Position Evaluation of IKEA
IKEA, has been the market leader in the Swedish furniture industry, because of this of their execution of competitive approaches for a global market place. All aspects of the company's value string are centered on the development of high quality 'knock-down' furniture at low and affordable prices.
IKEA's Strategic Position
Johnson et al. (2008, p13) stated that:
"The proper position is concerned with the effect on strategy of the exterior environment, an organisation's tactical functionality (resources and competencies) and the targets and affect of stakeholders. "
The under-mentioned is an assessment of the environment where IKEA operates, which has allowed these to use their key competencies to gain competitive gain in a global recessionary market.
Politically as a direct effect of the global tough economy many countries so that they can protect their current economic climate and local industries impose trade embargoes and tariffs in an attempt to prevent or make it more challenging for the import of IKEA products to their country.
The double-dip recession has led to a decrease in sales of IKEA's furniture as many folks are unemployed credited to many companies inability to financially meet their overhead cost. As a result many of IKEA's customers have chosen to carry on to their savings because of the economic doubt. The downturn impact IKEA's procedures as countries in which IKEA operate in, may deglobalise their marketplaces and try to promote buying-in with their local products and services instead of products from the international market. Therefore, this would reduce IKEA's earning potential based on a reduction in customer spending.
Socially, IKEA has had the opportunity to provide work to individuals in 35 countries improving the standard of living of these employees. IKEA has been attaining strategic benefits over their rival given that they have been outsourcing the primary level of their value chain activities. This plan is employed to increase occupation levels in expanding countries as they grapple with the communal effects of the global downturn, such as increased unemployment and legal activities.
IKEA's technological ideas have added value with their primary competencies which allows them to be more competitive. Technology at IKEA supports the development of new products, research and development systems and solutions to improve on the production process. Their technology has resulted in an efficient circulation string to ensure that their goods reach their consumers as so when they can be needed, making them always available. IKEA's it offers many opportunities to simplify, streamline, and improve every part of functional activity.
Ethically, IKEA has placed admirable expectations for achieving advanced competitiveness in the household furniture industry. Through its clear description of their functions and their romance with their customers, IKEA is able to more and more develop strategies and systems to ensure that products extends to the customer on time and is of the best marketable quality offered by affordable prices.
IKEA's corporate policies in essence are regarding their impact on the environment it's the motivator because of their relationship with suppliers. IKEA is placing itself to provide energy saving electric lights to consumers. Through its social programs IKEA has donated a large number of the standard requirements to underprivileged children.
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There are also legislations to control the ethical and lawful management organisations including IKEA. IKEA must perform their operations according to the rule of legislation as it pertains to the countries in which they operate especially about the human rights function, the safety of personnel and the proper execution of the Occupation Health and Security Act. These regulations are enacted to protect employee from exploitation, maltreatment, discrimination and violation. If personnel believe that their rights, while hired have been violated by the business they have a course of action which they are obligated to consider against their employer. The violation of individuals' rights can be quite damaging to the image, brand and reputation of the organisation. Therefore, it is of crucial importance that the proper investigation and specifications are carried out when outsourcing activities to ensure that workers' privileges in developing countries aren't exploited and abused.
IKEA's strategic capabilities are their talents, such as their skilled recruiting and their successful value string and distribution stations. The company developed strategies to defeat weaknesses and convert them into talents which the company can capitalise to gain competitive advantages. The standisation of the creation process in the production of their furniture allows IKEA to increase its production output with increased correctness and efficiency, thus enjoying economies of level.
Strengths, Weakness, Opportunities, Dangers (SWOT) Evaluation identify the obstacles and issues.
IKEA has outsourced to a number of global manufacturers to create their furniture at a cheaper cost put into the easily availability of raw materials and skilled labour. This however, can be a task for IKEA as governments wish to protect their local business. Therefore, they could impose trade tariffs and embargoes on the business's products thus making them more expensive for transfer.
The affordability of IKEA's furniture is a source of strength for the furniture giant therefore of which they could enjoy more sales. However, IKEA has felt the obstacles of the double-dip global recession from 2008. The tough economy has left many unemployed and other cautiously monitoring and handling their degree of spending. This can take into account the marginal upsurge in sales from 2008 to 2009.
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Through the standisdiation of their production functions and furniture design IKEA has had the opportunity to increase production, with minimum wastage and increased efficiency and speed. However, the standardization with their furniture does indeed present difficult for IKEA since it is a worldwide company and the cultural difference in countries exist. Therefore, their global customers may necessitate a variety plus they might need to conform their furniture to properly satisfy the various tastes, needs and styles.
