Due to the lack of fresh blood in the company, IKEA are suffering from a lack of ideas and are now faces the possibility of offering the consumers a very similar product base. The policy that IKEA is following on hiring same genre of people are leading to inhibiting diversity and ideas to meet the change in new market. The recommendation to IKEA is that they should broaden their selection base of hiring the employees at the same time whiteout changing the core competencies that is required of key staff, IKEA should focus on hiring people from a mix of backgrounds and personalities. This plan will make sure that the company are promoting the diversity and infusion of new ideas and at the sam time ensures the richness of the culture. However this diversity may lead to lack of goal balance and a distraction from common goals.It could be a waste of resources to make a diverse group to agree to common viewpoint.
4.0 Conclusions and Recommendations
Ikea was created by an great entrepreneur Ingvar Kamprad in 1940 Sweden. Ikea is now the largest furniture retailer in the world, they have plenty of innovations and a huge range of designs. They now have about 330 stores in 40 different countries with 154.000 employees (IKEA, 2011).
Ikea does not only sell furnitures items, they sells a solution to human lives as well. Ikea sells prosperous life styles for an affordable prices. With lower margins and lower costs they set up a reasonable price which the great majority of customers can afford.
IKEA uses 3 major services strategies. Complementary Service development, Overall Cost Leadership and Multi Country Expansion are the 3 strategies.
Practices are made for cost leadership as limited customer services, lower manufacturing cost, self selection of customers and modular furniture designs. That helps them to lower their cost. Ikea has maintain a restaurant, Cafe and a supervised play area. This 3 service strategiess have become successful and the practices they involved with leads to a long term sustainability.
IKEA has a lot of resons for its successful, the cooperating with suppliers from all over the world, an high efficiently of logics thats use life system, thats for finding out what customers need. By following their concept Ikea does its best to give the customers what they have promised, low price well design. IKEA brings new life style and services to customers around the world through their shops, such as in Europe, USA, Asia and Australia.The buyers have a huge influence over the products line in IKEA, in the 1960s IKEA developed their famous ability to package their unassembled furniture in flat cartons to make it easier for the buyer to handle the cartons easier. That was an response from a a buyer who had that idea as feedback for IKEA. Ikea will keep on its current growth strategy due to the buyer demand thats include the opening of 50 stores in North America by 2010 (Caplan, 2006).Due to the intense rivalry and the stiff competition between IKEA and the rivals, the costumers hold a high bargaining power. The costumers in the UK aren’t satisfied with both of the companies products and the services and they are purchasing their products from other companies, thats according to a case study by the UK Customer Insight.IKEA was also reported and accused of putting low waged employees in a unsafe working conditions as stated by Szkotak, (2011).With a negative publicity thats is circulating, a lot of damages could be brought about on IKEA brand reputation and the outcomes could result on the costumers choose there competitors to buy their products from. Unfortunately that could bring some direct consequences to the company in form of losses in profit margins and lost of their loyalty from their existing customers.2.4.2 Bargaining power of suppliersThe suppliers usually have the potential to affect on a company by increasing the cost inputs. Despite this, against Ikea the suppliers do not hold much bargaining power, its because of the huge other alternatives available worldwide that IKEA could just choose to work with. With the technological advances around the world, more factories have now the required expertise to form partnership with IKEA. According to (IKEA, 2014) IKEA is committed to establishing strategic partnerships in long term with their suppliers.Most of the suppliers work in IKEA and they compete with other suppliers and that helps the company to reduce the power of its supplier and therefore they have little barraging power. Also because of IKEA low pricing strategy their profit margin affects the prices in raw materials than by prices in labour.Some years ago IKEA had heard from their customers that many of their furniture were too complicated to be assembled by the customers, IKEA got directly cooperation from some suppliers to provide materials that are way easier for the customer to assemble. Thats shows the good relationship between IKEA and its suppliers (IKEA, 2010).2.4.3 Thereat of substitute products or servicesThe threat of substitutes is relatively low since there are little alternatives that offer the product ranges and also costs that same as IKEA offers. Its highly unlikely to switch from low to higher end alternative due to the lack of competitors and the stiff market.Some indirect threats could be for example when the online applications and internet based products increase, that could represent an indirect substitution for certain type of products that IKEA offers. Like the increasing popularity of e-books which decreases the demand for IKEA book shelves to a certain extent.The absence of switching the costs for customers to a such indirect subsections increases their heat.2.4.4 Rivalry among existing firmsWith saturated market and low threat on new entrants in the world of global discount furniture, the rivalry is intensive in the furniture market. The competition between IKEA and the other existing major players in the same industry such as Home Depot, Argos, Wal Mart and more others are mainly due to the similarities of traits that they share with IKEA, with the factors as low cost products, big market presence and well managed supply chain (Caplan 2006).If the competitors offer similar traits they could very well gain a piece from the market share of IKEA by also providing superior products for lower costs and by better services standards and grabbing over existing IKEA customers with the publicity gains from advertising. Thats why it could be stated with even minority competition the thereat of the rivals is still relatively large at the same time (Caplan, 2006).2.4.5 Threats of new entrantsThere are markets that are very profitable with their products and the results of an high return that is attractive head turners to innovate business people or larger companies that are looking into expanding in to new market they targeted. The most common threat of new entrant may effect all existing companies on the market, and it will effect the revenues as well with most likely a decrease in revenues for existing companies.According to (Bannett, 2013) the first year about 40% new entrants exit and another 34% exit in the second year. With a slim survivability the new entrants and companies that are looking to expand will likely enter with caution.
