Introduction: IKEA is a Swedish company registered in the Netherlands that designs and sells ready-toassemble furniture (such as beds,

chairs, and des s!, appliances, and home accessories" #ounded in Sweden in $%&' by a $(-year-old Ing)ar Kamprad, *he +ompany is nown for its modern architectural designs for )arious types of appliances and furniture, and its interior design wor is often associated with an eco-friendly simplicity" In addition, the firm is nown for its attention to cost control, operational details, and continuous product de)elopment, corporate attributes that allowed IKEA to lower its prices by an a)erage of two to three percent o)er the decade to ,-$- during a period of global e.pansion" *he first /0bel-IK1A store was opened in 2lmhult, Sm3land in $%45, while the first stores outside Sweden were opened in Norway ($%6'! and 7enmar ($%6%!" *he stores spread to other parts of Europe in the $%(-s, with the first store outside Scandina)ia opening in Swit8erland ($%('!, followed by 9ermany ($%(&!" As of :anuary ,--5, the company is the world;s largest furniture retailer" *he purpose of this report is The purpose of this project is analyze and evaluate the companys strategies through a series of analysis (( PEST , SWOT, Porters five forces , mar eting mi! analysis, value chain analysis and competitor analysis " and provide recommendations to the companys #ased on our findings$

% eas corporate management&

'$ (ission& Selling a )ide range of furniture and accessories at a reasona#le price so that most people can #uy them$ *y offering a )ide range of assortment the ey )ord is functionality, consumers can find everything under one roof$ That+s )hy you can find everything at %,E-$ (%,E-, ./''"$ .$ 0ision& 1to create a #etter everyday life for the many people+ 2$ 3oals& The #usiness philosophy of %,E- can #e #est descri#ed #y four goals4 To create a highly efficient sales department$ Providing ideas for home furnishing$ To serve the costumers as )ell as they are served #y a home furnishing shop$ 3iving people the idea that shopping at %,E- is a day out for the )hole family$

5$ 6ore 6ompetencies & lo) price, family7clu# for savings and free coffee8tea every time you visit, convenient and afforda#le delivery, flat pac aging, outstanding European design, e!cellent 9uality, great food (especially salmon and #lini", complimentary childcare services, and visual implementation of ideas for home$

:$ % eas Strategy& % ea follo)s the focused cost leadership strategy$ To hold on to this position %,E- is forced to ma e the internal production as efficient as possi#le$ To hold on to this position %,E- is forced to ma e the internal production as efficient as possi#le$ %nstead of relying primarily on third party manufacturers the,

the firms engineers design lo)7cost, modular furniture ready to assem#le$ (oreover, % eas customers can vie) different furniture com#inations (complete )ith sofas, chairs, ta#les and so forth" in a single7setting )hich eliminates the needs for sales associates or decorators to help the customer imagine ho) a furniture arrangement )ould loo )hen placed in the customers home$ This approach re9uires fe)er sales personnel, allo)ing % ea to eep its cost lo)$ The third practice that helps %,E- eep its costs lo) % e!pecting customers to transport their o)n purchase rather than providing a delivery service$ Strategic analysis& *efore dra)ing my recommendations for the company, %ll first analyze the companys strategy using& '$ (ar eting mi! -nalysis& Price ;o) price is the mission statement to %,E-$ Everyone #uy the product in %,E- #ecause that is cheap$ 6ompare )ith price to same product #et)een %,E- and other #rand$ %,E- is cheaper than other #rand a#out 2/< even 5/<$ -nd they still loo ing for different material to ma e product cost do)n$ *ut here is an interest point$ They dont have any discount for customer$ Even customer #uy #ig num#er product$ (oreover, there is one interesting feature a#out their prices 7 the company employ psychological strategy and ma e =tric y= prices$ -lmost all prices of their products end )ith >> cents$ This psychological tric has a positive impact on their sales$ Product& %,E-?s products respond to eco7efficient re9uirements$ -ppro!imately :/< of %,E-?s >,:// products are made from )ood or )ood fi#res and it?s aim is to recycle >/< of materials (currently over @/<"$ The firm produces itchens, #edrooms, living rooms, #athrooms and childrens rooms and sells at accepta#le prices, thus ma ing their products availa#le for middle class and moreover the design creates the image of e!clusiveness$ Place& The enterprise operates in over 2A countries (more than .A/ stores" )ith over >/// employees )or ing there$ Brom this, it can #e seen that %,E- is spread geographically )ise$ %n addition, it has over '2// suppliers in :/ countries and it provides good inventory management, and in7time product distri#ution$ This added value is might #e one of the reasons of company?s )orld recognition and success$

