VISION AND MISSION STATEMENT:

VISION:

The IKEA vision globally is to create a better everyday life for the many.

Mission:-

At IKEA Tempe we are dedicated to giving to the local community well being regarded by our

customers and co-workers as a social responsible company".

HISTORY AND BACKGROUND:

1943:

Founded in Sweden by Ingvar Kamprad;

´ 1951:

Published the first IKEA furniture catalogue;

´ 1955-1956:

Designed own furniture

Tested to use flat packages for shipping;

´ 1987:

Opened the first store in Warrington

´ 2001:

Established IKEA Rail Founded: 1943 in Älmhult, Småland, Sweden

Type: Private

Headquarters: Leiden, The Netherlands

Industry: Retail (Specialty)

Products: self-assembly furniture

Employees: 127,800

Website: www.ikea.com

External general and industry environment

Political Factors:

Increasing globalization and protectionism, presents a challenge as well as an opportunity to

IKEA. The challenge will be to compete against unknown forces and to source the best

quality/financially viable products from world over. IKEA can enter the markets of emerging

companies through joint ventures or partnerships to explore these new markets. At the same

time, however, the company has to be wary of protectionist policies of many host countries it

operates in since there is a real risk that countries may impose high tariffs on goods imported in

an attempt to spur domestic production.

However, IKEA may stand to lower its costs as governments begin to lower taxes

or provide subsidies to help businesses stay afloat in this economic crisis.

Economic factors:

The fluctuating commodity and raw material prices all over the world result in rising purchasing

costs for IKEA. This will have an impact on the margins of the organization and might lead to

passing over the cost to consumers by increasing prices of most things in the supermarket.

Furthermore fluctuating commodity and raw material prices leading to an overall situation of

increasing prices, resulting in decreased competitiveness.

The credit crunch can impact IKEA negatively as it might decrease the purchasing power of

consumers and though they will still buy the essentials they may be more cautious. Furthermore,

furniture, unlike fast moving consumer goods, are durable and can last for several years and in

such economic uncertainty. Consumers may be reluctant to change what they perceive to be still

serviceable sets. They may also spend less on luxury items, something that has a greater profit

margin for IKEA. All this may result in lowered sales and thus, reduced margins for the firm.

At the same time, leading to an overall situation of increasing prices, resulting in decreased

competitiveness - something which will appeal to cost conscious consumers. This may cause

IKEA to reduce its margins, affecting profitability.

Social Factors:

As Ikea forays into the lesser tap markets of China and India, social factors may also come into

play. Asian societies are generally more savers than spenders and in such economic certainty,

Asian consumers may be unwilling to spend on new furniture, preferring to save for a rainy day.

At the same time, the more affluent consumers who are able to spend may be unwilling to buy

products from Ikea which has a reputation of requiring self-assembly.

Technological Factors:

RFID (Radio Frequency Identification Device) technology can be used for significant benefits to

the supply chain of IKEA. If adopted, this technology will lead to less inventory for the

supermarket firms resulting in lower cost for the company which could translate into cheaper

prices.

SWOT ANALYSIS:

STRENGTHS:

Leading retailer of home furniture & furnishings

World’s largest furniture manufacturers

Global presence of more than 35 countries

Self assembled furniture

Not a traditional furniture

20-40 % Low cost furniture than competitors

Less time services

No extra Cost included

Carried away material

Product differentiation (product range)

Single global strategy

Workforce & designers

Informal Culture

No wastage of material

Effective Value chain & procurement

Unique business model

WEAKNESS:

Stuck in the middle

Different strategies at all levels

Following porters two generic strategies at a time for broad market

Weak game plans

Detracting to attain organization plans.

OPPERTUNITIES:

To do things in different way

Opportunity to enter in broad market

To sustain in long run

Opportunity to enter in small niches as well

Online orders or E marketing

Increasing average growth up to 11%

Opportunity to create economic designs with existing workforce and designers

To involve every contributor in value chain in optimal manner

THREATS:

To sustain in long run

To follow the strategies more than one for long run

Economic trends

Social trends

Market Forces

IKEA Policies:

Catalogues

Purchases

Other information

Personal information

Most IKEA stores communicate the IKEA policy on environmental issues

Website policies

STEPS TO GRASP OPPORTUNITIES

1 . Solutions for a sustainable life at home

2 . Sustainable use of resources.

3 . Reducing carbon footprint.

4 . Developing social responsibility.

5 . Being open with all its stakeholders.

Implementation:

These ideas are drastic changes to a company that was begun on the

premise of Swedish culture and business ideals. IKEA became extremely successful

without changing the model of their business plan over many years. There must be

a team of consultants who are made up of many different cultures to assess the

situation. They need to do a study of the different cultural roles of the subsidiaries,

the possibility of strategic alliances, and the new flatter structure of worldwide

management. After a year, this study should conclude the appropriate specific

moves needed to adjust the Swedish model to work in this new era of globalization.

