Strategic Management and Business Performance

This assignment delves into the crucial link between strategic management and a company's performance. It examines different models like Bowman's Strategic Clock and Porter's Generic Strategies, using case studies such as IKEA to illustrate their application. The analysis considers how strategy execution, particularly in multinational companies, impacts firm success. Furthermore, it explores the role of communication and attention dynamics in strategic change.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1 ................................................................................................................................................1
P1 Analyses the macro environment of IKEA...........................................................................1
LO 2.................................................................................................................................................2
P2 Analysis of internal factors with reference to IKEA.............................................................2
LO 3.................................................................................................................................................4
P3 Porter five forces ...................................................................................................................4
P4 Theories and concepts of strategic planning .........................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business strategy refers to plan of action of firm for achieving its mission vision,
objectives and gaining competitive advantage, This aids in increasing financial performance by
using appropriate business model. Present study will be based on IKEA company that operates
in field of designing and selling ready-to assemble furniture.
Study will explain impact of macro environment on an organisation. Furthermore, it will
undertake use of a framework to analyse the internal environment and capabilities. Report will
critically evaluate all the external environmental factors.
LO 1
P1 Analyses the macro environment of IKEA
IKEA is a firm that involved in designing furniture,home appliances, kitchen equipment.
the business has a vision to improve quality of day to day life of the people its ideas supports its
vision by creating well- designed, home furniture at a very minimum prices. so that more people
will be able to purchase its products((Aithal, Shailashree and Kumar, 2015). The main objective
of entity is to boost sells by creating awareness and maintaining strong relationships with people,
gain high market share. Analyses of various external environment factors in relation to IKEA are
described as below:
The business operations of IKEA is affected by several external environment factors and
any modification in such factors directly impact on growth of company. the reasons of this
impact is also described as below- Political: This factor affects operational activities of IKEA, changes in government
policies, laws or regulations influence business operations. Political instability may
disrupt supply chain of organisation. Social: it consist of changes in needs and wants of consumers. Business is focusing more
on customer oriented operations in order to deal with social changes. By giving priority
to needs and demand of the society it may increase revenue generation of concern. Economical: Favourable changes in tax rates, unemployment, interest and inflation rates
in nation can influence buying pattern of consumers as it will positively influence
disposable income of prospects. The business activities of IKEA are affected by positive
and negative changes in the economy(Hinkelmann and Pasquini, 2014). If people have
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adequate financial resources then they will buy goods of IKEA that would help in raising
revenues but if there is low employment rate then it might create trouble for business. Legal: The operations of IKEA is affected by changes in laws and legislation in legal
environment that impact operational functions of the entity the government has created
“make more in India” but IKEA is searching for new suppliers in some category of
product like sofa and mattresses . Technology: The frequent changes in technology affect growth of IKEA. Business has to
adopt new technological changes in order to increase effectiveness of operations and keep
its entity update. (Anwar, Shah and Hasnu, 2016).
 Environmental: This component includes changes in climate. Positive changes in climate
may increase the efficiency of furniture making process of firm. On the other hand
negative changes may impact the overall working operations of the business.
M1 & D1
Macro environment factors affects the growth and success of IKEA and also impacts its
decision making process and strategies .this factors include- political ,social, legal, economical,
environmental components. The main goal of IKEA is to maximize its sales and profitability of
organisation.. but economic changes like increase in inflation rates will increase the cost of the
company and reduce the revenues and profitability of the entity. Ultimately that impacts over all
productivity of the organisation(Yang, Kueng and Hong, 2015). Rapid changes in technology,
changes in trends and fashion may impact to organisational functions negatively. like
management need to provide training to manpower in order to train its employees .it will
reduced operational efficiency for some time and increase the lead time of services. That impacts
the overall growth of firm.
LO 2
P2 Analysis of internal factors with reference to IKEA
The internal analysis of the company refers to the management of employees,
stakeholders, suppliers, proper allocation of resources that may improve or decrease the level of
performance of the firm. SWOT analysation of IKEA on the basis of IWAY approach is
explained as below:
Strength:
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IKEA has a strong brand image in marketplace that works as biggest strength for
company. The mission, objectives and strategies of concern is clearly specified and effective
management works efficiently towards achieving those objectives and targets. The concern has
403 stores and presently operating in major market of the world. it has more than 817 million
customers visit to IKEA stores every year. They use various strategies for aligning its Supply
chain strategy in order to achieve sustainable competitive advantage. It has proper availability
of resources that helps in smooth functioning of every operations and business utilise this
resources effectively and efficiently that improve the overall productivity of its operations. The
company achieved high level of customer satisfaction from its offering that has build loyalty and
commitment of the audiences towards the organisation (Vlachos, 2016).