Promotion %,E- utilize various means of promotion$ Bor instance, the company put the emphasis on media$ -t Bace#oo %,E- has several pages and the largest has collected just under ' 2// /// =li es=$ This page contains current ne)s and advertisement (Bace#oo page"$ (oreover, %,ECouTu#e channel e!ist )ith a#out 2/// su#scri#ers and the division of the channel into several #ranches regarding geographical segmentation$ Cou can loo it up here& %,E- channel$

.$ PEST -nalysis& Political factors& %ncreasing glo#alization and protectionism, presents a challenge as )ell as an opportunity to %,E-$ The challenge )ill #e to compete against un no)n forces and to source the #est 9uality8financially via#le products from )orld over$ %,E- can enter the mar ets of emerging companies through joint ventures or partnerships to e!plore these ne) mar ets$ -t the same time, ho)ever, the company has to #e )ary of protectionist policies of many host countries it operates in since there is a real ris that countries may impose high tariffs on goods imported in an attempt to spur domestic production$ Do)ever, %,E- may stand to lo)er its costs as governments #egin to lo)er ta!es or provide su#sidies to help #usinesses stay afloat in this economic crisis$ Economic factors& The fluctuating commodity and ra) material prices all over the )orld result in rising purchasing costs for %,E-$ This )ill have an impact on the margins of the organization and might lead to passing over the cost to consumers #y increasing prices of most things in the supermar et$ Burthermore, fluctuating commodity and ra) material prices leading to an overall situation of increasing prices, resulting in decreased competitiveness$ The credit crunch can impact %,E- negatively as it might decrease the purchasing po)er of consumers and though they )ill still #uy the essentials they may #e more cautious$ Burthermore, furniture, unli e fast moving consumer goods, are dura#le and can last for several years and in such economic uncertainty$ 6onsumers may #e reluctant to change )hat they perceive to #e still servicea#le sets$ They may also spend less on

lu!ury items, something that has a greater profit margin for %,E-$ -ll this may result in lo)ered sales and thus, reduced margins for the firm$ Social Bactors& The cultural differences of Europe8Scandinavia and ES- may play a significant role on the #usiness strategy of %,E-$ -s the Scandinavians emphasis on the design and the perfection of the products, on the other hand the -mericans emphasize on the functional a#ility of the product$ People in all the countries tend to inherit furniture from their forefathers$ Burniture may last for generations$ This practice is more common in S)eden$ %n ES- this culture has #een changing recently$ Technological Bactors& FB%G (Fadio Bre9uency %dentification Gevice" technology can #e used for significant #enefits to the supply chain of %,E-$ %f adopted, this technology )ill lead to fe)er inventories for the supermar et firms resulting in lo)er cost for the company, )hich could translate into cheaper prices$ 2$ SWOT -nalysis& Strengths& %$ %,E-s lo) cost concept eeps it ahead of its competitors& %,E- is the cost leader in the furniture industry$ - living room furnished )ith %,E- products is as much as A:< less e!pensive than one furnished )ith e9uivalent products from other stores$ %ts target mar et is the young married couples, college students, ./ to 2/7something singles and middle class families )ho are #asically price sensitive customers$ So, if they can get furniture at a much lo)er price, of course the )ill opt for that$ Thus, this concept gives %,E- its #iggest competitive advantage eeping it ahead of its competitors$ %%$ %,E- has successfully com#ined lo) cost )ith good 9uality& 3enerally people have an idea that price and 9uality are directly related as in, higher the price #etter is the 9uality and lo)er the price lo)er is the 9uality$ Do)ever, %,E- has successfully changed this idea related to furniture$ Hot only is its furniture much lo)er priced than its competitors, they also have great 9uality$ %t has productively com#ined lo) cost )ith good 9uality$

