................2
PART 1 – Recent past strategic development history of IKEA and its outcomes .............3
2 Strategic development history an overview....................................................................3
3 Pattern of strategy development in IKEA.......................................................................3
4 Anders Moberg’s era, low cost high quality strategy .....................................................4
5 International expansion strategy of IKEA ......................................................................4
6 IKEA’s corporate culture a way to its sustainability ......................................................5
7 IKEA’s product differentiation strategy that attracts the customers...............................6
8 Summary of IKEA’s recent past strategic development.................................................6
PART 2 – Current strategic situation of IKEA.....................................................................7
9 PESTEL analysis on furniture industry ..........................................................................7
10 Porter’s five forces for IKEA in furniture industry ........................................................8
11 SWOT Analysis for IKEA............................................................................................10
PART 3: Strategic directions for the future........................................................................13
12 Strategic clock to develop competitive strategy options...............................................13
13 Strategic direction using Ansoff Matrix .......................................................................14
14 Evaluating the strategic choice .....................................................................................15
15 Conclusion and Recommendation ................................................................................16
16 Bibliography .................................................................................................................17
2. 2
1 Introduction
This paper consists of three major parts that leads to the strategic development process for
IKEA. Part one evaluates the recent past strategies that IKEA pursued and its outcomes. It
identifies the strategic development process involved in its past and its consequences. Part
two evaluates the current strategic position of IKEA, current strategic position is been
identified by analysing the macro and micro environmental factors that influence the
performance of the organizations and identifying the strengths, weakness, opportunities and
threats of IKEA. Based on the above results, Part three deals with developing future strategic
choices that suits IKEA’s goal and mission and those choices are been evaluated to identify
the suitability, sustainability and acceptability in its context. Finally a strong recommendation
is been given to IKEA about its future strategic choice.
3. 3
PART 1 – Recent past strategic development history of IKEA and
its outcomes
2 Strategic development history an overview
IKEA is a leading furniture retailer that operates globally. The company was founded by
Kamprad in 1943, at that time he started selling pens, Christmas cards and seeds from a shed
on his family in Southern Sweden. In 1951, First catalogue is been realised, Kamparad
penned all the text himself. The company is been transformed into a huge company that
generates 23 billion Euros per annum. IKEA emerged one of the most successful companies
in retail business. Retail commentators and business analysts said that the success is based on
its well established long-term strategy that has clear focus on its customers and the skill in
implementing the strategies successfully (Economist, 2011, pp. 67-68).
IKEA pursued many strategies in the past to obtain the current top position. Some of those
were long-term changes and far-ranging implications for organisational structure and control.
IKEA had an understandable purpose and structured value in both business achievements and
both customers and employees relationship. Moreover, IKEA had focused on young furniture
buyers and also it targeted them to market its products. While looking into IKEA’s growth it
was organic growth, the company gradually expanded to a giant retailer. In the beginning the
stores were built in Scaninavia and it’s been expanded wherever it got opportunities.
Kamparad used the same retailing concept in all countries (Norman & Ramirez, 1993).
3 Pattern of strategy development in IKEA
Strategic development process of organisations is better to describe and understood typically
in terms of continuity. There is a tendency towards momentum of strategy (Miller & Friesen,
1980). Once an organization has adopted a particular strategy, it tends to develop from and
within that strategy, rather than fundamentally changing direction (Johnson & Scholes, 1997).
However, it depends upon the successfulness of the adopted strategy. For example, Company
like Burton Group transformed from manufacturing to retailing, which is a major change. In
IKEA’s case the company transformed itself from a small corner shop to a giant retailer.
However, the growth of the company was incremental and it adopted a particular strategy
“To offer a wide range of well designed, functional home furnishing products at cheap price”
4. 4
and stick to it by improving its resources and capabilities to meet its strategic requirement.
The company’s incremental strategy is been detailed in the following sections.
4 Anders Moberg’s era, low cost high quality strategy
In 1980’s IKEA remained economical in its spending, it relocated to Denmark to save
Swedish taxation. Anders Moberg became the CEO, his simplicity and business tactics of
understanding the customers and fulfilling their expectations encouraged the customers.
Anders Moberg dressed informally, he used to clock in just like other employees, he used to
stay in economically class hotels in international trips, and he used to travel on economy class
air-tickets and expected his executives to do likewise (Norman & Ramirez, 1993).
IKEA planned to deliver low-cost and high-quality products by redefining its relationship
with its suppliers by establishing 30 buying offices around the world. IKEA chosen most
economical suppliers over traditional suppliers, it made the shirt manufacturer to be
employed to produce seat covers. It is an impractical practice however, once suppliers join
into the IKEA network they got access to global markets and received technical assistance.
