Key strategic issues IKEA is facing
- The issue which the organization is facing is that it turns out to be gradually bigger there is a threat of the influences with the company culture getting thinner. The culture inside a business is imperious, supposing a larger role, whether the association is an exultant and healthy place to work. It leads staff what to do and what not to do, comprising practices, qualities, and conventions about their work. Because of the absenteeism of hierarchical culture, it can have an effect on various outcomes, including organizational efficiency that prompts dissatisfaction of the organization performance in upcoming time.
- Another issue IKEA to manage the brand well has difficulty in maintaining the competitive advantage because of growth of imitation. Since IKEA is arriving into new markets in various countries to enlarge its chain, the proposals need to be modernized because unlike customers in different countries have various preferences that might reduce the demand if constantly selling same designs.
Current strategy and link with mission and vision
IKEA vision is to generate an improved daily life for the various people. Their business strategy supports this vision by proposing a wide choice of elegant, stylish, functional household furnishing products at lowest prices that will entail many people as the possible will to afford them. The vision and mission decided by IKEA by adopting various strategic analyses to improve its cost of production and enhanced productivity (Lindic, Bavdaz, & Kova?i?, 2012). The present strategies like porter five force models are analysing about how the organization is facing its competitors and gaining the advantage over. The value chain helps IKEA in finding the resources and advantages available with the company and how these can be used by the company in achieving its mission of low-cost products by reducing production cost. And SWOT analysis is enhancing the internal strengths to achieve the mission and vision with resources available. It is also helping in seeking various opportunities that IKEA can avail and overcome the weakness in its structure. The threats which company is facing also can be overcome by adopting low-cost techniques to retain customers.
Proposed strategy for strategic issues
Blue ocean strategy:
IKEA can adopt blue ocean strategy in order to remove the strategic problem.
Definition: Blue Ocean Strategy is applied by organizations across their different business sectors. It is not restricted to only single business but on the complete organization. When there is limited room to grow, industries attempt and search for verticals or opportunities of discovering new business where they can appreciate unconcealed marketplace share or 'Blue Ocean'. A blue ocean occurs when there is the possibility for higher incomes, as there is no rivalry or irrelevant competition.
Advantages of Blue Ocean strategy:
It is a Worth Innovation Strategy which competes in a recognized marketplace. It is also a Combination Strategy which enables pursuing differentiation though monitoring costs. The strategy signifies the immediate search of high product differentiation and low cost, thus creating irrelevant competition. It is successful because it appeals large numbers of customers while raising the cost of competition. It supports the business in making vast profits as the product can be valued at little steep due to its unique features. The blue ocean strategy is founded on continuous quest of differentiation as well as loss cost. It is also an “and-and strategy” rather than “either or” kind of strategy. The strategy objective is to create the rivalry inappropriate by rebuilding business borders. It also offers systematic tools and outline to disrupt the competition in market and develop an unconcealed market area. It also creates IKEA resources of analytical tool and guideline to proficiently achieve target. It also assesses the current role of company in market and then providing complete guide of 6 steps to achieve new position in market beating competition. With the combined methodology, Blue Ocean strategy displays the way to align to three approach proposals—value, benefit, and individual ensuring IKEA is allied to new target and it also develops a victory for consumers, the business and for workers and sponsors.
Implementing Blue Ocean strategy by IKEA
Restructure market borders – in a Blue Ocean strategy IKEA should evaluate the locations that form the business’s expectations and outline IKEA’s business model (Posen & Levinthal, 2012). The simplest way to restructure market borders is to plan about an idea which can improve the competitive advantage. As IKEA is facing competitive advantage so it should increase its market area by entering to the new market with proper planning and strategy. That does not only lead to the expanded value chain, but also into completely new markets (Goodarz, Samin & Navid, 2012).
