IKEA: Strategic Analysis of Competitive Advantage and Functional Areas

This report provides a comprehensive analysis of IKEA's business operations, focusing on its competitive advantages, functional areas, and strategic planning. It begins with an overview of IKEA's background, including its establishment, values, size, and structure. The report then delves into how IKEA positions itself to gain and maintain a competitive advantage, examining factors such as customer needs, unique strengths, and competitor profiles. A detailed analysis of IKEA's functional areas, including human resources, sales and marketing, customer service, and finance, is also provided. The report further explores recent changes within the organization and identifies key strategic shifts. Finally, it outlines future strategies and focuses for IKEA to sustain its success over the next 2-5 years, including recommendations for market expansion and adaptation to changing customer trends. The report concludes by summarizing key findings and insights into IKEA's business model and competitive positioning.

Report

Table of Contents
INTRODUCTION...........................................................................................................................1
Background of the company............................................................................................................1
Exploring that how business organisation and its positioning itself in its efforts to
gain/maintain competitive advantage.....................................................................................2
Analysis of functions areas of IKEA......................................................................................3
Recent changes in the organisation........................................................................................4
Future strategies and focus to achieve and sustain its success in the next 2-5 years.............5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
The present report is in context to IKEA's , a leading retail business in UK that operates
in different countries. There are various factors that affects an organisation while operating its
business functions in a market (Cunningham, 2017). This report will determine the current
competitive position and advantages of the organisation along with its strategic planning.
Furthermore, the study will also describe the various functional areas of IKEA. The report also
identify the unique elements of the selected organisation that differentiate it from its competitors.
In addition to this this study will also determine the recent changes in the position of the
organisation along with some recommendation which can help IKEA to achieve success in the
next 5 years.
Background of the company
IKEA was established in the year 1943 which achieved growth rapidly and became the
largest furniture retailer since 2008. It is known as the first self service furniture retailer in the
United Kingdom. It is a Swedish founded multinational group that designs and sells ready to
assemble kitchen appliances, furniture and home accessories.
Company's value :
 High quality products and services
 Sourcing integrity
 Making positive differences within the community
 Respect for environment
Size of the company:
IKEA is furniture retailer with more than 253 stores in more than 24 countries all over the
world. According to recent report it serves more than 565 million visitors in a year. The
organisation is offering more than 9,500 product which are produced by company itself including
home accessories and furniture. Ikea has employed more than 1,00,000 employees in their
organisation.
Structure:
In order to fulfil customer needs IKEA furniture retail sector or market area is segmented
into various customer led formats. There are two main format segments of the organisation -
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1. Ready to assemble products – These stores offer a wide range of accessories and furniture
which are ready to be assembled, these products are the major source of income for the
organisation.
2. Convenience stores – IKEA convenience stores are located within the high street
suburban and urban areas. They are specifically developed and operated in order to cater
for the furnishing solutions and convenience customers.
Exploring that how business organisation and its positioning itself in its efforts to gain/maintain
competitive advantage
Positioning level of business itself is the big opportunity for the business to get the better
outcomes. Every business has their own market value and goodwill in front of their customers.
Positioning itself helps to gain customer, loyalty and faith on the particular product services. On
the other hand, small or large business needs a competitive advantage to distinguish itself from
the competition (Edwin and et.al., 2016). It helps to get the best possible action plan to get the
best outcome results. Gaining a competitive advantage itself is the competitive market goal
which needs to be gained by IKEA.
Examining the business: it is very necessary for the company to examine the factors
which helps to gain competitive market position. Competitive advantage itself is the significant
tool for the business which distinguish the business growth. Competitive advantage is a way in
which company can create value for the customer. There so many reasons which company get
position in the market such as higher quality, lower cost, faster service, the best customer service
etc. On the hand it also necessary to maintain business profitability along with a good position in
the market to achieve overall growth in the market. IKEA take care of the quality and pricing of
their products to ensure it attract potential customers and achieve competitive position in the
market.
Work to understand customer needs: Demographic qualities of the business customer
base. It is another positioning quality which affect the business into more advantageous manner.
Overall, it helps to bring the new business growth and make the new managing successful
business growth. IKEA understand its customer potential needs in order to gain its competitive
advantage growth. It helps to keep the long-term goals alive to get the market high position.
Understand the need of customers means to understand which type of customer company would
target. It helps to get the best possible action plan to make and take the best possible action plan.
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In order, in order to meet out the best possible action. If a company fails to understand the needs
and demand of the customers, it becomes difficult for the organisation to sustain its position in
the market.
Examine the business unique strengths: in order to keep the best possible action
growth, this is another benefited growth for the business which makes good impact on the
business target market growth. Unique business strength of IKEA is low based prices or good
quality of product or services which makes them benefited to gain competitive advantage
growth. In order to achieve and sustain the competitive advantage in the market it is very
essential to identify the unique strength of the company so that it can further develop for
achieving higher growth and development.
Examining the competitor’s profile: It also helps to take care the best form of results and better
growth services. IKEA has to analyse or examine the competitive positioning level and their
strategies which is very helpful to make some new ideas. Competitive analysis is also very
essential for identifying the weaknesses and opportunities for the business. It targeting the
weaknesses of competitors and developing strength of the company.
To examine the growth and long term leading effective growth meets the profitability
growth for the business growth (Tchokogué and et.al., 2017). All the above discussed way
through which company can easily explore its competitive growth within the competitive
environment. Overall, business growth will help to explore the good managing effective channel
which helps to describe the long-term market existence growth.
Firms decision making been always affected the competitive position and profitability
