Strategic Management for IKEA in Covid-19 Environment

This report discusses the business problems faced by IKEA due to Covid-19 and the potential impact on its approach for sustaining competitive advantage in both domestic and international markets. It also covers the organizational context with merits and demerits of leadership and dynamic perspective, managing the paradox of profitability and social responsibility, and reflections from learning.

STRATEGIC
MANAGEMENT

TABLE OF CONTENTS
1. INTRODUCTION..................................................................................................................2
MAIN BODY..................................................................................................................................2
2. Managing complexity in Covid-19 environment.....................................................................2
2.2 Potential impact of Covid-19 on IKEA approach for sustaining competitive advantage in
both..............................................................................................................................................3
domestic and international market...............................................................................................3
2.3 Managing the complexity inresponse to the demand for localisation and demand for
globalisation.................................................................................................................................4
3.1 Organizational context in terms of organisational development...........................................4
Merits and demerits of organisational dynamics perspective......................................................6
3.3 Using of organisational chaos for exploiting the demand for top management for
profitability at..............................................................................................................................6
low cost by IKEA........................................................................................................................6
4.1 Corporate profitability.......................................................................................................7
4.1 Corporate social responsibility..............................................................................................7
Challenges faced by IKEA for the demand for profitability and social responsibilty.................9
5. Reflections from learning.......................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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1. INTRODUCTION
Strategic management is the overall strategies used by the companies to attain its goals and
objectives and gaining competitive edge over others (Fuertes, 2020). IKEA is a retail company
selling its products in the international market with the branches worldwide. This report will
include all the business problems faced by IKEA due to covid-19 and organisational context with
merits and demerits of leadership and dynamic perspective. Furthermore, it includes the
organisational chaos with corporate profitability and responsibility with reflection.
MAIN BODY
2. Managing complexity in Covid-19 environment
2.1 Distinguish a simple business problem and a complex business problem in the context of
global corona virus outbreak
A Simple business problem of IKEA
Insufficient credit facility: IKEA is dealing in retail business with worldwide branches
and need more capital or credit for new investment in new products for earning more profits.
Due to covid-19 the problem of availability of cheap credit has increased. New rules and
regulations: Uncertainty of new rules and regulations by the government is a problem faced by
the IKEA. Covid-19 has made new rules and regulation which are affecting company policies
(Gaur, 2019). Competition: Increasing competition in the market lead to fear of losing the
customers. IKEA is dealing in retail market worldwide due its wide market scope of competition
is high. Due to covid the old industry are in fear of more competition. New technology: New
market with new technologies made the old market with old technology in danger due to low
cost of producing the products (Handoyo, 2020). IKEA has to produce its products according to
the new technologies for attracting more customers.
A Complex business problem of IKEA
Climate changes Adversity of climate changes made the operation of IKEA business in
difficulty due to global climate changes. The company has to produce the products according to
climate changes uncertainty of climate create big losses like Covid -19 (Li, 2018). Poverty Due
to lockdown in the world and increase rate of unemployment made most of the company in huge
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losses. IKEA is selling its product worldwide with the same rate and poverty within the countries
making it difficult for the customers to buy the products. Global financial crisis due to covid-19
has made the world in extreme stress in the financial markets and banks (Westney, 2021). IKEA
also suffered from heavy losses during the pandemic due which the demand for goods and
services of this company decreased.
2.2 Potential impact of Covid-19 on IKEA approach for sustaining competitive advantage in both
Domestic and international market
Less turnover dueue to Covid -19 the demand for product decrease of IKEA because of
less cash flow in the market. The turnover of IKEA has decreased as compared to other past year
results. Less demand of goods demand of products of IKEA has decreased due to pandemic
people are only buying necessity goods with less income. Increase in Expenses Increase in
expenses due to income of employees and less profit the expenses related to cost of raw materials
and wages to the employees increased (Bussu, 2020). Cost of good cost of goods also increased
due to increase in the prices of goods in the market and less demand by the customers due to
covid -19. Autonomy to subsidiarie IKEA is an international company and has many
subsidiaries working across the countries by giving the full power of autonomy is the best
strategy use by IKEA to be competitive in the market.
