Competitive Strategy Report: IKEA's Expansion into India

This report provides a comprehensive analysis of IKEA's competitive strategy, focusing on its expansion into the Indian market. It begins with an overview of IKEA's history, development, and growth, highlighting its unique corporate structure and adaptation to different markets, such as China. The report identifies IKEA's internal strengths, like its clear vision and cost leadership, and weaknesses, such as potential quality control issues in different countries. It analyzes the external environment using Porter's Five Forces model, assessing the threats and opportunities in the Indian market, including the threat of new entrants and substitutes. The report evaluates IKEA's SWOT analysis, corporate-level strategy, and business-level strategies, including cost leadership, differentiation, and focus strategies. It also examines the company's structure and control systems, emphasizing the impact of these elements on its performance in the Indian market.

COMPETITIVE STRATEGY
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Table of Contents
INTRODUCTION.......................................................................................................................3
MAIN BODY...............................................................................................................................3
1.company's history, development, and growth..........................................................3
2.Identifying company’s external and internal weakness..........................................4
3.Analysing the external environment..........................................................................4
Evaluate swot analysis....................................................................................................6
Analyze corporate level strategy...................................................................................6
Analyze business level strategy....................................................................................7
Analyze structure and control systems........................................................................8
CONCLUSION...........................................................................................................................9
REFERENCES........................................................................................................................10
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INTRODUCTION
Competitive Dynamics can be defined as those actions which are being taken by
company in order to gain competitive advantage. In this company are engaged in
designing those strategies that assists them in establishing their business in new and
emerging market. Present report will lay emphasis on competitive strategy taken by
IKEA to move in India. IKEA is a furniture retail company who is been headquartered
in Germany. Present report will lay emphasis on company’s history, development and
growth. It will also lay emphasis on internal and external strength of firm. Assignment
will also provide detail about the key barriers which has been faced by them. Study
will also evaluate corporate level strategy adopted by IKEA.
MAIN BODY
1.company's history, development, and growth
IKEA is a privately held company, they are designing and selling furniture,
accessories and appliances. Company has followed complicated corporate structure
in which their main components were operations and Franchising. Operation
department was being involved in managing and designing furniture’s and
accessories. Franchising was being done by private company known as Inter-IKEA
system (Hagber and Sterner, 2019). They have a tight control over IKEA operations.
Firm has been engaged in making products according to needs and demands of
consumers and they have also made various sustainable strategy throughout its
evaluation. IKEA has brought various changes from its past corporate strategy. By
involving in changes they have been able to achieve its mission. Like for example
previously when entering into China one of the most difficult challenges which was
being faced by them included its prices. They analysed that prices of furniture made
by local stores were lower than them. So IKEA want to had access to cheaper labour
and raw materials, and because their design costs were usually nil.
They were also engaged in doing global branding of products, which did not work
out and after that IKEA focused on middle class income group who were more
educated and have knowledge about western styles. Initial products include pen,
wallet, picture products, table runners, watches, jewellery. After investing on all of this
IKEA focused on segments of furniture, they were engaged in choosing eco-friendly
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design for their products. After facing such huge challenges in China, IKEA prepares
its strategy to enter into new market that is India. Company is involved in attracting
urban middle class buyers who are keen to decorate their home. They will focus on
their low pricing strategy.
2.Identifying company’s external and internal weakness
Strength: IKEA has a clear vision, they are providing consumers with low price
and higher quality furniture products and accessories. Company is also involved in
providing a concept in an array of products which can be collected by consumers and
customised, this can assist consumers in saving huge amount of cost. This has
helped firm in attracting large number of customers (Marsh, Kanngiesser and Hood,
2018). There main focus is on creating cost leadership, that has made them world’s
best furniture retailer. Raw material and labour was founded by company as lower
prices.
Weakness: As IKEA operates in large number of countries sometimes they lost
their control over quality which do not creates value to consumers. It has been
analysed that cost of labour and raw material in some countries is really very high so
sometimes it becomes difficult for organization to control quality of its furniture.
Opportunities: IKEA has adopted green business model, through which there
are chances that many consumers get attracted towards it. It assists their growth in
international market. Firm can also get engage in expanding their business in
emerging market that will assist them in enhancing their profit and revenue.
Threats: Rising concern related to quality is one of the biggest threat that
IKEA can face, as there only focus is on creating cost leadership. Also there are lot of
consumers who are engaged in buying furniture from local buyers and online stores.
This can also act as threat for IKEA.
