Porters Profit and Vrio Model
1. What are the strategic capabilities of IKEA?
From the VIRO table (appendix 1) IKEA's strategic capabilities are grouped into the following categories -
Brand/quality reputation
Financial strength
Production capacity.
Brand/Quality reputation
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.
Financial strength
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.
Production capabilities
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
2. 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
From the VIRO table (appendix 1) IKEA's strategic capabilities are grouped into the following categories -
Brand/quality reputation
Financial strength
Production capacity.
Brand/Quality reputation
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.
Financial strength
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.
Production capabilities
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
2. 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