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Global Strategy

Presentation Handout
IKEA case

Grenoble Ecole de Management


BIB Group B

26-11-2015

Guy Lynott, Natia Silikashvili,


Thomas Jourde, Lene Minge,
Gala Milenkovic, Cheryl Tong

Introduction

Known for its minimalist Scandinavian design and low prices, IKEA is a
global furniture retailing giant that hosts 410 million shoppers a year in over
27 countries worldwide, boasting pre-tax operating profits of $1.7 billion (FY
2005) while keeping prices competitive.

Stakeholder Analysis
The company works with trade unions, organizations and other companies
sharing idea and cooperating to achieve greater success. Moreover IKEA
cooperates with several domestic and international stakeholders.

This analysis is part of the project management, possible conflict resolution


and business administration, in which we store them by the impact their
actions will have in the organization.

There are 3 steps in conducting a stakeholder analysis:

1. Identify stakeholders:

When choosing the board, and possible stakeholders the first step is to
brainstorm a group of individuals that could be stakeholders in your project.
Selecting a group that could work in harmony is difficult, however it is
crucial.

The firm’s stakeholders comprises of:

Employees: IKEA has 147.000 employees worldwide. They are divided by


departments, countries, franchises…
The company has a strong training policy, adaptation of the employees and
integration of each member.

Suppliers: The furniture sold is designed in Sweden and manufactured world


wide. Visual appeal and constant adaptation is something designers work on,
suppliers provide the materials necessary to do so. As wood is one of the
main materials used, suppliers purchase in tropical regions such as South
America.

Owners/ Shareholders: Ingvar Feodor Kamprad is the founder of IKEA.


However the current CEO and president of the company is Mikael Ohlsson.
The executive management consists of Peter Agnefjäll, Alistair Davidson,
Petra Hesser, Helen Duphorn, Torbjörn Lööf, Noel Wijsmans, Jesper Brodin
and Steve Howard.

Managers: They organise the company. As the company is internationalised,


there are different managerial structures depending on the country, shop
and area in which IKEA is positioned.

Customers: They are the target for whom we do business. We have a


specific target, however the company is globalized and there is a big variety
of customer needs and demands depending on location.
Trade Unions and Trade Associations: The company works with 20 different
independent organizations that have different values and purposes. These
organizations also form part of the stakeholders.  We analyse the most
relevant ones.

Some of the trade unions IKEA works with are BWI, which is a Global Union
Federation of democratic and free trade unions, and BSR, a global non-profit
organization that helps member companies to achieve success while
respecting people.

IKEA also works with several environmentally friendly organizations such as


CCWG or WWF. By doing this, IKEA increases its good reputation and takes
care of their environmental responsibilities.

IKEA also works as a franchise, therefore its stakeholders are divided locally
depending on the concrete shop.  The IKEA Group and all other IKEA
franchisees pay a franchise fee to Inter IKEA Systems B.V.

Competitors: IKEA has a very specific target, and a good strategy (hybrid)
meaning it is hard for other companies to compete with them.

Government: This are factors that change depending on the country IKEA is
in. However the headquarters  and registration is settled in the Netherlands
so their main regulations follow this counties governance.

2. Prioritize your stakeholders:

The second step of our analysis is prioritising the stakeholders of the


company, as we now have a big group of people and organizations we must
divide them into groups depending on their impact or responsibility in the
organization.

We divide stakeholders by primary and secondary at first. We refer to


primary stakeholders as the individuals that work internally in the company
and engage in economic transactions. Secondary stakeholders, or external
stakeholders, are those that are indirectly affected by the company's
actions.

Stakeholder mapping: The power interest matrix:

Low Interest High Interest

High Power Keep Satisfied Manage Closely


Governing authorities Shareholders

Trade unions Managers and CEO

Low Power Monitor (minimum effort required) Keep Informed

Local community/retailers Employees


Logistics partners
Customers

3. Understand key stakeholders:

Having knowledge of the stakeholders personal and professional abilities is


something that will help in the group work. The CEO of the company (Mikael
Ohlsson) must be aware of the company's top line management at least.
Knowing them well is key to work with them.  

