IKEA's Strategic Management & Innovation

This assignment delves into the strategic management of IKEA, highlighting its focus on sustainability. It examines IKEA's innovative supply chain model, rightsourcing strategies, and how they balance profit, planet, and people. Additionally, it explores IKEA's adaptation of service experiences to new markets like India and its commitment to creating a competitive advantage through sustainable practices.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT
Table of Contents
Introduction......................................................................................................................................2
Summarize the processes of developing strategic management of an organization plan................3
Company Vision and Mission.........................................................................................................3
Company SWOT Analysis..............................................................................................................4
Defining the company Resources, tangible, intangible resources and organizational capabilities. 7
Competitive Advantage of the company.......................................................................................10
Defining and Applying the VRINE model to your company’s resources.....................................11
Conclusions....................................................................................................................................13
References......................................................................................................................................14

2STRATEGIC MANAGEMENT
Introduction
Strategic management is the formulation and making and devising the plans and thereby
implementing such plans and goals by the management and the board of directors. The company
does this by analyzing the internal and external environment where the organization operates and
competes1.
This involves analyzing the strength and weakness of the company and formulation and
execution of various plans so that the company is able to successfully implement get the desired
objectives. This report focuses on the internal organizational resources and capabilities, which is
important to achieve the organizational objectives and vital for formulation of strategic
management2.
IKEA is one of the most famous brands, which has smart and affordable home furnishing
features. The IKEA has various products, which is affordable, durable and designed in a modern
technology. The brand is in all over the Countries and which demonstrates its passion for quality
and value. The company’s product shows the value and its quality. The company is very smart at
keeping customers’ value high and thereby delivering high quality products. The most important
is their strategy, which has helped them to expand internationally and position itself as favorite
1 Yilmaz, Ayse Kucuk, and Triant Flouris. "Enterprise Risk Management in Terms of
Organizational Culture and Its Leadership and Strategic Management." Corporate Risk
Management for International Business. Springer Singapore, 2017. 65-112.
2 Collins, P. (2002) The cost of war. Journal of Politics, vol. 1, no. 1, June, pp. 20-40.

3STRATEGIC MANAGEMENT
of the modern generation modern generation. The IKEA dream has three components – its
vision, its business idea and its human resource idea3.
Summarize the processes of developing strategic management of an organization plan
IKEA high and forward-thinking strategy has made it into the top furniture seller in the
world. It has moved its model into various places like no other retailer on the planet. The
furniture are very impressive and they have expanded in almost 298 stores spreading over 28
countries.
Few crucial aspects to IKEA success
1. Solving any problem related to the customer
2. The furniture is very cheap and reasonable
3. They are able to target the right people or the right demographic
4. The stores are spread all over the world
The factors influencing are as follows
Political factors
Increased of globalization and protectionism which has presented a challenge as well as
opportunities to IKEA.The challenges are very competing against the unknown sources ad it will
be competing against the unknown forces and sourcing the best quality financially viable
products from across the world. IKEA can enter emerging country markets through partnership
3 Collins, P. (2002) The cost of war. The Straits Times. Vol. June, pp. 20-40.

4STRATEGIC MANAGEMENT
for exploring into these markets. Company should be vary about the protectionist policies of
many host nations since high tariffs may be imposed on goods which are imported for
encouraging domestic production
Economic factors
The fluctuations in the commodities as well as raw material prices across the world will result in
increased purchasing cost for IKEA. This has impacts on the margins of the organization and can
lead to passing over the cost to the consumers through high prices, which adversely affects the
competiveness of the organization. The credit crunch has an impact on IKEA in a negative
manner as it can decrease the purchasing ability of the consumers`
Technological Factors
The technology can be used in the supply chain which can help in inventory savings resulting in
lesser costs for the company.
Company Vision and Mission
IKEA has its vision and mission statement as “To create a better everyday life for the
many”. It explains their vision statement as the relation between their vision and the business
ideas as “Our business idea supports this vision by offering a wide range of well-designed,
functional home furnishing products at prices so low that as many people as possible will be able
to afford them”.
IKEA’s has only one vision and mission statement therefore it is not very specific. Since
it is broad, therefore it does not specifically serve the particular purpose of the mission and