Focus on the big picture – IKEA should focus the eye on the overall vision and should not get lost in the figures. Several corporate strategists get lost in the statistics; therefore often they miss where they were and their rivalry is heading. IKEA should think customers’ needs and demands. This will help IKEA in recognizing how it can provide successful results to the customer. This can help IKEA to launch new products with ease by having the update of the current trend in the market (Cirjevskis, Homenko & Lacinova, 2011).
Reach beyond existing demand – Industries generally focus on present customers, a procedure which invariably takes to superior market segmentation analysis. But, actual growth lies outside current demand. IKEA should put its efforts in order to recognize or analyse the demand which in future can be asked by the customer. As IKEA’s highly focused pattern of product portfolio increases the effectiveness of brand identity with positive implications on consumer loyalty (Kim & Mauborgne, 2005).
Get the strategic sequences right – Companies should execute strategy successively to attain value innovation. To be convincing, the technology must provide expediency and safety. IKEA for removing issues should focus on customer life to make it comfortable with its products. IKEA should access its services and product effectiveness, luxury, convenience, protection, and environmental friendliness. This helps IKEA to access all factors which affects the customer upon purchasing it, carrying it home and disposing of it.
Overcome key organizational hurdles – Successful implementation needs that organization should resolve inner departmental differences. IKEA should resolve and remove the key organizational hindrances which are stopping it from performing well. If IKEA is having some issues also then it should then it should affect the performance of the company in eyes of customer. IKEA should not let inner politics, bureaucracy or other hindrances develop in the middle of providing flawless customer experience every time.
Build execution into strategy- Companies should reduce management danger by integrating Blue Ocean implementation into company’s current procedures. IKEA upcoming product should teach public to think extraordinary all the time and make assure that they are empowered to improve the processes (Chan Kim & Mauborgne, 2005). If IKEA does not shape the performance of great customer experiences part in organization’s strategy, then the employee will never do it. IKEA should consider and learn from other companies which are small but performing extremely excellent in serving customer experience (Parvinen, et al., 2011).
To prosper in Blue Ocean strategy, an important innovation must prove real investments and a considerable profit that a customer can use directly. IKEA has to be capable to complete the requirements of consumers constantly every time. The notion of Blue Ocean strategy is to develop new businesses where nothing was present before and the best way to do is to start rationally about procedures from the consumer point of view.
Disadvantages of blue ocean strategy:
The Blue Ocean Strategy as a whole seems not very compatible toward fostering the kind of inspiration that is desirable for rising unique strategies. Furthermore, the framework also reduces the creativity by proposing approach making is a numerous choice exercise. The only chances would be to go for low costs, high differentiation or a niche. Another disadvantage of Blue Ocean is implementation if not effected properly will lead to market complicacy. This will again take organization top backstage rather than innovation and growth. It also becomes red ocean strategy at the time of implementation. Many a times blue oceans decided by companies are not popular in market or demanded by consumers. It is also observed that being after creating new innovative idea launched by company, customers is not ready to accept it or purchase it. In that case rather than solving competitive problem, companies faces new problem of failure of newly developed products (Upadrista, 2015). More problems occur for companies when organization directions need to be changed in accordance with new target. This creates internal problem like employee resistance to change, lack of guidance, budgetary issues and many more.
Definition: One of the vital issues to be chosen by the administration of a business concern is that how much authority to be concentrated in the hands of best supervisors and the amount of it ought to be appointed to the chiefs at lower levels. At the end of the day, it is an issue worried about the level of decentralization (Lyons, 2016). Nonetheless, it might be noticed that it is not important to decentralize every single administrative action. IKEA can decentralize the sales service in the organization while the staff capacity may not be delegated (Yang, 2013). IKEA may delegate more prominent level of decentralization while some others may have less of it. The IKEA can also choose to decentralize routine and repetitive responsibilities that subordinates at the junior level can carry out without many directions from supervisors. This would enable IKEA managers to focus their attention on strategic and important issues.