%ts 1democratic designsI )hich #alances function, 9uality, design and price gives %,E- the competitive edge$ %%%$ %,E-s research and development team finds )ays to alter designs to save on manufacturing costs& Starting )ith the designer 3illis ;undgren, %,E-s research and development team al)ays finds )ays to alter designs to save on manufacturing costs$ The goal of the research and development team is to come up )ith stylish functional designs )ith minimalist lines that can #e cost efficiently manufactured$ This eeps the cost do)n and allo)s for the prices to #e much lo)er than that of the competitors$ %0$ - ey feature of %,E- furniture is self7assem#ly& - ey feature of %,E- furniture is self7assem#ly$ This proves to #e a very efficient concept for #oth the parties J %,E- as )ell as its customers$ The furniture pieces are ta en off and flat pac ed and then assem#led #y the customers at their homes$ %t reduces %,Etransport and )arehouse costs as )ell as saves additional hassles related to transporting a #ig piece of furniture, and the customers are also )illing to ta e on the tas of assem#ly in return for lo)er prices$ Gue to this, the furniture are al)ays readily availa#le )hich means the customers do not have to )ait .82 days after purchase for their furniture$ This is a #reath of fresh air for the customers$ 0$ %,E- uses cheap la#or, )hich eeps its costs do)n and gives them a competitive advantage& Starting from the days )hen it discovered that furniture manufactured in Poland )as as much as :/< cheaper than furniture made in S)eden, %,E- has started loo ing for cheap la#or$ %t top five supplying countries are 6hina (.'< of supplies", Poland ('@<", %taly (K<", S)eden (A<" and 3ermany (A<"$ 6hina, as everyone no)s, provides really cheap la#or so %,E- gets its largest chun of furniture manufactured from there$ 6heap la#or eeps the costs do)n and allo) them to charge customers lo) price and helps %,E- sustain its competitive advantage$ 0%$ %ts strong long7term relationship )ith its suppliers gives it a competitive edge& %,E- has #uilt a strong long7term relationship )ith its suppliers over the years$ The relationship that %,E- esta#lished )ith the

Poles has #ecome the archetype for relationship )ith suppliers$ This is one of their #iggest strengths$ - strong relationship esta#lished )ith the suppliers provides a very smooth supply chain, )hich saves %,E- from 9uite a lot of additional costs and hassles$ Gue to this strong relationship %,E- can put in a lot of additional advice regarding production$ %t is )idely seen that companies have al)ays #een #enefited #y a strong long7term relationship )ith their suppliers$ 0%%$ %,E- has the a#ility to adapt its tactics according to the mar et& -nother of %,E-s strengths lies in its a#ility to adjust its tactics according to the mar et$ -n e!ample of this can #e seen in )hat it did in the -merican mar et$ -t the time that %,E- launched itself in ES-, it noticed a change in -merican culture$ Something )as shifting in -merican culture$ To tap into this shifting culture of -merica, %,E- redesigned its mar eting strategies adjusting it according to )hat )ould #e appropriate in this cultural shift$ The result )as dou#le revenues in a four7year period$ 0%%%$ %,E- is a glo#al #rand& Brom the Scandinavian countries to 3ermany, S)itzerland, E,, to the -sian countries of 6hina, Lapan and Fussia and all the )ay across the -tlantic to ES- and 6anada J %,E- is every)here$ %t has spread its )ings and e!panded all over the )orld$ With its stylish Scandinavian designs and strong and con9uered cost leadership concept it has con9uered all of these territories$ Thus, %,E- has #ecome a glo#al #rand$ %ts reputation and #rand image acts as one of its greatest strengths$