The organisation has adopted a set organisation composition for greater efficiency in the management and control of personnel to ensure that the corporate and business objectives of IKEA are achieved at the functional degree of the organisation. However, IKEA's management strategy which empowers staff to make decision may lead to the development of a lassire-faire attitude among staff. Management may loss control as personnel conduct may become unethical and irresponsible.
IKEA's plan of deploying management using their company Swedish store to teach staff at their global branches is used as a strategy to ensure that IKEA's concepts, vision and objective is standarised throughout the business's 300 branches. This insurance policy may leave many employees sense de-motivated as they may believe that the Swedish branch is centralising their electric power, expert and control over them.
IKEA's shiny catalogue is an excellent promotional tool as it is sent out in 35 countries, in 25 dialects more than 190 million. The cost attached to publish these catalogues would impact the company's profit margin especially in market experiencing poor sales. The impact on the destruction of the natural habitat therefore of the high number of catalogues circulated on a yearly basis; there is certainly cause for environmentalist to be concerned.
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IKEA's main power however is the swiftness and efficiency with which the company ensures that their furniture grows to their customers though however, in striving to help make the furniture less expensive IKEA has didn't add to the selling point of their customer bottom part through their lack of style and choices.
IKEA has been able to open up 35 stores however, the negative impact of the global tough economy poses challenging as the worthiness of countries money may be devalued as countries seek to cope with the economic effects of the recession. Many governments in an attempt to protect their local sectors from the impact of globalisation are deglobalising their economies to allow their local businesses to make it through as many individuals exercise greater control in relation to their spending.
EXPECTATION & PURPOSE
At this level business procedures must be conducted ethically to the good thing about its stakeholders (employees, environment, customers, shareholders, suppliers, competition). IKEA has a responsibility to world and its discussion with its stakeholders must reveal and represent the organisation's best interest.
The business degree of IKEA's businesses strategies are put in place which allows for the hiring of the best skilled, certified and trained employees who are able to work effectively with minimum supervision. Employees are empowered to be a part of the company's decision making techniques of the company. It has allowed the company to be increasingly innovative in fullfilling the eyesight, missions and prices of the company. The proper implementation of IKEA's business strategy would lead to IKEA realising competitive advantage.
EXPECTATION AND PURPOSES
Johnson et al. (2008, p217) explained that:
"Strategic choices are concerned with decisions about an organisation's future and how it requires to the many pressures and affects"
IKEA's objective is to provide low-cost furniture, of high quality which would gratify the needs and objectives of these customer base. Their workforce is experienced and empowered with the expert to make decision and also to take responsibility for his or her decisions. IKEA can also put into practice procedures and plans to ensure that their center production and making concepts are standardised on a worldwide scale at every one of the 300 stores in the 35 countries that they operate.
CORPORATE & INTERNATIONAL LEVEL
However, at IKEA's corporate and business and international proper level they ensure that the creation and manufacturing techniques with their furniture are standardised to ensure that efficiency and quality control are preserved. The furniture are easily made available packed in boxes where the customer don't need to pay added costs to have the product delivered, they can self transportation and assemble themselves.
DEVELOPMENT DIRECTIONS & METHODS
IKEA's strategic path and methods of development has allowed them to invest in research and development. Their new notion in "knock-down" furniture has positioned them become a market innovator in this sector.
STRATEGY IN ACTION
IKEA have been able to implement prepared and unplanned strategies which includes enabled the business to get competitive advantages through technological control, producing superior furniture compared to competitors.
Suggest a range of options to deal with the difficulties of IKEA's position examination issues.
For a global company such as IKEA operating in a highly competitive recessionary market suffering from challenges and issues there are volume of successful strategies which IKEA should put into action. The successful execution would place IKEA able to revitalise their declining market and enhance their product offerings which allows them to maintain competitive gain. IKEA must use strategies to drive the marketplace through innovative principles and not allow market drive it.
IKEA can conform its online marketing strategy to get a wider and diverse segment of the marketplace. Strategies like a target differentiation strategy should also be utilized along with IKEA's low-cost "no frills" strategy which would place IKEA at a proper benefits to provide furniture at a substantial price to a decided on niche market demanding furniture of an exquisite quality and aspect. This strategy would allow IKEA to focus on consumers from top of the and upper middle class which they did not target before.
It is also advisable that IKEA commit heavily into promotion and branding of their products to entice a wider demographic and enter new market segments. This strategy endeavors to encourage customers they are paying higher prices for an item of top quality and unique to the needs and wishes of the buyer.
