Management IKEA Customer

Intoduction to Strategic Management

Introduction

IKEA is a Swedish company which deals with selling of inexpensive designed furnishes.IKEA was founded in 1943 in a village known as Aggunaryd by Ingvar Kamprad.He found IKEA when he was just 17 years old. IKEA has 76,000 workers and it operates its business in 43 countries .In 2003 IKEA had a total of 165 stores in 22 countries and 21 stores outside IKEA group, which was operating by franchisees in 14 countries. In 2003 310 million people or customers visited IKEA.IKEA of Almhult Sweden is the one which deals with production development and about 108 people visits IKEA yearly. http://www.geocities.com/TimesSquare/1848/ikea.html IKEA buys its products from Europe 64%,Asia 33% and North America 3 % http://www.ikea-group.ikea.com/?ID=127&num=4

THE MISSION STATEMENT

The main characteristics of a mission is to illustrate the services and customer needs that the company will attempt to satisfy, It also tries to show the image of the company and it discovers the scope of its operations in product and market. http://64.233.183.104/search?q=cache:dOWlWHalfvsJ:www.entrepreneurship.fiu.edu/downloads/colleen_post/Class%2520three.ppt+ikea%27s+mission+statement&hl=en&ct=clnk&cd=119&gl=uk&client=firefox-a

When talking about a mission statement things to be considered are the main objective of the firm or business and strategies. A mission statement should contain the following:

A mission statement is a purpose or aims that an organization sets for the development of its own business. These are the goals set which must be reached and achieved. IKEA as company it has its main goals which it has set so as to have an effective business.

The main mission of IKEA is ‘to create a better everyday life for many’ this is their main mission. http://www.ikea.com/ms/en_US/ikea_near_you/woodbridge/new_wood_app.pdf. The mission means that the Ikea’s products are affordable to every one because it has the best products at a lower price and so anyone can afford them. The vision of IKEA is to create a better everyday life for many people.

The Following are the internal factors affecting the strategy development of IKEA

Michael Porter suggested that any organization should develop its own competitive advantage by having or functioning the internal activities at a lower cost than its competitors (Bartol et al, 1993:211)

Internal factors are the factors affecting IKEA internally that is within IKEA and not outside. These can be the weakness or strength that is positive or negative factors affecting the strategy development. We should focus our idea on how IKEA organize its business through designing, delivering, services; marketing and how it supports its products these are things to judge and the figure below explains it better that is the value chain analysis it shows how the business adds value that is how the internal factors bring profit to the business. In which there are activities which are done primarily and other are supported activities. The primary activities are mainly five and these are:

The value chain it divides the firm separate forms it performs such as follows:

• Human resources,t his is mainly based on the recruitment of the employees, it has more than 40000 co workers ,it does not only deal with recruitment but also skills. IKEA through HR encourages equal opportunities,it also needs different races example now it represent 30 %

• Financial: here is how the firm obtains its money which can be through cash, the relationship with money suppliers such as shareholders ,finance, houses and so on ,a lot of money is used in buying of materials and they control the international accounts

• Physical these includes the building materials, production facilities,techniques,information system networks

Appendix 1

http://www.ukeducation.org.uk/UkeduFrames/Documents/images/Value_chain_Diagram_1.jpg

Ikea has jus give more modification to its value chain by introducing a two way value system between the customersand the suppliers and the headquarters of Ikea where by the customer is the supplier of labor,time,information,knowledge and transportation.The customers can also be the suppliers in the other way round

The external factors are the factors that affects Ikea’s strategic development externally,These factors can be viewed within the Theories of Porter’s generic forces,The five forces, PESTEL analysis and SWOT analysis and these can be seen as follows:

PORTER’S GENERIC FORCES

Porter identified the things that can bring a competitive advantage and these are low costs and differentiation. And so he developed three generic strategies that a firm or a business can use and the generic strategies are cost leadership, differentiation and focus. IKEA has try to use the 3 generic strategies so as gain competitive advantage and this is seen as follows:

• Cost leadership is when the company or organization tries to sell his or her product at a low price as possible so as to attract a lot of customers at the same time, in this part the main weapon is the lowering of price. As the mission of IKEA says to ‘create a better everyday life for many’ through the lowering of price and making their goods as cheap as possible.

• Focus strategy this can also mean the aim of the business or the targets that the firm has to its people, according to the focus strategy their main point is to know which kind of services should be provided to a certain group of people such as children ,teenagers and so on.IKEA’s main focus is to the children and the environment, Children at IKEA are the most important people the main focus of IKEA is to focus on the activities that will help children to achieve what they want and so Ikea focuses on supporting children’s’ learning. Another focus is to the environment that is ‘low prices, but not at any price’ this means that Ikea want to support its environment by selling products at a low price as possible so as to gain a competitive advantage.

• There is also Differentiation strategy this can be achieved through being creative and producing the best unique products which will make people or customers to be attracted to them, the goods produced should be different from the competitors’ goods or products. Ikea produces quality inexpensive products, by having unique products it makes it to win the market and gain a competitive advantage.Refer to appendix 2

The five forces analysis

The Porters’ five forces is one the source which leads to a competitive advantage of any business firm because they enhance acquisition of profits, Porter argues that ‘the intensity of competition in an industry is neither a matter of coincidence nor bad luck. Rather it is rooted in its underlying structure’ Paul Dobson, Kenneth Starkey and John Richards (2004) page 26.The following is how five forces are analyzed:

• Potential new entrants ,Competion in any business is obligatory to happen. ‘The more easily new competitors can enter the business, the more intense the competition’ Garry Dessler (2001) page 167.Ikea faces a big competition from other companies but it tries to give good and better services such as delivering customers’ goods at their home, it doesn’t support much customer service but what it does is it gives its customers a freedom to choose transport.

