Chapter 3 Ikea OT Case anaylsis Essay

The well-known ‘build-it-yourself’ product design makes them progressive and makes them running ahead of the competition. IKEA is the only big brand in a category further not present in global markets, there are no real competitors operating in the same category. In 2013 775 million customers visited IKEA in 2013, and its website hosted 1.2 billion visits (4). Due to the ‘build-it-yourself’ product design IKEA is able to provide their customers with high quality and low cost products, even the customers with limited income and limited living space

* IKEA’s low cost structure has been the very core of its success. It’s low-cost and high-quality strategy fits with the current state of the economy. Offering convenience factors within IKEA’s stores would fit well with IKEA’s low cost structure. It maintains its low-cost business model by creating a different furniture shopping experience. IKEA supplies customers with all possible materials needed to complete their shopping when they enter the store (that are, measuring

This assignment had to be written for the class of Management and Organizations at Stenden University, course IBMS, first year. We had a group of 6 and had to work it out together. We were enjoying getting into the world of IKEA, the world’s most furniture store on the market.

”The IKEA Concept starts with the idea of providing a range of home furnishing products that are affordable to the many people, not just the few.” *http://www.ikea.com/ms/en_GB/this-is-ikea/the-ikea-concept/index.html

IKEA’s social responsibility and sustainability is continuing to grow and progress according to Chief Sustainability Officer, Steve Howard. IKEA wants their business to have a positive impact on the world so they have implemented a strategy called the People & Planet Positive strategy which focuses on 3 areas (IKEA Group, 2014). The first area of focus is to get customers on board with living a more sustainable life at home

Strategic alliances could reduce the complexity of logistics if IKEA is able to find a reliable partner in this field.

1. List IKEA’s external and internal challenges. Looking at IKEA’s challenges, which do you think pose the greatest threats? Why? How would you address

Low prices are the cornerstone of the IKEA vision, business idea and notion. The basic thinking behind all IKEA products is that low prices make well-designed, functional home furnishings available to everyone. After all, our vision is to create a better everyday life for the many

IKEA also based on low cost to achieve hybrid strategy. Big items are all flat-packed that the customers transported and assembled themselves. This saves IKEA with shipping costs from suppliers and delivery costs to customers so that they can pass this benefit to customers through low price. In the stores, there are no armies of sales staffs. Customers are providing with tape measures and pencils so that they can self-served. This reducing the number of sales staff required. IKEA encourages customers to create value for themselves by taking on certain tasks traditionally done by the retailers and their low expectation on service levels keeps costs down. Additionally, IKEA choose most economical suppliers over traditional suppliers around the world. The company buys great volume of materials from suppliers to get the economies of scale. Since the labour in UK is expensive, their products are produced in

The IKEA group sells quality furniture at a low price, to maintain a strong competitor. For that, the company has to try to cut cost without losing quality in the products that it sells.

The world offers significant business opportunities for every company, however, opportunities are accompanied by significant challenges for managers. Managing global operations across diverse cultures and markets represents a big challenge and opportunity for companies. To compete in the global market and be successful, companies must learn the strategies, policies, norms and technology necessary to conduct international business. The opportunities for global expansion are numerous, and attaining success is a matter of developing the right strategy to win local markets and its consumers.

Companies can decide to go global or to enter international markets for various reasons, and these different objectives at the time of entry that enable the business to produce different strategies and the performance goals, and even forms of market participation.

At the outset, it may be useful to characterise IKEA in terms of the characteristics of demand (also known as the four Vs, see Slack et al. p 20). First, IKEA is clearly a high volume operation – as indeed most international retailers are – which lends to systematising operations but which implies capital intensive processes and therefore cost considerations will be crucial. Second, IKEA offers a large number of products (up to 14000 depending on the country/store) so there is high variety in the

IKEA’s strategy towards its suppliers is that of a low production costs strategy. IKEA wants to sell its products at the lowest possible price therefore their

As trade increases hyper-competition grows forcing organizations to go global. By a company going global it requires them to rethink strategy and reform (Ananthram and Pearson, 2008). Global organizational structure is the way a company aims to merge local preferences with global strategy. The definition of global strategy is “strategic choices that have the characteristics of being globally uniform or integrated,” (Yip et al., 1997) such as standardization of products, uniform marketing, and competitive moves, but all globally (Townsend et al., 2004; Zou and Cavusgil, 2002; Bayraktar and Ndubisi, 2014). Global strategic strategy is a way to adjust to globalization. Globalization is “the economic and social process by which economies and communities grow inextricably interdependent “(Jhirad et al., 2009). The recent financial crisis (Das, 2010), large amount of poverty, and climate change are all problems that show how the world is globally connected because all countries impact each other (Jhirad et al., 2009).