Last Updated 29 Mar 2021

Strategic Management and Ikea

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IKEA's Success at Expanding

First of all, seems reductive say that IKEA provides a standard range of products having regard to the incredible width of this range (which allows, therefore, to offer many variables of many types of heterogeneous products: in this way is almost completely bypassed the limit traditionally connected with the offer diverse depending on the country of destination).

In fact, the product range is so vast ("The IKEA products on offer Exceed 12. 000 items in number") to allow a lack of diversification for export market: every type of consumer that is part of the target audience can find products of his choice, ignoring the others (which will be desirable by other consumers focused on other features). In this way this strategy exceeds its traditional limit.

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As it is written in the text under consideration "IKEA has achieved the impossible, to create a range of products attractive to consumers everywhere, in countries with very different cultures, and to apply a formula for presentation and sale of those products which reinforces the attractiveness" . With regard to the standard strategy used by IKEA in my view its success relies on a few points well described in the article. First, the target is well defined (and wide, and in all countries without exception). It may sound corny but the self-proclaimed focus of IKEA is ‘young people of all ages’. In reality the market is primarily young people, who are well educated, liberal in cultural values, white collar, but with limited means because of their stage of career and family cycle, and in the process of setting up or expanding their homes because they are having children". The second successful point of the unitary strategy of the company is the interest to achieve and maintain a cost advantage (in light of the needs of the target, of course). This cost and price leadership is achieved by a combination of strategies – large-quantity purchasing, the push to discover ever-cheaper suppliers in ever-cheaper markets (sourcing in developing economies has risen from 32% to 48%), low-cost logistics, store location in relatively cheap suburban areas, and a do-it-yourself approach to marketing and distribution. Low costs are translated into low prices as IKEA pursues a deliberate price leadership strategy".

In addition to this, the Distribution and Promotion system is modern and inexpensive and easily replicable and acceptable to consumers around the world. So, everything in IKEA works to create a great opportunity, overcoming (as already said at the beginning of my answer) the limits of the not-diversified offer per country and culture in this particular industry sector, characterized by strong cultural differences.

Limitation of Expansion

I think the main limit to the expansion of the business of IKEA is cultural and, therefore, be able to contain production costs, while continuing to adapt its products to markets other than those served today. The example of the American market is helpful in this regard. On that occasion, IKEA had to wait a long time before being accepted in the United States, producing profits. That was  very risky investment, yet the American market in that commodity sector has its own characteristics, presumably, very well known and different from European ones. The entry into the U. S. market, to be profitable, had to wait an important adaptation activities never done before. I think in this case when it comes to expansion it is done in a geographical sense (and not profits), so an entry into other markets to IKEA today seems to be quite complicated (making reference only to markets and economies very different from those faced up to date) for the reason just expressed.

America is a huge market, strategic and inviting for which is undoubtedly good to do what IKEA decided to do (invest with the initial losses, if necessary adapting their products), but I doubt that this can be repeated for other markets less strategically important than the American. From the point of view of the enlargement of the volume of business and profit, I have no knowledge to be able to express with certainty, however IKEA in the text is placed at the highest levels of Globality and Added Value, therefore I do not think there are great possibilities of strong growth even in this sense. The most important thing is to keep their volumes trying to increase it as much as possible.

Creativity of IKEA

IKEA is able to take full advantage of the cost benefits of mass production (carefully selecting its employees and suppliers are able to meet stringent quality standards at very competitive set from IKEA) and mass consumption because the citizens of all the world, belonging to the target specified by the company and reported above, and have an idea of odernity and style quite comparable, therefore the need to adapt its products to different markets is quite limited in this field (happened only for America). However, the need for fashion and modernity today is constantly evolving. A company structured differently from IKEA would have difficulty to be continuously ready to offer something desirable. Instead, IKEA, through a work of upgrading its products (however, wherever standard) can not only meet the needs of customers, but also to anticipate them! IKEA makes low-cost trend. This is amazing. At this point it is clear and understandable as reported in the article: IKEA "has combined the cost-reducing benefits of mass production and consumption with attention to the style required to persuade consumers to buy items which will be on display and in the eye of the purchaser for many years, unlike the humble hamburger or cup of coffee which are consumed quickly and as quickly forgotten. In short, like Harley-Davidson, it has created a global brand. It has managed to innovate and respond to Continuously changes in the world, continuing to convey a sense of excitement and modernity. Most important is the contribution of the catalogue of the Swedish firm, which "has become something of a design icon" imitated by competitors from around the world.

IKEA's Strategies

We could say that IKEA has merged the two strategies in a single large successful director. At first glance, without a careful study of the phenomenon IKEA, it would seem easy to classify the choices made by the company as cost and price leadership helped by a not differentiated offer. But in answer to the first question, I have already explained how, for me, one can not speak of a lack of differentiation. It is absolutely not possible to speak of a strategy or the other in the case under study. IKEA has been able to be innovative in all aspects: product and design, mass production delocalized and strongly supported, distribution channel, promotion type, location of stores and their structure. Thus, it has managed to combine the two strategies in a single strategy that brings together and makes something completely new. In other answers I have given a part of my interpretation of what is required in this question, but I think the best summary is that given by the authors of the article: “IKEA’s strategy has been described as a focused cost leadership strategy, focused because it is targeted at a particular market niche, those who want style at low cost. However, this oversimplifies the approach adopted and underplays the complexity of the product, with its packaging of different services. If it were true that the strategy was no more than a form of focused cost leadership, it would be difficult to understand why IKEA has been so successful.

Rather it is the combination of low price and high quality which attracts the consumer, which is not an unusual situation. The attributes of the product offered by IKEA differ markedly from those of other retailers. Instant accessibility, customer participation in value-adding, the combination of low cost and high quality – all mark the product out as unique and therefore as carrying a competitive advantage, one which is continuously renewed as products are improved and renovated. IKEA is always ready to innovate”. ) How far do you think that IKEA can look into the future in framing its strategic management? I believe that this model of strategic management is winning. It is and it will be due to the fact that creates something new from what is already well known to everyone. What is even more important and that bodes well for the future of IKEA is that it has always been the first mover. Being first means being able to reap the benefits from it. Be consistently first mover means being able to store the successes and failures of the past, learning from heir mistakes and their victories better and more quickly than your competitors are able to do by copying you. Achieve great results and be always ready for change (in fact, promote it! ) is a symptom of a far-sighted and enlightened strategic vision. Follow this structure means continue in a context that is the company itself to "manage" and, presumably, to command. The key word today is not to sit on themselves. I think that IKEA is not ever sat on.

Strategic Management and Ikea essay

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Strategic Management and Ikea. (2017, Apr 04). Retrieved from https://phdessay.com/strategic-management-and-ikea/

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