The companies and new entrants that are vying to be like IKEA on a global scale, they are much highly inconceivable because of the current established market that involves a very heavy financial essential and investments expertise. Thats why the threat of new entrants posed to IKEA is relatively low (bannett,2013).IKEA integrates several channels of marketing communication as print media advertising, also sales promotions, events and experiences, even public relations and direct marketing. Fight Club, Cash Back, 500 Days of summer and TV programs as 30 Rock Blind Date, Being Human, Ghost Town and Little Britain has been the most notable cases of product placement by IKEA (Caplan, 2006).2.3 Organizational CultureIkea does not follow regional or national trends or even tastes, Ikea have kept it simple by following the typically Swedish. That was one of the reasons for their global hit and success.At the beginning Ikeas market research was minimal without any intention to find out consumers interests, the Swedish management decided instead to present to the global public, which also become their vision to sell good quality functional frunhhers in affordable prices. At the same time IKEA also highlighted the Swedish culture and roots from putting shops and cafes that offers Swedish legacies from meatballs to some jams in their stores to the blue and gold color scheme on their display unites.
Gaining sustainable competitive advantage is one of the main strategic objectives of any organisation. The environment in IKEA is complex and dynamic in nature. The porters five forces could allow IKEA to be ware of the forces and understand the way of how to compete with them.1.4 Vision and MissionIkea sets its vision to create a better everyday life for many people, in order to achieve their goals, they have decided to produce well-designed, functional household products and price them at a low cost so that as many as possible can afford to buy it.2.0 Current State Analyse 2.1 Growth PatternAs a strategic tool for IKEA to growth sustenance, it used a steady reduction of the product prices. This style made IKEA growth enviable. Before taking any new project IKEA seeks full knowledge of production costs. Low production costs made it possible for IKEAs low product prices and high product quality. By the researchs the company identified and eliminated all the unnecessary elements that added the production costs.IKEA set up an four way plan in order to make the price reduction strategy sustainable.
keeping its custom-built properties and develop new retail stores
Adopt a economical spending towards its operation activities. Increasing the production volume to ensure reduction in production cost and raw materials cots
Develop a more effective supply chain protocol
Employees taking responsibilities decisions for better and faster resolution of the customer issues. Because of the established economical culture in the company, the employees had no difficulty adapting to the growth strategy.