3.Analysing the external environment
Porter’s five forces model:
Threat of new entrants: It is really high as the Indian market is been
controlled by Dotcom who are engaged in creating issues for physical shops, they are
engaged in providing customised furniture’s to local people (Vahlne and Jonsson,
2017). So IKEA needs to think about a strategy which can be used by them to
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overcome the threat of new entrants, as this can lay impact on their profitability and
revenue aspects. Company also needs to increase quality of their products by
lowering down their cost. They must can also engage in diversifying their accessories
range.
Threat of Substitute: It is also high. The influx of the engineered rubber wood
is challenging the existence of Indian plywood industry which was predominantly
favouring the masses against the heavy wooden furniture that was pricey. Plastic,
chairs and tables are also being used by urban middle class people which is being
targeted by IKEA.
Threat of Suppliers: It is medium. There are lot of suppliers in India who are
engaged in providing wood for making furniture’s. So IKEA has large number of
options that can be explored by them. They can even engage in doing bargain for
wood which is being provided by them. It can assist growth of firm.
Rivalry among existing competitors: It is very high in Indian market. There are
various competitors such as Raj and Raj, Neelkamal, Zuari who are involved in
providing them with high quality of furniture products. They all area engaged in
providing readymade furniture which take less time to get delivered.
Life cycle model:
Introduction: The first stage is introducing the product in emerging market. It
has been analysed that IKEA is going to produce sustainable furniture which they are
going to sale in India. In this stage firm will explore the demand of product in market
Growth: At this stage IKEA can see growth of furniture. They will see increase
in sales for furniture, rising demand and also increase profitability. At this stage
company can lead the market conditions. This is the stage where they can earn
revenue and work on growth of firm.
Maturity: At this stage there will be no rise and no decline in sales of goods
and services. This is the stage of full maturity. In this stage IKEA can face huge
number of competition. At this stage they can also plan various strategies.
Decline: At this stage company will see declining phase, where the sale of their
furniture will go down. Now they have to think of different strategy to enter into new
market.
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Evaluate swot analysis
The company internal and external factors will have impact on company sales
because company in selling the products to customers at low prices. Organization is
providing the products to customers which are high quality products and
accessorizes. On other side IKEA is operating in several countries which will increase
sales but quality of products is compromised. It has analyzed that cost of labor and
raw material is high in some countries and this is having impact on company profits
(Garvey, 2017).
company has adopted green business model which has chances of attracting
consumers on large scale. Company is also expanding the business in other
countries which will increase the sales of company and profits as well. On the other
side company is facing threat of cos leadership. Some consumers are buying
products form large number of local buyers which are engaged in buying furniture and
online buyers will have face threat of IKEA.
Company has entered Indian market but company is facing the biggest
challenges regarding the place and stores. In many countries company will get the
sufficient place for opening the stores in effective way. Stores of IKEA are quite
sophisticated and these are having negative impact on consumers. Swot analysis is
using the various strategies for overcoming the problems and working in effective
way.
Analyze corporate level strategy
Company corporate levels strategy will include the organisation mission and
vision goals. IKEA has vision of create better life for many people. It is reflecting
about the business idea of well-designed home furnished products which have been
provided to customers are economic prices. IKEA mission statements is offering wide
range of products to customers and providing them well furnished products at low
prices. It will be providing the strategy of implementing and achieving the vision for
long time. Company is revolving around achieving the long term growth which will be
benefit for suppliers, customers and employees.
The company can sue new strategies which will improve company strategy
and performance of organisation in market. In order to do this company need to
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evaluate the business products and situation which will help them to work in effective
way. There are various strategies thorough which company can improve future
performance in market. Organization can evaluate about strengths and weakness of
company. In India company was facing problems relating to the establishing stores in
retail sector along with availability of retail space and its cost. In major metro cites
accommodation is big problems and customers are not visiting store because it is
quite away for them (Cosmo,. and Yang, 2017).
So, company must think about the increasing the number of stores in India. It
can improve sales and customers will visit store without any complaint. So,
organization have to develop specific strategy for overcoming the problem. Company
also stated hiring new employees which will have abilities it increases business and
attract customers towards company. Organization has stated doing the negotiation
with vendors which can buy their products and sell their products in market on the
name of company. Company has started doing advertising by players of cricket which
can increase sales of company in the future.
Analyze business level strategy
Company is using porters generic strategy which will help company to improve
the performance.
Cost leadership strategy
as the company has entered market of India company is using low pricing
strategy for completing the work. In this company is expanding the business other
countries and providing products at low prices which will attract customers towards
them. IKEA is focusing on affordability of product to customer along with increasing
the brand value in India.
Differentiation strategy
In differentiation company is providing the low cost and good quality products
to consumers which will increase the sales of company along with productivity as
well. Company is providing products to customers by way of improving the products
and by adding unique features among products (Lebherz and Hartmann, 2017).