strategic planning helps IKEA in essential marketing growth. Overall, marketing positioning is
very much attractive in the market that helps to gain good return outcomes.
Analysis of functions areas of IKEA
There are various important function performed by IKEA that helps it to achieve its
business goals and objectives. These functions assist the organisation to gain competitive
position the market. Each and every business function performed by IKEA or its employees
contributes in the growth and development of the organisation. The various functional areas that
helps in sustaining the market position of the company can be described as below -
1. Human resources – The first and important functional area of IKEA is the human
resource management. Human resource department plays an important role of employing
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and managing the employees working in IKEA. Employees or human resources are the
most vital part of every business and organisation (Lambert and Enz, 2017). In order to
perform each and every function in a business it requires effective human resources.
Human resource management in the cited organisation perform various functions such as
recruitment, training and development of the employees to develop a strong workforce
which can help the organisation to improve its performance and profitability. Therefore,
it can be summarised that human resource department plays a important role in IKEA to
sustain its competitive position in the market. Human resource management plays an
important role in each and every organisation as it affects the business both negatively
and positively. If management of human resource is not proper the organisation culture
and performance can be affected negatively.
2. Sales and Marketing – Marketing and sales functions are also very essential for every
business as it assist in promoting the products and services of IKEA and also increasing
sales of the business. The marketing department of IKEA introduced the TV solution idea
in order to promote their products through Television. The company promotes its
business through various promotional messages and campaigns that helps it to attract
more and more customers and obtain competitive advantages in the market. Sales and
marketing are also important areas within an organisation that helps to promote good and
services of the company. Ineffective sales and marketing of the products get negatively
affect the profit of the business.
3. Customer service – IKEA have an effective and efficient customers service department
that handles and manage its huge number of stores in different parts or the country. The
customer service staff is trained and developed with an aim to provide satisfactory
assistance to the customers. This department helps the organisation to provide effective
and efficient services to the customers in each and every store of the organisation.
Customers expect that the staff or employees of IKEA treat them in polite and friendly
manner while buying a product or receiving any service from the organisation.
4. Finance – The financial department at IKEA deals with all types of transactions related to
business and control the revenue as well as expenses of the company. One of the major
part of financial department is the financial accounting. IKEA perform a huge number of
transactions every day such as making payments to suppliers, manufacturer or receiving
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amount from the customers etc. This department ensure appropriate records and
management of these financial transactions and help management to make suitable
strategies or plans for then business.
Recent changes in the organisation
IKEA faced a huge competition with other big players in the retail sector such as Tesco,
Morrison etc. In order to sustain its market and competitive position the CEO of the company
decided to introduced certain changes recently in IKEA business strategies and operations. The
organisation made three strategic changes within the organisation with regard to its relationship
with customers, the first change was to improve the communication process between the
potential customer base and the business. It was initiated in order to obtain required feedback
that can assist the company to determine the current needs and demands of the customers (Kaul,
2017). This strategy was implemented with the help of a programme that included additional
market research through in store as well as external surveys and questionnaire. Another change
that was introduced in the business was focusing on improving the customer shopping
experience. IKEA provided effective training and development program for their customers in
order to improve customer services and develop customer relationship. The company also
decided to the make significant changes in the marketing and promotion functions of the
company. IKEA decided to adopt a new kind of campaign formulated by the corporation over the
past four years that has accumulated upon delivering a message that focuses upon the low-price
and customer service quality of the business offerings and shopping experience. There are many
negative influences identified due to changes in the organisation, such as change in customer’s
trends and behaviour affects IKEA to develop and innovate their products & services in order to
attract more and more customers in the market. It also helps the organisation to achieve
competitive advantages in the market and increase their profit to earn more and more market
share.
Future strategies and focus to achieve and sustain its success in the next 2-5 years.
IKEA has adapted and embraced change to secure its position, survival and prosperity in
the highly competitive market. In the present challenging business conditions and environment,
the company continues focusing on capitalising the recent changes in the organisation. The
company needs to identify the current trends and demands of the customers in order to sustain its
competitive position in the market. In order to sustain the profitability of the business IKEA can
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expand its organisation to various other countries in the world. The company can use global
market entry strategies such as franchising, licensing, etc. The company also aims at estate
development and to step its online resources in both ready to assemble and ready-made furniture
or kitchen appliances (Aluko and Knight, 2017). The company can improve its marketing
strategies by using more attractive methods of promoting products and services in the market for
example – Social media marketing.
CONCLUSION
The above report summarised that IKEA is a leading furniture retailer in UK, this study
includes detailed background of the company along with its size and structure. The report
identified the ways in which business organisation position and manage itself in its efforts to
gain/maintain competitive advantage. Furthermore, the report also included analysis of various
functional areas of the organisation that helps in sustaining the competitive position among its
competitors such as Marketing, Sales, Human resource management etc. In addition to this the
report also included recent changes in the business strategy along with effective
recommendations to achieve success in future.
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REFERENCES
Books & Journals
Cunningham, I., 2017. The wisdom of strategic learning: The self managed learning solution.
Routledge.
Lambert, D.M. and Enz, M.G., 2017. Issues in supply chain management:
Kaul, D., 2017. Customer Relationship Management (CRM), Customer Satisfaction and
Customer Lifetime Value in Retail. Review of Professional Management, 15(2), pp.55-
60.
Aluko, O. and Knight, H., 2017. From corner store to superstore: a historical analysis of
Sainsbury’s co-evolution. Journal of Management History, 23(4), pp.423-435.
Edwin, S. F. and et.al., 2016. Generation of competitive advantage through BASC management
system in the ironmongery sales. CIENCIA UNEMI. 9(21). pp.27-35.
Tchokogué, A. and et.al., 2017. Intra-organizational legitimization strategies used by purchasing
managers. Journal of Purchasing and Supply Management. 23(3). pp.163-175.
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