Strategy, Enterprise and Innovation -2

This report discusses the key model drivers of innovation contributing to the success of IKEA, including priority, plan, people, and process. It also explores the approaches used by IKEA, such as VRIO analysis and Value Chain analysis. The report further examines the competitive strategy of IKEA and the application of the Blue Ocean Strategy within the company.

STRATEGY, ENTERPRISE
AND INNOVATION -2

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
A key Model driver of innovation contributing to the success of IKEA.....................................3
Approaches used by IKEA Company..........................................................................................5
Competitive strategy of IKEA Company....................................................................................6
Application of “Blue Ocean Strategy” within IKEA company...................................................8
Four-Action Framework of Blue ocean strategy.........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Strategy is an action which is generally adopted by the managers of the company in order to
achieve one or more goals and objectives. This report is based on the IKEA case study which
will discuss the appropriate strategic framework and approaches used by company in order to
shape its vision and business model. IKEA is a Swedish multinational home furniture retailer
which design and offer the ready to assemble furniture, kitchen and home accessories to its
customers (Jiang, Jia and Gong, 2018). The company on the basis of their strategic approach
such as VRIO analysis and Value chain analysis not only enter new markets but also achieve its
vision and mission. This report will also include the SWOT analysis in order to find out the
competitive strategy of IKEA at both business unit level and corporate level. IKEA is a company
which succeed even during and after the global financial crises of 2008. The company continued
to make increment in their revenues from 32.7 billion by 2015 to 50 billion in 2020. So, this
report will address the blue ocean strategy and how the application of this strategy further help
the management in IKEA’s success and growth. The report will also describe the key drivers and
innovation model which contribute to the success of IKEA.
MAIN BODY
A key Model driver of innovation contributing to the success of IKEA
The IKEA company uses the various model drivers of innovation it uses for the
organisational, team and the individual level with the help of this drives it create new innovative
ideas and implement it by that IKEA achieve the more success there are 4 PS of the innovation
model: plan, process, people, and priority are the key model drives of the innovation contributing
to the success of the IKEA (OSIPOV, and KRASOVA, 2017).
1. Priority
The first model of the driving the innovation is priority it is the important for the IKEA
to give topmost priority to the innovation if the IKEA want to making something innovative for
that they have to give the priority. Most of the organization not stay in the market for the longer
period and fail because of the innovation they not put organized effort for make priority to the
innovation. In the modern innovative world most of the organization not invest huge amount for
the innovation so also because of that it fail. The IKEA Company crush increases everyday
towards the innovation it pushing their team and the organization for the innovation so that

create something new and achieve the success (Akgun, and et.al., 2017 ). It pushes so that in the
future it stays in the market by proving every time something new to their customers. The duty of
the senior management of the IKEA to state focus , commitment and give topmost priority on
innovation so for that it properly coach, lead , maintain focus to achieve the overall goals.
2. Plan
For the innovation not only priority is enough the IKEA company senior management
have to make an appropriate and proper plan for how to work for the innovation. The particular
goal or objective have to make and set a proper way achieve goals in an innovation plan include
the strategies and objective. The proper plan should be prepare by the manager to reaching
specific objective and for that follow or apply appropriate strategies that help in innovation plan.
The plan is decided in advance so for the innovation there has a need of the plan so that easily
achieve the objective without the plan there have problem arise in the innovation.
3. People
The people of the IKEA Company are the key model drives of the innovation that play a
vital role in the success. People of the IKEA Company are the important asset and it very
responsible for the innovation. In the success of the organization the people of the company play
a main role so it is the responsibility of the manager carefully or appropriately select the
innovation team that have a creative and innovative state of the mind so the company should pay
more attention and provide some training to the selected team so their efficiency is more develop
and enhance by that it create more innovative ideas because the future of the IKEA Company in
the hand of the people (Flores, 2017). The right team is very essential for the innovation so the
leader of the organization should have an innovation skill or passion so that produce innovative
ideas so solve the obstacles that create hurdle in the innovation plan and process because if the
leader not have an innovative skills so it can’t lead their innovation team. If the team innovate
IKEA company innovation team create something innovative ideas or the products so the whole
team should be appreciated so they fell that organization give value to them and also the team
feel motivated by that it produce more innovative ideas that helps in the success of the IKEA
4. Process
The innovation process is the key driven model of an innovation that more contribute in
the success of the IKEA Company (Van Looy, 2018). The innovation process should be in
proper discipline and free-wheeling also have a clear or step by step innovation process. In the

