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Global Business Environment: IKEA Add in library

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Question:

It would be expected that the report offers a good understanding of the nature of the case (market position, product, market share, current issues, core competence, future plan, etc.). Therefore, a good individual progress report should be composed of the following:

(i) Your theoretical understanding of the research;

(ii) Practical application of the study;

(iii) Logic and clarity of the research; and

(iv) Examples given?
 
 

Answer:

Introduction:

IKEA is a renowned and among most successful international retailers. Visited by 583 million shoppers, IKEA had 300 home furnishing stores across 35 countries. In 2008 IKEA generated sales of 21.2 billion euro, which was a lift up from 4.4 billion euro at early stage, with its designed merchandise. Though the private companies don’t reveal their profitability figures, it was rumored that IKEA’s profitability margin reached about 10%.

IKEA was situated in 1943 with the initiative of Ingvar Kamprad in Sweden. In 1948 furniture was added as a product line by the Kamprad and company’s first catalog was distributed in the year of 1949.

IKEA’s objective with emerging trend over time was to offer its customer stylish functional design with minimal cost requirement to become affordable by most of the people. Theory of Kamprad is to make the design of manufacturing of furniture in such way a way, so that the man with a flat wallet can afford the product services.

Case study of IKEA:

Year

Achieved goals

1943

IEKA was situated by Kamprad

1948

Furniture was added as a product line

1957

Started exhibition of furniture at home furnishing fairs.

1958

First store of IEKA was recognized at Almhult location

1964

There was first publication of IEKA’s furniture as a traditional Swedish furniture manufacturer.

1965

IEKA opened its first store in the capital of Sweden, i.e. Stockholm.

1973

With 9 stores, become largest furniture retailer in Scandinavia

1980

Stores increased to 15

1976-1982

IEKA opened seven stores in Canada

1985

Company stepped its feet in United States.

1987

Company stepped into United Kingdom

1998

Company made its entrance in China

2008

Company becomes able to open 17 stores in United Kingdom and 4 stores in China and 11 stores in Russia.

2008

IKEA became able to have 1380 suppliers in 54 countries.


Theoretical Understanding of research:

IKEA’s markets are targeted to sell the product among the people who are from the global middle class; those who are looking for the low priced materials along with attractively designed house hold items and furniture.

Products are designed to give the reflection of the clean Swedish line, which have become the IEKA’s trademark. IKEA pays its attention to find the right supplier for each time. For most of the products, IEKA signs out manufacturing contacts. Since 1990s IEKA is involved to manufacture most of its products internally, where most of the products were sourced from the independent suppliers, where 10% were produced internally (Mullin, 2006).

To gain the benefit of having large volume with less amount of cost IEKA maintain supplier contact and ensures to have delivery of raw material over a long period of time. There are certain cases, where IEKA provides its supplier some financial assistance.

Even the strategies which have been running well since the starting phase became vulnerable now to become stuck in the middle. The organization is having the tendency of going out of track while the connectivity is lost between the company and founder. As long as there is connection between the founder and the whole management schedule, respective persons stay devoted. The absence of the founder enhances the risk for the organizational existence (Ikea.com, 2015)

 

Practical application of study:

With the TNS (The Natural step) framework as a core, IKEA North America implemented an environmental training program. The training program follows the train-the trainer principle. There is the basic module, which includes a company’s Environmental program designed on action plan, background and policy, b) basic knowledge on the environment according to the TNS framework or the working principle.  b) Required adoption of education in the field of Purchase, retail and distribution.

Clarity and logic of the research:

With the study of the IEKA there is a logic adopted to understand bigger volumes can case the lower prices. To gain the benefit of having large volume with less amount of cost IEKA maintain supplier contact and ensures to have delivery of raw material over a long period of time (Nike, IKEA and IBM's outsourcing and business strategies, 2005). There are certain cases, where IEKA provides its supplier some financial assistance. This scenario in the business of IEKA created a wide range of opportunity to produce various range of home furnishing products. Hence most people are able to afford to purchase the product with their flat wallet (Baye, 2000).

Among the mostly faced challenges, those lie in the area of the sustainability of the Forestry, transportation and responsibility legislation of producers. There are some lessons learned from the IKEA case study:

  1. Awareness is created by engaging as many as possible people from the start.

  2. Alignment of the environmental work should be done in order to work with the business vision. Hence it can fit the business reality.

  3. A task should start with the visible action to show the concrete result (Krstic and Becic, 2011).

Resourcing suppliers of IEKA is aimed to find those who can produce a good product along with its good functionality and design with an affordable price.

IEKA focuses on product capacity rather than quantity of product, for example, they place production order of 10000 hours from their suppliers instead of 10000 booking cases (Hawkins, Best and Coney, 2004).