Power is the ability of individuals or groups to persuade, induce or coerce


others into following certain courses of action.
The Mikael Ohlsson has the main power of IKEA, however it is clear that the
company has a strong flexibility and adaptation to its workers.
Every single stakeholder has different power levels.
In our opinion it is important to understand the consumer at first as we sell
to them.

External: Macro Environmental Scan: STEEPLE-C

STEEPLE/C model is a strategic tool which expose the different factors that
can affect the environment of an organization. The acronyms represents
political, economic, social, technological, environmental and legal factors
that impact on a business.

Political factors (government's attitude toward the brand, political


stability)

IKEA revenues may be significantly influenced by the political situation in the


market and different political factors like attitude of the governments toward
them and the political stability.
Indeed, IKEA has already been concerned by some kind of political issues.
Some scandals have affected negatively their brand image. For example 3
years ago, they acknowledged that they used forced prisoners in Germany
from the 70's to the 80's to produce their furniture. Another example of
political scandal was their toy badly named “Lufsig” which became an Anti-
Governmental Symbol in Hong-Kong, or even allegations which linked the
IKEA founder Ingvar Kamprad to the Swedish Nazi group.

Economic factors (Macroeconomic uncertain situation, consumers spending


power, raw materials cost variation, exchange rate variations, interest rates,
tax rates)

IKEA revenues as all businesses, can be affected by lots of economic factors


in the world, but the most significant ones are the macroeconomic uncertain
situation and the spending power of consumers. Indeed, we can use the
global economic crisis as an example. Even if the economic crisis did not
have on IKEA'S an impact as negative as on other big businesses, they
nevertheless cut 5.000 jobs worldwide (in 2009). Such a huge number of
jobs cuts suggests that the global economic situation can have a major
impact on the well-being of the organization. Moreover, interest rates, and
tax rates which are subject to changes worldwide can influence the
company's revenues too.
In addition to that all of that, we can not deny that IKEA revenues are also
directly affected by costs variations of raw materials bought from all over the
world, that IKEA needs in huge quantities (wood, cotton, metal, plastic,
glass and rattan).

Social factors (demographic changes (urbanisation, people on the move),


consumers and media opinion and perception about the brand, consumers
changing habits and attitude towards home furniture)

IKEA revenues are subject to a wide range of social factors.


Indeed, many changes happened in society over the past decade that
directly or indirectly affect the home furniture industry. (generation Y
students tends to leave parent's home earlier, people tend to be constantly
on the move, we face an increasing urbanisation, sources of information
change with the rising of internet, shopping become increasingly online...)

Technological factors (technological innovations, manufacturing


techniques changes, arrival of new devices at home, decreasing life-cycle of
technology)
Technological innovations may impact importantly the furniture market.
Indeed, firstly, people are used to deal with increasingly new devices at
home, people behaviour towards furniture is constantly changing and IKEA
needs to find a way to make its furniture adaptable to this new devices. (big
TV screens, computers, sound systems, kitchen devices...)
Moreover, the development of technological innovations in the
manufacturing process has to be taken into account by IKEA because it
implies changes in manufacturing techniques. Technological improvement
and changes are growing exponentially, and furniture industry has to adapt
reactively.

Environmental factors (increasing world sensitivity to environmental


issues (global warming, air pollution), deforestation, climate changes)

IKEA revenues are subject to a wide range of social factors concerning the
environmental issues.
Nowadays, more and more people feel concerned about environmental
issues, mainly about the deforestation, the global warming or even the lack
of water... And IKEA uses every year 1% of the world's wood to build its
furnitures (it is currently the third-largest wood consumer in the world), and
according to the World Bank, all logging are not legal. Any important
companies like IKEA are expected by stakeholders, governments and
customers to behave in an eco-responsible way about the environmental
issues which concern all of us more and more. Mainly when their activity
implies logging and has a direct or indirect impact on the air pollution, the
global warming. Non supporting those causes and neglecting of this
environmental factors can for sure give a bad image of the brand and impact
on its revenues. Moreover, quite important climate changes forecasted in
certain regions of the planet could impact on how IKEA operates and the
products offer. We have already figured out that wooden furniture are
subject to damages when they are exposed to a climate change.

