IKEA Case Study



IKEA Case Study

Executive Summary

As every organization is planning to expand its operations, the top management at IKEA has realized the necessity and importance of expanding its business in other countries. This paper explores IKEA's strategic directions and the challenges and risks that the company faces in attaining its long term goals. The paper explores the inherent risks in IKEA's key marketing strategies. The strategy is extensively analysed in light of SWOT analysis. Keeping in view the current and strategic position shown by the analysis, the paper suggests recommendations that may help IKEA in mitigating its strategic risks.

Company Profile

IKEA Group is active in the development, procurement, distribution and sale of its products. The company was founded by Ingvar Kamprad in 1943. Since then, IKEA has expanded to include a number of domestic furniture stores worldwide (IKEA 2007). Today, IKEA is a global company of 110,000 employees working in 42 countries. There are approximately 12,000 articles in the total IKEA product range. Each store holds a selection of these articles in 9500 based on its size. Most of the assortment is same from one country to another (Andrews, 2008).

Risks of IKEA Strategy

The risk involved with a focus strategy is that the needs of customers within a narrow competitive segment may become more similar to those of industry-wide customers as a whole. As a result, the advantages of a focus strategy are either reduced or eliminated. At some point, for example, the needs of IKEA's customer for stylish furniture may diminish, although their desire to buy relatively inexpensive furnishings may not. If this change in needs were to happen, IKEA's customers might buy from large chain stores that sell somewhat standardized furniture at low costs (Daft 2009). If this happens, it is clear that IKEA should rethink its entire strategy and therefore reorganize current stores in terms of size, structure and objectives. Faced with a highly competitive environment where each firm tries to maximize its earnings while increasing its market share, IKEA managed to develop a strategy to offer its customers a wide range of products at affordable prices (Brady et al 2007). To sum, IKEA's strategy is based on certain key points that gave it a significant growth:

A Hybrid Strategy Ikea strategy can be described as hybrid because the brand offers products at low prices while creating value. Indeed, the company offers its customers products that are simple; products that customers carry with them easily and assemble themselves. Thus they contribute to creating value by performing certain tasks reserved for the manufacturer or distributor, such as the assembly of furniture or the measurement within the store (customers are provided with pencils and tape measures to make their own measurements). Besides that, IKEA offers special services such as catering and the children care (Dunn 2008). A Strategy of Cost Leadership

In order to offer low price, IKEA has developed a strategy of cost leadership. Indeed, the company realizes greater control of its costs of product development to distribution ...