innovation process innovation team have to follow the proper rules and regulation so in the
future have no any problem arises. In the innovation process must describe when and how the
creative or innovative ideas will be produce, what method and policy will be followed, how it
will be evaluated, what type of new technology will be used and how it will funded (Ubaid, and
et.al., 2019).
Approaches used by IKEA Company
The two approaches used by the IKEA company which help them in achieving their vision
and goals of the business. This includes VRIO analysis and Value chain analysis approach.
VRIO analysis of IKEA
With the help of this analysis the management of the company will look out at its internal
resources and analyse whether these resources provide them sustainable competitive advantage
or not. This helps in identifying the opportunities available to them and threats which is going to
diminish the value of the company in the market. By identify this the company’s management
can easily adopt appropriate strategies (Valerisha and Ahadisuryo, 2020).
 Valuable: This analysis indicate that financial resources of the company are highly
valuable with the help of which they can easily adopt external opportunities via investing
into them. But the research and development resources of the IKEA is not valuable
because the cost of research is more than the innovation benefits it provided.
 Rare: The rare resources of the company include employees and distribution network. It
is because employees of the company are highly trained and motivated as compared to its
competitors. The distribution network of the IKEA is rare because it requires lots of
investment and is time consuming which is not everyone’s cup of tea.
 Inimitable: The employee’s resources of the company are not inimitable because
competitors of the IKEA are also well advance and knowledgeable. With the proper
training of skills and by investing time and money on employees the competitors can
easily trained their staffs and convert corporate culture to imitate it in the long run.
 Organization Applicable: The presence of the company in the market is for the long
period of time. The unique design of the product of the company creates a strong brand of
the IKEA with the help of which company is successful in many countries even at the
time of 2008 crises (Geraldes and et.al., 2020).

Value Chain analysis of IKEA
Value chain model state the activities involve from the procurement of raw material stage
to the delivery of final product stage to the ultimate customers. This helps in analysing the cost
efficiency and operational effectiveness it brings to the business model of IKEA company
(Trendafilov, 2018).
 Inbound logistics: IKEA company made the logistic as the integrated part of its business
and select a highly efficient distribution system with the help of which the inward flow
the raw material take place. Around 20% of the IKEA products are directly supply from
the supplier to the stores which help them in reducing their production cost.
 Operations: The franchise systems are being operated by the company with the help of
which the company products and brands expand in foreign countries faster and easier.
The total number of the stores of the company worldwide reached to 433 in 2019. The
company also attract more customers through the e-commerce.
 Outbound logistics: As it is clear that 20% of the goods of the company are directly
supply to their stores and the rest of the goods are transferred through distribution system.
The customer of the company either picks the products either from stores or receive home
delivery as well.
 Marketing and Sales: The company uses innovative marketing and sales strategy which
involve both the traditional and modern channel. Along with that the IKEA company also
established distribution network all over the world which is basically managed by the
franchisee of the company.
 Product and Services: The production process of the company involve supplier,
franchisee, internal engineering and design team which design around 2000 new
furnished home products every year. The company sell large number of products every
year to its customers in which 9000 products are sale from the stores of the IKEA
company (Benzaghta and et.al., 2021).
Competitive strategy of IKEA Company
The competitive strategy of the company visualized by the SWOT analysis because it helps
in identifying the key strategic area of the IKEA (Solanki, 2021).

