Source: Hit
Top 5 Background Readings:
Relationship Marketing - Case Study on IKEA by Solveig Matz, Viktoria Grah, Eileen Manz
IKEA. Strategic competences and capabilities by David Wagener
Introduction
The reputation of IKEA as a successful company has been acclaimed worldwide (IKEA, 2015 b). However, as per IKEA (2015 c), the company is facing few hurdles as in offering technological support in its supply chain. This is actually a major concern and threat in terms of sustaining in the global market. This selected field will be explored and analysed in this paper, in order to gain appropriate strategic managerial approach for a secure future of the company.
Advanced
Technical Initiations
Strategic Sourcing and Category Management: Lessons Learned at IKEA by Magnus Carlsson
IKEA and the Psychology of Shopping by Sebastian Baumann
IKEA. Success and Problems of a Swedish Concept by Manja Ledderhos
Introduction
The core purpose of
this paper critically analyse the current strategic management approach of IKEA.
In doing so, IKEA is scrutinised under various theoretical formulations of
strategic management in order to gain better state of sustainability in the
current complex and global competitiveness. IKEA’s ethical notions and CSR
related practices are also discussed in order to gain pragmatic recommendations
for the company.
The reputation of IKEA as a successful company has been acclaimed worldwide (IKEA, 2015 b). However, as per IKEA (2015 c), the company is facing few hurdles as in offering technological support in its supply chain. This is actually a major concern and threat in terms of sustaining in the global market. This selected field will be explored and analysed in this paper, in order to gain appropriate strategic managerial approach for a secure future of the company.
IKEA is a company
that originates from Sweden. It is into the business of ready-to-assemble kind of furniture like chairs, beds, etc. home
accessories & appliances, SMV. Being a multinational company, it supplies
in different international market. The company was established in the year 1943.
Since then the company is recognised for its well-managed operational system, even
amidst complex global marketing scenarios (IKEA, 2015).
ICM (2015) derives
that by Dec. 2014 IKEA was operating 351 stores in a total of 46 nations. From
its official website, it has been noted that the company comprises of 12,000 products
and thus appears as a representative for offering 1% approx. of international commercial-product
made out of wood. Thus, the company is also noted as one of those largest consumers
of wood, who are noted in the international retailing sector.
According
to the official statement of IKEA (2015), the company is successful in
establishing itself as a very profitable company with adequate power of
sustainability in the global market. The official statements further add that
the total sale of the IKEA Group for FY2015 is 31.9 billion EUR, which is an
increased amount of 11.2% than previous year. As for the stores, the growth has
been declared as 5.1% more than former year (IKEA, 2015 a).
Being in
the position of a leading manufacturing IKEA is efficient enough in handling
most of its organisational strategies. However, irrespective of its managerial
modifications and re-modifications, Pahl (2015) notes that with its short-term
strategy, the company is in constant mode of accepting changes as per market
demands. Hurdles in such approach needs higher level of proficiencies and
current strategy of IKEA after the resignation of Ingvar
Kamprad in June 2013; is in the hands of Mathias Kamprad, Ingvar Kamprad’s youngest
son. For this new leader the overall maintenance of long-term vision appears
more relevant that quick changes.
According
to Sustainability Report of IKEA (2015 c), the
growth a company is possible when enough importance is led over the growth to
its workers. Thus, the current strategy of the company is much into the trend
of offering good lifestyles and adequate economic and social support to its
workers, against their quality performance (see Fig 1 for details).
Figure 1 Better lives to IKEA Labours
Source: IKEA (2015 c)
Moreover, the report
adds that by February 2014, the strategic approach of IKEA gained worldwide appraisals
for considering extensive contributions towards the frontier of meeting
environmental responsibilities. Its venture like selling of energy-efficient
LED generated lights and fixtures, which will consume 15% power of any
incandescent bulb, showed its increasing sense of implementing strategic
responsibility towards environmental wellbeing.
IKEA is facing many
organisational issues in last couple of years. The most important of all is in
offering technological support to the entire structure of globally spread supply
chain of the company (IKEA (2015 c). Albarrak (2011) noted that issues of price
gouging, as in Canada, and various labour issues noted against IKEA are
actually the result of lack of transparency within the organisational setup.