Legal factors (rules, norms and regulations on employees health and


safety, laws protecting consumers, employment security laws)

IKEA performance can be influenced by numerous rules, norms and


regulations on employees health and safety, employment security laws but
also laws protecting customers. These rules and norms which has to be
perfectly respected by IKEA depend on the countries, regions and
organizations governments, and are hard to predict.

Competition factors (omni-channel retailing, arrival of fake IKEA stores)


IKEA revenues can be affected by several competition factors. With the
increasing trend of doing shopping online, retailers has to adapt and look to
set up omni-channel retailing to maximise their revenues. To face pure play
online retailer as Amazon, they would have to provide a seamless shopping
experience across stores and the online channel.
Moreover, an another kind of rising competition can affect deeply some
areas IKEA revenues. Indeed, recently, Chinese brands “11 Furniture” or
“Joyme” built fake IKEA stores which sold their own furniture. These brands
which replicate perfectly all details that have built the IKEA brand image
even stand that they provide better quality furniture.

Ethics factors (trend to seek for lower possible prices to face competition,
increasing concern about labor conditions, deforestation)

IKEA brand image and revenues can be affected by ethics factors. Indeed as
the multinational company keeps seeking for lower prices to face
competition and satisfy its customers, they relocate manufacturing in low
labor cost countries. However, in some countries there is a risk of poor
labour conditions.
Moreover, more and more people and NGO fight against world deforestation,
and IKEA has been accused some years ago of logging old-growth forest in
Russia.

External: Microenvironmental Scan: Porter’s 5 Forces


Rivalry Among Existing Competitors is high. There is intense competition
amongst existing firms in the discount furniture industry with large players
such as Wal-Mart, Argos and Tesco. Competition also stems from smaller
firms that copy IKEA’s concept e.g. in China
Threat of New Entrants is low, since the low-cost home furnishings industry
is already saturated with existing players. A high amount of initial capital
expenditure is required to enter this industry. It is difficult for new players to
compete with existing firms based on price since they have already amassed
vast economies of scope and scale.
Bargaining Power of Suppliers is low as IKEA has a large network of suppliers
from all over the world. Thus, IKEA has greater negotiating power over
suppliers to demand for better price and quality. Suppliers also have low
bargaining power as the products supplied are largely raw materials that are
undifferentiated materials.
Threat of Substitutes is low as there are not many other products/services
that can fulfil the same need of their target segment for low-cost home
furnishings.
Bargaining Power of Buyers is high. Consumers in IKEA’s target segment are
extremely price-sensitive and have a wide array of other rival firms to
choose from. There are also little or no switching costs involved for
consumers to switch from IKEA to other products.

Analysis

As an existing player in the industry, the high barriers to entry is


advantageous for IKEA. However, the intensive competition and high
bargaining power of buyers means that it is vital for IKEA to continue to
strike the balance between their twin objectives of a hybrid strategy,
continually seeking out new ways of differentiating themselves from their
competitors while maintaining their cost leadership.
Cultural Web
Stories
IKEA family, constantly “on the way”, “Cut prices”, Equality, enthusiasm and
an entrepreneurial spirit
Symbols
Ingvar Kamprad, Swedish lifestyle (product names, food, egalitarianism,
blue and yellow), the box shaped stores and layouts, Brand name/Logo,
store layouts, IKEA-catalogue
Rituals and routines
Fika, Employ people with right values, Rigid training programs, everyone in
same uniform, Anti-bureaucracy; once a year managers hit the floor
Power Structures
Togetherness (no superstars), everyone has a voice, Focus on developing
managers for other places than Scandinavia, “it’s your duty to expand”,
Informal management
Organizational structures
Everyone is expected to make a contribution, Leadership by example,
Everyone in same clothes also managers
Control systems
Benefits and discounts include: a strong culture, hiring people with certain
values, checklists and manuals, group rewards, personal development and
promotions
Paradigm [Core assumptions, what they think about themselves]
Everyone deserves to afford a nice home that makes a better life, equality,
cost consciousness, design
Analysis

