Strategic Management and Ikea

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1) How has IKEA succeeded in expanding across the world using a standard range of products and a standard strategy in the home furniture and furnishings industry, in which divergent cultural influences are likely to be at their strongest?

First of all, seems reductive say that IKEA provides a standard range of products having regard to the incredible width of this range (which allows, therefore, to offer many variables of many types of heterogeneous products: in this way is almost completely bypassed the limit traditionally connected with the offer diverse depending on the country of destination). In fact, the product range is so vast ("The IKEA products on offer Exceed 12.000 items in number") to allow a lack of diversification for export market: every type of consumer that is part of the target audience can find products of his choice, ignoring the others (which will be desirable by other consumers focused on other features). In this way this strategy exceeds its traditional limit. As it is written in the text under consideration "IKEA has achieved the impossible, to create a range of products attractive to consumers everywhere, in countries with very different cultures, and to apply a formula for presentation and sale of those products which reinforces the attractiveness" . With regard to the standard strategy used by IKEA in my view its success relies on a few points well described in the article. First, the target is well defined (and wide, and in all countries without exception). "It may sound corny but the self-proclaimed focus of IKEA is ‘young people of all ages’. In reality the market is primarily young people, who are well educated, liberal in cultural values, white collar, but with limited means because of their stage of career and family cycle, and in the process of setting up or expanding their homes because they are having children". The second successful point of the unitary strategy of the company is the interest to achieve and maintain a cost advantage (in light of the needs of the target, of course). "This cost and price leadership is achieved by a combination of strategies – large-quantity purchasing, the push to discover ever-cheaper suppliers in ever-cheaper markets (sourcing in developing economies has risen from 32% to 48%), low-cost logistics, store location in relatively cheap suburban areas, and a do-it-yourself approach to marketing and distribution. Low costs are translated into low prices as IKEA pursues a deliberate price leadership strategy". In addition to this, the Distribution and Promotion system is modern and inexpensive and easily replicable and acceptable to consumers around the world. So, everything in IKEA works to create a great opportunity, overcoming (as already said at the beginning of my answer) the limits of the not-diversified offer per country and culture in this particular industry sector, characterized by strong cultural differences.

2) Is there a limit to this expansion? Does IKEA’s history illustrate the nature of such a limit?

I think the main limit to the expansion of the business of IKEA is cultural and, therefore, be able to contain production costs, while continuing to adapt its products to markets other than those served today. The example of the American market is helpful in this regard. On that occasion, IKEA had to wait a long time before being accepted in the United States, producing profits. That was a very risky investment, yet the American market in that commodity sector has its own characteristics, presumably, very well known and different from European ones. The entry into the U.S. market, to be profitable, had to wait an important adaptation activities never done before. I think in this case when it comes to expansion it is done in a geographical sense (and not profits), so an entry into other markets to IKEA today seems to be quite complicated (making reference only to markets and economies very different from those faced up to date) for the...
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