Elaborate the depth analysis of cooperative strategy by taking consideration of the IKEA’s case study.
Overview of IKEA
Competitive strategy is known as the long-term strategy that helps in business to grow in an effective manner. The main focus on the company is on a co-operative strategy in which IKEA India Company will be taken to describe the cooperative strategy. Organizations like IKEA focusing on the process of developing a protective location in the respective market comes under the strategic management. It will also highlight the strength of the company in India. In order to provide a detailed analysis of the Australian supermarket, the cooperative strategy will be explained with strategic alliances, business level cooperative strategy, international cooperative strategy, and corporate level cooperative strategy. IKEA is one of the prominent house furniture manufacturer companies around the world headquartered in Sweden. The corporate structure of the company was constructed in order to prevent any takeover as well as to protect the family from the burden of the taxes. The discussion will be made on IKEA case study by taking various kinds of strategy.
IKEA is an international company that is able to sell the home furniture products, appliances of the kitchen and assemble furniture. It has been found that IKEA is an international company that deals in furniture and satisfy the customers by providing them with high-quality services. The company has 375 stores in 46 countries in which more than 172, 000 employees are working worldwide. The company is known for its modernist design for various sorts of furniture and appliance and it's interior design work which is relegated to eco-friendly simplicity. The company has produced more than 9,500 products of furniture with a number of interior features. The company has more than 1.2 billion visitors visit its websites and purchase products. The main reason of the companies famous is operational particulars, cost control and corporate attributes that represented IKEA to smaller its range uploaded by an average of 2% to 3% in the time of growth of global. It has been found that the current landscape of the furniture industry is dynamic that is why it is required for the company to look forward in the latest trend of furniture in order to attain the momentum in the competitive market (IKEA.com, 2018).
The role of the cooperative strategy in the competitive market is huge as it helps in attaining the objectives of the company in an appropriate manner. It refers to a planning strategy in which two or more than two firms work together in order to attain the common goal of the business. There are so many companies all over the world that applies this strategy for the purpose of increasing the profits by cooperation with other companies that stop being competitors. It entails various strategy such as strategic alliances, business level cooperative strategy, international cooperative strategy, and corporate level cooperative strategy. This study is focused on its objective to provide the alternatives of overcoming the consequences of the acquisition strategy of the targeted company IKEA. It has been found that the strategy categorized two subsets such as collusive strategy and strategic alliances. The role of the collusive strategy is dependent on the working criteria of several organizations in order to eliminate the output of the industry below the competitive level. This strategy can perceive in the organization in the form of the defensive strategy. Strategic alliances are another subset of the cooperative strategy which increases the position of the competition of the industry as a whole. It has been found that alliances are typically made at the research and development stage on the basis of a different level. The cooperative strategy has a significant role in the company as it helps in increasing the competition in the market by making an improvement in the company’s operation. There are various reasons for using this strategy in the company which is mentioned below:
Cooperative Strategy and its types
Lack of resources: a cooperative strategy facilitates in fulfilling the resources in order to accomplish the task. The role of the resources in the company is huge as it helps in attaining the objectives of the company in a significant manner. Cooperative strategy facilitates in providing the guidance on how to increase the resources within the company (Schramm-Klein, Morschett, and Swoboda, 2015).
There are many international companies and trade projects that need expertise from various kinds of fields. Comparatively, companies have endeavored to improve all kind of required skills in-house. The role of the cooperative strategy is to make a sure company that they are valuable assets and their skills and can enhance the revenue of the company.
The strategy of IKEA Company is different from others as the major focus of the company on core competencies that have been impacted in the term of maintaining the productivity. The capabilities of the company have been expanded globally in which the value of the supply chain is embedded. The business model of the company is based low-cost strategy that facilitates customer to accumulate the rewards of high superiority intent furniture (Prasad and Warrier, 2016). To create firm brand equity is the major core competency of IKEA Company in which the unique promotions and revolutionary advertising campaigns are involved. The company is financially strong and the major strength of the company is brand value because this company is stood at 46th position in the world in which the value of the company accomplishes the target of $11.9 billion. It shows the strong financial condition of the company. Along with that, it has been found that the revenue of the company was €32.7 billion in 2015. However, the company has approached all those strategies from which they can increase their revenues that is why the role of the product price plays a significant role by which the customers of the company get a high ROI on the funds.
