Ikea's Business Strategy

Topics: Strategic management, IKEA, Ingvar Kamprad Pages: 5 (1802 words) Published: December 12, 2010
Ikea, from its humble beginning to a multinational corporation has entered the hearts of many of the world’s citizen thorough its unique design and low cost products. Ingvar Kamprad, the founder of Ikea and the genius behind this phenomenon, continues to build his empire throughout the continents of the world by his vision and bold business strategies. Spanning his wing around the world globally, Ikea is set to make its mark in history. 2.Background Note

Company vision is to create a better everyday life for the many people by integrating sustainability in all business strategies. Today Ikea encapsulates all the key beliefs and vision of its founder, which includes: a.Democratisation of consumption – Offering good value furniture at an affordable price b.Enhanced visual sensitivity

c.Non hierarchical world and anti-bureaucratic attitude
e.Frugal attitude – Ikea is in the hands of Dutch charitable trust. Looking at Ikea’s turnover from 1954 to projected turnover in 2010 one could only marvel at their ability to continue to grow at such a steady pace. The Ikea Group opened 16 new stores in 2009 and 15 more as at October 2010 (Ikea, 2010) Ikea’s success lies in the way it has been able to put together various strategic activities vis-à-vis strategic thinking and strategic planning. Strategic thinking encompasses key tenets like: 1.Taking a holistic view

2.Focusing on the intent and purpose
3.Real time thought process- using the knowledge and experience of past behavior and predict the future trend 4.Hypothesis driven – Scientific method of testing and re-testing a scenario. This is a creative and critical or analytical process 5.Opportunistic

3.Building an Empire
Ikea’s biggest investment plan yet is to expand in China, the world most populous nation. Bloomberg (2010) reported that Ikea plans to dump in US$300 million for their expansion in China. They target to more than double the number of stores in China from 8 now to 18 in 2015. This is to capture the China market where retails sales rose 18 percent in the first eight months in 2010. Ikea plans to invest up to US$1.2 billion in China over the next five years. Ikea has had their fair share of experience in the Asian market. In 1974 Ikea opened its door in Japan. After a long struggle it pulled out from Japan in 1986. In 2006, Ikea returned to the land of the rising sun just to reopen a giant store in the outskirts of Tokyo. The very essence of their success in Japan where many other foreign companies have failed to do is to understand the local market. The company needs to have local people employed right from the start. A local at a high level will ensure the success of the company, who understands the people’s culture and what this country is all about (Lane 2007). In 1998, Ikea opened its first store in Shanghai, China. The demand of housing increased when the Chinese government allowed foreign investment in the real estate industry in the mid 1990s. This surged the home ownership which in return also boosted the demand for fine home decoration and furnishing. As per Porter’s Diamond – The determinants of National Advantage, Ikea’s business srategy in China can be described in the following four broad attributes. •Factor conditions – China’s with its large human population gives the much needed advantage in terms of labour supply. Ikea is able to take this advantage to build its empire within China and also all over the world by producing its products in China and has kept its cost low. •Demand conditions – A nation with population set to reach 1.4 billion by the end of 2010, demand for household goods of higher quality and unique design is set to soar with the increase of per capita income. In a country where showing off one’s status symbol by acquiring material goods of high quality and standards, the affluent don’t mind spending the money for this cause. However, it’s the middle class that Ikea wants to...

References: 1. Lane, G. (2007) A study of how different companies have failed, and tips on how to succeed, in the Japanese market (Online). Available at http//www.japanic.com/mgz_sep-oct_2007_issue_failed-businesses (Accessed on 20th Oct, 2010)
2. Bloomberg 2010 (Online). Available at http://www.bloomberg.com/news/2010-10-19/ikea-plans-to-add-300-million-to-mall-developer-s-investment-in-china.html (Accessed on 20th Oct, 2010)
3. Ankli, R.E. (1992), Michael Porter 's Competitive Advantage and Business History. pp. 0228-0236. Available at http://www.h-net.org/~business/bhcweb/publications/BEHprint/v021/p0228-p0236.pdf (Accessed on 25th Oct, 2010)
4. Ikea 2010 (Online). Available at http://franchisor.ikea.com/showContent.asp?swfId=facts1(Assessed on 20th Oct,2010)
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