Strategic Management 1
The purpose of this paper is to conduct a position analysis of the IKEA Corporation. It presents a profile of the company operations, identifies its strategic issues and challenges and analyses strategies which it has contributed to it gaining a competitive advantage.
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IKEA is a privately held, international home products company that designs and sells ready-to-assemble furniture such as beds and desks, appliances and home accessories. The company which is the world's largest furniture retailer originated in Småland, Sweden and distributes its products through its retail outlets.( IKEA, 2007; Sloan, 2007) As of October 2010, the chain has 313 stores in 38 countries, most of them in Europe, North America, Asia and Australia. The IKEA Group itself owns 276 stores in 25 countries and the other 37 stores are owned and run by franchisees outside the IKEA Group in 16 countries/territories. 2006 saw the opening of 16 new stores. A total of at least 15 openings or relocations were planned for 2010. IKEA built and designed its own furniture through Swedwood, an IKEA industrial group, where they also started testing the idea of flat packages. The idea was to design products that could be packed completely flat and later reassembled by the customer. Staying true to its motto of providing “Affordable Solutions for a Better Living,” their consumer-assembled furniture allows them to decrease assembly and shipping costs because of the simplicity in packaging parts of unassembled furniture. Bartlett, C. A., and Ghoshal, S. (1989). By developing a new paradigm for furniture and house wares, IKEA continues to lead the way in home furnishings with much room for improvements and expansions. (See SWOT analysis Appendix i)
Political – The Political factors that IKEA has to contend with would include the various Economic and Trade Agreements policies and tax arrangements in the various countries in which they operate. (Dupuis & Prime 1996) With regard to Canada and the European Union for instance, very close monitoring is taking place of the discussions to either allow tax breaks or increased taxes on imports into Canada. This can affect them negatively or positively. If the political directorate decides to reduce taxes in order to increase the amount of trade between Canada and the EU IKEA will likely benefit from this change. They will be able to ship more products for less money therefore giving them more of an opportunity to expand into different regions in Canada. If the outcome is to increase taxes on furniture into Canada, to decrease the amount of competition Canadian furniture manufacturers face, it would result in a decline in IKEA’s numbers as well as a lack of expansion for them into regions and territories. The outcomes of these types of political issues affect IKEA’s expansion plans in the company’s global network. Another factor is the political uncertainty in place right now and the rising tide of popular uprising which are toppling long existing regimes such as in Egypt and Tunisia. This trend has number implications for investment expansion job opportunities and legislative changes that impact on employment, minimum wage, taxes and workplace safety. Economic The global economic crisis is by far the greatest issue being monitored by transnational corporations presently and IKEA has had to make adjustments by adopting different kind of strategies that will still hold the appeal on their customers and aiming to own the customer loyalty. They also have a very conservative policy when it comes to borrowing money. IKEA prefers to use retained earnings and do not borrow very much. While the reality is that since the 2008 global financial crisis, some people have been coming to the stores less others have been coming to the stores more as people...
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