IKEA has the right value chain model, good relationships with their suppliers, a

strong customer base, and great company values. These positives need to be

worked in with the cultural specific, and alliance driven world to keep IKEA ahead. If

this is implemented correctly IKEA will become the world’s leading supplier of build -

it-yourself furniture in the near future.

Follow wing are the main departments in IKEA organization

1. Finance and accounts

2. Marketing and Sales

3. Human resource and administration

4. Technical / Operations

V ALUE CHAIN ANALYSIS OF IKEA

IKEA has quickly evolved from a local Swedish home furnishing manufacturer into the

Largest home furnishing company in the world; partly by convincing their customer to

Perform the transport and assembly processes of the furniture manufacturing value

chain. They have executed their strategy by building a worldwide sourcing network of

high quality global manufacturers to support their growth.

IKEA Modified Value Chain

Ikea's role in the value chain is to mobilize suppliers and customer to help them

further add value to the system. Customers are clearly informed in the catalogs

of the firm's business systems provides, and what they are expected to add to

the final process. In order to furnish the customer with good quality products at a low

cost, the firm must be able to find suppliers that can deliver high quality items at low

cost per

unit. The headquarters provides carefully selected suppliers with technical

assistance, leased equipment and the necessary skills needed to produce high

quality items.

This long-term supplier relationship does not only produce superior products,

but also add internal value to the suppliers . In addition, this value-chain

modification differentiates Ikea from its competition

IKEA’s supply chain is global with sales in more than 250 own stores in 24

countries and 32 external franchisees in 16 countries. The stores are supplied

through 31 distribution centres, or directly from the 1,350 suppliers in more

than

50 countries. IKEA’s supply chain consequently has a global spread with both

sales and purchasing in all major regions of the world. IKEAs growth has been

tremendous and sales are still growing. Currently IKEA plans to open 10-20

new stores every year with a goal to double sales within the coming five year.

Considering the pace of growth in sales, the many stores and warehouses, and

the fact that some business areas change up to 30% of its assortment every year,

supply chain planning is a real challenge. The supply chain needs tight control

and high levels of visibility to keep costs down and avoid obsolete inventory

and/or stock outs.

The IKEA supply chain is mainly make -to-stock (MTS) and only a few

Products are made to customer orders. Consequently, the entire supply chain is heavily

dependent on forecasts. The regions and the stores have traditionally had a

strong power and a high degree of local freedom in terms of planning an d

placing replenishment requests. This has led to a fragmented supply chain

planning with local optimization and a lot of manual intervention with plans

throughout the supply chain. Furthermore, due to frequent shortage situations.

O b j e c t i v e s a n d F u t u r e p l a n s :

P o s i t i o n I K E A a s t h e l e a d e r i n t h e h o m e f u r n i s h i n g s m a r k e t . D e l i v e r 6 0 , 0 0 0 v i s i t o r s t o t h e s t o r e d u r i n g t h e f o u r - d a y

o p e n i n g p e r i o d . D e l i v e r a v e r y a g g r e s s i v e s a l e s t a r g e t ( t h e n u m b e r i s

c o n f i d e n t i a l ) . P r o v i d e a s t r o n g s e n s e o f c o n n e c t i o n b e t w e e n I K E A a n d t h e

l o c a l c o m m u n i t y . E f f e c t i v e l y c o m m u n i c a t e I K E A ' s p e r s o n a l i t y ( f u n , e m p a t h e t i c ,

i n t e l l i g e n t ) a n d i t s p r o d u c t r a n g e ( q u a l i t y h o m e f u r n i s h i n g s f o r t h e e n t i r e h o m e ) .

The organizational design and function is a key for IKEA to carry out its global

planning concept in a standardized way worldwide. The supply chain planning

responsibility has been centralized to IOS, and two specialized planning

positions (Demand Planner and Need Planner) were developed to take the

responsibility of the main processes in the global planning concept. There are

about 32D emand Planners and their role is to secure that the sales planning is

translated into a sales forecast on article level with a global responsibility. The

responsibility includes the global sales forecast accuracy, involvement in the

sales planning process, product range changes and development of the sales

forecast methodology.

The approximately 70 Need Planners focus on securing that the need planning

continuously is matching the capacity planning with a global responsibility.

Need Planners are responsible for service levels and stock levels in stores and

DCs, the global need planning process, balancing the global need and capacity

per supplier/category/material, actions on capacity exceptions, supply plan

accuracy, and so forth. The more long term planning issues, such as checking

and securing supplier capacity, involve the strategic purchasing and trading

business support organizations.