Weakness:
During the expansion of the IKEA it follows same standards that work as a weakness for
firm. That reduces the chances of bringing innovation into the operations. Cost of manufacturing
is very high that impacts the profitability of the firm ultimately this will reduce the growth of the
company.(Chatterjee, Narayanan and Malek, 2016). There is no reward system or strategies to
increase the level of motivation of employees or boost their performance efficiency that reduce
the employee satisfaction with work and ultimately decrease the performance of their employees
that will affect the organisation as a whole..
Opportunities:
The preference of the customers towards eco friendly products is increased. They can
create hand made goods and customise according to the specification of the consumer at a
affordable rates that may enhance the demand for firms products. That will attract large number
of customers and will help firm in retaining its potential customers and achieving their loyalty,
commitments towards firm. Ultimately sells and growth will increase that automatically help in
achieving the success for the organisation (Aithal, Shailashree and Kumar, 2015).
Threats:
In the market place competition level is increasing day by day. New competitors are
entering into market with advanced technology and creative methods for their operations Like
walmart. This may increase chances of shift in customer preference that would directly impact
sell volume and profitability of firm. Changes in macro environment factors such as political,
legal, social, economical, environmental and technological, directly affects success of
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IKEA(Vlachos, 2016) . Positive changes leads to in taxes and inflation rates government policies
and favourable marketing and customer satisfaction with the brand will positively impact on the
growth of company.
M2
The internal environment that includes strength, weakness, opportunities and threats that
impacts the organisational performance. IKEA has strong brand image in the market because
they provide high quality products at a low prices that helps them in retaining its potential
customers and gaining satisfaction, loyalty . It is increasing growth and achievements of the
concern. And on the other hand there production cost is high that is impacting the profitability of
the firm (Hinkelmann and Pasquini, 2014).
LO 3
P3 Porter five forces
Porter five forces helps in analysing the level of competition in the industry. The
profitability and its brand position of the firm is determined by the overall strength of these
forces. Each forces are described as below:
Threat of new entrants- it brings new expectation to increase market share. This threat depend
on the barrier to entry in a particular industry.such barrier is high ,smaller will be the threat for
IKEA it can increase competitive position in market (Anwar, Shah and Hasnu, 2016).
Bargaining power of buyers: The customers play a very important role in any IKEA. they may
easily drive the prices down. The company has to bear the cost to the buyer to switch from its
product to its competitors product.
Bargaining power of supplier: In the marketplace there are limited supplier available for the
products. If the suppliers have high control over the supply of raw materials. they may rule over
the IKEA and can charge high prices for the supply . In such case the firm has left with only one
option of increasing the prices of its output to enhance its revenue.
Threat of substitute: This force will not impact on the companies success. Because they have
less availability of substitute for home appliances, and furniture and other products . Te company
has high customer retention due to its specialization in low cost furniture and good quality
products(Mohelska and Sokolova, 2016).
In case of IKEA, there are so many retailers in this industry so the customer have so
many options and opportunity to chose or get product from any firm. That impact the pricing
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strategy of firm. And because of good brand image of IKEA and its convenience, low cost
product most customer prefer their products over other competitors goods. there is no substitute
product available for IKEA products because it is specialised in providing good products at a
low cost. that help company in retaining its customers.
M3
The porter five forces helps in examine the competition level and rivalries with in the
industry. These forces includes- Threats of substitute, threats of new entrants, bargaining power
of supplier, bargaining power of customers, competitive rivalry. In the market the buyer has
strong influence on the prices of company products .s but these factor does not have much
influence on IKEA offering because they provide high quality goods at a affordable rates.
P4 Theories and concepts of strategic planning
Porter’s generic strategies
IKEA is the largest furniture retailer that aims to expand its business across the world
(IKEA–A success of Porter’s Generic Strategies Combination, 2016). It prepares effective
strategies that can support organisation in accomplishing its objectives.
 Cost leadership: IKEA tries to provide furniture to consumers at minimum cost. Entity
has prepared strategy to offer lower cost products in order to gain superior profit (Hill,
2017). This strategy can be used in order to gain attention of mass audience and gaining
competitive advantage.
 Differentiation focus: IKEA always tries to produce variety of goods and services so that
different needs of different users can be met. It always concentrates ion requirements of
buyers and accordingly offers them products. In this strategy IKEA can offer such
products to consumers that do not provide by its competitors (Doz, 2017).
 Cost focus: It is another essential strategy that can help IKEA in gaining success in
market; Enterprise can focus on niche market and can provide them services at lower
cost.
 Differentiation leadership: In this strategy entity always emphasis on large markets and
try to gain competitive advantage (Meyer, Neck and Meeks, 2017). In this firm plays the
role of market leader and provide superior quality products. Wide distribution channels
assist
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IKEA has to adopt cost leadership strategy, this will help in attracting more buyers and
increasing its market share.
Bowman’s extended model
It is essential model that aids firm in exploring options for strategic positioning. This
explains four major strategies: Low price / low value, low price, hybrid, differentiation, focused
differentiation, increase price and standard products, high prices/ low value and low value /
standard prices (Ocasio, Laamanen and Vaara, 2018).