Advantage of decentralisation
Decentralisation creates development of the managerial employees. Because as the company grows in dimensions, it will necessitates the capabilities and skills of a huge amount of directors and decentralization offers a training ground for the upcoming managers. The directors acquire the skills by knowledge inside the business concerned. Decentralisation also satisfies the human needs. It is a significant method for fulfilling employee’s desires of control, individuality, position and respect. This type of accomplishment helps in developing a team of fulfilled directors, who will feel their sense of responsibility in the direction of company’s target. The decentralization will help IKEA in taking quick decision-making of problems occurring at hierarchical level.
Ways to implement decentralisation effectively
Develop initiative among subordinates:
A delegation of authority by IKEA at central and lower level will build the trust and confidence of upper authority in their subordinates and this belief and reliance encourage the workers employed at various levels as they are permitted to take decisions without seeking the approval of superiors (Fatke, 2016). This will help IKEA to resolve the hierarchical structure problem it facing in present so adopting decentralization can benefit it.
Create administrative ability for future:
In the decentralization administrators working at lower and centre level additionally take in the art of decision-making (McElheran, 2012). IKEA structural problem of organization can be resolved by delegating the powers to juniors. They get the experience of performing exercises of best administrators and figure out how to deal with the expert given to them. So decentralization process readies the administrators working at lower and centre level to play out the assignment of best level. IKEA will be having future managers prepared by adopting decentralization.
Quick decision process:
In the decentralization procedure, basic leadership is not confined to few hands just but rather basic leadership control is endowed to every one of the directors who is taking activities or playing out the exercises (Slava & Hapak, 2016). The decentralization will let IKEA take quick decision-making of problems occurring at hierarchical level. The quicker decision power enables a junior manager also to remove the defects in planning due to which IKEA performance is getting affected.
Reducing overburden of management:
Decentralization eases the best officials of the burden of performing different capacities. Centralisation of specialist puts the entire duty on the shoulders of an official and his quick gathering. These will IKEA to diminish the time at the transfer of best administrators who should focus on other imperative administrative capacities. Along these lines, the best way to diminish their weight is to decentralize the basic leadership energy to the subordinates. IKEA can be benefitted by decentralization as this will reduce the authority of top managers who are overburdened (Indjejikian & Matejka, 2012).
Disadvantages of decentralization:
Decentralisation places more burden on central heads to recognize incomes at any cost. Often in meeting their new profit plans, bring clashes among supervisors (Zhao, et al., 2016). The achievement of decentralization will depend upon the excellence of personnel operating the distributed units. In many cases the training, understanding, and learning of the personnel are insufficient then decentralization of delegating authority and decision-making would be destructive for the enterprise. There will be wrong conclusions, misperception, and contradictions (Ribot & Larson, 2013). IKEA hierarchical structure will suffer if decentralization is not implemented efficiently. Decentralisation also fragments the company structure. Due to this the units or departments which worked together in centralised structure will lose their motive working like a team. This strategy many a times also brings the interest if individual to priority rather than of company. The areas of business like productivity, quality of customer service, willingness of individuals to perform for company will also suffer. Moreover the innovative ideas which were freely rotating in companies may lose their value and ideas will limit to individuals only. A major difficulty of a decentralized organization is that company have to surrender a part of control. Company should put faith in co-workers to continue to convey out company's vision and mission.
Recommended strategy for strategic issues
Decentralisation is preferred because of following reason:
A powerful corporation culture in IKEA will be an influential recruiting point. Corporations with an exposed participative workplace, where individuals appreciate working and have the wide range of opportunities for progress and vision attract other people also to join the IKEA. One of the measures of an outstanding work culture is that current employees will urge their groups to join bringing more talent to the company. When workers do this, they are usually highly selective; engaging only people who they know will excel in the company (Becker, Kugeler & Rosemann, 2013).
Motivation blossoms in a decentralized culture that identifies the employee’s individual work needs and requirements and permits individuals to complete these needs through the organization tasks. When employees talents are recognized and appreciated for who they are and what they can add, the reciprocal welfares are large and never-ending. The motivation of employees of IKEA will enhance their confidence level and they will be performing according to the expectation of organization (Bannink & Ossewaarde, 2012).
