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1 AUTHOR:
Anthony Olabode Ayodele
University of Plymouth
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A
SITUATIONAL
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STRATEGIC
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IKEA AND
THE FUTURE
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A SITUATIONAL
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STRATEGIC
ANALYSIS OF
IKEA AND THE
FUTURE
ABSTRACT: This situational and
strategic analysis examines the
present situation of furniture and
fitting market leader IKEA providing
recommendations on how the
company could strategically maintain
its lead on a long-term basis in an ever
changing uncertain future.
AUTHOR: ANTHONY
AYODELE
COURSE: BUSINESS
ORGANISATIONAL POLICY
SUPERVISOR: PETER
AKINSOWON
MODULE: PM 204
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TABLE OF CONTENT
TABLE OF CONTENT ................................................................................................................................ 3
INTRODUCTION ....................................................................................................................................... 5
1
1.1.1
1.1.2
1.1.3
1.2
APPENDIX ...................................................................................................................................... 22
2.1
2.2
2.3
2.4
2.5
Bibliography .................................................................................................................................. 28
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Table of Figures
(Cover from top left clockwise)
Figure a IKEA showroom SOURCE: (Wikimedia, Wikimedia, N/A)...................................Cover
Figure b IKEA Store front SOURCE: (IKEA, IKEA, N/A) .....Cover
Figure c IKEA Model SOURCE: (IKEA, IKEA, 2012)..Cover
Figure d IKEA Bedroom furniture SOURCE: (IKEA, IKEA, 2009)....Cover
Figure e IKEA Flags in front of store SOURCE: (Times, 2010)....Cover
Figure f IKEA plain furniture SOURCE: (Brandman, 2013) ..Cover
Figure g IKEA Home furnishing pix SOURCE: (Wikimedia, Wikimedia, 2007)..Cover
Figure 1 Product Life Cycle Chart ............................................................................................................................................. 22
Figure 2: SWOT Analysis Chart ................................................................................................................................................. 24
Figure 3 PESTEL Analysis Chart ................................................................................................................................................ 25
Figure 4: Michael Porter's Five Forces Chart............................................................................................................................ 26
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INTRODUCTION
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for both office and home usage. However, over the years competitors have
begun to master the Ikea Edge, as companies such as Tesco, Walmart, DFS,
Argos and Carrefour (now selling under Ocado, Gateway or ASDA, which
absorbed or took over aspect of the company when it discontinued in operations
the UK Market.) (Townsend, 2009) among others have adapted a low-price
strategy and are venturing fast into the furnishing and furniture terrain.
(Andyboss, 2011)
It is towards ensuring that the company does not lose this position in the nearby
or distant future that this report has been put together on the companys
request. (IKEA, About Ikea, N/A)
In terms of its product life Cycle IKEA could be said to be at its maturity stage
considering the success the initial modest company has experienced over the
past 87 years since when founded. Furthermore this report seeks to ensure that
IKEA does not go under as a result of the external change in the business
environment it operates in.
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1 THE COMPANY
The Swedish originated company has since come to emerge as force to
reckon within the area of affordable furniture.
IKEA originated from Sweden and was founded in 1926 by Invar Kamprad . It
has since emerged as force to reckon with in the area of affordable furniture. At
87, Kamprad presently is reportedly touring IKEA stores worldwide which as at
2011 stood at 320 in 26 countries with over 140,000 employees by the year 2012
(Torekull, 2011)
The company has adapted a design style for its products which is in line with the
tastes of its home country Sweden functional and simple, not fashionable or
centred around attraction. These are values that IKEA has exported beyond its
shores, providing an insight into the realistic taste of the average hardworking
Swedish National who believe in being frugal by making best use of resources
available. (SA, 2012)
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SITUATIONAL ANALYSIS
A Situational Analysis has been drawn up to assess the present state of IKEA.
Modules/Tools used for such include A SWOT Analysis, PESTEL and Michael
Porters Five Forces.
1.1 MODULES/TOOLS USED TO ANALYSE IKEA
1.1.1
SWOT ANALYSIS
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The operational strategy has also been similar, enabling the consumers to know
what to expect. (Jafry, 2012)
In its products IKEA provides portable, packed-flat furniture that is set to be
assembled by buyers. (100 T. T., N/A)
1.1.1.2 Weaknesses
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1.1.1.3 Opportunities
IKEA may identify opportunities in providing greener products for its clientele
and further educating the public on waste reduction in the area of furniture
usage. (100 T. T., 2013)
The company can take it DIY approach of furniture assemblage to another level
by recognising the various forms of learning identified in different people being
Video, Audio and Kinaesthetic (VAK) and providing instructions on such basis
(more on this later.)