Suppliers leased equipments and they were trained to bring the quality up to world-class
standards. IKEA managed to procure 12,000 items from 1,800 suppliers in 45 countries at
approximate 20 to 40 percent lower cost compared to its competitors. Thus, IKEA developed
its core competence with good quality and cheap price.
Through the above strategy the company attracted most of the cost sensitive customers and
obtained a significant market share. The company attained its break-even and started offering
the best designs in low price that attracted most of the population. Now, it is time for the
company to expand its market. So Anders Moberg started looking opportunities in
international markets for expansion. The following section details the expansion strategy of
IKEA.
5 International expansion strategy of IKEA
Sweden is a very small country and it is logical, in a country like this if a business is very
strong and successful then it is reasonable to expand into international markets at some point.
IKEA found much bigger growth potential outside Sweden. IKEA was one of the leading
companies to become a global player. IKEA built its brand through its uniqueness on its
products and its low cost high quality strategy. The company believed that the brand
5. 5
awareness has always been higher than the company’s actual size and sales volume (Kling &
Goteman, 2003). He planned to expand the company using its internal funding itself, 15
percent of the turnover is being reinvested in expansion (Norman & Ramirez, 1993).
IKEA re-organized its supply chain as it was supposed to cope up with the widely dispersed
sources of components and high-volume orders made it imperative for the company to have
an efficient logistics system for ordering parts, integrating them into products and delivering
them to the stores with less cost of inventory management. IKEA has achieved this through
its world network of 14 warehouses. These provided storage facilities, acted as logistical
control points, consolidation centres and transit hubs and aided integration of supply and
demand, reducing the need to store production runs for long periods, holding unit costs down
and helping stores to anticipate needs and eliminate shortages (Baraldi, 2008).
6 IKEA’s corporate culture a way to its sustainability
In 1996, IKEA split into three groups, comprising the retailing operations, an organisation
holding the franchise and trademarks, and third one in banking and finance. The new
structure meant that the Kamprad’s family would not access to the capital of the business or
the right to inherit it. However, it would continue to have influence-rich roles in the
governance of IKEA. Kamprad believed that IKEA will survive, preserving both its
profitability and egalitarian culture. In 1999, Andres Dahlvig became a new president and
CEO for IKEA group of retail stores. In October 9, 1999, total sales profit of that special day
form the worldwide stores was divided equally amongst all co-workers and hard working
employees which was €84.85 million. This was one of the key strategies to improve the
working ability of the employees towards the organisation goal.
IKEA shopping online was introduced in the year 2000 which made easier way to buy the
products from home itself. It produced the furniture in fibreboard and particleboard for the
first time in same year. IKEA recovery was launched in 100 stores in Europe in 2003 by
which repaired and recycled instead of waste the materials. In 2005, IKEA made all type of
home products available under a roof. The next, IKEA labelled foods were launched about
150 foods with high quality in 2006. These new products launched every year shows that the
IKEA recognized the environment needs and made the valuable strategy. IKEA catalogue- it
was considered the major marketing medium tool. Catalogue was spent 70% of the annual
marketing budget. It was printed in 38 various editions in 17 languages of 28 countries. In
6. 6
2008, 110 million copies of catalogues were distributed which was three time higher than
bible prints available in United Kingdom (IKEA, 2011).
7 IKEA’s product differentiation strategy that attracts the customers
IKEA’s product range is developed to be extensive enough to have something that appeals to
everyone and to cover all functions in the home. The products are modern not trendy so they
are practical enough for everyday use. IKEA is the home furnishing specialist. IKEA
products are functional and appealing, and enable many people to improve their home life
through practical solutions to everyday problems. IKEA’s concept of marketing is that “We
do our part” by focusing on our part by designing consumer valuable products through
inexpensive materials in a novel way ad minimising production, distribution and retail costs
to benefit its customers through low price (Norman & Ramirez, 1993).
IKEA believes that products don’t appeal unless it represents good value for money. So, the
company is committed to have a good relationship with its suppliers to purchase good quality
products, economically. IKEA’s products are based on a functional approach to design. Its
designs products those are attractive, practical and easy to use. They don’t have unnecessary
features and they give genuine solutions for specific home furnishing needs and are made of
the most suitable materials for their purpose. IKEA makes sure that the quality of the product
must be appropriate for the intended use (IKEA, 2011).
