The Importance Of A Firm Within A Business Network

This paper aims to demonstrate a detailed description of the elements of ‘IKEA’ company based on its famous name in the furniture industry.

The industry does not possess major threat from new entrants due to strong barriers to entry and strong competition for retail space. There is also a strong rivalry between competitors as limited space is being contested by major players alongside

Global sourcing is an important sourcing strategy for IKEA Company. According to Hultman, Hertz and Johnsen (2012), in 2008, IKEA has 54 different sourcing countries and 30 purchasing departments which were located all over the world. With the expansion of its market, IKEA was not satisfied with selling its product only in domestic and Nordic market instead it put its higher goal in global market. Therefore the sourcing market also expanded with the growing market. There were 64% of its products were sourced from European countries which were mainly in eastern part like Czechoslovakia, Rumania and Hungary; China with a 22% share of the supply was the largest single supply market, and Poland with a 16% share (IKEA 2007). However, IKEA also trades off the cost of raw materials and cost of transportation, hence IKEA combined the Global sourcing with local sourcing strategy to lower the total cost.

“…Are the factors that need to be overcome by new entrants if they are to compete in an industry…” Home retail in the UK is very big, developed and competitive industry. It has well-known companies that are recognized for style, price, and costumer services. A new competitor can get easily to the market competing with better services, design products and price. But economic and legal aspects may be a reason for potential entrants to refrain to enter into the UK market as it represents a fairly large investment. Potential entrants need to penetrate into the market with a new kind of service or product. Example: Argos use catalogues to make sales through the market. IKEA, is known for selling ready-to-ensemble products.

In IKEA’s history two different modes of entry were used. Both were met with big success and allowed IKEA to enter new markets very easily, and in a secure way.

Threat of New Entrants (Medium): The threat of new entrants is not really high, appliances manufacturing industry is easy

IKEA is rumored to be a very standardized retailer, i.e., a certain set of marketing strategies is used that are the same around the world. This indeed sets IKEA, operating on markets in Europe, US as well as Asia and Australia, apart among international retailers. Often the theoretical conclusions in international

With such situation, IKEA faces several challenges in this competitive market. In order to prevent to be substituted, IKEA need to improve on marketing strategy. I have two ideas of marketing strategy which is online store and IKEA collaborate with real estate.

IKEA, is known around the world for its stylist low cost furnishings. However, developing and maintaining relationships in the U.S. market is paramount to its continued success. This assignment, will discuss whether value or image is the biggest reason for IKEA’s success. Additionally, I will discuss which is more important to it maintaining and developing relationships in the U.S. market. Notably, IKEA founder Ingvar Kamprad, started the business in 1943, as a mail-order business. However, in 1948 Ingvar started exploring making furniture, in 1951 IKEA’s first catalog was published. Moreover, in 1953 the first showroom opens, by 1955 IKEA is designing its own furniture. Additionally, in 1958 the first brick and mortar store opens in Sweden. Consequently, from the late 50’s to early 60’s Ingvar accomplished some successes and losses. Nevertheless, by the 1970’s the first IKEA store opened outside of Sweden, in the 80’s Ingvar realized he needed to plan for international expansion. Therefore, according to IKEA.com (n.d.), Ingvar separated the ownership of the retail operation from the ownership of the concept and the IKEA brand – to keep these separate roles in independent business groups, operating under a franchise system. Furthermore, Ingvar Kamprad thus donated a large number of the operating companies to a Dutch Foundation, the INGKA Foundation, which today owns many of the IKEA franchisees. Consequently, the franchise business model, with both franchisees owned by the

IKEA’s corporate philosophy is to provide goods at a reasonable price. However, in providing products at a lower price than expected, then profit maximization is reduced (Rigby, 2011). This would be a possible threat on profit and may affect the growth for IKEA. To prevent their stock from becoming dead stocks, IKEA only order items when they are low in stock, provided the demand is there. Such as

The IKEA Group, one of the world’s top furniture retailers, has emerged as the fastest-growing furniture retailer in the US. Its unique business strategy has given it its strengths for its success today. However, like all strategies, IKEA’s strategy has its own flaws that can pose as weaknesses. IKEA also has a lot of opportunities in the marketplace such as expansions of their company and threats such as competitors in the same industry.

This is vital in times when the retail sector is depressed, as it increases IKEA’s potential market.

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 before the mishaps in America could be characterized as going against the norm charting their own path to success using low priced manufactures to secure lower selling prices aimed to target those who were of older age and of middle class standing. Their new strategy was to target those of a younger demographic, young married couples, college students, and 20-30 something singles. By reemphasizing design, promoting through hip quirky advertisements, and encouraging consumers to do away with their old furniture, IKEA revenues doubled in a four-year period. IKEA today has adapted somewhat of a local customization strategy where their store layouts will resemble that of many local household layouts as proven by their success in China where they failed to expand beforehand. They also keep their prices extremely low in some areas as China by sourcing a large percentage of products in the area of operation.

2. The reason of why distribution is such a key element of IKEA’s value chain.. 2