Figure 1: Bowman’s extended model
(Source: Bowman's Strategic Clock (Strategic Positioning), 2018)
In order to gain success IKEA is required to adopt hybrid strategy. It has to provide
furniture products to consumers at lower prices. Offering variety of superior quality goods will
create value for business and it will help in making unique brand image.
Strategic management plan
Strategic planning aids business in evaluating process and taking such actions that can
support in gaining competitive advantage.
 Mission and objective: The main purpose of IKEA is to expand business and generate
more revenues.
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 Environmental scanning: IKEA has adequate financial resources and has good brand
image worldwide. These strong points can support firm in expanding its operations in
other country successfully. Furthermore, entity can make changes in its pricing policy as
per the economic situation of market (Ocasio, Laamanen and Vaara, 2018).
 Strategy formulation: IKEA has to offer high quality products at lower price and have to
take support of social media marketing. This will help in establishing its business in other
location successfully.
 Strategy implementation: IKEA has to manage its resources well and have to monitor
progress so that strategy can be implementing efficiently and it can give positive result
(Meyer, Neck and Meeks, 2017).
 Evaluation and control: Manager of the firm is required to closely monitor each activity
and have to control over operations so that it can gain success.
M4
Mission of the company is to generate more revenues, company’s internal strength is very
strong and it is able to expand its business across the world. By offering products at lower price,
it will be able to meet with the objective.
 Environmental scanning: Company has strong internal and external position, it can
sustain in market for longer duration
 Strategy formulation: In order to meet the objective of expanding operation IKEA is
required to offer quality products at lower price.
 Strategy implementation and evaluation: Resources can be managed by firm efficiently. It
has to timely evaluate plan against the objectives so that actual success can be measured.
Priority of IKEA is to utilise resources well and gain competitive advantage. IKEA aims to
generate more profit and want to enter into new market. Company has strong financial position
and good market reputation. Both these aspects can support firm in gaining success and
accomplishing its objectives (Hill, 2017). By using social media marketing more effectively and
making changes in pricing strategies entity can gain competitive advantage and can sustain in
market for longer duration.
CONCLUSION
From the above study it can be concluded that there are several different forces that is
impacting the operational activities of IKEA. The internal and external environment is impacting
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the company positively or negatively. This report will explain the strength, weakness,
opportunities and threats as well as PESTEL analysis of IKEA in order to identify or analyse the
impact of such factor on the decision making process of the Enterprises. This analysation will
help firm in making effective strategies for its firm.
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REFERENCES
Books and Journals
Aithal, P. S., Shailashree, V. and Kumar, P. M., 2015. Application of ABCD Analysis Model for
Black Ocean Strategy.
Anwar, J., Shah, S. and Hasnu, S., 2016. Business strategy and organizational performance:
measures and relationships. Pakistan Economic and Social Review. 54(1). pp.97.
Chatterjee, S., Narayanan, V. and Malek, W., 2016. How strategy execution maps guided Cisco
System’s Sales Incentive Compensation plan. Strategy & Leadership. 44(6). pp.25-34.
Doz, Y. L., 2017. Strategic management in multinational companies. In International Business
(pp. 229-248). Routledge.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2017. Reviews of strategic management
research. Strategic Management Journal. 38(1). pp.3-3.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hinkelmann, K. and Pasquini, A., 2014, August. Supporting business and IT alignment by
modeling business and IT strategy and its relations to enterprise architecture. In Enterprise
Systems Conference (ES). 2014 (pp. 149-154). IEEE.
Meyer, G. D., Neck, H. M. and Meeks, M. D., 2017. The entrepreneurship‐strategic
management interface. Strategic entrepreneurship: Creating a new mindset. pp.17-44.
Mohelska, H. and Sokolova, M., 2016. Smart, connected products change a company’s business
strategy orientation. Applied economics. 48(47). pp.4502-4509.
Ocasio, W., Laamanen, T. and Vaara, E., 2018. Communication and attention dynamics: An
attention‐based view of strategic change. Strategic Management Journal. 39(1). pp.155-
167.
Vlachos, I. P., 2016. Reverse logistics capabilities and firm performance: The mediating role of
business strategy. International Journal of Logistics Research and Applications.19(5).
pp.424-442.
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Yang, M. J., Kueng, L. and Hong, B., 2015. Business strategy and the management of firms (No.
w20846). National Bureau of Economic Research.
Online
Bowman's Strategic Clock (Strategic Positioning).2018. [Online]. Available through<
https://www.tutor2u.net/business/reference/strategic-positioning-bowmans-strategy-
clock>
IKEA–A success of Porter’s Generic Strategies Combination. 2016. [Online]. Available through <
https://blogs.ubc.ca/junlingliu/2016/10/02/ikea-a-success-of-porters-generic-strategies-
combination/>
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