Strategy Of Ikea
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Executive summary
Swedish company IKEA was the worlds largest furniture retailer since the early 1990s. It sold inexpensive furniture of Scandinavian design. The company operated in 55 countries with a workforce of 76,000. IKEA offered nearly 12,000 items to the home furnishings market worldwide. It sold a wide range of products including furniture, accessories, bathrooms and kitchens at 186 retail stores in 30 countries across Europe, North America, Southeast Asia, Middle East and Austral. IKEA is well known for its unique concept, low price, wide range of product and flat packing.
This report shows the understanding of strategic application, and applies the tools and concepts to IKEA case. It covers three main parties; the first is summary which has brief introduction of IKEA, and then describe IKEAÐŽ¦s strategies position and business- level strategy. The second is assessments, evaluates and assess the strengths and weaknesses of IKEAÐŽ¦s business- level strategy; also extent synergy between the strategic position and the business-level strategy. The last part is recommendations, according the second part to recommend some future strategic options for IKEA.
Content
Chapter One -Summary
Introduction
Strategy position
Macro analysis- PESTEL
Strategy capabilities
Leadership
Culture
Business- level strategy
Chapter Two- Assessment
Synergy between IKEAÐŽ¦s strength and business- level strategy
Weakness of IKEAÐŽ¦s strategy
Chapter Three- Recommendations
Perspectives for IKEA
Consistence in simple and stylish furniture
Return to activities ÐŽV Focus on imperfect trade model
Concentrate on simple structure for internal control
Standardization V.S. Localization
Appendix
Reference
Chapter One
Introduction
IKEA Svenska AB, founded in 1943 is the worlds largest furniture retailer that specializes in stylish but inexpensive Scandinavian designed furniture. It has 128 fully-owned stores in 26 countries, visited by over 108 million people yearly and worldwide sales of about $5.4 billion in 1994. IKEAs success in the retail industry can be attributed to its vast experience in the retail market, product differentiation, and cost leadership. The company is, perhaps, one of the Worlds most successful multinational retailing firms operating as a global organization based on its unique concept that the furniture is sold in kits that are assembled by the customer at home (IKEA Annual Report, 2002).
IKEAs mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them. The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, transporting the items home and assembling the furniture for a better price. The typical IKEA customer is young low to middle income family.
Macro analysis ÐŽV PESTEL
Political
Globalization has encouraged the relaxation of import control rules. By doing so, cheap imports, especially from Asia and Latin America, have saturated the domestic furniture market. Most furniture trade regulations are based on some globalization friendly agreements, such as World Trade Organization (WTO). However there is critical issue ÐŽ§dumpingÐŽÐ which refers to many Chinese enterprises are accused of dumping because they receive government subsidies, which, other nations manufacturers contend, allows them to sell their products for less than cost. (Mintel report, 2004)
Economic
Large items of furniture in the home are usually planned purchases and typical ticket prices are high. This makes major items of furniture vulnerable to economic cycles. A strong economy and high levels of consumer confidence will help to stimulate demand, while a downturn in consumer confidence can lead to purchases of large items being deferred. Furthermore the growth in PDI (Personal disposable income), which in turn has led to growth in consumer spending and this has benefited the overall market for furniture and furnishings. (Mintel report)
Sociocultural
Nowadays consumers are also looking for a lifestyle, as TV makeover programmes are encouraging them to be more design-literate and aware of changing fashions. Therefore many consumers are willing to refurbish or rebuild houses and consume on furniture expenditure. On the other hand, most peopleÐŽ¦s attitudes of shopping furniture, price-related issues are well up the list of priorities for many furniture shoppers. ÐŽÒIn my price rangeÐŽ¦ as well as ÐŽÒfree deliveryÐŽ¦ and ÐŽÒgood after-sales serviceÐŽ¦ rank very high among the features considered important by consumers. (Mintel report, 2004)
Technological
Speed of technology transfer and knowledge share is vital element in the business process. Furthermore many companies utilise the self-service technology to keep customers at armÐŽ¦s length and also increase customer grows.
Environment
Environmental protection laws, waste disposal, and energy consumption are main issues in environment condition. In the mid-1980s, IKEA ran into an environmental problem that had significant implications on the firms furniture line. Tests on some IKEA particle-board furniture products showed that formaldehyde emissions exceeded the standard specified by Danish environmental law. Moreover IKEA was also criticized for the amount of waste produced in the making of the catalogs and from discarded catalogs after their use.