IKEA SWOT analysis
 Strength: The strength of the company involves pricing strategy because they provide
high quality products at low price to its local and foreign customers. This helps the
company in placing strong position in the market and build strong brand reputation in the
market as well. The strong financial position is also one the strength of the company and
maintain cost leadership that put positive impact on its revenue. The product of the
company is itself is the strength of the company because it is available in various designs
without compromising in the quality of the home furnished product.
 Weakness: The weakness of the company is that it is difficult to provide standardized
product with high quality at low cost to the customers. It became difficult for the
company when the supplier increases the raw material of the products. Another weak
point of the IKEA is that they face various criticism from the social media that they treat
their employees badly. This negative publicity about the company is putting bad impact
on the brand of the company.
 Opportunity: The biggest opportunity that the company is trying to adopt is increment in
the customer base by implementing the green business model. This will attract customers
because they are close to the nature and miniating sustainable use of natural resources
always make the company’s customers happy. The company is expanding the business all
over the world to connect with the various customers and grab this opportunity for
increasing the sales of the business. They also launch various premium quality products
for the customers that are attached with the luxurious life. Because of this premium
quality products, the company can increase their revenue by charging high price as
compared to the other products of the IKEA.
 Threat: The threat of the company involves large number of competitors in the retail
sector and the impact of which the customers might shift to new company. In case if they
provide them the product even at low price than IKEA company. The company faces
various lawsuits and court issues regarding the poor quality of products and creating
discrimination between the employees. As the company provide products in low cost so
the people with high income think that the company products quality are not good enough
to satisfy them (Ganguly, 2020).

Application of “Blue Ocean Strategy” within IKEA company
Blue ocean strategy helps the company in forming new product or new industry which are
quite different and unique from its competitors. This is basically established by analysing the
needs and preferences of the customers. For this, the company need to focus on the factors which
affects their customers and the factors which don’t. If the IKEA apply this strategy in the
business than this helps the management in finding out the uncontested market and avoid
matured market. This further helps the company in moving to new market with the new product
or existing product which help them in their value improvement. It is because value innovation is
the backbone of the bule ocean strategy. The application of this strategy will allow the business
to alliance the innovation with the price, utility and cost position. In this strategy the products of
the company and the customers choice doesn’t lies between the value and affordability. If IKEA
company apply this the chances of the high paying off is increased and also the customers of the
company increase from different markets (Segovia, 2021).
But as it all depends upon the future ideas so predicting all the future possibilities is quite
difficult for the company. And this involves high risk as well at the initial stage of entering the
different market i.e., ocean of market. That’s why the management need to address all the
possible outcomes before selecting and implementing this strategy.
Four-Action Framework of Blue ocean strategy
Basically, this framework is used in order to reconstruct the value of the buyer by considering
the factors which need to eliminated reduced, raised and created. In this, the factors are first
being discussed by the company’s management so that they can create new value curve or can
say strategic profile. With this the company can break the trade-off which get arises between the
differentiation and low-cost which help them in creating the new value curve for the customers
of the company (Alam and Islam, 2017). This involves four keys:
 Eliminate: In this section, the company need to ask some question from themselves and
need to analyse its impact on their company. Such as the factors which require lots of
investment and efforts from the company but do not provide the equalize benefits then
such a factor must be eliminated from the company. This also involve the factors which is
useful and make sense in the past but as the time passed it is of no use. For example;