This element of transparency remained limited for IKEA, as it is yet to accept
worldwide technological support for better functioning of the corporation. Business
Case Studies (2015) too notes specifically that though IKEA is already using
many kinds of technological supports to its organisational functionalities, yet
the company actually need to upgrade the same as per current advancement. Lack
of technological advances is creating hurdles in the supply chain management of
the company and thus the issues related to pricing, and quality delivery is
getting at stake.
Pahl (2015) adds
that IKEA is currently under the pressure of complications in logistics and
long-lead times. As a result, the company is forced to maintain levels of high
control over all its international suppliers. It is through technological
transfers, quick economic transactions and long-term records that company
prevent its suppliers from integrating as well as producing competitive products
among local competitors. It has been also noted that since IKEA does not have
centralised logistics system, the instances of store shortages remains as its
continuous threat (Dahmann, et al., 2011).
In order to
evaluate the current strategic management of IKEA and further identifying the
best strategic approach for the organisation, this paper is interpreting the
company under the theoretical formulations of SWOT, PESTEL, Six Sigma and Lean
Operations. Illustrations are interpreted hereafter.
Business
Case Studies (2015) defines SWOT analysis as a strategic tool for any
organisational plan that investigates the Strengths and Weaknesses of the
Company from internal frontier and Opportunities and Threats for external
factors. The SWOT as identified for IKEA are noted as follows –
Figure 2 SWOT Analysis of IKEA
Strengths
|
Weaknesses
|
Quality and low prices (Ayodele,
2015)
|
Low level of customer service
(Porter, 1996)
|
Efficient value chain system Porter,
1996)
|
Quality and low prices balance (The
Times, 2009)
|
Ownership of retail stores (Caglar,
Marco, & Kleiner, 2012)
|
|
Sustainability approach (Business
Case Studies, 2015)
|
|
Extra services (Porter, 1996)
|
|
Opportunities
|
Threats
|
Greener products (Ayodele, 2015; The
Times, 2009)
|
Unexpected events, like low economic
turn over as in the US (Ayodele, 2015)
|
Demand for low priced furniture (Business
Case Studies, 2015)
|
More competition from local manufacturers,
due to lack of centralised logistics system (Griffiths & Stuart, 2010)
|
Expansion into emerging markets (MSG,
2013)
|
Resource scarcity, due to time
consuming communicative instances within the organisational units (Waghorn,
2013)
|
The
strengths and the opportunities of IKEA a noted in Fig. 2 are very effective in
making the organisation be in the top list of international business. However,
from a futuristic point of view, the weaknesses and the threats appear very
complicated and complex for the company.
Political Factors
In terms of
handling taxation trade related regulations and tariffs, IKEA is remains
positively favourable to the government and thus is successful in maintaining stability
in its political approaches.
Economic Factors
IKEA’s
dealings are basically in the first world nations like the European countries
and the American Sates. However, the
company performed in a very balanced way even during the phase of economic
recession. It is in the last couple of years that the profit margin of the
company is getting highly competitive and its expansion in getting widen more
rapidly.
Sociological Factors
IKEA is
regularly facing changes in its marketing trends on global periphery. Though
company is very keen in responding to all kinds of social demands of the
consumers, at the same time due to lack of technological presence in media
through advanced networking services, the company is struggling in being part
of the social structures of its new markets.
Technology Factors
IKEA is
very particular in being in the trends ad that has been well placed through its
well comprehensive website. However, what the company lacks in adding the
advanced technological tools to its SEO based functionalities. As noted by
Griffiths & Stuart (2010) IKEA is in real need of creating new domains of
socially active networking presence to meet maximum consumers on personal
basis.
Environment Factors
In recent
years, the environmental factors of IKEA are much advanced, especially by
manufacturing of LED lights as mentioned above. Its motive to remain green is
gaining much positive response in the international market.
Legal Factors
In terms of
global marketing and operations, IKEA is yet to control its price and labour
related issues under legal domain. As its issues with labours, need more
attention in many locations, the company demands more quick and effective
resolution to the same.
According
to the analytical overview of Meredith & Shafer (2010), the concept of six
sigma aims in identifying as well as further eliminating the weak factors and
errors in an organisation, in order to reduce variability chances. This is a
theory that specifically assists the company in designing the strategic
formulation of quality management for prolonged sustainability amidst competitiveness.
IKEA too follows the six-sigma formulation to meet the targeted count of
increase in its profit margin. For an ideal quality management, IKEA’s six sigma
laid emphasis on ensuring the delivery of consistent quality products to the customers.