8 Summary of IKEA’s recent past strategic development
IKEA identified its customer’s expectations and developed an inimitable core competency
through low cost high quality strategy to fulfil its customer needs. The company organized its
resources and capabilities to support its core competency. The company developed good
relationship with its suppliers to get cheap products. Its unique corporate culture and diversity
in management roles enable the company to compete more flexibly. Its diversified products
and unique presentation played an important role in its success. Its international expansion
strategy supported the company to create global brand awareness and to increase its market
share.
7. 7
PART 2 – Current strategic situation of IKEA
It is essential to understand the strategic position of an organization before choosing strategic
direction for future. There are two basic views to identify the strategic position of an
organization, one is external factors of the organization and the second is internal factors. The
external factors of an organization matters most to the success of a strategy, strategy
development is the process of seeking attractive opportunities in the market. Attractive
opportunities are those favours the internal capabilities on an organization. So, understanding
about external environment matters a lot in formulating future strategies. Internal
environment of an organization should be evaluated to identify the internal strength and
weakness of an organization. It also helps to identify the resource availability to pursue a new
strategy. It weights the internal capability of an organization. It also interrelated with the
external environment as if the environment changes the internal capabilities and resources
need to develop in order to match the external environment (Johnson, Scholes, &
Whittington, 2008).
There are several tools that could be used to analysis the external and internal environment of
an organization, they are PESTEL analysis which is used to analyse the macro-environment,
Porter’s five forces is used to analysis the micro-environment. SWOT analysis can be used to
analysis the internal strengths, weakness and external opportunities, threats of an organization
(Johnson, Scholes, & Whittington, 2008).
9 PESTEL analysis on furniture industry
PESTEL stands for political, economical, social, technological, environmental and legal
elements of a macro-environment. It provides a broad list of influences on the possible
success or failure of the strategies. In these elements Politics refer to the influence of
government policies upon the strategy, Economy refers to the macro-economic factors such
as business cycle, exchange rates and differential economic growth rates around the world.
Social refers to the factors such as demographics, ageing population and changing cultures
that influence the strategy. Technology refers to the elements such as automobiles,
aeronautics, internet that influences the strategy. Environmental stands for pollutions control
and policies related to green issues that may influence the strategy. Legal refers to the
legislative constraints, restrictions upon a company that may influence the strategy (Thomas,
2007).
8. 8
Political factors
There are fortunate political situations in European countries and Middle East countries.
IKEA has successful in international and domestic business portfolio. IKEA hopes that
Indian political unfavourable will be revolutionized soon to make foot prints in the country
(Economist, 2011).
Economical Factor
Economic downturn globally hits the IKEA’s sales. However IKEA is adopting the current
trends and moving towards sustainability. IKEA derived economic thoughts and strategies
managing the lacking of the external economic presents. IKEA is focusing middle class and
young buyers to deliver its goods in increasing economic countries such as China, UK, and
Canada etc.
Social Factors
IKEA understands its customer’s social life and implements its design according to their
needs. It considers the various cultures in world and manufacture products accordingly. The
company produces low cost high quality products which is affordable by the society.
Technological factors
IKEA continuously adopts latest technologies and educate its suppliers to follow the same. In
that way the company could able to manufacture cheap products and world-class quality
within the time line. The company incrementally updates its supply networks to obtain
cheapest transportation.
Environmental factors
Due to pressure from global environmental situations IKEA has moved towards
sustainability. Today, 71% of all IKEA products are recyclable, made from recycled
materials, or both. The group recycles 84% of the waste generated in its stores.
10 Porter’s five forces for IKEA in furniture industry
Porter (1980) states that, “Porter’s Five Forces framework helps to identify the attractiveness
of an industry or sector in terms of competitive forces”. The five competitive forces in this
framework are the bargaining power of buyers, bargaining power of suppliers, threat of new
9. 9
entrants into an industry, threat of substitutes for the industry’s product or service and
competitive rivalry in an industry.
Fig 10.1 Porter’s Five Forces, IKEA
Bargaining power of buyers
Since there are huge competitions in the furniture industry from direct furniture
manufacturers and retailers to customized designer retailers, the buyer has low of leverage in
switching from one retailer to another. Switching cost between retailers are very less in this
industry.
Bargaining power of suppliers
Since there are lot of furniture and home appliance manufactures in developing countries like
China and India, IKEA has access to lot of suppliers that increases the bargaining power of
IKEA. The company is well experienced in developing small suppliers into a highly
competitive world class producer that increases the wide access.
Competative
Rivalry
High !
Threat of Substitutes
Low !
Threat of new
Entrants
Low !
