Strategic Management of IKEA

Running Head: STRATEGIC MANAGEMENT
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STRATEGIC MANAGEMENT
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4/24/2019

STRATEGIC MANAGEMENT 1
Executive summary
IKEA is a furniture multinational company established in 1943 and based in Swedish that is
designing and trading furniture that is ready to assemble, home accessories, and kitchen
appliances. The report will discuss the strategic analysis of IKEA, where the company aims to
provide a large product range to customers with innovative design at affordable prices.
The resources of Ikea that are identified to be a strong competitive advantage for the company
include digital use capabilities, international and domestic presence, position amongst
wholesalers and retailers, customer community, and precarious raw material aimed at positive
implementation. Moreover, it was identified that Ikea should follow a hybrid strategy that
includes a combination of two of these strategies. On the majority, the company must adopt the
best cost provider strategy. This could be one of the best strategies as the company vision is to
provide affordable goods for customers. Some recommendations to IKEA included agile and
cross-cultural teams, new product development, technology up gradation, and increase in digital
presence.

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Contents
Executive summary.........................................................................................................................1
Introduction......................................................................................................................................3
VRIN Test........................................................................................................................................5
Porters Five force.............................................................................................................................6
Recommended generic strategy 300............................................................................................8
Critical Evaluation...........................................................................................................................9
Staffing........................................................................................................................................9
Leadership..................................................................................................................................10
Recommendations..........................................................................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
Appendix 1 : Ikea VRIN Analysis.................................................................................................19

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Introduction
Strategic management is the rapid planning, observing, evaluating and controlling everything
that is essential for the company to achieve its objectives and goals. This would include
formulating and implementing key initiative considered by the company to achieve goals
(Bailey, 2018). The report will discuss the strategic analysis considering a company case.
IKEA is a furniture multinational company established in 1943 and based in Swedish that is
designing and trading furniture that is ready to assemble, home accessories, and kitchen
appliances. As per the statistics, Ikea has now considered as the largest retailing company of
home furnishing across the globe. The key product range of IKEA include chairs, table, beds,
household good, and cabinets and are doing business in forty nations across the world. The
competitive advantage of IKEA is the quality of goods at low prices to enhance the standard of
living of individuals (ikea, 2019).
IKEA vision includes making people’s life better through innovative business ideas and products
offering. The company aims to provide a large product range to customers with innovative
design at affordable prices (Chari & Feng, 2018).
The furniture industry in which the company performs is a competitive industry. Some of the
major competitors of the company include Wal-Mart, amazon, and Tesco. For 2015, the statistics
reflect IKEA was on the second position in the Australian market. The market share of the
company can be analysing from the graph presented below:

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Figure 1: (Source: (roymorgan, 2019)
The market share of the company in Sweden is thirty three percent, as the company focus over
the customer needs and behaviours than assessing their competitors.

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VRIN Test
VRIN test is one of the business analysis tools that are helpful in assessing the competitive
advantage of the company due to the company’s resources and capabilities. Here VRIN stands
for valuable, rare, inimitable, and non-substitutable.
Resources or capabilities of IKEA that are to be analysed include (as presented in Appendix 1)
 Digital use Capabilities – This capability of the company is a valuable asset for the
company as it is increasing continuously and can gain opportunities. This is not rare as
competitors of the company can invest in technology. In-house analytics and AI could be
problematic for competitors to imitate which makes is a sustainable competitive
advantage for the company (Chatzoglou & Chatzoudes, 2018).
 International and Domestic Presence – IKEA has diversified business across the globe,
which is helpful for the company to minimize the risk of the economic cycle in various
nations. This is rare the competitors however can imitate resource for the company,
which makes it a strong competitive advantage.
 Effective Application of Digital Approach – the digital strategy of the company is
valuable for the company as it is difficult to compete for local companies. This strategy is
not rare and can be imitable by the competitors as most of the companies are using such a
strategy like Amazon. This resource is an essential part of the industry but it is not
considered to be a competitive advantage.
 Prospects in the Adjacent Trades – This competence can be valuable to IKEA as it can be
responsible for enhancing revenue streams for the company. This is not rare resources