 

Examples:

Today’s product range of IKEA consists of more than 9000 products on home furnishing goods. These goods are designed to have good functionality along with attractive look and low price. There are two product names, which are KLIPPAN and BILLY.

Through Swedwood, there is also another chance to have the source of furniture. A bulk of inventory is supplied by the third party suppliers with the belief of investment limiting strategy to higher capacity of productivity (Schirone and Torkan, 2012).

Core competency:

Generally core competency of a company defines the feature which allows a company to be competitive in market with the pooled knowledge and accuracy (Walker and Walker, 2003). There are core competency is described in context of the IEKA’s business model-

  • IKEA is developing unique business structure to five a better environment and lifestyle to its customers and employees.

  • There is also the implication of corporate social responsibility dedicated to labor, environmental along with business ethics.

  • To attain sustainable business model in United States IKEA keeps opening new stores across the region (Jain, 2000).
 

Current issues faced by the IKEA:

There is a very high market competition, which is faced by the IKEA. Leaving behind the questions on whether the company can keep main and basic foundation values alive or not, the presence of those managers who are trained by the founder made it possible to keep the key founding values.

Even the strategies which have been running well since the starting phase became vulnerable now to become stuck in the middle. The organization is having the tendency of going out of track while the connectivity is lost between the company and founder. As long as there is connection between the founder and the whole management schedule, respective persons stay devoted. The absence of the founder enhances the risk for the organizational existence (Jonsson and Foss, 2011).

Future Plan:

As far as the future plans are concerned, it needs an efficient technology to forecast the market scenario and to be always updated about the information on the competitors across the globe.

Also the logistics and transportation cost needs simplification. Hence it is possible to trace out the whole management process and proper information about product’s whereabouts.

IKEA also needs the approach to make improvement for prediction of customer behavior and for the sales forecast. Hence it can predict the buying behavior of the customer and the feedback of customer also can be fetched in order to make betterment of the product (Kourdi, 2003).

Again it also needs to check constrains, hence it become possible to anticipate the problem before they occur. A larger organization may have problems in supply chain management. Hence it is better to be prepared before the occurrence of the threat or the certain level of expertise should be available there in order to maintain the problem whenever there is a chance of problem occurrence.

 

Conclusion:

IKEA has great future. It needs to focus to have an aggressive role to play in the market as the sales of this company are on the way to become stagnant and the costs are rising. Even the conservative approach also is lagging the production and making innovation in the production, this is where changes are needed. Changes in the policy for more innovative production and the strategies are followed by these companies.

Though the company has potential and unique business strategy, which is cannot be found in other organization, the company needs to become more web based for reduction of the logistics and transportation cost.

Its current marketing strategies were effective enough to expand the economic background in the current recession by its fundamental business strategy of selling products with a lowest range.

The organization need to train its employees to become more efficient and able to handle the equipment in order to have better sale.

As a conclusion I must say that IKEA has a great potential not only within its own country, but it also serves where it do not have stores. It is only needed to tap into sales before any other organization do the same.

 

References

Baraldi, E. and Waluszewski, A. (2005). Information technology at IKEA: an “open sesameâ€Â solution or just another type of facility?. Journal of Business Research, 58(9), pp.1251-1260.

Baye, M. (2000). Managerial economics & business strategy. Boston: Irwin/McGraw-Hill.

Hawkins, D., Best, R. and Coney, K. (2004). Consumer behavior. Boston: McGraw-Hill Irwin.

Ikea.com, (2015). Welcome to IKEA.com - IKEA. [online] Available at: https://www.ikea.com/ [Accessed 17 Mar. 2015].

Jain, S. (2000). Marketing planning & strategy. Cincinnati, Ohio: South-Western College Pub.

Jonsson, A. and Foss, N. (2011). International expansion through flexible replication: Learning from the internationalization experience of IKEA. J Int Bus Stud, 42(9), pp.1079-1102.

Kourdi, J. (2003). Business strategy. London: Profile.

Krstic, I. and Becic, S. (2011). Implementation of marketing strategy: Factor of competitive advantage. Marketing, 42(2), pp.118-126.

Mullin, R. (2006). Creating a marketing strategy [marketing development]. Engineering Management, 16(6), pp.40-41.

Nike, IKEA and IBM's outsourcing and business strategies. (2005). Hum Res Mgt Intl Digest, 13(3), pp.15-17.

Schirone, D. and Torkan, G. (2012). Food in IKEA: A Strategy to Support the Core Business. BMR, 1(4).

Walker, O. and Walker, O. (2003). Marketing strategy. Boston: McGraw-Hill/Irwin.

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