Furthermore, the company needs to work on establishing a good
communication link with its consumers and workers all being the stakeholders
of the company. The building of trust in this regard is crucial to the companys
continuous development. (100 T. T., 2013)
1.1.1.4 Threats
Threats to IKEA include the downturn economic recession experienced
throughout the United Kingdom and Europe. This has affected the consumers
purchasing power and in turn, general sales in the industry. As stated earlier
more competitors are delving into the home and office furniture industry,
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PESTEL ANALYSIS
The Political climate of the host country of any company has a direct impact on
its performance. The influx of foreigners from European countries on one hand
and the clamp down on illegal immigrants by the conservative government in
the United Kingdom on the other have brought about a negative impact on the
provision of labour for the industry. (100 T. T., 2013)
Corporate and consumer tax along with business legislation which differs from
country to country are also other influencing factors. In all, these have borne
an influence on the structure of IKEA. They have also, in one way or the other,
impacted competition by affecting the enabling environment.
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Inter-country migration, for example from the countryside to the city, in search
of jobs due to the close down of industries in the former could drive the
demand for functional low cost furniture in the city, where most of IKEAs
business is found. (Chopra, 2009)
The absence of good infrastructure in host countries where IKEA is found could
also hinder the companys growth. The extent of road networks, the presence
of National highways and good transportation network structure are factors
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that have a direct impact on IKEA successfully doing business in any host
country. (Pattairman, 2013)
1.1.2.4 Technological Factors
The utilization of the internet has promoted the easiness and freedom with
which people make their decisions. Since this can be accomplished by using
advanced and modified technologies. (Jafry, 2012)
The demographics of the society based on age, income, family size, etc are also
factors that influence a companys performance such as IKEA, as the
preponderance of old-aged pensioners in a society would result to a lower
demand than that of a society made up of teenagers and middle class yuppies.
IKEA would do well to understudy each environment it finds itself. Products
should be made available based on effective demand. (Jafry, 2012)
The introduction of RFID Technology in supermarkets and stores has made the
shopping experience easier while it has enhanced shelving and product
identification for companies. More frequently, companies are taking advantage
of this technology, coming up with variations of its usage towards providing the
customer with a better shopping experience. An example is Argos which has
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introduced the provision of digital stores that enable customers to walk in and
pick up goods ordered online with little or no Customer Service interface.
Environmental
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parties. Employee protection acts are also part of legislative issues that could
affect operating companies.
1.1.3
The competition affecting IKEA has been analysed above. IKEAs Unique Selling
Point (USP) has been in the area of its ability to provide down-turn, low price
strategies to marketing. Many more high street retailer outfits however have
adapted a similar approach to marketing furniture and fittings and hence IKEAs
market share is seriously being threatened.
1.2.1.2 Threat of Substitute Products
Many have argued that there is no substitute to furniture per se. Rather, the
ability to provide up-to-date modern furniture in comparison with competition
is the major threat manufacturing companies face in the industry. In the case
of IKEA, taste and design differences is the nearest to any substitute possibility
one may come by. (Andrade, 2012)
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The Economic recession experienced in developed countries has seen the need
to adapt low cost/pricing strategies in Furniture and Fitting companies
inevitable. In the place of DIY services provided by IKEA some have provided high
discount long-term credit goods such as DFS. Others like Argos have adopted
flat-pack packaging designs similar to IKEA and, with their venturing into
furniture and fittings on a larger scale, have reduced the edge IKEA has over
competition.
1.2.1.4 Threat of new entrants to the Market
There is a low threat posed by new entreats into the furniture and fitting
market considering the high cost involved and economies of scale enjoyed by
exiting companies. The market is believed to be saturated and the cost of
highly skilled labour required in the industry is high. (Jafry, 2012)
MATURITY STAGE AND PRODUCT LIFE CYCLE OF IKEA
As stated earlier, IKEA could be said to be in the matured stage of its Product life
Cycle. It has entered into a stage where it has experienced rapid growth and
stabilized in the market. IKEA has also differentiated its products from those
offered by competition. The company has made its products stand out among
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the rest, being able to carve a niche for itself in the Furniture and Fitting industry
(Marketing, 2013)
However it is at this stage that the company needs to be careful to ensure that
in the face of change it does not enter into a declined state but rather that of
innovation that leads to further growth. This is turn would lead to high brand
loyalty as seen in the diagram below:
Another tool that could be used to analyse what the future of IKEA should look
like having applied Strategic Management principles to fulfil its objectives is the
punctuated Equilibrium.
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This theory suggests that a group or company continues in a stabilised state until
disrupted by a factor. In the case of a company it could be an external factor
within the industry that brings about change. When this happens (which is
usually preceded by a period of uncertainty or instability or the flux stage) the
company enters the transformational stage where it either experiences a
strategic fit: being its ability to match resources with its opportunities; Strategic
wear out: when a particular strategy applied is no longer useful towards fulfilling
the companys objective or, Strategic Drift:
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RECOMMENDATIONS
As previously stated IKEAs main strength has been to use a downward trend,
low cost strategy pricing to maintain the market leader position. It has however
converted its competition by price compression approach (which is supposed to
be only on short term basis) into a long- term policy. (Akinsowon, 2013)
A this point the company needs to go back to the drawing board and come up
with another strategy to maintain its position. It also needs to among others
things:
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2 APPENDIX
2.1 IKEA PRODUCT LIFE CYCLE/FUTURE CHART
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2.5
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3 Bibliography
100, T. T. (2013, N/A N/A). An IKEA Case Study. Retrieved November 20, 2013, from Business Times
100: http://businesscasestudies.co.uk/ikea/swot-analysis-and-sustainable-businessplanning/opportunities.html
100, T. T. (N/A, N/A N/A). Swot Analysis and Substanable Business Planning. Retrieved November 25,
2013, from What is Enterpreneurship: http://www.icesstudy.org/WhatIsEnterpreneurship/CaseStudies/(case%20study)%20ikea.pdf
Akinsowon, P. (2013, November 7). Strategic Managment Lecture. Strategic Managment. London,
London, UK: Peter Akinsowon.