Rituals and Routines


IKEA has a strong culture of collaboration and inclusion, regardless of
hierarchy and what position one possesses within the organization. With an
enthusiastic and family-like culture, employees are encouraged to participate
in the growth of IKEA with phrases like “on the way” and ”it’s your duty to
expand”.
Control systems / Power structures / Organizational structure
IKEA seems to be useing of control systems to monitor their employees
(manuals, checklists, employing “people with right values”, several training
programs, build your own IKEA carrier, internal ladder, routines),  it is all
about delivering the right quality to its customers and cutting costs at all
levels. IKEA rewards to stores with good margins and that are cost efficient.

IKEA practice something they call “Leadership by example” that’s a sign of a


desire for autonomy by its employees.  Although IKEA’s size and complexity
would suggest that it has a rigid and hierarchical organisational culture, they
have a relatively flat and informal management style. Managers and
leadership in all branches and units are sent to work in different stations
along the supply chain such as at warehouses once a year. Despite
centralized decision-making, it is clearly communicated that the company
values equality and collectiveness at its core, striving to make their
employees feel valued.
As a cost leader IKEA has to cut costs across all units and business functions
in the organization. To be a cost leader the need for control to keep cost
down is crucial. And IKEA is doing this by having a strong cost cutting
unified culture.
Strategic capability
The strategic capability of IKEA is based on its resources and
competences, Ikeas strategic capability are their strengths which is mainly
skilled human resources, effectively designed value chain and efficient
distribution chain. IKEA has achieved competitive advantage through having
dynamic capabilities. With both formal and informal techniques company
renew and recreate its strategic capabilities to meet needs of changing
environment.
Ikea has created the value among customers which makes them believe
that nothing is expensive, and that every time it’s trendy for less money.
The goal of IKEA is to create and sell the lifestyle which would be equally
important and attractive for people around the world. It’s like a signal that
everything that people are searching for can be found here which creates
value to the customer.
Rarity of company’s strategy capability is based on the fact that it is easily
transferred among all members of company. Ikea is run by managers who
were trained and groomed by the founder of the company Ingvar Kamprad
and who are personally devoted to the founder. Correspondingly culture
and history of the company together with its founder makes employees to
pitch in taken for granted activities.  Employees follow leaders by example
“Our managers try to set a good example, and expect the same of IKEA co-
workers. “Rarity can be temporary, however ikea has developed
sustainable methods of maintaining the most valuable capabilities and
competences which this is the part of their corporate culture.
Knowledge and competence gained by IKEA throughout its operation since
1943 is the main value of the company. Which remains to be inimitable
strategic capability, Design capability, corporate culture, and customer
oriented culture, effective combination of contemporary design and low-cost
materials and knowledge accumulated through systems, constant desire to
seek new opportunities and innovation, Daring to be different in terms of
packaging, design and shipping.
Founder of the company Ingvar Kamprad

Company holds:
·         Tangible (machines, distribution centers, stores. And etc.),
·         Financial (capital, cash and etc.)
·         Human resources (mix of designers, suppliers, sales person from
different demographic backgrounds in different counties, 12 full time
designers 80 freelancers)
·         Intangible assets (their adaptability, creativity and innovative
approaches, gained knowledge and experience, competence to deal with
customers and suppliers, and etc.)
Since 1943 company goal is to expand, correspondingly the one of the main
challenge is to sustain threshold capabilities in each market it operates.
To achieve this company constantly tries to reduce cost improve efficacy and
seeks for more innovative materials, and designs, what is the most
important customize product and make them sell better in a given market.