Bargaining power
of buyer
High !
Bargaining power of
Suppliers
Low !
10. 10
Threat of substitutes
Threat of substitutes in furniture and home appliance industry is very low. People look for
most convenient and appropriate furniture that suits their home.
Threat of new entrants
Due to huge capital involved in this industry it is hard for a new company to enter a new
market. To be successful in this industry, companies should establish the best supply chain
and supplier relationship to become competitive. Due to huge disinvestment cost involved
there is threat for new entrants.
Competitive rivalry
Due to lot of retailers in this industry the market is highly saturated and the rivalry through
price war is high. Companies developed their own core competencies and focuses on a
particular market to increase its market shares. However, the competitive rivalry is quite high
in this industry.
11 SWOT Analysis for IKEA
It identifies the key issues of a business atmosphere and the strategic ability of an
organization that are like to influence the strategic development. The goal of SWOT analysis
is to identify the degree to which the strength and weakness are relevant to or capable of
dealing with the changes occur in a business environment. SWOT analyse is only effective
when it is comparative in relation to its competitors (Jacobs, 1998). Identifying opportunities
and threats is a valuable part when thinking about strategic choices for the future. It is used to
respond strategically to the environment by reducing the identified threats and taking
advantage of the best plausible opportunities (Valetin, 2001).
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Fig 11.1 SWOT analysis for IKEA
Strengths: - Significant market presence
IKEA sells more than 9,500 home furnishing products in about 301 stores in more than 36
countries. A strong presence gives the group considerable bargaining power and an advantage
in terms of customer recall. The IKEA concept is based on offering home furnishing products
at low prices. To help keep prices low, the group ensures maximizing production equipment,
using raw materials efficiently (IKEA, 2011).
Strong in customer satisfaction
IKEA was ranked 9th in Datamonitor’s retail brand Consumer Satisfaction Index (CSI) which
measures how satisfied customers are with the retailers they use. CSI looks at satisfaction
across different aspects of the retail proposition range, convenience; price, service, facilities,
ambience, quality, and layout that provide an overall satisfaction score for each of these.
Focus of sustainability
In response to pressures on global retailers to co-exist with the environment, IKEA has been
working towards sustainability since 1999. Previously, IKEA was accused of being a landfill-
waste generator because it made large volumes of products that did not last for long time. To
reduce the associated poor publicity, IKEA has been pursuing sustainability in a big way
since then. In 2009, IKEA invested $77 million in clean technology start-ups like solar.
Strengths
1. Significant market presence
2. Strong in customer satisfaction
3. Focus on sustainability
Weaknesses
1. Location disadvantage
2. Declining sale densities in the UK
Opportunities
1. Diversifying sourcing base
2. Increasing online sales
Threats
1. Impact of economic slowdown in major
markets
2. Barriers to enter lucrative growth market
3. Unfavourable market trends
SWOT IKEA
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Today, 71% of all IKEA products are recyclable, made from recycled materials, or both. The
group recycles 84% of the waste generated in its stores (Datamonitor, 2010).
Weakness – Location disadvantage
Most of the IKEA stores are located outside the city. It is because of high land cost and traffic
access. Since this strategy reduces the cost of operations, IKEA still struggles with
convenience problems. Out-skirts stores are disadvantaged because of long travel
considerations of customers (Economist, 2011).
Declining sale densities in the UK
Since 2005, the IKEA’s average sale density in the UK is declining so the group deviated
from its previous plan and just opened 1 store instead of 32 stores planned previously. IKEA
just operate 18 stores in UK. The sales density increased during 2002-04 and started
declining since 2005. Opening more stores distribute the IKEA customers and decline the
sales density. So, the company has to look into its growth strategy to increase its sale density
in UK.
Opportunities – Diversifying sourcing base
IKEA sources a substantial portion of its products from low cost manufacturing centre China.
In 2009, IKEA sourced 30% of its products from Asia being China (21%) as its major
supplier. To reduce its overdependence on China for the first time in several years, the group
intends to strengthen its sourcing relationship with India. India, which currently accounts for
3% of IKEA’s worldwide purchases, is expected to become a stronger supplying partner. A
diversified supplier base will reduce IKEA’s dependence on China and increase its
bargaining power (Datamonitor, 2010).
Increasing online sales
Online retail spending is expected to increase world-wide. Retail e-commerce revenue in the
US was increased of 4.1% between 2008 and 2009. Retail e-commerce revenue is expected to
grow at an annual rate of 8%, 9.5% and 9.2% in 2010, 2011 and 2012, respectively
(Datamonitor, 2010). To benefit from this trend, IKEA has also started transacting on its
website, www.Ikea.com. Through online sales IKEA can also overcome the issues faced by
customer due to out-skirts stores and inconvenience.