5STRATEGIC MANAGEMENT
vision statement4. The statement talks in general about the products like customers and other
important factors related to the business, competition and financial strength. A mission or vision
statement usually helps the company However, the mission is very broad and does not
specifically talk of things like products, customers or other important factors related to the
business and the organization like its culture, competition and financial strength. Whether a
vision or a mission statement, it must be specific enough so that the managers and the directors
can form a decision based on the resource allocation. IKEA’s vision fails to be both specific and
clear5.
A mission statement explains what the product sells and its customer segment and
position are. When explaining the purpose of the business, a mission must state what the
business is doing including the products it sells, its customer segment, market size and position6.
What IKEA does is to create better homes by creating and selling good quality home furnishing
products at affordable prices Mission and vision statements are also useful at marketing of the
brand and therefore must give a clear glimpse of the company and its business. These are guiding
statement, which guide the organization during decision-making7.
4 Frynas, Jedrzej George, and Kamel Mellahi. Global strategic management. Oxford University
Press, USA, 2015.
5 Grant, Robert M. Contemporary Strategy Analysis Text Only. John Wiley & Sons, 2016.
6 Gunnarsson, Adam, and Gustaf Ljungwaldh. "Business Model Innovation Towards
Sustainability: The Mobile Phone Industry." (2015).

6STRATEGIC MANAGEMENT
Company SWOT Analysis
Strength
1. The most important strength s that IKEA has a clear vision thereby it adds value to the
customers even in a bad condition. The well-defined strategy helps the company in its
pioneering and its simplicity helps in targeting of the competitors and their position8.
2. IKEA measures the strength by using the key performance indicator that includes the
increased use of renewable material thereby maintaining long-term relationship with the
suppliers and economies of scale.
Weaknesses
1. IKEA is operating in various countries throughout the World due to the large size scale of
the business and therefore difficult to control standards9.
7 Ivanov, Gennady, and Elena Mayorova. "Intangible assets and competitive advantage in retail:
case study from Russia." Asian Social Science 11.12 (2015): 38.
8 Kotler, Philip, Roland Berger, and Nils Bickhoff. "Strategy and Strategic Management: A First
Basic Understanding." The Quintessence of Strategic Management. Springer Berlin Heidelberg,
2016. 5-22.
9 Kotler, Philip, Roland Berger, and Nils Bickhoff. The quintessence of strategic management:
What you really need to know to survive in business. Springer, 2016.

7STRATEGIC MANAGEMENT
2. It focuses on cost leadership, quality goes up and the cost of inputs and raw materials has
gone up. The profitability also increased. It is sometimes difficult for the company to
maintain quality with the increase in cost and the need to change the standards across all
the location in the World.
3. The environmental situation about IKEA is that the company faces the challenge and
difficult in exchanging the policies of the environment and the policies of the
Government and the shareholders or the stakeholders10.
Opportunities
1. The company has a good business mode and its huge opportunities in terms of attracting
from the customers and to rise in the ethical consumers buying such products and the
environment is conscious and s getting such opportunities and is tapped in the company.11
The opportunity for the company is that it has a cost leadership, it focuses on the cost
leadership, and there are expenses. The concerns are all about the quality has raised and
the customers mind is getting more money minded and it is significant opportunity12.
2. The last opportunity lies on the company’s expansion and on the markets and which have
developed throughout the World and which has untapped the customers base that have
10 Lebherz, Matthias, and Jonathan Hartmann. "Applying the value grid model to the furniture
industry: the example of IKEA." (2017).
11 Mason Carpenter, Gerry Sanders,(2009), Strategic Management: Concepts: International
Edition,2ndEdition, Pearson International Edition
12 Mena, Carlos, Martin Christopher, and Remko van Hoek. Leading Procurement Strategy:
Driving Value Through the Supply Chain. Kogan Page Publishers, 2014.

