IKEA is a multinational company in the furniture retailing industry where the product lifecycle is highly unstable. The levels of performance will be evaluated through the performance of an SWOT analysis.
IKEA's brand recognition keeps the sales growing in spite of competition.
The organization is concerned about cost efficiency. The benefit of "Cost Lowering" is offered to the customers in the form of price lowering. This draws in especially the middle school customers.
Customers feel that IKEA provides goods which have value in terms of the price they pay and the as convenience and stability.
Customer Value = Product Benefits/Price
The customer value of IKEA is therefore positive.
It has a competitive edge within the substitutes because of the ability to adopt to the changes on the market conditions quickly.
Growth requires IKEA to double its resources by 2010 which would raise the costs.
Increased competition from competitors including Wal-Mart will lead to additional advertising costs to IKEA.
The product lifecycle in the furnishing retailing market is highly unstable. Therefore IKEA must spend considerable amounts on research and development activities to introduce new ground breaking furniture products.
The world downturn that prevailed in the latter part of 2000's is now coming to a finish gradually. This may permit IKEA to increase its turnover.
The marketability of convenience and cheap furniture models are in the development. As market market leaders in retail furniture, IKEA will be able to positively exploit this opportunity.
IKEA evidently differentiates its products from others.
The activities of europe may have adverse effects on the abroad sales of IKEA.
Pressure communities in the neighborhood areas would protest against the market extension of IKEA in their areas including local merchants.
3. 0 Macro Environmental Analysis
The goal of macro environmental research is to recognize the major trends impacting the further trends of the furniture retailing industry and also to assess whether this industry develops faster or slower than the common development of the industry. The macro environment is evaluated through a Infestation analysis.
3. 1 Infestations Analysis
Industries generally in most economies are damaged by political affects and legislations. Many government authorities show a development for privatization and trade agreements. Free international trade and new organizations coming into the furniture industry will increase the competition for IKEA in the future.
Economic developments that have an effect on the furniture retail industry will be the gross national product (GNP), personal disposable income expansion rates, inflation rates, unemployment levels, interest levels, exchange rates, duty rates and income rates. These monetary trends effect the purchasing electricity of the clients. The revival of world tough economy and global economic styles are positive for the development and steadiness of IKEA.
Human search changes permanently. The requirements, preferences and styles of the clients are put through changes frequently. Therefore IKEA should continue to have its capacity to adjust to the socio-cultural movements.
The world is subjected to a series of technological revolutions therefore does indeed the furniture industry that is afflicted by major shifts in the scientific paradigms. IKEA should concentrate more on genetic engineering of its product to ensure its long term stability and expansion.
4. 0 Industry Analysis
The reason for industry analysis is to evaluate the pushes within the industry identifying the success and the magnitude of the changes in these forces that will impact on the development rate and success of IKEA.
4. 1 Porters Five Forces Analysis
Michael Porter has classified the forces impacting on the industry into five categories. (Refer appendix 1)
Threat of new entrants
The volume of new entrants in to the industry is basically decided on the coming into costs (sunk costs) and the cost of departing the industry. The cost of entering the furniture industry is not large; which means threat of new entrants to IKEA is fairly significant. To face these risks, IKEA should maintain steadily its brand loyalty among the customers.
Bargaining ability of suppliers
This power examines the bargaining the power of the suppliers. Ivar storage systems will be the best sellers worldwide. They purchase their requirements from more than 50 suppliers in more than 80 countries. IKEA ensures well-timed and quality supply of their requirements. It sustains a good B2B romance with the suppliers. Which means bargaining ability of suppliers is not significant for IKEA.
Bargaining ability of Customers
This element is related to the bargaining electricity of the clients where the existing customers are up to date. Therefore customer understanding of the range of products available for sale is high. They go for quality goods at reasonable prices. Therefore the bargaining power of the clients is relatively high for IKEA. Therefore the corporation should constantly add value to its products to reduce the impact of the clients bargaining power. This would enable the organization to face competition better as well.
Threat of substitutes
There are extensive substitutes available in the market including those that are retailed by Wal-Mart and other rival businesses. Therefore the risk of substitutes is high for IKEA. This threat could be reduced if IKEA differentiated and situated its products from substitutes. Positive and hostile advertising campaigns would reduce the risk of substitutes.