Unique resources: consume using renewable sources, using flat-


packaging, perfect tastemakers, unusual materials combined with innovative
design thinking, low cost supply and distribution chains, key partners,
management force and employee.

Unique competence: Thinking outside the box, seeing things differently


going back to simple, using wood resources wisely, finding alternatives and
using recycling, putting people first, frugality inherited by founder and
obsession with design. Shipping more products, less air. Strategically
planned distribution. Management integrity in all actions guided by vision
and mission of the company culture.
Using their main sources and capabilities IKEA

Competitive advantage:
company develops its capabilities as a global retailer by adding value to the
supply chain (thoughtful product design, local sourcing and low-cost
distribution). Constructing a low-cost business model that enables
consumers to reap the benefits and maximize satisfaction. Cohesion gained
through unique corporate culture with the help of training and coaching
motivating and guiding.
·         Characteristic ambiguity as well as linkage ambiguity of the company
makes it difficult for competitors to imitate.
·         It is apparent that IKEA chose to pursue cost leadership as their
strategy to be its attractiveness.
·         Wholly-owned subsidiaries in order to maintain their brand image.
·         Well-developed company culture
·         Design the price tag first and then develop the product to suit that
price.
·         Learning on failures and mistakes.
·         Well designed, encouraging infrastructure of the store, accessorized
displays,
·         Advertising, marketing campaign, giving awards and recognition to
best-performing store and employee
·         Constantly working on new product development, design, cost
reduction, effective marketing strategies.
·         Anti -bureaucracy tendencies and steely competitiveness acting
ethically and maintaining corporate social responsibility
·         Standardization of manufacturing furniture as well as customization of
product to the different market needs.
·         Management integrity in all actions guided by vision and mission of
the company culture
COST Analysis
The company’s goal is to achieve cost efficiency as well as create affordable
contemporary designs for the masses. IKEA knows that their customers are
price-sensitive and thus their designs are centred around the objective of
keeping prices low. With a standardized manufacturing process and
producing in vast quantities, IKEA also enjoys significant economies of
scale, where its fixed costs and overheads are spread over a higher volume
of output, lowering its cost per unit.

They have developed cheap and reliable supply chains, they try to have a
good contract with suppliers meanwhile the try to make suppliers enjoy the
agreement with them. Reciprocal profitability.
IKEA understand that improvements in capacity fill, product design and
labor productivity is very significant. Well-designed company culture as well
as qualified managers and designers are “going extra miles” to make
product as cost effective as possible. Flat-packaging is one of the most
significant issue. E.g. designer Chris Martin worked on creating dining chair
(with special features) for a year and a half. With the price 39.99$. 'Low
price but not at any price
Experience gained throughout its operation since 1943 is the main value of
the company.IKEA has developed activities ( product design, manufacturing,
transporting, retailing, and distribution.) which are the key resources of
company success, making modern furniture, manufacturing with low costs,
operating in variety of markets, having affordable prices targeted on global
middle class is the core competence of the company.
Value Train

IKEA has 1,800 suppliers in 50 countries. Company hires in-store logistics to


handle efficient flow of goods. The goal of co-workers is to monitor and
record deliveries, carefully check delivery notices, sort and separate the
goods. Inventory accuracy, inbound checks, and transfer types are all key
aspects of the job. Jobs in logistics account for about 20 -25% of each
store’s co-workers
Operations:
Operations in IKEA are decentralize there are 3 divisions: Franchise division,
property division, finance division. The key operational processes are
managed and controlled at the firm’s headquarters in Almhult, Sweden.
Operations includes: creating stylish of products in order to enable flat
packing and cost reduction, effective quality control system (testing),
product assembly and decomposition.