13. 13
PART 3: Strategic directions for the future
Decisions about an organization’s future and the way in which it needs to respond to the
pressure and influences of external environment. There are basically three choices should be
made (Johnson, Scholes, & Whittington, 2008). They are,
The choice of how an organization positions itself in relation to competitors.
The choice of markets and products of an organization.
The choice about how the developed strategies are to be pursued.
12 Strategic clock to develop competitive strategy options
If an organization to position itself in the competitive market, it has to develop core
competencies that are not been inimitable by its competitors easily. The base of competitive
advantage in business-level can be identifies using strategic clock tool (Browman &
Faulkner, 1995).
Fig 12.1 Strategic clock to develop competitive strategy options
Source: Bowman C., and Faulkner D., (1995) The essence of competitive strategy, prentice hall.
14. 14
Where the strategic clock illustrates price and product benefit relationship in eight ways. In
which it is classified in to 5 major areas such as Price-based strategy, Differentiation
strategies, the hybrid strategy, focused differentiation and failure strategies. Sustaining
competitive advantage: Organizations that try to achieve competitive advantage may try to
hold it for long time. So there are three different areas of sustaining competitive advantages
they are based on the organization’s current strategic position. If an organization plans to
sustain its cost leadership, it should pursue sustaining price-based advantage (Johnson,
Scholes, & Whittington, 2008). IKEA’s strategic direction is towards hybrid strategy where it
produces high quality products in low price.
13 Strategic direction using Ansoff Matrix
Based on the current strategic position and opportunities in the future it has to develop its
market through online sales. Corporate level strategies can be developed using Ansoff matrix.
In this the organization could decide whether it has to concentrate on the product
development or market development or diversification (Ansoff, 1988).
Fig 13.1 Strategic direction using Ansoff Matrix
Products
Existing New
Markets
Existing Market Penetration Product development
New Market development Diversification
Source: Ansoff H., (1988) corporate strategy, penguin
There are huge opportunities visible towards online shoppers and there is chance for IKEA to
increase its market share by launching existing products in a new market.
Alternative methods of strategy development
The above Ansoff matrix concerned with strategic choices at the generic level. However, in
more precise level these strategies are developed into different potential method of
development to support the generic strategies. IKEA also has opportunities to develop its
supplier base by expanding its global sourcing. IKEA has started pursuing into Indian
15. 15
markets for sourcing. It can develop its supplier relationships through strategic alliance with
Indian manufacturers to increase its bargaining power. Strategic alliance enables IKEA to
develop good relationship with suppliers and can produce goods at competitively cheaper and
good quality.
14 Evaluating the strategic choice
Evaluating the strategies is necessary to analyse whether the developed strategic choice will
succeed in future. This can be analysed in three main criteria’s they are.
Suitability analysis
It is concerned with whether a strategic choice that is been developed is addressing the key
issues related to the strategic position of an organization. To fulfil the customer needs it is
necessary for IKEA to increase its online sales facilities. It also fulfils the issues related to
store locations as the customers who feel inconvenient to reach outskirts stores can access
online facilities. The company also have enough financial resources to adopt strategic
alliance with suppliers and (Johnson et. al., 2008).
Acceptability analysis
It is concerned with whether the expected performance outcomes such as return or risk of a
strategy and the degree to which these strategies meet the stakeholder expectation (Johnson
et. al., 2008). Since IKEA is pursuing a market development strategy through online
business, the risk involvement is quite low. However, there can be uncertainties in online
sales upon expected return. As the company is going to invest in developing websites and
online shopping facilities, the expectation for sales growth is high and the stakeholders will
be happy that the company could increase its revenue with increased profitability.
Feasibility analysis
It is concerned with whether the company has the capabilities to deliver a strategy and
whether the strategy could work in practice. Financial feasibility analysis and Resource
deployment analysis are the tools used to evaluate the feasibility of a strategy (Johnson et. al.,
2008). IKEA has financial capabilities and infrastructure to pursue the online market
development strategy and expanding its supplier base.
16. 16
15 Conclusion and Recommendation
Based on the above analysis IKEA could pursue market development strategy by
concentrating on online business. IKEA could able expand its supplier base into other
developing countries like India to obtain buyer bargaining power among its suppliers. The
company has enough resources and capabilities to pursue these strategies in future. The above
strategies may support the company to obtain its goal.
17. 17
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