The following is an analysis of the IKEA Essay
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The following is an analysis of the IKEA case study found in the Strategic Management Text book. This analyses the strategies used by IKEA to gain competitive advantage in markets outside its original area. The report begins by providing a background into IKEA. It studies International Business Level Strategy and the three international corporate level strategies. The case study goes into informing its target market and pricing strategy, which is already discussed.
This case study further says how different people in different parts of the world thinks about IKEA, how elegant their designs are and how affordable for them to purchase IKEA products.
Some of IKEA’s main markets are in three of the fastest growing markets such as Russia, US and China. IKEA store bring out products such as furniture to small product like a scented candle. IKEA has over 1300 suppliers in about 53 countries. They further have 12 full time in- house designers with 80 free lancers and other production workers to identify the correct raw materials and produce products ef? ciently and cost effectively.
Primarily, IKEA produced standardized products however; this international strategy did not work for one of its vital markets that is, US. Therefore, they had to emphasize on taking corrective actions. The report also analyses the entry methods used by IKEA and its sustainability. IKEA was founded by Ingvar Kamprad a native of Sweden in 1943, when the founder, at the age of 17 was given money by his father in return for doing well in his studies. This money was used to start up his own company, IKEA, which stood for his intials and the ? rst letters of the farm and village in which he grew up.
The company initially sold basic items such as pens, picture frames, table runners, wallets, jewellery, nylons stockings and watches, at a low price(“History of ikea,” 2010). Furniture was ? rst introduced into the IKEA range of products in 1948, and due to a positive response, the product line increased in size. Customers were allowed the ability of viewing and touching the furniture that was previously only viewable through catalogue. IKEA opened a showroom in Sweden to create a competitive advantage, due to a price war with their main competitor, so that customers could determine whether they were getting value for money.
Finally IKEA made the decision to design its own furniture due to competitors trying to make suppliers boycott IKEA products. The “? at-packs and self assembly” concepts arose when an employee disassembled a table in order to prevent damage during transport (“History of ikea,” 2010). In 1963 the ? rst IKEA store outside of Sweden was established in Norway. From this point on, IKEA began to spread like a wild? re, ? rst to Denmark, then Switzerland, Germany, Australia, Canada, Austria and Netherlands.
Many alliances were struck up with different suppliers in order to introduce new products, together with new concepts, which led to costeffectiveness. One example was an innovative, multifunctional seat/recliner, which was made by utilizing a denim, a raw material from another industry, which could be obtained at a low cost. In 1980, together with the new furniture concepts being born at certain intervals, IKEA was looking to expand to further markets, and did so through franchising. To ensure continuation and long term independence of IKEA, the founder created a new ownership structure and organisation.
The major portion of IKEA was donated to a foundation, while the right to franchise the IKEA concept worldwide remained with the IKEA group of companies. In the 1990’s, the IKEA market expanded not only geographically, but in terms of target market. The company began to design furniture that catered expressly to children. A website was launched to cater to the many markets that were now open, and the children’s line was enhanced on consultation with experts on with experts to develop play areas, room settings, and baby areas within the stores themselves.
Kitchen-ware and kitchen areas were another concept developed in this period. IKEA also began participating in a number of forestry projects to ensure sustainability, by taking responsibility for developing acceptable practices and policies in countries where IKEA works. IKEA Case Study 4 Company Outline IKEA is a world renowned furnishing company reputed for selling Scandinavian-style furniture and other home-based goods. The company has 230 stores, with operations carried out in over 42 countries with well over 70 000 employees. The stores themselves can host 410 million shoppers per year.
It is a Swedish based company built on the idea of offering a wide range of well-designed, functional home furnishing products such low prices, that a majority of people will be able to afford them. The IKEA group is currently solely owned by the INGKA Foundation through a holding company, unlisted on any stock exchange. The vision at IKEA is to “create a better everyday life for the many people”(“Ikea,” 2011). The main business of IKEA supports this vision, by the manufacture and selling of a wide range of home furnishing products at an affordable price.
Since the ethos of IKEA is to make good quality products at an affordable price, the company has succeeded in development of costeffective and innovative production methods. This has been the company’s focus since its inception, and the company has succeeded in doing so by making the maximum use out of raw materials, and adapting the products to meet people’s needs. 04-02-18 Currently, in addition to the historical additions to the IKEA range, customers can now shop online. Other innovations include 2
the boards with patterns created on them directly, called “print on board”, in addition to a concept known as “product !! Expert where returned products are repaired instead of equipment etc where possible. recovery concept”functions such as IT, food services, retailbeing thrown awayoperates under economies of scale and is supportive to the basic operations !! IKEA of Sweden AB is responsible for the range – design, purchase from etc The majority of the operations occur within the retail business; while IKEA does developmentexternal suppliers, in addition !! Inter IKEA systems B.
V (The Netherlands) owns the IKEA concept and trademark which the company produces its own products through their industrial group known as Swedwood. is bought by the retail operations but is also sold to outside operators on a franchising basis !! The furniture is purchased through purchasing operations (trading service offices) in 33 countries with 1800 suppliers in 55 countries. !! The distribution operations covers 25 regional distribution centres in 14 countries supplying goods to the stores !! The retail operations are geographically organised with a specific organisation for Retail Europe