2.3 Managing the complexity in response to the demand for localisation and demand for
globalisation
Demand for localization the Company IKEA is localizing its products in the target market
to remain competitive in the present world (Schwenzow And et. Al., 2021). Adapting the culture
and languages of the local market to produce the products accordingly for more profit. Demand
for globalizatio this retail company is globalizing its products in the international market to
attract the mass customers and for selling products in bulk with various cultures and languages to
remain competitive worldwide. Decentralization by decentralising the decisions of products and
services of IKEA so that the employees will produce products according their knowledge and
experience for customer satisfaction.
3. Management control versus organisational chaos
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3.1 Organizational context in terms of organisational development
Organisational leadership
perspectives
Organisational dynamics
perspectives
Emphasis on Organisational perspective emphasis
on setting strategies and leading
people towards organisational goals.
Organisational dynamics
involves doing the mass
functions for achieving the
goals.
Organisational
development
It involves development of employee
by motivating them towards group as
well as individual goals.
It involves development of
organisation fully.
Development
metaphor
It uses democratic style of leadership. This style using mix
strategies for more
development.
Development
direction
Leaders give direction to the
employee.
Top management gives
direction to leaders.
Decision making Top management Top management
Change process Leaders change the perspective of the
employee for group goals.
Changing process depends
upon the market or
customers.
Change
determinants
Leader’s ability to change the
employee skills.
Political, cultural changes
the perspective and
decisions.
Organisational
malleability
Leaders are strict and focused and
have high malleability.
Slow malleability due to
mass development.
Development
driver
Leaders follow strategies and skills to
manage the team
All the internal and external
policies change the
development.
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Organisational context is the sum of all the organisational factors both internal and external
such as leadership approach, organisation culture etc (Cardno, 2018).
3.2 Merits and demerits of organisational leadership perspective
Merits
IKEA is using laissez- fair style to make its employees relax in doing its work smoothly
in which members can take the decisions on their own (Koutsopoulos, 2018). Another style
which this company is using is democratic style in which employees can give their suggestions
to the managers. The employees remain satisfied by this style and work with full efforts.IKEA is
giving full freedom to its employees to work with more efforts and with new creative ideas for
more efficiency.
Demerits
IKEA is using laissez fair style in which employees are relaxed because of these
employees will not work fluently and with efforts because of no restrictions on work.Due to
democratic style employees will give suggestion on behalf of their benefits not the benefits of
companies overall goals. For example employees will resist any new changes on work due to
more efforts. Employees are not doing the work what they need to do on a particular time. This
leads to high cost of production due lack of negligence.
Merits and demerits of organisational dynamics perspective
Merits
IKEA is using various types of strategies to enhance its overall performances like
advertising to attract mass customers worldwide.This company has advantage of doing its
business worldwide due its brand and more customers because of good customer services.The
manager of IKEA is using various marketing mix communications to reach the potential
customers for more profits.
Demerits
Implementing of strategies involved huge cost and maintenance and it increases the cost of
production of goods. It is a time consuming process because IKEA is serving its services and
products worldwide and it takes time to fulfil every customers need (Ferrell and Fraedrich,
2021). Due to covid-19 the strategies of IKEA is not implementing properly due to various
legislations and rules.
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3.3 Using of organisational chaos for exploiting the demand for top management for profitability
at
Low cost by IKEA
BCG MATRIX
This tool is used to for the graphical representation of the company’s products and
services to know about its sells and revenue within a particular year. It uses four methods of
comparing its products. Cash cow includes low growth of products and great markets
internationally.Dog’s method includes low growth of the company and low markets.Stars this
include high growth and high market of the products worldwide.Question marks category
includes market with large demand with large consumption of resources.
IKEA is following organisational chaos method to maximise its corporate profitability at low
cost of leadership and product differentiation.