8STRATEGIC MANAGEMENT
leveraged the company’s profitability. IKEA has the cost leadership and it was planning
for expansion, which yield the benefit for the company13.
Threats
1. IKEA has low cost model, which have made and initiated and copied by the rivals
through and company can innovate itself and therefore can stay ahead of the competition.
Thus, IKEA came up new strategies and thereby there can be threat to the customers14.
Thus in order to survive in the market the company needs to innovate constantly to keep
up with the growth.
2. With the invention in the technology in the market and there is immense competition in
the market and there is use of internet and online. DIY is the unique proposition of IKEA
they can provide the lower cost so that the cost of having physical presence lowers and
there is snapping of heals of IKEA.
.
Defining the company Resources, tangible, intangible resources and organizational
capabilities
The resources of the companies are as follows:
13 Olson, Aaron K., and B. Keith Simerson. Leading with Strategic Thinking: Four Ways
Effective Leaders Gain Insight, Drive Change, and Get Results. John Wiley & Sons,
2015.
14 Percy, Larry, and Richard H. Elliott. Strategic advertising management. Oxford University Press, 2016

9STRATEGIC MANAGEMENT
Tangible Resources
1. The Financial resources:
a. The organization has borrowing position
b. The firm has the ability to get funds from different sources
2. The Physical resources:
a. Sophistication from the location of a firm
b. The plant available in the factory
c. Access through the raw materials
3. Technological resources:
a. Stock such as technology taken as patents,
b. Trademarks and copyrights

10STRATEGIC MANAGEMENT
Intangible Resources
Organizational resources:
a. The firm or organization is having reporting structure
b. The formal planning, and
c. Coordinating with system15
Organizational Resources
Resources are those, which help in the creation of the firm’s value. Resources are the
products for the companies and for the company like IKEA the furniture they sale are the most
cost efficient retailer throughout the world. One of the resource that support the company is that
the stores combining the shop and the warehouse16.
IKEA design and the capabilities to contribute in the market and the efficiency the
company .The overall performance of the company is dependent on the activities of value chain
15 McNamara, Tom, et al. "Can IKEA adapt its service experience to India?." Emerald Emerging
Markets Case Studies 6.1 (2016): 1-14.
16 Rafique, Muhammad, Richard David Evans, and Muhammad Tahir Nawaz. "Absorptive
capacity: A hub of blue ocean and red ocean strategies and capability transformation in
innovative business environments." Knowledge-Based Engineering and Innovation (KBEI), 2015
2nd International Conference on. IEEE, 2015.

11STRATEGIC MANAGEMENT
and this help to prioritize the resources and the capabilities and this require high performance17.
The resources being tangible as well as intangible contribute to the customers contribute to the
product or services. IKEA tangible resources are the wood, cotton, waste, food which is
important to have the finished goods. Whereas the intangible resources of IKEA is the human
resources which helps in the running of the company and which helps the company to do day to
day operation.
Competitive Advantage of the company
There are diverse and varied strategies that IKEA has implemented so that to meet the
order to make it in the furniture and home appliances industry. These strategies are very
diversified and it depends on the goals and they include both internal and external. The following
are the competitive advantages that IKEA has implemented:
Human resources management: IKEA has implemented many strategies and it has also
implemented and lauded for its extraordinary recruitment process. Talented employees are
sourced from diversified backgrounds in order to create the highly multicultural workplace in
that company. Additionally, IKEA also uses huge amounts of resources in training the staffs. The
company believes in creating the right set of skills in their employees and this is why it invests in
the training and development of its staff. The company takes reviews and evaluation seriously
and employees have to go through performance appraisals and there are rewards for those the
employees who perform outstandingly.
17 Rothaermel, Frank T. Strategic management. McGraw-Hill Education, 2015.