feature of a digital product is become obsolete as the time passed. These factors are
basically the part of the products and services offered to the customers.
 Reduce: in this section, the IKEA company’s management need to address the factors
and elements which need to reduce by the company in order to create value curve for the
buyers. In this, the company have to consider that whether they are adding to much
feature in their product or not. If yes then it needs to be reduced so that the differentiation
and low-cost gap get minimized. If the company use high quality design and serve this
product to the customers at low cost than this indicate that company is over serving the
customers. If the company uses too much resources which is actually not demanded by
the customers than this will not only increases the cost of product production but also the
company will lose their competitiveness.
 Raise: This section of the four-action framework defines that the factors which affects the
customers needs and preferences must be adopted by the company in order to became
unique in the industry. This question helps the IKEA company in finding out the actual
demand of the customers because there are always some features which the customer
does not receive from the other’s products. Identifying this element and including such in
the product production not only attract the customers but also increases the company’s
market share and profitability. These factors have to be raised by the company for
making the customers happy and realizing them that company cares about them.
 Create: In this section, the company need to identify the completely new sources and
factors which is not consider by their competitors. It is because creation of such features
helps the company in creating unique position in the local as well as international market.
By discovering and creating new values for the customers it not only helps the company
in satisfying the customers but also helps the company in changing the entire strategic
position of the IKEA in the market.
The first two question helps the company in reducing their cost structure while the other two
question helps the company in building new values for their company by satisfying the
customers’ needs and desire. This framework helps the IKEA in creating the whole new demand
of the company’s existing products and services (Vieira and Ferreira, 2018).

CONCLUSION
It can also be concluded that in the modern innovation era our economy move towards
the generating new and innovative ideas it is very important for the business because the wants
and needs or wants is changes every day so to satisfy the customer by fulfilling their needs for
that innovation is very essential for the business. The IKEA company uses the different strategies
for the innovation so retain and satisfy the customers. Innovation play a essential role for in the
success of the any organization if the company innovate something new for their customer so
their sales and profit is increase also it helps in achieving the organization objective. By using
the 4Ps of the key drivers model of the innovation priority, people, plan and process helps in the
contributing the success of IKEA with the help of the different approaches and strategies the
IKEA prepare different business model and vision. By creating innovative or creative ideas after
the IKEA compete with the competitors because to survive in the competitive market so it
necessary to innovative every new for the customers and also for long run growth of the
business.
In the competitive market or environment IKEA maintain distinctive and unique profile
the IKEA vision is to expand their business operation by using the strategy at the time of the
biggest financial crisis in the 2008 it continuously innovates something new so to stay in the
market. IKEA success can be attributed to the successful application or implementation of the
Blue Ocean strategy so it can sale their products where have less competitions so by using this
strategy the IKEA can be generate more profit because of the low cost and competitions in this
market it can create new demand because success is very important for the business and also for
the economy.

REFERENCES
Books and journals
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Diplomacy and Nation Branding. JURNAL SOSIAL POLITIK. 6(1). pp.85-97.
Geraldes, R. and et.al., 2020. Circular economy in home textiles: Motivations of IKEA
consumers in Sweden. Sustainability. 12(12). p.5030.
Trendafilov, D., 2018. Design incorporated: IKEA as personal experience. Punctum.
International Journal of Semiotics. 4(1). pp.165-178.
Benzaghta, M. A. and et.al., 2021. SWOT analysis applications: An integrative literature
review. Journal of Global Business Insights. 6(1). pp.54-72.
Solanki, K., 2021. ANALYSIS OF THE HR AND CUSTOMER RELATED CHALLENGES
FACED BY IKEA IN THE UAE MARKET DUE TO CROSS CULTURE
DIFFERENCES. International Journal of Entrepreneurship. 25(1). pp.1-12.
Ganguly, K. K., 2020. BLUE OCEAN STRATEGY: A marketing theory to create uncontested
market space and make the competition irrelevant. American Journal of Business and
Management Research. 1(1). pp.30-45.
Segovia, S., 2021. Creating a blue ocean strategy for a biostimulants company (Doctoral
dissertation).
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A literature review toward implementation logic. IOSR Journal of Business and
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dimensions: the blue ocean strategy approach. Total Quality Management & Business
Excellence. 29(13-14). pp.1648-1667.
Ubaid, A.M., and et.al., 2019, March. Advancing Knowledge in Technological Innovation:
Innovation Mapping Model. In 2019 Advances in Science and Engineering Technology
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Van Looy, A., 2018, September. On the synergies between business process management and
digital innovation. In International Conference on Business Process Management. (pp.
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Flores, A.M.M., 2017. Innovation journalism: A multiple concept. Brazilian Journalism
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