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IKEA

1. Introduction

IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was
founded in 1943. Today it is the world's largest furniture retailer, recognised for its Scandinavian
style. The majority of IKEA's furniture is flat-pack, ready to be assembled by the consumer. This
allows a reduction in costs and packaging. IKEA carries a range of 9,500 products, including
home furniture and accessories. This wide range is available in all IKEA stores and customers
can order much of the range online through IKEA's website. There are 18 stores in the UK to
date, the first of which opened in Warrington in 1987. In July 2009 IKEA opened a store in
Dublin too - its first in Ireland.

1.2 IKEA Business Strategy

Four generic business Strategy which includes
Cost leadership strategy
Focused cost Leadership strategy
Differentiation strategy
Focused differentiation strategy

IKEA products are differentiated because their products are different in design (good, nice and
simple in design), convenience in use and customization ability. But the level of differentiation is
moderate because IKEA concentrate on young design, good quality products, cheap price
and customizable. Specially, IKEA most concentrate in cost leadership. IKEA prices always
cheaper than their competitors because they always try to find the cheaper suppliers with good
skill for make good products all over the world, restructure their form and find the convenience
for customers customizable in limits way IKEA supports help reduce the cost of warehouse,
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cost of inventory, cost of management and so on. Beside that, IKEA also develop wide products
lines for customers can buy everything relations with furniture. Moreover, they make people not
only buy something they want with a little money, customers also pay more when shopping at
IKEA by diversification of IKEAs products and customers can buy everything relations with
furniture at IKEA stores. Overall, IKEA follows cost leadership strategy.
Supporting for cost leadership strategy, IKEA do a lot of actions at functional level: efficiency,
quality, innovation and customer responsiveness.

IKEA tried to achieve superior efficiency by increasing their effective of economic scale,
learning effects, experience curve, flexible productions systems and mass customization.
By outsourcing good products from all over the world, it not only helps IKEA reduce
products cost because of cheap labor and inexpensive materials from many other
countries, also helps them study and adapts new technology into their business.
Moreover, they invested heavily in Swedwood plans, equipping them with the most
modern technology for help themselves and their suppliers adapt new technology in
business. For example, they trying to find suppliers in Vietnam with cheap labor and
inexpensive raw materials, they also help Vietnamese suppliers IKEAs technology and
knowledge for enhance Vietnamese suppliers quality and cheap raw materials. Beside
that, by always try bring to customers cheap products with good quality, IKEAalways try
to find out more suppliers for increase their competitive advantages and power with their
suppliers. It pressure to supplier always try to reduce cost, increase competitive with their
competitors. As the result, this strategy support IKEA reduce products price, also try
maximize their customization ability, support customers more choices.

Secondly, because of IKEA strategy is that always try provide for customers good
products with high quality and cheap prices, so IKEA always invest money in research
and develop new technology, finding out better suppliers, help suppliers adapt new
technology in business, redesign IKEA products every year for more convenience, IKEA
gain their mission is that products with high quality, cheap price, nice design.

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Third, by spend more money and time on research, design and marketing, IKEA always
try to find out customers requirements, try to understand what is customers needs, what is
the trends. Every time, they always try to introduced new designs in every product lines,
bring the innovation to their customers.

Fourth, by do all things above, understand customer needs, IKEA supply for their
customers customization ability by come to IKEA warehouse, collect the materials which
is customer needs to adapt its together become a product.


.1.3 INTERNATIONAL EXPANSION

For increasing profitability and profit growth we can achieve by global expansion.
expanding the market: leveraging products
realizing cost economies from global volume
realizing location economies
leveraging the skill of global subsidiaries.
Moreover, by using maximum national competitive advantages from each nations by analysis
and using Michael Porters Diamond: factor endowments, local demand conditions,
responsiveness of supporting and related industry, intensity rivalry, companies can increase
their profit by using maximum resources with highest competitive advantages from many
countries.
Understand the meaning and opportunities, at the beginning of started business, Kamprad
recognized is that not only Sweden market, Europe also had the same problems that were: poor
in design, expensive in price, dominated by small retailers. It motivated Kamprad started IKEA's
business. The more he developed the more he knew that everywhere on the world had the same
furniture situations with Sweden. That really was a big opportunity for Kamprad to expand
IKEA's market share and gain profit, drove IKEA expansion their number of stores around the
world.

SWOT Analysis
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Strengths
IKEAs cost leadership concept keeps it ahead of its competitors.
IKEA has successfully combined low cost with good quality.
IKEAs research and development team finds ways to alter designs to save on
manufacturing costs.
A key feature of IKEA furniture is self-assembly.
IKEA uses cheap labor which keeps its costs down and gives them a competitive
advantage.
Its strong long-term relationship with its suppliers gives it a competitive edge.
IKEA has the ability to adapt its tactics according to the market.

Weaknesses
Its organizational culture can become a demotivating factor for many of its employees.
IKEA is not at all customer focused.
It lacks thorough market research on customers preference before entering into a new
market.
IKEA never took economic issues into consideration before being faced with the
problem..
IKEAs strategy is not exactly aligned with its vision.\

Opportunities

IKEA can expand its product line by producing high end products
IKEA can expand its business into interior designing and cookeries products
IKEA should listen to the customer demand to make more sustainable solution
Product customization can boost up IKEAs sales
.
Threats

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Changing social trend can hinder the growth of sales of IKEA
Accelerated market competition in USA
The risk of global financial crisis

Outsourcing
Strategic outsourcing is the decision of IKEA to allow one or more company to perform
specifically or selected value chain activities or function by independent specialist companies
that focus all their skills and knowledge on just one kind of activities. According to available
information IKEA now outsource 90% of their product and rest 10% produce internally.
Outsourcing has brought some benefits for IKEA, those are,
Low cost structure
VERTICAL Integration has been cut IKEAs cost structure because it creates increasing
economic of scale. Achieving economic of scale is very important of IKEA because it has a high
fixed cost structure. In furniture industries allows IKEA to spread its fixed cost over its large
volume of production and in this way it drove down IKEA to average cost per unit.
Focus on the core business
A final advantage of strategic outsourcing for IKEA is that it allows managers to focus their
energies and company resources on performing those core activities that have the most potential
to create value and competitive advantage.
















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