What are the strategic capabilities of IKEA?
From the VIRO table (appendix 1) IKEA's strategic capabilities are grouped into the following categories -
IKEA operates (in 2002) 154 stores in 22 countries and serviced 286 million customers. With a 14% share of the market (in America), there is huge opportunity for growth via a continued marketing campaign to leverage off its brand, differentiating itself from other distributors by highlighting it's unique price and business acumen.
IKEA-with a revenue stream of $12 billion would have a strong balance sheet which could allow capital raising for options such as a focused marketing campaign, buying market share by organic growth and new store strategy. IKEA also has the ability to control their own distribution network to control the supply chain from production to consumer.
Increasing its market share, by growth (50 stores by 2013 in America) and creating a continued infiltration in the American consumer's minds and utilising that company's infrastructure will increase its presence, and this will have the effect of improve economies of scale and hence improve profitability and return on investment.
By the selection of its own design, and price advantage (20% to 30 % below other distributors), it has the ability to purchase from currently approximately 1800 suppliers from around the world, thereby ensuring the best prices flow onto the customer. I
Recommend a business strategy for IKEA.
IKEA has several options available for its future business strategies, including
Increase its market share through expansion
Targeting new markets
Improve distribution networks
Increase in Market Share
Ikea need to understand the American consumer trends and then formulate their corporate strategy accordingly and pursue it vigorously (current campaign seems to work pretty well). The furniture industry is fragmented with a large number of distributors and this represents an opportunity to increase market share by buying strategically.
Targeting Market Segments
IKEA has only 14 % of the American market therefore; consumption per capita will grow steadily which will requires targeting new market segments and design of separate products for that segment.
Improve Distribution Networks
IKEA need to improve the sales/distribution chain and develop a better widely educated distribution strategy and enter partnerships with transportation companies for exclusive distribution rights. (This may ensure the cheapest mode of transportation for the customer)
Ikea's strategic capabilities can be summarised using the PROFIT and VIRO frameworks as below
The size, location, technical sophistication and flexibility of plant and equipment
Large retail outlets located in the suburbs and cities, in America
Company established in 1943 demonstrating longevity and ability to survive
14 th Largest retailer with "monster stores" (page 9)
Modern facilities including childcare and café's
Unique store layout
The location and alternative uses for land and equipment
Alternate uses available for retail facilities generally a retailer has large showroom facilities which could later on be used for other purposes.
Location, generally in city and suburbs.
Reserves of raw materials/ inventories
Finished product are sourced both locally and imported
sufficient supply to meet retailing demand which is seasonal
good level of alternate local suppliers (+- 1800 suppliers)
strongest asset of the company is its brand name
long serving Scandinavian company renowned for its price vs. quality product
Iconic modern "flat pack" systems
Large number of products
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