Wea ness& %$ %ts organizational culture can #ecome a demotivating factor for many of its employees& %,E-s organizational culture reflects informality$ %t is nonhierarchical, team #ased and titles and privileges are ta#oo at %,E-$ Pay is not particularly high and there are no special per s for senior managers$ The culture is egalitarian$ -ccording to ,amprad, people generally )or here #ecause they li e the

atmosphere$ Do)ever, there is a do)nside to this sort of organizational culture$ %n an egalitarian culture )here everyone is e9ually treated, someone putting more effort and hard )or than others might get demotivated since he is #eing treated the same )ay as someone )hose efforts and inputs are much less than his$ De )ill o#viously )ant something e!tra for his e!tra effort$ This )ill lead to demotivation and he might stop putting in that e!tra hard )or for the company$ %n todays competitive )orld, people )or for that special per s associated )ith designations and promotions$ This is )hat eeps them going$ *ut all these are missing in %,E-$ -nother important factor is that, the management style that )or s in Europe does not )or in -merica or in -sia$ So, %,E-s -merican or -sian employees )ill not li e this sort of organizational culture$ Thus, )ith an organizational culture li e this, %,E- might repel future employees$ %%$ %,E- is not at all customer focused& %,E- is mainly cost focused$ %ts main focus is eeping the costs do)n so that it can eep the prices of the furniture lo)$ Do)ever, in this .'st century companies are more focused on customers needs, )ants and preferences$ 6ompanies first conduct a mar et research on )hat customers )ant and then produce that$ Ho)adays, mostly everything is completely customer driven$ %,E- is not at all customer focused$ -n e!ample of this can #e seen in its product offerings )ith )hich it launched in ES-$ -mericans )anted #ed sizes ing, 9ueen and t)in #ut they offered #eds measured in centimeters$ Thus, in such a customer oriented era %,E-s not really caring a#out customers )ants can put it at a disadvantage$ %%%$ %,E- lac s product innovation& %,E- designs the price tag first, then the product$ %,E-s product strategy council is so much o#sessed )ith lo) price that they spend almost no time on product innovation$ %,E- has #een enjoying sustaina#le competitive advantage due to their lo) cost strategy$ Do)ever, to some e!tent, product innovation is also re9uired in order to #ac their sustaina#le competitive advantage up$ Dere, %,E- lac s product innovation, )hich is one of its )ea spots$ I<" IKEA=s strategy is not e.actly aligned with its )ision: %,E-s vision is 1to create a #etter everyday life for the many people$ We ma e this possi#le #y offering a )ide range of )ell7

designed, functional home furnishing products at prices so lo) that as many people as possi#le )ill #e a#le to afford themI (%,E-s )e#site"$ Ces, it is offering products at prices so lo) that as many people as possi#le can afford them$ Do)ever, isnt creating a #etter everyday life for the many people mean caring a#out the needs and preferences of these many people and producing accordinglyM *ut, %,E- is not doing this$ %t is more concerned )ith lo)ering the costs$ So, this strategy is not e!actly aligned )ith the vision$

Opportunities& %$ %,E- can e!pand its product line #y producing high end products& Esually %,E- manufacture their product for the middle class, upper middle class family$ *ut if )e consider the present mar et situation then )e can see that, people )ants elegant design and they are ready to pay for that, so %,E- can come up )ith a ne) target customer that is upper class and gra# the mar et as )ell$ %%$ %,E- can e!pand its #usiness into interior designing and coo eries products& as furniture is highly related )ith interior designing and also interior designing #ecome very popular no)adays, so %,E- can come up )ith a ne) idea and that is interior designing division to ma!imize their mar et share as )ell as their profita#ility$ (oreover coo eries also can #e an ideal product for %,E-$ III" >roduct customi8ation can boost up IKEA=s sales: %,E- manufactured very stylish product #ut general, )hereas if %,E- can come up )ith a customize product for their customer then if could #e a very profita#le #usiness for %,E-$ People )ants customize furniture and there is no su#stitute product of furniture$

Threats&

%$

6hanging social trend can hinder the gro)th of sales of %,E-& from the very #eginning %,E- is emphasize on the lo) cost product #ut if )e consider the customer trend then )e see that, a large num#er of people )ants 9uality product$ So there is high possi#ility to lost that mar et )ho )ants good product$ So %,Eshould come up )ith a good 9uality product strategy )ith their lo) cost strategy$