Delegation of authorit The IKEA is following delegation of authority by not giving any
decisions from the top level management and giving this power to the lower levels for better
decisions. For removing the cost of appointing specialist and managers to increase the net
income (Haque, 2021). Product differentiation IKEA is using product differentiation method to
increase it sells at same cost by developing and designing new products to look attractive. With
same cost and same price but with different features to attract the customers for more profits.
4. Managing the paradox of Profitability and Social Responsibility
4.1 Corporate profitability
Corporate responsibility is the economy measure of all the gross profits, operating profits, net
incomes, expenses (Elswah, 2020). It is calculating the profit left after all the deduction of the
company. It also involves the calculation of the tax rates differences and the replacement of
machinery in the company etc.
4.1 Corporate social responsibility
Corporate social responsibility of a company is to fulfil the needs of customers and society
as well (Kharub, 2018). A company need to make good image in the eyes of customers and
society by following the government policies like environmental and social policies to
established a better goodwill in the eyes of everyone.
4.2 Achieving corporate profitability and CSR in the MNC’s survival and growth in Domestic
and International Markets’
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Environment responsibility IKEA senior team has to decide its products in a way so
that it can fulfil the objectives of the society. Environment responsibility is the main aim of the
team to be competitive in the market (Gurca And et. Al., 2021).
The pros and cons of CSR
Ethical values the team of IKEA maintaining its moral toward the company and take all
the decision according to the needs of the customers and its maintain its moral values fully to
earn a good image across the world. Equality IKEA is producing the products with gender
equality for earning more profits and also educating the workers by motivating and leading to
work more efficiently. Donations this retail company is planning to donate some amount of
revenue to the needy peoples and helping them by doing charity (Latapí, 2019).
Figure 1 corporate social responsibility
Objectives of corporate profitability by the CEO and senior management team of IKEA
Profitability this is the first and foremost objectives of IKEA for which the top
management work more efficiently and for more profits. Because profits is the main source of
income of top management. Sustainable growth with more profits the IKEA will remain more
sustain in long run. Company cannot survive without profits in the long run because it has bear a
lot of expenses and credits (Amoah, Jehu-Appiah and Boateng, 2022). Competition with more
profits the IKEA will be more competitive against the other firms due to its great sells of
products and demands. Corporate profitability is important for staying first in the competition.
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Customer satisfaction for staying in the market at first place the IKEA has to provide good
customer services for their satisfaction so that they feel safe buying any products. The top
management should plan the exchange services so that they can build good image in the minds of
the customers (Sorin, 2018).
Challenges faced by IKEA for the demand for profitability and social responsibilty
Lack of resources creates a big challenge because IKEA has its operation worldwide it
becomes a barrier (Purbawangsa, 2019). Less income and resources makes a big hurdle in
profitability of IKEA because people’s buying will be less. Inequalities in the world create more
challenges for the company for earning more profits.
5. Reflections from learning
From the above report I learned that IKEA should manage its simple and complex problem
with the help of top manage and the CEO of the company. The decision should be taken
according to the needs of the consumers so they remain satisfied (Ye, Liu and Tan, 2022). IKEA
should involve in various strategies for local as well as international market so that it can get the
benefits from both the market.
From my point of view IKEA should involved in chaos so that it can manage less cost of
leadership and cost which are not necessary should be removed or controlled for earning more
profits. It should cut down all the cost which is not as important for less cost of production for
earning more revenue (Akpan, Soopramanien and Kwak, 2021). IKEA should involve more
marketing strategies like product mix or differentiations and involving its employees in the
decision for better working and earning more profitability.
After understanding all the pros and cons from my thought IKEA should maintain a good
relation with the society and fulfil all the social responsibility to attract the customers of
domestic as well as international market.
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CONCLUSION
From this report it has been concluded that for IKEA to be competitive in the domestic and
international market it has to solve all the business problems efficiently. It needs to decide the
strategies and leadership and dynamic perspective for profitability and social responsibility with
using senior team and chaos.
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