It undergoes the phases of managing DMAIC (define,
measure, analyze, improve and control) structure at IKEA (Chopra, 2009).
Gibson (2012) notes that it is through the implementation of Six Sigma that IKEA
gained success in improving its quality related domains with much success. It
has attained the capability of being consumer driven manufacturer with optimization
of its manufacturing units and designs. However, addition of advanced technologically
structure and innovative modes of handling its supply chain and pricing is
liable to offer better life cycle management to the company (Gibson, 2012).
The theoretical
approach of implementing lean formulation to an organisational structure laid
stress on gaining extensive value from the customer and at the same time reducing
all kinds of wastages that can hamper the growing trend of the company (Gibson,
2012). Chopra
(2009) notes that in case of IKEA, the application of lean process of
production is getting into the core business model of the company. It is
through this approach that IKEA is able to optimise its business operations from
the level of raw material acquisitions to the proceedings of delivering flat-packed
furniture all its customers from international marketing. The wastages are also
under control by the adoption of various ways of reusing the wasted materials.
As against this
Caglar, et al (2012) noted that the wastages in case of IKEA are handled very
specifically. There is definitely no room for material waste, yet in terms of
delivery delay, shortages in the retailing stores, etc. are also some of the
wastages that the organisation should consider while planning its futuristic
strategic management structure. IKEA can be considered as a fully lean operated
organisation, only when the company will understand customer-oriented value for
timely delivery. Development of customer value can be generated through lean
tactics by using value creation approaches and the same will feature zero waste
to the company.
The
theoretical interpretations and analyses of IKEA under SWOT, PESTEL, Six
Sigma and Lean Operations, note that the company is yet to gain some basic
elements in its strategic management structure, for future growth and
sustainability. Irrespective of quality
products, due to lack of advanced technological participation, the company is
unable to cope up with its supply chain. Thus, there is the need to add
following technical advancement to the current functionalities of the company,
to achieve the desired status of sustainability and growth in upcoming years.
Considering the limitations derived from the theoretical
implementations as noted by IKEA, this paper lays serious emphasis in the act
of overhauling the entire operational management system of the company. The act
of overhauling the operation management will be supported by the addition of
technologically designed communicative systems between the demands of the
consumers, the whole supply chain and most importantly, in connection with the
top management positions (Walker, 2001). The inclusion of advanced
technological approach must be well supported by voracious trainings and
recruitment of some in-house technical experts. These experts must be part of designing
and analysing the workflows as commemorated by the organisation in the
international market. Some of the very important inclusions are - Call in facilities,
maintaining block hours, managed services instantaneously, and technical
support in crowd sourcing (Walker, 2001).
Call-in Facilities
This is a technical assistance that is much followed by IKEA, yet there
is the need to up-gradation in offering services to culturally diversified
consumers, spread all over the world (Leung and Lau, 2007). Being a ‘Time and Materials’ (or T&M) kind of
IT-based assistance IKEA needs to train the executives of this domain as per
both organisational and technical frontier, so that they can resolve issues
without any delay.
Block-hours
Implementation of technically generated block-hours must be considered
by IKEA in initiating its new strategic plans. By this provision that the
suppliers of IKEA will have the scope to buy some hours beforehand and as per
determined price. IKEA can maintain a standard mode of non-reduced rate and
even can opt to represent least possible fees to suppliers prior to any product
or service (Kajko-Mattsson, 2004). The objective at IKEA should be that the
suppliers bought fixed hours on per month/year basis, in order to have the flexibility
for the utilisation of hours in accomplishing necessary paperwork or instances
of receiving/paying bills from/to distributors.
Managing Quality Services
For IKEA, the management of quality services and on-time delivery needs
serious attention. By adding a brand to manage services, the company will have
the extension of paying responses and further resolving issues in a very fast
manner (Kajko-Mattsson, 2004). This act of managing services must be maintained
on a 24x7 monitoring led by respective servers, support from help desk, on-site
visits by the managers to investigate the performances of the support team,
etc.
Crowd sourcing Technical Assistance
IKEA needs to add crowd-sourcing facilities to its both operational and
marketing management domains. Through crowd sourcing, the company will be able
to offer discussion boards to the consumers, suppliers and the top managerial
positions of the IKEA. This is an approach that can be used by the consumers
and suppliers the scope to interact with top management in a transparent way
(Leung and Lau, 2007). As this will be an open forum, the top management of
IKEA will be able to see through the issues that are actually troubling the
suppliers and the consumers while dealing with IKEA. This forum will also allow
IKEA in reducing the cost of support and gaining customer feedback on direct
basis.