It has been found that it is not an easy task for the multinational companies to enter in the market of India by taking entire acquisition. IKEA has taken around 12 years to enter in the market of India because the company did not want to become a partner of any company that is why they took longer period (Burt, Johansson and Dawson, 2015). It is required for the company to adopt the cooperative strategy in order to increase the revenues of the company. India is the second largest population country which has a largest open economy market. The company has a huge range of products in which 7500 products are being offered by the company (Tandon, 2018). There are various challenges which have to be faced by IKEA at the time of entering the country. These are do-it-yourself culture, needs to change sourcing strategy, store format, competitors with very low prices, low home, and garden expenditure and no brand awareness. Along with that it has been found from the case study that there are some another challenges such as the availability of retail space and its cost, Hiring activities and vendor negotiations, Last-mile supply chain issues, IKEA’s do-it-yourself (DIY) concept may not work in India, IKEA’s anti-corruption policy, Reception of IKEA’s products is unpredictable (Businesscase, 2018). The main motto of the company is to search out the suppliers who should be able to manufacturer effective design sub-assemblies at the lower cost. It would be able to increase the productivity of the business and to save the delivery which would be effective not only for the supplier but also for the producers (Dobbs, 2014).
Challenges Faced by IKEA in the Indian Market
It has been found that IKEA took around 12 years to establish a store in India and finally in 2018, the company opened a store in Hyderabad. IKEA wanted to enter in the country with full share without partnering but local laws of the country allowed 51% foreign ownership that hampered the entire planning of the company (Martinez-Simarro, Devece, and Llopis-Albert, 2015). After 3 years in 2012, the Indian Government says IKEA that they can invest around 600 million in the country and after that, the proposal of the company is accepted by India’s Foreign Investment Promotion Board. The company did a partnership with its supplier Hyderabad-based Shree Malani Foams Pvt Ltd, which makes mattresses. Strategic alliances are the major factor of cooperative strategy that helped the company to eliminate the lack of resources and capabilities from the company. The cooperative behavior has the ability to develop value in the view of their partners that they are the valuable component of the company. Similar strategies applied by the company and them give great value to their suppliers (Alänge, Clancy and Marmgren, 2016).
GATI-KWE is another partner of IKEA company In India in which the partnership of the company with GATI-KWE helps the company to manage home deliveries if its products (Do-It-Yourself) sold from its India store to homes across Telangana (TOI, 2018). It shows that one of the challenges of the company while entering the market of India has vanished. Alliances have the ability to provide a new source of revenue and increase the range of responding to market opportunities and technological changes. This initiate of the company is able to reduce the competition and the major reason behind choosing strategic alliances strategy is slow-cycle, standard cycle, and fast cycle. Along with that, it has been found that the company has made IWAY which is the code of conduct which specifies the requirements in which the importance of the suppliers in case of products and service in which what they can expect in return for IKEA has been developed (IKEA, 2018).
Business strategy helps the organization to achieve the aims of the company which can be simplified by recounting the long-term business planning. It has been found that the business strategy is considered as the game plan which is helpful in strengthening the performance of the company. It is the strategy that elaborates how business should be managed to achieve the desired aims. The cost leadership strategy can be taken into consideration in order to remove the obstacles of IKEA. The cost leadership strategy is referred to the porter’s generic strategies that have been proposed by Michael Porter (Hitt, Li and Xu, 2016). It has been evaluated that the company has adopted a differentiation strategy due to the different process of adding the customer of the company in the value chain. The combination of both will be helpful in increasing the attention of young buyers who are exploring things at lower costs. IKEA has adopted a business strategy and trying to develop the maximum products according to the affordability of the customers. It is required for the company to focus on third-party manufacturers. Along with that, the company should seek for the suppliers who have the ability to manufacture effective subassemblies at affordable rates. The concept of IKEA is different from other companies as they allow customers to choose their furniture option as per their affordability and choices. The main focus of the company is on the idea of “You do your part and we do our part and it will save our money”. This idea will be helpful for the Indians as well because they can select the option as per their affordability which will rich them with full of integrity (Leonidou, Christodoulides, Kyrgidou and Palihawadana, 2017).
From the above discussion, it has been found that competitive strategy helps in attaining the objectives of the company in an appropriate manner. The discussion will be made regarding the competitive strategy in which the case study of IKEA has been taken into consideration. The cooperative strategy has been taken in which strategic alliances defined in an effective manner. It has been found that the business strategy is another strategy of the company which helped in attaining the target of the company in the Indian Market.
Alänge, S., Clancy, G. and Marmgren, M., (2016) Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA, Journal of Cleaner Production, 135, pp.1009-1022.
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Dobbs, M. E., (2014) Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
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Tandon,S., 2018. With 7,500 products and four years of research, IKEA is ready for India, [online]. Available from: https://qz.com/india/1301582/ikea-prepares-to-open-its-first-store-in-india-after-four-years-of-research/ [Accessed on 19 Sept 2018].
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