The establishment of the two centralized planner positions is important for

creating necessary specialist competence in demand and need planning, but also

for making it cost efficient and practically possible to carry out the planning

processes in a standardized way, worldwide. Despite of the centralized

planning

Organization there have been some problems implementing the new global

planning concept and working methods, partly because of insufficient e nd-user

training and support, insufficient knowledge and involvement by line

management and that the planning software are not the main applications for some

organization.

P roject and change management

IKEA has over time struggled with achieving consistent result from its

Execution efforts. Although several project ts have resulted in successful

implementation, the opposite has also occurred leaving the organization with some co-

workers not fully adapted to new working methods and tools. The Change Process has

not been sufficiently recognized and the affected co-workers have from time to time

been brought in to the change process too late, and left on their own too early by the

implementing projects.

Part of the recent change efforts, the change process has been taken seriously. A four-Step

model has been defined clearly recognizing the need to create awareness in the first step,

create interest in what is coming in the second step, making users try out the solution in

the third step and finally adopt the changes in the fourth and last step. The experience thus

far is that the receiving organizations truly appreciate the implementation approach and

the result is very good.

Communication and Learning:

Actively supporting the roll out resources. This might at first glance be perceived

as an extra cost, but the true belief is that making things right from the start

Saves money at the end.

CONCLUDING REMARKS:

Old planning concept:

Functional orientation

Limited transparency

Reactive behaviour

Extensive manual work

Unreliable planning information

Lack of trust

Fluctuating goods availability

Over stock

New planning concept

Solitary integrated planning process providing ‘reliable planning

information.

A common ´working-together environment ´creating supply chain

visibility.

Working methods and tools to detect and deal with problems at an early

stage.

A coordinated and ´balanced´ Supply Chain.

IFAS

Internal Factors Weight Rating

Weighte

d Score Comments

Strengths        

Leading retailer of home furniture and

furnishings. 0.10 4 0.40

World’s largest furniture manufacturers 0.06 4 0.24  

Global presence of more than 35 countries 0.07 4 0.28  

Self assembled furniture 0.06 3 0.18  

20-40% low cost furniture than competitors

0.06 4 0.24  

No extra cost included

0.06 3 0.18  

Less time and carried away material 0.05 4 0.20  

Single global strategy 0.05 4 0.20  

Work force and designers 0.08 4 0.32  

Product Differentiation 0.07 4 0.28

Weakness  

Stuck in the middle 0.05 3 0.15

Different strategies at all levels 0.05 4 0.20  

Following porters 2 generic strategies at a

time for broad market 0.05 4 0.20  

Weak game plans 0.07 3 0.21  

Informal Culture at every level 0.06 2 0.12  

Targeting single market 0.06 2 0.12

Total 1 3.50

EFAS

External Factors Weigh

t

Ratin

g

Weighte

d Score

Comments

Opportunities        

To do things in different

way

0.08 4 0.32

Opportunity to enter in the

broad market

0.10 3 0.30  

To sustain in the long run 0.08 4 0.32  

Opportunity to enter in

the small niches as well

0.10 3 0.30

Online orders or web

marketing

0.10 4 0.40  

Increasing average growth 0.08 3 0.24   Up to 11 %

Opportunity to create

Economic designs

0.10 4 0.40

Opportunity to achieve

organizational goals

0.08 4 0.32  

Threats  

To sustain in the long run 0.07 4 0.28

To follow the strategies

for more than 1 year

0.08 4 0.32  

Competitors strategies 0.06 3 0.18  

Threat of new entrants 0.04 4 0.16  

Dynamic global

environment

0.03 4 0.12  

 Total 1 3.66  

IE Matrix.

The IFE total Weighted Scores

4.0 Strong (3.0-4.0) 3.0 Average (2.0-2.99) 2.0 Weak (1.0-1.99) 1.0

High

3.0_4.0

3.0

I II III

Medium

2.0_2.99

2.0

IV V VI

Low

1.0_1.99

1.0

VII VIII IX

IFE score 3.50

EFE score 3.66

As they are lying on I,II and IV so they must adopt strategies for “Grow and build” which are

mentioned below:

GROW AND BUILD:

As IFE and EFE result is lying on (Quadrant-I) which shows that company should grow and

build and the strategies for this quadrant are:

Forward, Backward, Horizontal integration

Market penetration

EFEIFE

Market development

Product development

COMPETITORS ANALYSIS

NM

Heavens

Kenwood

Barnum

And others….

