CASE STUDY ANALYSIS: IKEA
In Partial Fulfilment
Of the Requirements for the Course
STRATEGIC MANAGEMENT ( BA 111-A)
1st Semester, AY 2013 – 2014
IKEA is one of the most successful global retailers in the world today. It is an international company that designs and sells ready-to-assemble furniture and low-rpiced elegantly designed merchandise such as beds, chairs and home decors. It is found in Sweden in 1943 by Ingvar Kamprad, just only 17-years old by then. The company's name is an acronym made up of the initials of the founder's name, Ingvar Kamprad; Elmtaryd, the name of their family farm; and Agunnaryd, the name of the village where he grew up.
Although IKEA has been generally successful in the 1950s, IKEA continued to encountered several problems until the 1970s. Problems such as the changing of the milk truck’s route, prohibition of IKEA during the Furniture Fair, the rumors about IKEA’s low-quality products and finally in Stockholm, when they had longer lines and slower customer service. In 1985, IKEA opened in Philadelphia, United States. This was to see whether a European retail store such as IKEA could succeed in a massively different market. The consumers in America had a completely different preference. IKEA was then able to solve the problem by redesigning the furnitures, trasnferred their locaitons to reduce costs and they priced their products from Kronor to U.S. Dollars.
In 1980s, IKEA continued to enter new markets around the globe. Stores were opened in the Canary Islands, France, Iceland, Saudi Arabia, Belgium, Kuwait, United Kingdom, Hongkong and Italy. In terms with thei business model, IKEA’s target market is the young, mobile global middle class who are looking for attractively but low prices furnitures. Although the prices are low, IKEA made sure that the quality of its products is not being sacrificed.
The groups of companies that form IKEA are all controlled by INGKA Holding., a Dutch corporation, which in turn is controlled by a tax-exempt, not-for-profit Dutch
foundation. As of October 2011, IKEA has 332 stores in 38 countries. In fiscal year 2010, it sold $23.1 billion worth of goods, a 7.7 percent increase over 2009. In mid-August 2012, the company announced that it will be establishing a chain of 100 economy hotels in Europe.
II. Issues and Discussions
IKEA needs to adapt the culture of country. In their case, they opened their first store in America in 1985. Unfortunatley, the European-style did not appeal to the American culture. Americans had different sheet sizes, chair sizes and the preferences overall. Therefore, IKEA have to be always flexible in terms of customer preferences. This is very important because different culture have diffrent trends and necessities. A traditional design in Eurupe might not be attractive in the Asian or Northern American countries. Egalitarianism
The company IKEA developed a culture of Egalitarianism in their company. This means that they all treat each other equally. Kampard’s management style was informal, nonhierarchical, and team based. Egalitarianism has an advantage of having shared equality recognition. Each individual worker is responsible for personal and team tasks without a chain of authority. This is good for the company because it prevents confusion. In IKEA’s case, there are no special perks for senior managers and pay is not as high. However, having an Egalitarianism culture has several downfalls. The company will have lack of leadership. There will eventually be no authority figures to take control. Low-Cost Products
Although the model promotes low prices it has been identified there is an associated low level of customer service which couples this suggesting there is a need to work on service to ensure a complete shopping experience and ensure repeat business within the existing customer base. Too strong of an emphasis on cost-saving could lead to cutting corners and...
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