12STRATEGIC MANAGEMENT
Client retention: Over time IKEA has been able to improve its services and the quality of
products and this has made it retain the huge clientele it has captured. Initially the products were
not good since their focus was on cost cutting. Today there are number of product and service
users. They are now constantly updating its products
Ubiquity of the company’s service. Much furniture is already used by all the people. The
furniture and appliances are used by all the people all around with the standardized furniture and
home appliances. This is a competitive advantage that IKEA has exploited against over the years.
The fact that not every company has furniture and this popular makes IKEA stand out.
An organizational capability for the company is to properly allocate and effectively gain
over the competitors. The company’s organizational capabilities are mainly to meet the business
capabilities and they must focus on the customers’ ability and demand. The focus of the
company is to meet the customers and meet organizational capabilities, which is unique to the
organization. Organizational capabilities are anything that differentiates the business in the
market. Thus by developing and cultivating organizational capabilities the company and the
business owners gain an advantage and which the company can focus and then they can excel
and have growth18.
18 Larsson, Rolf G. "Ikea's Almost Fabless Global Supply Chain—A Rightsourcing Strategy for
Profit, Planet, and People." Lean Management of Global Supply Chain. 2016. 65-82.

13STRATEGIC MANAGEMENT
Successful implementation requires the company to build the organizational strategy.
This is important for business success. The best solution includes the full review of
organizational design and in understanding the key cross-functional effectiveness and thereby
ensuring the effectiveness in order to have the staff members understand the strategy and get
motivated by excelling in the role of the company.
.
The core organizational capabilities are as follows:
In order to maintain the low cost product and the packaging made by the company this is
less costly and simple. The company maintains the design and the model to maintain the design
of the customers and so that the company and increase and improve its brand image19. Thus, it
helps in creating the brand image of the customers, which increases the loyal brand image.
IKEA is so renounced that the policy of the company is such that it is simple, it is
flexible, and so that the target is to start the business and that the part of the company is without
the complex formalities and thereby, it increases its cash flows with the company20.
Defining and Applying the VRINE model to your company’s resources
19 Singh, Harbir, and Michael Useem. The Strategic Leader's Roadmap: 6 Steps for Integrating
Leadership and Strategy. Wharton Digital Press, 2016.
20 Souto, Jaime E. "Business model innovation and business concept innovation as the context of
incremental innovation and radical innovation." Tourism Management 51 (2015): 142-155.

14STRATEGIC MANAGEMENT
Comparative advantage is the ability of the company to gain from attribution of the
resources and from a way that there is proper allocation of resources and to perform the same so
that the resources are properly utilized and that they can perform in the same industry and
market. A firm has a comparative advantage there is proper allocation of resources, which is
creating value and implemented by a current or potential player. The company properly
implements the strategies and this will lift a firm higher. The competitive advantage to
outperform the potential players in undertaking the work and these resources can competitive
advantage and to have a edge over and to overcome the outcome and superiority in in production
resources reflects the competitive advantage21.
VRINE framework
It can determine the resources and the sources of sustainable competitive advantage. In order to
be sustainable competitive resources must have the following advantage:
1.Valuable – The resources shall be of greater source or of greater value and in terms of relative
cost and benefits with respect to the resources in a competing firm22.
21 Teece, David J. "Short Note on Intangible Assets, Intellectual Capital, & the Mission & Focus
of the Tusher Center." University of California, Berkeley(2017).
22 Turner, Raymond. Design leadership: securing the strategic value of design. Routledge, 2016

15STRATEGIC MANAGEMENT
2.Rare – Rare means that the resources must be in that sense that the demand for that particular
product is high but the demand for that particular product is less relative to the demand or for the
demand for its uses.
3.Inimitable -- it is difficult to imitate the same product
Non-substitutable – the products are non-substitutable and therefore any type of resources
cannot be functional resources23.
Exploitable – The firm can exploit the resources and capabilities that they own or control
The criteria for the VRINE Framework clearly rule the best practices for competitive
advantage24.
Conclusions
It is important to examine the internal environment that includes the resources and the
organizational capabilities of the company to have competitive advantage and this is a
continuous process of strategic management. The resources can be identified and can be used
23 Wenzel, Henning, and Andreas Förster. "Blue Ocean Strategy. How IKEA created a new
market." (2013).
24 West, Douglas C., John Ford, and Essam Ibrahim. Strategic marketing: creating competitive
advantage. Oxford University Press, 2015.