Through the execution of the differentiation strategy IKEA provides goods and services different and of a wider variance from their competitors. To gain proper advantage in a global recessionary market and highly competitive market IKEA can further outsource and also just offshore their support and key activities of its value string to India for example where the cost of labour is a lot cheaper than it would be than for example, the USA and European countries. Here they would have the ability to reap the benefits of time arbitrage. IKEA can benefit from the great things about time changes by placing the change with time from one geographic location to some other to successful use which means manufacturing process is doubled.
This strategy would enable IKEA to enter in and take new segments of the marketplace that they were not able to enter before. Because of this, the price tag on production decreases making price more affordable to the masses. Ensuing increase sales and strengthening the market potential of the IKEA brand on a global scale.
IKEA can give attention to improving the quality of their existing products thus staying competitive reducing the chance of losing market share to competitors.
MAINTAINING CUSTOMER Life time VALUE
By focusing on maintaining life time customer value IKEA should not only concentrate on a single transaction with the client but producing and preserving a lifelong relationship using their customers. IKEA can achieve this by keeping a level of constant contact with customers, keeping informed of their needs and providing them with an excellent level of customer service which their rivals cannot imitate or they might find it hard to do so. This plan works of building customer loyalty which can last a lifetime.
IKEA should continue steadily to provide added value with their customers, since their customers do care about the benefits that they get from their IKEA furniture, they must get value for money. IKEA must continue to offer an extra degree of service to further increase the value with their furniture with their customer bottom part, IKEA has already done this by providing a low-cost product, helping in reducing the cost by allowing customers to provide and put together their own furniture. Additional, IKEA may offer more benefits to their consumers such as promotional gifts with acquisitions.
Through mergers and acquisitions IKEA can partner with another company which can allow them to type in new markets which they have been struggling to successful penetrate. This strategy fosters an atmosphere of expansion because the tangible and intangible resources of both companies are merged which increase the chance of further growth potential.
As consequence of this growth IKEA can reap the benefits of horizontal integration which can allow IKEA to offer to new marketplaces its existing furniture series or they can bring in a new range of products with their current. This strategy can allow IKEA to experience further expansion and increased advantages from economies of scale, as there can be an increase in the amount of models produced this ends in a lower cost per unit.
IKEA supply string which include in adequate way to obtain raw materials to create their furniture having the ability to fulfill the needs and wants of the customers. As a consequence, IKEA would be poised to exercise higher control of their functional systems leading to improved quality, variety and price which would impact the business's profit margins in a confident way. IKEA can also experience growth by diversifying into a fresh range of products and new product development allowing IKEA to take pleasure from synergic progress and development.
SHORTENING THE PRODUCT LIFE CYCLE
By producing products with a shorter product life cycle IKEA can continue steadily to anticipate and efficiently meet the changing needs of these customer base, reaching and fulfilling the needs of new customers as well the existing. Through innovation and research IKEA can keep-up with changes in developments in the market. Giving the customer what they want before the customer even know, what they need.
IKEA can re-engineer its systems by critically evaluating its operations to produce strategies to let it improve the company's efficiency by making it more standard or removing them from the company's operational systems.
TALK TO THE CUSTOMERS
IKEA can improve its existing product, packaging and supply their furniture offering in a new way an excellent marketing strategy which makes it possible for IKEA to keep competitive advantage. This strategy would be used to win over IKEA's customers with the new increased product offering. IKEA's marketing manager can develop strategies through effective general market trends into geographic and demographic sections of IKEA's furniture market. With the information obtained IKEA can generate new suggestions to improve their product offerings benefiting customers because they are able to gratify their market potential through customer satisfaction.
Though market research IKEA was able to provide stores in the geographical locations where there has been a higher demand for the IKEA brand.
This may involve including or getting rid of levels of control in KEA's organisational framework which would promote a far more efficient culture resulting in increasing efficiency.
TRAINING & DEVELOPMENT
IKEA should target training and development programs which allows staff to develop and harness their capabilities to be more innovative and creative providing IKEA competitive benefits.
For the continuing success of the IKEA brand, it is important that a detailed environmental examination is conducted which can know what is a good strategies to be carried out to meet the changing needs and style of the new market and the prevailing market. Within a rapidly growing world in market where consumers needs are constantly changing at an instant rate, coupled with the economic issues of a worldwide tough economy, IKEA must diligently assess their products and their capability to satisfy the near future needs of their consumers. By expanding and enhancing the abilities and abilities of the recruiting IKEA would be poised to maximise the capabilities of their central competencies. IKEA can reinvent itself as they strive to maximise the amount of competitive advantage it includes over its closest competitor.
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