2.2 Generic and Development StrategiesIKEA follows a generic strategy where a mix of cost leadership and differentiation.The fact that they maintain low prices on products while delivering good quality is especially attractive for the millennial generation. IKEA has differentiated its business on some points. These differentiation points are important because they give a unique identity to IKEA and that has made it an excellent brand.IKEA focuses on meeting the needs of the middle class, which is a major customer base globally. The middle class usually wants to have good products at average or low prices, which IKEA has been able to solve well. Being able to buy modern quality products at a very low price has become a favorite for middle class consumers.Product quality and affordable prices are a source of sustainable competitive advantage for the brand. There are other factors that distinguish it from the other brands and give the unique brand identity. IKEA is also known for its customer service, the stores are designed as a labyrinth to create a unique and smooth shopping experience, which contributes to the brand’s overall appeal. Market strategy is also differentiated from competing brands. They use product catalogs that are available online and offline. These factors have made it possible to generate and enjoy a source of sustainable competitive advantage.2.2.1 Product DevelopmentOne of IKEA strategy is to involves bringing new products or services to the market. IKEA has an well known product and design innovation. By the time IKEA has grown its product range a lot, they sell today more than 9500 products. IKEA has found faster growth by product development strategy. IKEA offers wide range products according to consumers needs. The products are available for all different sections of the society. IKEA has adapted their products according to each different market. IKEA diversify the product line and product depth. IKEA is a low priced furniture store, they provides reassembled and casual furniture. The most of the products in the store are stylish which makes the company unique. Instead of selling assembled furniture, Ikea sells its furniture unassembled to allow the customer to mount it, which in turn creates a family feeling, to make it possible to mount their own furniture. IKEA reduces transport costs in this step. A fitted wardrobe takes more space in transportation for both the customer and IKEA, so IKEA ensures that there is less energy consumption and contributes to a better environment. IKEA designs its own furniture showing proffs about the power of the company. 2.2.2 Market developmentIKEA faced difficulties when they expanded abroad. IKEA overcome these difficulties by experimenting and innovating by that they was able to grow their popularity in overseas markets. Theis overseas expansion expansion has brought great new opportunities and extra sales for IKEA. There are today 300 stores in 36 countries. IKEA expanded their customer base globally not only by understanding local peoples needs but by taste and catering to them (Caplan, 2006).2.2.3 Marketing StrategyIKEA target families, students and singels with lower income. The marketing strategy is based on deep customer research and market research. In order to gain more information and knowledge IKEA do send degin experts into peoples house to listen to their concerns and provide them with feedback. This step allows IKEA to make marketing decisions based on peoples real life experiences instead of using surveys or data collections (IKEA, 2012)IKEA most unique and successful tool to promote its brand are the promotional catalogs. The catalogs are most used and most effective among its communications channels. The catalogs are printed in several languages and based on the market. IKEA catalog is available both in print and online. The IKEA catalogue has a huge wide range of products available to the consumers. The catalogue circulation has increased from 131,500,00 to 198,000,000 in 2010 (IKEA. 2011)
Ikea focuses especially on products and price elements of the marketing mix. IKEA attempts to offer the most of its products to the lowest cost. There are other marketing mix then just the price I have chosen IKEA to do a business research on for several reasons, partly for Ingmar Kampvard’s spectacular and successful story, as well as for the company’s unique and simple idea that has led Ikea into even more success.Ingmar Kampvard’s successful history has always given me the motivation and inspiration. Kampvard has succeeded in creating and operating the business that led IKEA to what it is about now. Ikea is now obtains more than 15 billion British Pounds (Lucy Ballinger, 2008, Dailymail).1.2 IKEAEarlier in his age, he went around as a five years old selling matches in the Småland farm Älmtaryd in Agunnaryds parish in Ljungby municipality in Kronoberg County (Lucy Ballinger, 2008 Dailymail).Kampvard was 17 years old when he founded Ikea in 1943. The name comes from his first and last name I for Ingvar, K for Kamprad and E for the family farm Älmatyrd where he grew up, A for Agunnaryd, his homeaby. He started producing furniture in 1948, but IKEA’s first department store was opened in 1958 in Älmhult, Sweden. IKEA’s head office is located in the Netherlands (IKEA 2010).With 300 department stores in 36 countries, IKEA is now one of the world’s largest furniture industries and one of the largest leading brand in the world. IKEA currently has more than 154,000 employees worldwide (IKEA, 2012) 42 distribution center, 1000 suppliers that create 10,000 item product line. Ikea is a home product retailer where the industries are spread internationally. Ikea is privately owned and sells furniture, bathroom and kitchen items and accessories in flat packs. Ikea’s unique concept for the furniture sold in flat packaging, affordable prices and home installation of the customer was one of the reasons for the company’s success.1.3 Ownership
The management of various stores is IKEA’s responsibility. INGKA Holding is a private Dutch company owned by the Stichtting INGKA Foundation, founded in 1982 in the Netherlands as a tax-free basic fund. The design and manufacture of its furniture, purchasing and delivery functions are supervised by INGKA. In 36 countries, 2235 stores are run by INGKA Holding, while the remaining 30 stores are operated by the Frachise. The INGKA Foundation is governed by a member of five members organised by Kamprad and includes his wife and lawyer. Ikea’s brand and concept is owned by Inter Ikea Systems, registered in Luxembourg. All stores are operated by Inter IKEA Systems under a franchise agreement.