Outbound logistics:
Trucks, boats and trains are used for distribution. IKEA uses two types of
delivery services: Parcel delivery and Truck delivery. On the other hand one
of the main feature of the company is that it uses unique kind of system of
transportation, as long as products are flat packed Transportation of
products can be done by customers. Customers select the furniture, retrieve
the packages themselves and take it home.

Marketing and sales:


IKEA also publishes an annual catalog as their main marketing tool,
distributed in stores and by mails. Targeting global middle class but main
targets are young adults from low to middle income who may or have or
have no children. Second target group is business customers who run small
or medium size offices. Important channels for marketing are IKEA websites,
publications, and brochures, advertising and PR.  They have inspiring and
realistic showrooms.

Service:
According to the chosen strategy IKEA has limited customer service (low
numbers of assistants) however IKEA has 100 day return service, loyalty
cards, provision of online cu telephone customer service, offering refunds
and exchange of goods. Company is always open to feedback.
Procurement:
IKEA suppliers and good relationships with them are among our greatest
assets. Purchasing co-workers builds win-win relations with competitive
suppliers who care about people and the environment. Efficient and reliable
production with high quality results and minimum waste are the basis for
creating the lowest price. Together we create optimal conditions and long-
term cooperation.
Technology:
They constantly develop products, seeking for cheaper and innovative uses
of unusual materials, they are searching for new trends needs and tastes in
various markets

HR management:
Company finds people as the main asset, they look after recruitment,
training, coaching and managing all the employees, transferring the main
competence and values to the staff for safeguarding and strengthening the
IKEA culture.

Infrastructure:
The have well developed planning quality controlling and information
management systems. Strong Corporate culture helps company to set
flexible as well as efficient structures and routines.

Option 1: Popup IKEA


The IKEA store has conventionally been a standardized experience globally
of massive blue-and-yellow buildings that house approximately 7000 product
items, often parked in the outskirts of cities to lower costs. It is
unsustainable for IKEA to continue setting up such stores at the rate that
they have been indefinitely.
To complement this expansion, IKEA can consider rolling out a series of
“pop-up” IKEA mini-stores, comprising of a number of trucks that function as
mobile IKEA showrooms. These showrooms will display items that are
carefully curated to suit the particular market and will aim to bring IKEA
to places where it was previously inaccessible – namely, dense urban
city centres as well as smaller towns in more rural areas. The pop-ups would
function as a retail space for IKEA’s smaller items. However, customers
would also have the option of browsing the catalogue for IKEA’s full product
offerings and placing orders for their desired items, which can then be
delivered to their doorstep. IKEA could also leverage on virtual reality
technology to provide customers with a virtual shopping experience as a
feature of the pop-up store, where the conventional IKEA store experience
can be simulated.
The benefit of these pop-up stores is that IKEA would be able to better reach
out to previously less accessible customers, providing greater convenience
to their potential customers. The temporal nature of these makeshift stores
also translates into lowered cost since IKEA would no longer have to make
huge capital expenditures required in setting up shop permanently such as
investing in retail space, which has been prohibitively expensive in urban city
centres. The relatively lower initial outlay and risk exposure also makes this
a good way for IKEA to conduct initial market testing, gauging the
demand for their products and gaining invaluable knowledge on the
needs, tastes and preferences of consumers in that particular
market. The impermanent structure also makes it easy for modifications
to be made quickly according to feedback from customers.  The pop-ups
can be used to gauge the suitability of both their basic product offering as
well as those that have been designed to fit the particular market’s needs. It
is also a good way of testing the market in inaccessible rural areas with
weaker transport and distribution infrastructure in place to see if it is worth
the trouble of entering. Finally, the pop-up IKEA store would also have the
added advantage of generating buzz and building brand awareness.
Suitability is high as this option can help to boost revenues by reaching out
to more customers in new markets as well as those who previously
eschewed going to IKEA, perceiving it to be a hassle involving “long lines,
crowded parking lots”.  It also rides on the on-going trend of temporary
retail establishments and concept stores that capitalize on consumers’
fascination with the temporal that creates a sense of urgency and
encourages spontaneous purchases.
Feasibility is moderate to high, what with IKEA’s vast retail experience and
network of logistics providers. The idea is also conceptualized around
lowering costs and does not require huge capital expenditures. There could
be possible implementation issues with regard to the sophistication of virtual
technology available on the market, as well as with the selection of products
to offer out of its inventory of over 7000 items.
Acceptability is moderate to high. The idea does not threaten the interests
of IKEA’s major stakeholder groups. It may face opposition from members in
the management that perceive the pop-up store to be a dilution of the
company’s culture since the universally standardized IKEA store experience
has been an iconic hallmark of the company. However, the pop-up stores are
proposed as a complement and not a replacement to the current model.
IKEA also needs to consider the local authorities as a stakeholder group to
gain approval from in terms of obtaining the necessary administrative
licenses or permits for setting up shop.