Andrade, F. (2012, N/A N/A). IKEA. Retrieved November 25, 2013, from Slideshare:
http://www.slideshare.net/mykingboody/ikea-13393834#btnNext
Andyboss. (2011, March 11). Key Challenges Facing Brand IKEA. Retrieved November 16, 2013, from
Studymode: http://www.studymode.com/essays/Key-Challenges-Facing-Brand-Ikea646692.html
Brandman, M. (2013, January 8). Wordpress. Retrieved November 2013, 2013, from Wordpress:
http://mybrandman.wordpress.com/tag/furniture/
Chopra, R. (2009, December 12). IKEA Case Study. Retrieved November 25, 2013, from Slideshare:
http://www.slideshare.net/riddhimachopra/ikea-case-study
Dahlvig, A. (2013, November 17). What is the IKEA Edge. London, N/A, n?A. Retrieved from
http://www.youtube.com/watch?v=KTqehqLZ930
Fredrick, D. (2013, N/A A/A). iAIRBLOG. Retrieved December 2013, 2013, from Wordpress:
http://instituteair.wordpress.com/2009/05/19/punctuated-equilibrium-theory-applied-tobusiness/
Garun, N. (2012, February 22). IKEA. Retrieved December 4, 2013, from Digital Trends:
http://www.digitaltrends.com/lifestyle/ikea-furniture-assembly-vlog-prove-its-instructionsare-totally-indecipherable/
Hammond, R. (2013, December 5). Do Tesco's Latest poor sales figures show the danger of
companies becoming to large. City News, p. 21.
IKEA. (2009, March 7). IKEA. Retrieved November 16, 2013, from Bedroom Design:
http://www.bjoku.com/the-awesome-ikea-2010-bedroom-design/colourful-bedroom-ideafrom-ikea/
IKEA. (2012, May 01). IKEA. Retrieved Novemeber 16, 2013, from IKEA PRESS:
http://www.ikea.com/ms/en_IE/about_ikea/press/expansion/index.html
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IKEA. (N/A, N/A N/A). About Ikea. Retrieved November 18, 2013, from Ikea:
http://www.ikea.com/ms/en_GB/about_ikea/the_ikea_way/history/index.html
IKEA. (N/A, N/A N/A). IKEA. Retrieved Novemeber 16, 2013, from IKEA:
http://www.ikea.com/us/en/store/tempe/activities
Innovation. (2013, December 06). How Brands Affect Product Life Cycle. Innovation, p. N?A.
Jafry, A. (2012). SWOT, PESTEL, Porters Five Forces and Value Chain analysis of IKEA. London:
http://www.afsheenjafry.com/IKEA.pdf.
Journal, H. (2011, May 6). Ikea's Strengths, Weaknesses, Oportunities and Threats. Retrieved
November 22, 2013, from Hign's Journal: http://highn.me/ikea-strengths-weaknessesopportunities-and-threats/
Pattairman, K. (2013, May 10). IKEA Pest Analysis. Retrieved November 25, 2013, from Slideshare:
http://www.slideshare.net/kripap/pest-analysis-20947996
SA, I. (2012, May 12). About IKEA. Retrieved November 19, 2013, from IKEA SA:
http://www.ikea.com/ms/en_AA/about_ikea/the_ikea_way/index.html
Timetoast. (2013, N/A N/A). IKEA. Retrieved December 03, 2013, from Timetoast:
http://www.timetoast.com/timelines/ikea--2
Torekull, B. (2011). The Ikea Story. Sweden: IKEA.
Townsend, P. (2009, December 20). Carrefour Cribbs Causeway, Bristol. Retrieved November 20,
2013, from Flickr: http://www.flickr.com/photos/brizzlebornandbred/4199433045/
Wikimedia. (2007, July 02). Wikimedia. Retrieved November 16, 2013, from Wikimedia:
http://commons.wikimedia.org/wiki/File:Ikea_multistory_Leeds.jpg -top right Ikea Store
front (picture)
Wikimedia. (N/A, N/A N/A). Wikimedia. Retrieved Novemeber 2013, 2013, from Wikimedia:
http://commons.wikimedia.org/wiki/File:HK_IKEA_Kowloon_Bay_Store_201006.jpg - Pix on
Ikea store (picture)
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