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IKEA is a Swedish private company, which is registered in the Netherlands. It is the world’s most successful global retailer. The company designs and sells the ready-to-assemble furniture, including desks, chairs, beds and other appliances a various home accessories. IKEA is headquartered in Leiden. The company is famous for innovative architectural designs for different types of appliances and furniture, and its interior design work. The last is often associated with the eco-friendly simplicity (About IKEA 2013). Moreover, the company is known for the operational details, cost control, and continuous product evolvement. These are corporate characteristics that helped IKEA to reduce prices by approximately two to three percent over the decade before 2010 during the global extension period. The company serves in such areas as North America, Oceania and Eurasia (Brett 2011).
The vision of IKEA is to improve everyday life of people and make it better (Our vision and business idea 2013). The business idea supports such vision by supplying a wide array of choice of sophisticated, functional and practicable home furnishing products at prices, which are so low that as many people as possible are able to afford these products (Aresu 2013). IKEA objectives encompass several points. First of all, it is the desire to produce cheap and affordable product for its customers. Secondly, it is the wish to make life better for those people, who cannot afford expensive products (The IKEA vision 2013). Thirdly, it is the desire to ensure that the customers can find everything that they are looking for. Finally, their objective stands for the lowering of prices (Marketing and communication 2013). Their marketing objective encompasses the developing of a wide local market. That is the reason why IKEA provides jobs in communication and marketing in all their retail countries, even if the numbers are constrained. The general marketing task is to strengthen the IKEA brand and to stimulate customers to visit their retail-shops (Marketing and communication 2013).
The external environment analysis as such facilitates to develop a finite list of opportunities that an organization can benefit from and avoid threats. Such external factors, as indentifying opportunities, threats, strategic choices and strategic uncertainties can have serious impacts on the company. They can influence the company as a whole and these factors are out of the IKEAs direct control. Political factors influence IKEA costs due to the fact that governments begin to lower taxes and provide subsidies to help business stay afloat during the economic crisis. Economic factors influence purchasing costs for IKEA due to the fluctuating commodity and global raw material prices (Dudovskiy 2012). It definitely influences the margins of the organization and it can lead to passing over the cost to customers by increasing prices and resulting in decreased competitiveness. Moreover, economic factors can cause the reduction of margins and affect profitability (Aresu 2013). Social factors can be influential in case when more affluent consumers who are able to spend are unwilling to buy products from IKEA, as it has a reputation of requiring self-assembly. Technological factors allow to use Radio Frequency Identification Device Technology, which allows to provide significant benefits to the supply chain of IKEA and lead to less inventory for the supermarket teams. The last can create lower costs for the company and lower prices for customers (Dudovskiy 2012).
The internal environment analysis includes value chain analysis together with SWOT analysis. The analysis allows to identify IKEAs resources and capabilities. Value chain analysis encompasses two broad categories. These are primary and supporting activities. Primary activities of IKEA consist of operations, inbound logistics, outbound logistics, sales, marketing, and services. Support activities encompass the tasks, which assist the primary activities, including procurement, technology development, and companys level of infrastructure. The IKEAs resources show that it operates globally and it has 28 distribution centres and 11 customer distribution centres in 16 countries.
SWOT analysis identifies strengths, weaknesses, opportunities and threats of IKEA. Strengths include a number of points. IKEA has a strong global brand, which includes key consumers. The company promises the same quality and range world-wide. It also has a strong concept, which is based on offering various well-designed and functional products at low prices. It has a democratic design, which helps to reach ideal balance between function, quality, design and price (The IKEA concept 2013). The company provides a single global strategy and unique business model. Finally, IKEA works in the environmentally friendly manner (Gorman 2013). Weaknesses include the fact that IKEA has little transparency. In addition, the company has a difficulty in understanding customers attitudes and tastes in different countries. IKEA does not have enough distribution channels. Finally, there is a problem of product recalls. Opportunities include the possibility to enter in a broad market, Asian market in particular. There is an opportunity to widen online orders or E-marketing (Jurevicius 2013). The company can create economic designs with existing workforce and designers. The company can also continue the demand for low prices (SWOT analysis and sustainable business planning 2012). There is a strong opportunity of a growing demand for products, which do not harm the environment. Finally, the company can practice using less water when marketing products and reduce their carbon footprint. IKEAs threats include several points. The first one is the threat to sustain in the long run. Secondly, to follow the strategies more than one for a long run. Finally, more competitors offer similar products (Lee 2007).
According to Michael Porters Five Forces analysis, IKEA has low power of buyers, due to the low-price options existence (About IKEA, 2013). Furniture and other small items have an alternative and consumers have limited alternative choices that make IKEA unique among competitors. Power of suppliers is strong, due to the fact that IKEA has thousands of suppliers that set standards in delivering the material. Most suppliers have little bargaining power. Rivalry force is weak, as IKEA is the most successful in delivering the complete package for the customers. Substitutes force is low, as there is no specific product that can be a substitute for furniture but IKEA. Through the cutting and realising technology applied by IKEA, the company can roughly pattern on any innovative style and move each product into its retail stores. New entrance force is low, as any furniture company will have to compete with the IKEA, which is the excellent company in delivering house wares and furniture (About IKEA 2013). New entrants have to round a strong and a wide range supply chain. Moreover, they will have to create a sui generis brand name. The force of relative power of stakeholder is strong, as IKEA is opened with all its stakeholders. Being sustainable is a central part of IKEAs image (Lee 2007).
IKEA follows all the Porter Generic Strategies. Its mission statement indicates cost leadership strategy. Nevertheless, IKEA is also using a devious differentiation strategy through the unparalleled method of including the customer in the value chain. Such a combination designates a focus strategy (Aresu 2013). According to Ansoff Matrix, IKEA opts to attain growth with current products in their current relative market niches in order to boost organizations market hare in its market penetration. In the market development, IKEA opts to attain growth by aiming its current products to new market niches. In product development, IKEA opts to produce new product aimed at its current market niche. In diversification, IKEA opts to attain growth through diversification in new industries by establishing new products for new industry (Aresu 2013).
IKEA selects new strategies positions, which contribute in the increasing of the firm value. As the resources are limited on an organization hence, it is essential for the IKEA to allocate the resources efficiently in order to achieve better results. The location of resources can be done successfully and effectively while applying corporate parenting and resources base approach. IKEA provides professional development for its staff as it boasts an annual Learning and Development program guide for each of their workers. It includes over 45 training opportunities from in-store-training, national training and specialized workshops (IKEA provides professional training for its staff 2012). IKEA has changed its target a bit and began to target the young middle-class population, as this category has comparatively higher incomes and they are better educated. The human resource management has contributed to the success of IKEA, as it has concentrated on the issues like cross-national transfer of the employees. It revolved in identifying and managing the expatriates in the international job market and transferred them to regions with no expatriates. Moreover, the human resource management focuses and trains the developing of the work force in organization in order to overcome the unpredictable issues and rapidly changing environment.
In conclusion, it is important to say that IKEAs serious present success predestines its future strategy (Applegate & Johnsen 2007). The company has successful preference due to the combination of its pricing structure, innovative product design, self-financing strategy, original selling proposition, human resource management and profitable business philosophy. The future of the company is challenging due to the threats mentioned in SWOT analysis. The most important future opportunity of IKEA is the ability to evolve and adopt innovations. It is the actual key to success for IKEA. Moreover, the company should confirm its self-financing and high quality of design and materials in order to keep its prosperous global performance (Best global brands in 2012 2012).