Strategic Moves of Direct for these Competitions:

Strong market commonality (Responses) Less Likelihood of an Attack

Weak market commonality (Responses) Greater Likelihood of an Attack

Strong resource commonality (Responses) Less Likelihood of a Response

Low resource commonality (Responses) Greater Likelihood of a Response

Review of Ikea’s strategies and options:

Given its business model and environmental factors, Ikea has several options to ensure that its

growth continues even in such gloomy economic climate. One of the steps it could take is to

focus on its core business, producing low-cost designs to cater to the average consumers who

have less discretionary spending powers. At the same time, IKEA could also invest in research

and development to improve the designs or lower production cost through technological

breakthroughs.

Another area it can look at is to increase sales through the use of promotional strategies.

Currently, IKEA's advertising campaigns were based on unique marketing conditions and

cultural sensibilities of each country, which varied significantly across markets. For example,

European advertisements, especially in the UK, were more straight-forward than those in North

America, which were generally more witty. Over the years, IKEA had worked with different

advertising agencies to bring out some of the most creative and unconventional television spots

across the globe. For these reasons, an IKEA account was considered a choice catch as it allowed

the agency the freedom to explore some interesting and unexplored ideas.

Ikea’s stores can also be a means to attract more and more customers in their stores. As when a

customer enters a Ikea store, he can not go out without having seen all the furniture available in

Ikea due to the way the products are placed. In fact, Ikea stores are big and the customer is

obliged to visit the 2 floors of the store before exiting as It is impossible to go directly to the exit.

It is a marketing strategy which incites customers to buy. This system results in customers often

buying more furniture than they need and Ikea can capitalise on this by getting more personnel to

help customers walking through the shop. This is important as one drawback is that many

customers feel that the service at Ikea could be erratic at times due to high customer turnout and

low number of staff working.

IKEA also benefits from economies of scale and healthy supplier-firm relationships. IKEA could

enter into long-term contracts, provide leased equipment and technical support in exchange for

exclusive, low-cost supplies from suppliers. For new markets in India and China, IKEA should

retain its price- image to maintain the brand’s positioning of providing low cost quality products.

Product differentiation exists in the value-added dimension since IKEA’s consumers are treated

as ‘prosumers’ with most of its products requiring assembly after purchase. Although assistance

in this aspect is limited, IKEA offers options for choosing, transporting and assembling furniture.

While this is well accepted in areas where IKEA now operates, it may be a point of consideration

when entering new markets. Should IKEA encounter a market where DIY is not favored, IKEA

may include the cost of the service to the product’s price.

In conclusion, to grow its market share, IKEA would need to continue to provide low cost

products that is differentiated (in terms of offering consumers a choice of assembly and

transport) and at the same time, to build on its staff competencies in order to offer consumers an

enhanced shopping experience.

Choosing Strategic Alternatives For IKEA:

Risk-Avoiding Strategy protect a competitive advantage

Risk-Seeking Strategy create a sustainable competitive advantage

Strategic Reference Points targets used by managers to determine if the firm has a

sustained competitive advantage

Recommendations:

IKEA currently operates in several countries and since it is mindful of the socio- cultural aspect

of the countries it operates in, Ikea would need to continue operating as independent business

groups with each group making its own managerial decisions. Such an arrangement would

ensure that the various units can respond quickly to the fluid situations in the host countries they

are in.

Secondly, IKEA should also stick to the policy of reaching out to cost conscious consumers by

focusing on quality yet low cost products. This can be done by sourcing for materials and putting

in more efforts to integrate its supply chain to reduce costs. At the same time, the policy of

choosing malls in suburban locations is also an ideal one as it also lowers rental which can form

a substantial portion of operating expenses.

Recommended Diversify Strategies:

CONCENTRIC DIVERSIFICATION

HORIZONTAL DIVERSIFICATION

CONGLOMERIATE OR LATERAL DIVERSIFICATION

Conclusion:

From a fledging family business in 1943, IKEA has since grown into a multi- million company.

As IKEA moves into the next few years, it would have to continue to sustain its current market

of low cost, quality goods and at the same time, grow new segments (the high end market for

instance). It also has to continually improve its customer service to ensure that customers remain

satisfied while using technology, especially internet shopping, to grow its business. Given its

strength in its industry and the relatively stable environment it operates in, the potential for IKEA

to grow its business is strong if it embarks on a two pronged thrust of growing its market share

and limiting cost in this downturn moreover according to porter there are conflicts but by

considering the other options we must consider the “Diversification Strategies” for the IKEA as

it is expanding globally and it might need to be diversify by applying above mentioned

diversification according to the suitable conditions.

REFERENCES:

http://en.wikipedia.org/wiki/Diversification_(marketing_strategy)

http://www.strategylabs.net/search-bcg-matrix-in-ikea_p4.asp

http://www.slideshare.net/amarendrahota/ikea-final-presentation