Option 2: A New Global IKEA image


Option 2 is about changing IKEAs brand image. Since its beginning is has
based all its culture, values and design on Swedish culture. Now IKEA is no
longer a Swedish firm since its more or less globalized. IKEA will now be
something for everybody not just the ones that love Swedish designed
furniture.
With this strategy you will be bringing other cultures into the IKEA store and
concept. Having different lines of products connected to other cultures, IKEA
can accomplish to have something for everyone. Design categories of
products and from all around the world and also having culture weeks and
happenings in the stores.

Suitability for this is medium, it is in line with the trends of globalization


where people are on the move. When people are moving they like to have
things that are familiar and from their culture. IKEA is also getting better at
adapting to new cultures and are collecting more knowledge.
Feasibility is low. This strategy has high risk of damaging the brand. Here
you will be messing with the much loved swedish design and values. They
can lose all they have worked for since the beginning and becoming IKEA for
no one.
Acceptability is moderate. Here you are building on existing operations and
resources. Cost will be relative low.

Option 3: Invest more in R&D

This option includes putting a lot more money and focus into research and
development. This will follow a more traditional approach, but attempt to
gain as much as possible from it. In this option we have decided to send top
designers from IKEA to live in some of the countries we intend to move into.
By actually being in these countries and talking to the people, IKEA will gain
a much greater understanding of these peoples wants and needs, as well as
many cultural and social differences. IKEA will also bring in top designers
from these other countries to help teach and train local IKEA designers. The
true goal of this option is to combine the experience knowledge gained from
traveling and living in this other countries, with the concrete knowledge
learned from their designers.

Suitability
“high”

Suitability is high because it is coherent with the aim of reaching out and
satisfy new customer segments whose needs were not matching with current
ikea proposing products. These measures will allow the brand to grow some
stores attendance and even open new ones in countries Ikea is not
implanted yet, which will result in a raise of revenues.

Feasibility
“medium”
There would be an increase in capital expenditures for the company due to
the hiring of more people with great competencies and knowledge from
different cultures, the differentiation of some products, but also due to the
deeper research and market tests. Moreover, figuring out what products has
to be adapted to new markets, finding great foreign designers to train and
collaborate with Swedish ones, and handling the production and distribution
of new products is time consuming.

Adaptability
“medium”

The development of multicultural teams and hiring of foreign employees will


bring to the company new insights concerning the designing of their
products, but it will results in the progressive loss of Swedish culture and
values of the company. In addition to that, these measures imply the teams
to face some cultural and language barriers, and thus will make the
communication and the managing of operations more difficult within the
company as for now the most part of top managers are Swedish.