Response to change:
A decentralized culture brings an outstandingly improved sincerity to transformation and the desire of workers to make changes work. As belief and accountability increases, workers don’t just initiate important progress in current procedures; they aggressively reach out to their surroundings, conveying development concepts and enterprises that make the corporation further market reasonable. For example, IKEA customer service representatives through casual discussions with the customer should learn about abundant deal fulfilling the customer’s needs and strategies. In a powerful culture, these facts are efficiently connected to advertising and product expansion (Packard, 2017).
Help in merger and acquisition:
Decentralised and improved cultures help in bringing smoother mergers and acquisitions, with greater accomplishment rates. Individuals get more involved during the merger and make everyone to work (Pasmore, Woodman & Shani, 2010). And when an enhanced culture attains a less established culture acquiring then supervisors recognize how to lead the culture merging procedure so that anxiety is minimized, efficiency is sustained, and highly valued workers in the acquired company stay. Conversely, when a business with a well-built culture is acquired by a business with a less-developed culture, the supervisors in the acquired corporation may reach out and help the supervisors in the acquiring corporation more effectively achieve the merge process.
Financial and strategic benefits which can be achieved
As per financial benefits, the above strategy adopting a well-developed culture fetches dramatic, sustainable increase in efficiency and performance in IKEA. An organization like IKEA if deeply involves people is reasonably much more creative. Unit productivity should doubles in upcoming years however this depends on the unit’s size, the expansion type, and the level of top supervision commitment. Continuous development is the standard target defined by IKEA. Ideally, there is no limit to better efficiency so long as leaders keep working on the culture. As employees know cost control is significant (Cameron & McNaughtan, 2014). By adopting thus strategy IKEA profitability will automatically be enhanced. With such extensive emphasis, managerial and functioning costs drop below industry norms reducing the cost of furniture product. The IKEA reason for improving the corporate culture is mainly to enhance profitability in the competitive environment.
Decentralisation implementation issues
Issues effecting implementation of decentralisation
Training cost: as in decentralization the authorities and powers to perform various critical functions of the organisation is delegated to various personnel which involves high training cost as the proper training about their work responsibilities is to be imparted to them. IKEA employee will need to impart sufficient training in order to delegate them the authority decided by management (Rose, 2010). The reason being for imparting training is that if delegation made to unprofessional then decentralization effectiveness will be reduced and organization issues will be remaining unresolved. Resistance to change: the employees working in any company has the general tendency to resist the change in the management style of the organization as they don’t find the new systems as comfortable as the old systems. The fear individuals of lack of confidence will seldom disclose. Many times, change in organizations imposes variations in skills, and some individuals will sense that they won’t be intelligent to make the alteration appropriately.
More human resource requirement: Delegation of involves division and delegation of responsibilities which require the adequate amount of workforce in any organization. The decentralization will require talented people in IKEA to handle the authority efficiently. New personnel will be required so as to delegate more and more responsibilities. Thus it’s an implementation difficulty which will require financial as well as manpower to bring the change successfully.
Resolving implementation issues:
Overcoming opposition: IKEA should involve those who are conflicting in a change management. By doing this, IKEA can enthusiastically see what are the concerns of employees resisting change and through this IKEA can alleviate the problem in a suitable method. By allowing the employee time to contribute their effort, it guarantees IKEA to be a part of the team that actually cares about its employees (Joanis, 2014).
Human resource training: IKEA can resolve the issue of human resource by providing them guidance and training required taking the authority. This will enable the employee to handle the responsibility properly rather than resisting to it. IKEA also should delegate authority to capable personnel who requires lesser training then newly hired.
Introduce incentives: For motivating the employee to welcome decentralization implementation smoothly, IKEA should introduce the incentive scheme for employees who are taking authority positively and moving with the change to create the better organizational hierarchy.
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