Ikea Assignment

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LIVERPOOL JOHN MOORES UNIVERSITY

STRATEGIC MANAGEMENT
TOPIC
IKEA CASE STUDY

SUBMITTED TO: MARILYN MAY
STUDENT NO: C0362023
1.0 INTRODUCTION:
Ingvar Kamprad Elmtaryd Agunnaryd (IKEA) was founded by a 17year old boy Ingvar Kamprad in a small town of Smaland in Sweden. IKEA is now the largest furniture retailer in the world. As of October 2010, IKEA has 313 stores in 38 countries most of them in North America, Europe, Asia and Australia. The IKEA group owns 276 stores in 25 countries and 37 stores run by franchisees outside the IKEA group in 16 countries.

IKEA VISION:
The IKEA vision is to create a better everyday life for many people. We make this possible by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.

2.0 ENVIRONMENTAL ANALYSIS OF RETAIL INDUSTRY:

3.1 SWOT ANALYSIS:

SWOT analysis is a planning method which is strategic and which also helps to assess the strengths, weaknesses, opportunities and threats involved in an organisation. It projects the internal and external factors that are favourable or unfavourable for a future project. Company’s objectives are aligned throught the very first planning processes.

STRENGTHS:
STRONG GLOBAL BRAND: IKEA is the largest furniture retailer in the world. The brand “IKEA” has been well known globally due to its 276 stores across 25 countries. Due to its low price and good quality products, it has become a must want for many people across the globe. IKEA is targeting the middle class people of the world, and it has been largely successful in doing so. So becoming a very well known global brand is a very big strength in terms of selling.

VOLUME COMMITMENT: IKEA has maintained long term relationships with its suppliers and has been buying large amount of raw materials promising its suppliers a large volume of purchase. With a network of 1300 suppliers in 53 countries (according to case study), IKEA spends a lot of time in finding the most suitable supplier for its product designs. COMPETITIVE PRICES: IKEA has a very vast range of furniture products on display for its consumers which are properly designed at very competitive and low prices. IKEA can afford to do this, as they have people in production teams identifying the appropriate materials and least costly suppliers which bring down their production costs. ECONOMIES OF SCALE: Due to IKEA’s global stores and its ever expanding nature, IKEA obtains a cost advantage due to expansion as their production increases. A producer’s average cost per unit falls due to certain factors when the scale of output increases.

WEAKNESSES:
SIZE & SCALE OF ITS GLOBAL BUSINESS: It is advantageous to be a global business, but sometimes it becomes hard to control the standards as well as quality when the business is all over the world. It is tough to implement control and standardize the stores across the world. COMPROMISING QUALITY: As IKEA’s focus is on low priced products, they sometimes compromise on quality. In order to stay competitive, and stay on their low cost strategy they should keep the quality consideration. GOOD COMMUNICATION WITH CONSUMERS & STAKEHOLDERS: To retain its current customers, IKEA needs to communicate with its consumers and stakeholders and consider the environmental activities. IKEA needs to be in touch with its customers and potential customers with the help of different medium of communication.

OPPORTUNITIES:
DEMAND FOR LOW PRICED PRODUCTS: Due to the current economic condition, there is an ever increasing demand for lower price products in all the sectors. If the prices are high, consumers will tend to buy the product less, so the low priced products are more popular. DEMAND FOR GREENER PRODUCTS: These days there is an increasing demand for greener products. This is a big opportunity for IKEA.

THREATS:
SOCIAL TRENDS: There is a decline in the first time buyers...
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