Focus strategy
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In focus strategy company is focusing on low cost products and on customers.
Low cost strategy is sued by company for entering the new market along with it will
increase the sales as well. Company is focusing on the product attributes and on
need of customers which will increase the sales of organisation.
Company was building the brand image in market by way of providing quality
and innovative products to customer. It will help company to achieve the long term
objectives and increase business in India. IKEA is using the technology as well for
increasing business and attracting customers towards them. Organization is also
using tows model for increasing the business in India. Tows will examine the internal
and external threats and opportunities which will be compared. In these model swot
analysis is compared and critically evaluated in effective way. Organization is taking
effective measures for avoiding the damage which will have impact on the company.
Analyze structure and control systems
Company is working in effective way and it will include company structure and
culture and politics. In a company power is among one employee and other are
working under. In IKEA also power is in one employee and other are working under
them. Power is distributed among other employees which are working in company at
the high post. The high post employers are controlling the employees of company and
every decision is depended on them. Structure is supporting the other employees but
the suggestion of these employees are accepted, and they are working in effective
way (Lee, Hu, Yang Yinand Lim,2019).
Culture of ikea is affected because of employee relation in work places.
Culture of organization is depended on the employee performance. Employee
performance is affect because of culture change in organization. Employee are most
important part of organisation culture and culture is depended on basis of culture of
organization. Employees must be aware about the change in the culture.
Organization politics is the important part of the culture and for controlling the work of
employees.
Recommendations
Company can use the various strategies which can help company in future and
increase sales. Organization can use culture model which will help company in
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improving the culture of organisation. Company is facing the challenge in the retail
sector and also it will create products on large scale and which will is must Indian
climate in effective way. Company will use the latest strategies like it can improve the
strategies firm in improving the employee performance and employee relations. For
these company can motivate employees and try to scale the conflicts among the
employees. Ikea can provide the best quality products to consumers which will build
the and image for company in market. in Indian market there is strong competition
and so company can improvise products and provide the low cost products to
consumers which can help company in fighting the competition (Lim Pirsiavash and
Torralba, 2013.).
Company is also dealing with the cost leadership strategy and it will include the
strategy which will provide consumers which will increase sales. Company is facing
problems relating to the high cost and labor which will increase the price of products.
Prices of raw material is high in several countries which will affect the company
performance in market. Labor of the country is charging the price of product as
compared to the price of company in other country. So, company is buying the
products form different country and selling the products in retail market by way of
collaborating with the vendors which can sell the products efficiently. Company is also
increasing the business by way of selling the products online which can be improved
by company in effective way. Company is selling the products at discounted prices on
the websites which will increase the demand of products. IKEA can use the latest
strategies and use the latest strategies and achieve the long their sales in effective
way.
CONCLUSION
From the above study it has been summarized that IKEA has been engaged in
entering into India. They have adopted corporate strategy. Company has laid focus
on cost leadership, in which they have increased the quality and tried to lower down
cost of product and service. This has helped them in attracting more consumers
towards them. It has helped them in establishing their market in India. It has helped
company in increasing their profit as well as revenue. They have also engaged in
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targeting upper middle class people who have knowledge of western furniture. This
has helped them in creating consumer base.
REFERENCES
Books and journals
Vahlne, J.E. and Jonsson, A., 2017. Ambidexterity as a dynamic capability in the
globalization of the multinational business enterprise (MBE): Case studies of
AB Volvo and IKEA. International Business Review.26(1). pp.57-70.
Hagberg, H. and Sterner, H., 2019. A study about possible digitalization of a product
development process: A business case at IKEA of Sweden.
Marsh, L.E., Kanngiesser, P. and Hood, B., 2018. When and how does labour lead to
love? The ontogeny and mechanisms of the IKEA effect. Cognition. 170.
pp.245-253.
Lim, J.J., Pirsiavash, H. and Torralba, A., 2013. Parsing ikea objects: Fine pose
estimation. In Proceedings of the IEEE International Conference on Computer
Vision (pp. 2992-2999).
Lee, Y., Hu, E.S., Yang, Z., Yin, A. and Lim, J.J., 2019. IKEA Furniture Assembly
Environment for Long-Horizon Complex Manipulation Tasks. arXiv preprint
arXiv:1911.07246.
Lebherz, M. and Hartmann, J., 2017. Applying the value grid model to the furniture
industry: the example of IKEA.
Cosmo, D.E. and Yang, K., 2017. A Further Strategic Move to Sustainability—A Case
Study on IKEA. Journal of Strategic Innovation and Sustainability. 12(2).
Garvey, P., 2017. Unpacking IKEA: Swedish Design for the Purchasing Masses.
Routledge.
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