%%$

-ccelerated mar et competition in ES-& some of the )ell esta#lished retailer sale furniture )ith lo) cost than %,E-, so it could #e very difficult for %,E- to continue their #usiness )ith only lo) cost strategy$ %f )e consider )almart, Office depot price then )e can see that, their price is ./< to 2/ < lo)er than %,E-$ So, %,E- should come up )ith another strategy #esides lo) cost strategy as early as possi#le$

%%%$

The ris of glo#al financial crisis& The )orld)ide recession is a major factor of #ad economic condition$ Since .//@, glo#ally most of the #usiness organizations turnover is decreasing$ So it might have some #ad effect on %,E-$

5$ Porters Bive forces analysis& Po)er of the #uyers& There is a little po)er #ecause of the e!iting lo)7price options$ Burniture and other small items have an alternative and consumers have limited alternative choices that ma e the %,E- uni9ue among its competitors$ %n addition the lo) price strategy is another )ay of the company to response in #uyer+s need$ Po)er of supplier& %,E- has its thousands of suppliers that set standards in delivering the material$ Once in a )hile, for some products, the %,E- #ids for the contracts )ith multiple companies to craft the same products$ (ost of the supplier )or in %,E- and compete )ith other suppliers, and they have a little #argaining po)er$ *ecause of the lo)7pricing, %,E-+s profit margin also affects the price in ra) material than #y prices in la#or$ Fivalry&

the %,E-+s furniture competitors+ offers different styles and functionality corning targets a ne) lo) cost in terms of furniture line4 cartelN *arrel offers a furniture in #o! )hich is su#ject in higher prices Ethan -llen aimed at a more upscale mar et4 Wal7(art is e9uipped in a #ig #o! furniture that is categorized under the general store must have items, #ut don+t have much of a style$ %,E- is the most successful in delivering the complete pac age for the customers that reflects on )ea rivalries$ Su#stitutes& There is no specific product that can #e a su#stitute for furniture #ut %,Eat least, have to eep up )ith the latest trends, to avoid #ecoming out of style$ -nother advantage is that through their cutting and leading technology, %,E- could copy any ne) style fairly and move each the product into its stores$ He) Entrants& -nother furniture company is rolling on lo)7cost strategy and should compete )ith the %,E- as the e!cellent company in delivering the furniture and house )ares$ %,E- stores do not reach many small to)ns and this is an opportunity for the ne) competitors to move into small and midsize cities )ith smaller stores and less selection$ *ut not easier in city #ecause ne) entrants have to esta#lish a vast supply chin and create a uni9ue #rand name$

:$ 6ompetitor analysis & Wal7(art Stores, %nc 8, is an -merican multinational retail corporation that runs chains of large discount department stores and )arehouse stores$ The company is the )orld?s second largest pu#lic corporation, according to the Bortune 3lo#al :// list in ./'2, the #iggest private employer in the )orld )ith over t)o million employees, and is the largest retailer in the )orld$ Walmart remains a family7o)ned #usiness, as the company is controlled #y the Walton family, )ho o)n over :/ percent of Walmart$ %t is also one of the )orld?s most valua#le companies$ 6orporate strategy&

-$ (ission4 To help people save money so they can live #etter$ *$ 0ision& 1 %f )e )or together, )e )ill lo)er the cost of living for everyoneO )e )ill give the )orld an opportunity to see )hat its li e to save and have a #etter life$ 6$ 6ore competencies& %$ %%$ %%%$ %0$ Gistri#ution capa#ilities& Wal J (art has an efficient distri#ution system , )hich results in a cost saving from lo)er inventory level$ Partnership relationship )ith suppliers & integrating suppliers via %T )hich in turn improve the supply chain and lo)ers distri#ution costs$ -dvanced data mining& Wal7(art actively collect and uses customer purchase #ehavior info$ 6ustomer oriented )or force motivated through generous monetary participation and #elief in Wal7(art culture$