Advanced
Technical Initiations
Apart from the above-mentioned
technical up gradation, there are some major considerations, which IKEA’s
strategic planning should add to it. With
right recruitment of advanced technical support, IKEA will be at much ease in
handling its current issue of managing supply chain. Though the maintenance of
the technical responsibilities can be outsourced, yet it is always better to
have a back up in-house team. For this purpose, IKEA must add its presence and
its brand image very much visible in the social networking sites. By making,
itself more active on social networking sites, the company will be able to
publish about its CSR based activities to public. For this purpose, the
implementation of technical tools like Facebook, Instagram, Twitter, etc. (see Table
1).
Table 1 IKEA Presence in Social Media
Facebook
|
IKEA profile must be maintained on
Facebook manually. The company should also consider RSS for this purpose. The
IKEA page on Facebook should have more followers and in generating new
followers, the company should add its ads in the right-hand column of the
user’s page.
|
Twitter
|
IKEA profile should get regularly updated
through manual tweets as well as news feeds, publication of events,
especially CSR programmes and comments through RSS.
|
MySpace
|
IKEA profile at MySpace must be maintained
in order to enable respective suppliers and consumers come in contact with
the top management and share their feedbacks and comments directly to
management.
|
YouTube
|
Uploading IKEA’s promotional videos and
videos about its environmental consciousness in YouTube will help the public
in getting aware of the company and thus the positive brand image can be
created at large.
|
LinkedIn
|
IKEA’s company profile as added on
LinkedIn, should keep on updating all the latest events and recruitments of
the company. Being an active professional site LinkedIn can offer IKEA best
of the people in developing its technical domains.
|
Wikipedia
|
A page of IKEA on Wikipedia means a lot to
the upcoming generation. Offering all the necessary information about the
company and its CSR & environment based contributions will encourage the
students in showing special interest in researching opportunities for the
company.
|
Google
|
SEO based maintenance of IKEA related
information must be enhanced in Google. The keywords for this purpose must be
so generated that IKEA gets the first page in the list of Google search. The
maps of its dealers and shops should be maintained well for convenience of
the targeted consumers.
|
iTunes
U
|
IKEA feeds in iTunes through RSS, added by
media content must offer exposures to the contributions made by the company’s
staff and labours by Tulip, MySites, etc.
|
Instagram
|
IKEAI should upload the images of all its
products through the team assigned for social media, & share on
Instagram. This should further get connected the profiles in other social
networking sites.
|
This paper
lays emphasis in the promoting and upgrading the technical scopes for IKEA. In
this venture, the most important thing is to maintain all kinds of ethical
points that the technically upgraded organisation needs to follow. The core
points are noted below -
Legality
An
organisation like IKEA must observe all the legal regulations in initiating its
approaches in the technical sector. IKEA must ensure to remain consistent with
technical laws at both local and global level (Vallero, 2012).
Honesty
IKEA must
offer truthful as well as accurate data and communication to its suppliers and
the consumers. There should be enough dedication, in delivering information and
responding queries. IKEA needs to maintain appropriate clarity, conciseness,
clarity, creativity, coherence, and striving to serve with its quality bases
services and products (Van de Poel and Royakkers, 2011).
Confidentiality
IKEA must
respect enough confidentiality of its customers and the suppliers. Through
technical tools, it will have most of their information like location,
profession, etc. However, none of the IKEA member should disclose any of the
personal or professional information of the supplier or the consumers (Vallero,
2012).
Eventually,
from the theories mentioned above it has been noted that though IKEA is very
successful and popular company, yet it is struggling hard in terms of creating
adequate transparency with its suppliers and the consumers. In this frontier,
the best possible solution as derived by this paper is that of adding
technically supported product and service initiations.
The
recommendation to IKEA can be articulated in the following manner –
- IKEA is already having enough issues in context
of its quality services and pricing of its products. It is through
technical assistance, that the company should be able to make the
consumers understand the reasons for the variations. Issues like taxation,
per capita income, etc., in a nations are reasons that make these
differences and IKEA should take the initiative in clearing these points
to the consumers, so that there remains no grievance.
- Availability in the social networking sites in
an active way and creating open forums for the suppliers and consumers
will offer enough transparency in the futuristic business structure of
IKEA.
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