• Intensity of rivalry among competitors, this is more based on how the competition is?Example Ikea is now facing competition because some of the companies are also arising and producing best and quality products, the competitors are such as WH Smith, Argos and so on and in world wide are such as china and so on.

• Power of buyers that is if the buyers have a got a big and strong bargaining power this can lower the profit, and it is very easy for the buyer to switch to another place if the price is lower Ikea tries to lower her price so as to escape the power of the buyers.

• Suppliers is another factor, this is when the supplier have the bargaining power and the bargaining power becomes tense when there are only few suppliers. The condition that increases the bargaining of suppliers are the opposite of those applying buyers. Hill and Jones (2004) suppliers are the most powerful if the suppliers’ product has a few substitute. IKEA has got many suppliers

The PEST analysis is so very important in any organization such as IKEA. The PEST analysis consists of Political, Economic, socio-cultural, Technollogical and so these factors affect IKEA’ s strategic development in one way or another.This cabe seen as follows

Political or Legal factors

• These are the factors affecting IKEA politically or legally,the main factor here is the Government stability,if a country has a good stability then it can well progress the business which it controls .Example almost all the ikea stores have a good government stability with an exception of the few ones.

• Employment law that is child labour is restricted at any Ikea workplace ,children are not allowed to work,this is very estricted because Ikea bases its work on the UNHCR and ILO which is International Labour Organisation which does not support child labour.

• Foreign trade which is based on the tariffs,embargoes which are mainly set so as to avoid domestic market and so by doing this it ensures full control of its firm.

Economic factors

These are the factors which affects IKEA economically and this can be as follows:

• Interest and inflationPrice inflation can destabilize the economy, producing slower economic growth, higher interest rates, and volatile currency movements. If inflation keeps increasing, investment planning becomes risky. The key characteristic of inflation is that it makes the future less predictable. This can destabilise Ikeas ‘ firm.

• Another economic factor is the increase in the cost of energy and fuel in the world is a very big problem at the moment.

Socialogically

• The lower price of goods attract or stimulates the increase of population at a give country,because every one will want to get access to the place where life can be inexpensive to them.

• The presence of IKEA in other countries can make some of the countries to change their lifestyle,this can even make people to adopt other cultures which are not theirs.

• Cultural challenge is so very important this is one of the primary element and its one of the factors which can affect the development of Ikeas’ strategy because it can limit the distribution of Ikeas’products this means that not every culture do the same things that the other cultures do,there are certain things which some cultures do and others don’t. The culture of Ikea includes the way things are done starting from the team members down to the customers.

THE SWOT ANALYSIS

The performance of IKEA in the past 2 years

• Services:

The main services of Ikea is selling products to its customers at the price which is very affordable.through.As their mission states that is to create a better life for everyone.Its products are of lower price but they are not long lasting and so the customers have been complaining about their products.

• The distribution of products

IKEA distributes its products through delivering them customers residences,through this method it helps attract many customers and at the same time Ikea has failed to distribute its products at the time given.

• IKEA’s social and environmental responsibility this was done in 2006,Ikea has done a lot of projects so as to make sure that there is good use of the environment.It has also develop forestry specialists.

• IKEA improves its products

It has try to produce the new quality and brand new goods at the end of every year,every year there is a new catalogue.

FACTORS THAT WILL AFFECT IKEA

• Competition from its rivals

Ikea might loose its market because as the days goes by a lot of competitors arise with new products and which are of good quality and durable ones ,Ikea is now facing competition from WH-SMITH an Argos ands so on.Sometimes competition becomes intense because of the unique products or the differentiation of the products.

• Poor services

This can affect I kea’s success because there is no one who would like poor services but everyone would like the best or better services,and so the lateness of handling of customers’goods can cause a very big pit fall..

Loosing of customers

Ikea might come to face such aproblem because it doesn’t satisfy its customers’needs such as delivering the products at the right time to its customersand sometimes they give wrong promises such as we will deliver your products after one hour then when it reaches the time they don’t do the same.

Conclusion

IKEA as a business firm it has its own mission which is ‘creating a better everyday life for many’so as to make its good as cheap as possible by doing this Ikea has gained a lot of customers and it has been recognized widely which has made him to expand his business,In the way of expanding it also faces competition from its rivalry such as WH-SMITH and Argos.Ikea as a company has its mission and vision but it has fail to improve its services to people through delivering the products to its customers.

REFERENCES

Paul Dobson, Kenneth Starkey and John Richards(2004) Strategic management 2^nd edition

http://www.geocities.com/TimesSquare/1848/ikea.html

http://www.ikea-group.ikea.com/?ID=127&num=4

David Boddy (2005) Management an introduction 3^rd edition, prentice hall

http://www.ikea.com/ms/en_US/ikea_near_you/woodbridge/new_wood_app.pdf

http://www.ikea-group.ikea.com/?ID=726

C. Bowman. (2004), strategic management, Prentice-Hall of India, New Delhi

G. Dessler. (2001), Management, 2^nd edition, Prentice-Hall, New Jersey

Fred R.David (2005)Strategic Management concepts and cases 10^th edition,prentince hall