Conclusion and Recommendation:  


     
      When it comes to a company as experienced and established as IKEA
it becomes more difficult to offer advice, especially since they strive with
their ability to innovate and remain attractive. Though creating a slightly
more difficult task, this project also revealed the true beauty of global
strategy. That being that, no matter how successful and competent a
company is, there always remains a need to plan for the future. It also
forces one to become more innovative and creative when formulating this
plan, which is exactly what our team did.
        Before we could begin to offer any advice, our team knew that we
would first have to obtain a better understanding of how IKEA operates. We
first looked at the Macro environment using the STEEPLE + C model. From
this we concluded that there were not many factors restricting IKEA from
operating successfully. The only opposing factors we thought posed any
threat were, the ever changing socio-cultural mindsets of people in
unfamiliar countries, and the economies of these countries. (Pg. 6-8) We
also looked at Porter’s Five Forces, and again we concluded that, there were
not many opposing forces facing IKEA. The threat of new entrants,
substitutes, and bargaining power of suppliers were all low. (Pg. 10)
Although we found the furniture market to be highly competitive, we do not
believe that has a very negative effect on IKEA. This is because Ikea has
been so prevalent for so long they have a very firm grip on their market
share. “The retailer accounts for just 5–10% of the furniture market in each
country in which it operates.” More important, says CEO Anders Dahlvig, is
that “the awareness of our brand is much bigger than the size of our
company.”  Thus creating a highly competitive environment over the
remaining shares, and leaving the buying power of customers to be the only
true force opposing IKEA.  

We then attempted to figure out what are the key competences and
capabilities of IKEA. (Pg.13) From this we concluded that IKEA was truly a
hybrid company due to their ability to continuously cut cost and
differentiate. We then used the TOWS matrix to plot out the key
opportunities and threats IKEA faces. From this we generated a list of key
strategic issues. We then chose to attempt to find a solution that would
prevent IKEA from getting stuck in the middle, and allow them continue to
operate as a true hybrid company. Though this is a two part problem,
consisting of cost strategy as well as differentiation, we decided to only focus
on the differentiation portion. Due to IKEA’s implicit knowledge with regards
to cutting cost we did not believe there was a need to create a plan for
sustaining this. Cutting cost has been something IKEA on has focused on
from their start. This is done time and time again because of the control
IKEA has over its whole manufacturing and distribution process. Even down
to how big each of their boxes are, “the good designers, the experienced
ones, they have this in their backbone,” said Mr. Dickner. He said “IKEA’s
designers use software that calculates optimal sizes and shapes, helping the
company avoid having to tweak designs or scrap ideas entirely because
they’re deemed too expensive to ship.” Once realizing all this we began
thinking of options to help IKEA continue to differentiate.
As stated earlier in this paper, our team came up with three
interesting options. Option one, which was to start performing road shows
where IKEA would take mobile show rooms to rural cities, surrounding
countries we intend to move into. This would allow IKEA to reach people who
would not normally be able to reach their main stores. Though this option is
good great for the reason stated above, it is even better for the information
we will receive by doing so. The intended purposes of these road shows is to
gain a better understanding of what the natives of these untapped countries
think about IKEA products. In addition to these road shows, IKEA will also
set up virtual stores within major cities. These stores again will be intended
to receive feedback on traditional IKEA products from locals.These two
services will really help IKEA to reach targets that have traditionally been
unavailable, and use their input to help them begin to create an
understanding of the culture and interests of these people.
        Though option one will provide a lot of value to IKEA, we believe they
still to really differentiate themselves they will need to acquire more in-depth
cultural knowledge and advice. Therefor we believe they should also
implement option three. This option includes spending more money on R&D
in the form of sending top IKEA designers to live in foreign countries and see
firsthand what their houses are like. It would also include bringing in top
designers from these foreign countries into IKEA to help teach and train
IKEA designers. We believe this perfect combination will allow IKEA to apply
the firsthand knowledge and experiences they gain to the expert knowledge
provided by the foreign designers.
        In conclusion, we have great faith based of the research we have done
that, if IKEA implements options one and two stated above, they will then
obtain a truly genuine and useful understanding of the differences in cultures
and lifestyles between the countries they operate in. This knowledge
combined with the proven ability to find ways to cut costs time and time
again will

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