Industry rivalry depends upon industry development rates, brand identity, switching costs, variety of competition, informational complexness and corporate and business stakes. The industry rivalry for IKEA is high because of the diversity of its competitors. Therefore IKEA would face commercial rivalry effectively in retaining brand personal information.
4. 2 Strategic Grouping
Ina a business opponents do not compete immediately with one and another. There are several groups of competition that happen to be called strategic categories. It also predicts how communities are going to react to either industry forces or to any specific changes. (Refer Appendix 1) IKEA retains an edge on middle price ranged furniture in comparison with its challengers.
5. 0 Internal Environmental Analysis
5. 1 Michael Porter's Value Chain
Porter's value chain analysis assessed how firms create value to its customers. The IKEA style and design created value to the customers too. The business produces furniture in modular bits which is often packed well in order to be transported to long distances easily. In addition, it reduces its costs sub-contracting its production to low labor cost countries. IKEA also makes its stores attractive to customers by offering large shows of furniture compared to its competitors.
5. 2 Examination of the performance of IKEA using well-balanced score-card
The balance score credit card is a toll used in the performance management process. It targets many performance signals including business process point of view, customer perspective, learning, expansion and financial perspectives that guide the progress to the organizations corporate goals.
Internal business process perspective
IKEA has constantly strived hard to attain cost efficiency by increasing the degrees of performance of personnel. This has increased the level of performance of the overall IKEA workforce. In addition, it increased the number of stores to 250 around the world to market customer convenience. The supply chain of the organization is also strong with a strong storage system.
IKEA has generated effective branding which increased the coordination between customers, suppliers and sales personnel. It was in a position to establish brand commitment amongst absolutely free themes so that they feel "quality products" is offered for the price that they pay.
Learning and Growth
IKEA has launched portable furniture with the aid of new technology. However it must spend more in the foreseeable future to obtain the great things about new technology.
IKEA is among the most most profitable furniture store in the world. Through the fiscal year ended 31st August 2005 income increased by 15% to $17. 7 billion and IKEA's pre-tax operating revenue are anticipated to be $1. 7 billion.
5. 3 VIRO Analysis
(Please send appendix 3)
6. 0 Difference Analysis
The gap analysis evaluates the spaces between the requirements of the strategy and the genuine available with the organization. (Refer appendix 4)
Macro Environment Business
IKEAS business strategy focuses on large number of furniture users worldwide, however the capacity of the customers to purchase the products and the resources available with IKEA to meet their requirements have a difference. The business should increase its quantity of stores to bridge this space.
Key Rivals Business Strategy Gap
The key opponents for IKEA include Wal-Mart which really is a giant in the worldwide retail trade. The business enterprise should focus more on advertising and product differentiation to lessen this difference.
Business Strategy and Organizational Performance Gap
The growth of IKEA will require it to increase its resources in 2010 2010. The business strategy targets growth but the price of financing would be high. So there is a space which would be bridged through low priced financing.
7. 0 Recommendations
IKEA holds an archive for its past growth and success. Its storage system is strong and retains a good B2B marriage with customers and suppliers. The competition is increasing due to new entrants and the growth of existing furniture organizations including Wal-Mart. Therefore we recommend that IKEA should enlarge its selection of products in future. This would be done through "diversification. " IKEA should focus on "market development" especially in the fast growing parts such as Malaysia, Thailand and the Indian subcontinent countries. This increase its market talk about in the global furniture market.
The organization retains roughly 200 stores mainly in Europe and the U. S. A. We recommend that it will increase its stores to 300 within the next 5 years to increase customer convenience. IKEA will not engage in competitive advertising and sales promotional activities. Intense sales promotional activities will permit the organization to increase its expansion.
8. 0 Conclusion
IKEA is continuing to grow from a tiny retail shop to a multinational firm in the furniture retailing business community over. The organizational culture of IKEA is team centered. The command of the business is democratic and participative styles of control. The organizational composition of the firm is efficient where each team is directly accountable for the proceeding of the respective functional team. The command and organizational structure is suited to the current position of IKEA.
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