16STRATEGIC MANAGEMENT
effectively then the strategic plans put together, and it will have competitive capability over its
rivals.
IKEA mission is to help the organization throughout the world to do more and achieve
more by creating quality for supplying home appliances. It thus deliver new and varied
opportunities with greater convenience, and will enhance value to people’s lives.

17STRATEGIC MANAGEMENT
References
Collins, P. (2002) The cost of war. Journal of Politics, vol. 1, no. 1, June, pp. 20-40.
Collins, P. (2002) The cost of war. The Straits Times. Vol. June, pp. 20-40.
Frynas, Jedrzej George, and Kamel Mellahi. Global strategic management. Oxford University
Press, USA, 2015.
Grant, Robert M. Contemporary Strategy Analysis Text Only. John Wiley & Sons, 2016.
Gunnarsson, Adam, and Gustaf Ljungwaldh. "Business Model Innovation Towards
Sustainability: The Mobile Phone Industry." (2015).
Ivanov, Gennady, and Elena Mayorova. "Intangible assets and competitive advantage in retail:
case study from Russia." Asian Social Science 11.12 (2015): 38.
Kotler, Philip, Roland Berger, and Nils Bickhoff. "Strategy and Strategic Management: A First
Basic Understanding." The Quintessence of Strategic Management. Springer Berlin Heidelberg,
2016. 5-22.
Kotler, Philip, Roland Berger, and Nils Bickhoff. The quintessence of strategic management:
What you really need to know to survive in business. Springer, 2016.
Larsson, Rolf G. "Ikea's Almost Fabless Global Supply Chain—A Rightsourcing Strategy for
Profit, Planet, and People." Lean Management of Global Supply Chain. 2016. 65-82.
Lebherz, Matthias, and Jonathan Hartmann. "Applying the value grid model to the furniture
industry: the example of IKEA." (2017).

18STRATEGIC MANAGEMENT
Mason Carpenter, Gerry Sanders,(2009), Strategic Management: Concepts: International
Edition,2ndEdition, Pearson International Edition
McNamara, Tom, et al. "Can IKEA adapt its service experience to India?." Emerald Emerging
Markets Case Studies 6.1 (2016): 1-14.
Mena, Carlos, Martin Christopher, and Remko van Hoek. Leading Procurement Strategy:
Driving Value Through the Supply Chain. Kogan Page Publishers, 2014.
Olson, Aaron K., and B. Keith Simerson. Leading with Strategic Thinking: Four Ways Effective
Leaders Gain Insight, Drive Change, and Get Results. John Wiley & Sons, 2015.
Percy, Larry, and Richard H. Elliott. Strategic advertising management. Oxford University
Press, 2016.
Rafique, Muhammad, Richard David Evans, and Muhammad Tahir Nawaz. "Absorptive
capacity: A hub of blue ocean and red ocean strategies and capability transformation in
innovative business environments." Knowledge-Based Engineering and Innovation (KBEI), 2015
2nd International Conference on. IEEE, 2015.
Rothaermel, Frank T. Strategic management. McGraw-Hill Education, 2015.
Singh, Harbir, and Michael Useem. The Strategic Leader's Roadmap: 6 Steps for Integrating
Leadership and Strategy. Wharton Digital Press, 2016.
Souto, Jaime E. "Business model innovation and business concept innovation as the context of
incremental innovation and radical innovation." Tourism Management 51 (2015): 142-155.

19STRATEGIC MANAGEMENT
Teece, David J. "Short Note on Intangible Assets, Intellectual Capital, & the Mission & Focus of
the Tusher Center." University of California, Berkeley(2017).
Turner, Raymond. Design leadership: securing the strategic value of design. Routledge, 2016.
Wenzel, Henning, and Andreas Förster. "Blue Ocean Strategy. How IKEA created a new
market." (2013).
West, Douglas C., John Ford, and Essam Ibrahim. Strategic marketing: creating competitive
advantage. Oxford University Press, 2015.
Yilmaz, Ayse Kucuk, and Triant Flouris. "Enterprise Risk Management in Terms of
Organizational Culture and Its Leadership and Strategic Management." Corporate Risk
Management for International Business. Springer Singapore, 2017. 65-112.