International Marketing of IKEA: A Strategic Analysis

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International Marketing of IKEA
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Table of Contents
Introduction................................................................................................................................3
LO1 Analyse the impact and influence which the macro environment has on an organisation
and its business strategies...........................................................................................................3
LO2 Assess an organisation’s internal environment and capabilities........................................3
LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a
given market sector....................................................................................................................4
LO4 Apply models, theories and concepts to assist with the understanding and interpretation
of strategic directions available to an organisation....................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................4
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Introduction
The assessment embarks as a trainee Strategic Planning Manager by IKEA, UK where its line
manager has asked in to create an environmental analysis, and a strategic expansion plan on
the external and internal logical tools, for the company’s growth objectives and expansion.
IKEA, known to as a Swedish company, which have large presence in UK, and globally and
most of its products include the Kitchen and home appliances. It is one such retail company,
which has high revenue of $40.906 billion, and 208,000 employees, as of 2018. The firm is
also known to find good attention to its cost control, continuous product development and
attributes that can lower its prices (IKEA, 2019). As of 2018 November, around 424 IKEA
stores were operating in about 52 nations. This task will be devised by several strategic
frameworks, so that its internal and external environment can be estimated.
LO1 Impact and influence which the macro environment has on an organisation and its
business strategies
The Strategic Context:
Missions, visions and objectives
As IKEA is one global brand for retail home furnishing products, their vision would be to
create a better phase of life for many people. It also explains that their business idea would
tend to support by offering functional furnishing products, at a lower price. The mission of
IKEA is to attain sustainable long-term growth, which would be done by investing in future
to benefit suppliers, customers and employees (IKEA, 2019). The key objectives, devised for
IKEA’s growth platform are as follows:
 To increase their sales by 10% in Q2 of 2019
 To increase customer participation on social media, so that engagement can increase
by more number of comments, likes shares and clicks
 To increase new product channels for IKEA by 2019, so that their customer base can
increase globally
Meaning of strategy
Strategy actually is a plan, or method that is being chosen for bringing a desired future, such
as answer to a problem or attainment to a goal.
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Power/
Influenc
e
Interest/Impact
The role of strategy to achieve business objectives and goals, strategic intent and strategic
direction
According to Laurin and Fantazy (2017), the role of strategy is imperative, as it works in
operational planning and then sets clarity in direction of the key activities. For instance,
IKEA could define its major objective to work, as profit earning business in furniture to
define its objective clearly. While IKEA has a strategic intent for doubling its yearly store
openings in an attempt to capture a section of increasing markets in China, Russia and US.
IKEA could use its global strategy that may attempt to attain economies of scale, by
managing global supply chain (CNBC, 2017). Thus, its strategic direction could be
understood by Porter’s five forces in LO2.
Different strategic planning techniques
While there could be varied strategic planning techniques for many firms, but for IKEA, their
business level strategy is effective, as it creates a competitive benefit for key products, which
are being produced (IKEA, 2019). While some other that, the company uses include
forecasting, goal setting, decision-making, etc.
Analytical frameworks of the macro environment:
Stakeholder analysis: stakeholder matrix
4
Keep
Satisfied
Manage
Closely
Monitor
with
minimum
effort
Keep
Informed

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Figure 1: Stakeholder Matrix
(Source: Learner)
From the figure, to analyse the stakeholder matrix for IKEA, the high level of stakeholder
power includes high level of interest for shareholder, employees, government, competitors,
customers and suppliers. While the low level of stakeholder includes the community and the
environment that needs to communicate regularly (Ikea.com, 2017).
Environmental analysis: PESTLE and Porter’s Five Forces model
Factors Analysis
Political As IKEA stores are in 41 nations, it has to abide by regulations. The
company also depends on relations to remain stable, or otherwise, revenues
could be in stake.
Economic IKEA is largely influenced by a weak and strong dollar. IKEA also had to
focus more on the advertising campaign to thwart American’s unwillingness
to be a part of style furniture (Ikea.com. 2017).
Social IKEA does suffer from one-star reviews, which brings disgruntled
complaints. IKEA has also shifted its catalogue appearance in order to suit
general thinking of people in UK.
Technologica
l
The company uses advanced systems and technology for tracking, and
trading patterns that can be accurate towards staffing. IKEA optimises
supply chain to manage the workforce effectively, to make environment
contended.
Environment
al
As they have put on environment-friendliness, it has put around $1 billion
towards renewable energy for poorer nations (Business Insider, 2017).
Legal Due to its poor product quality, their major items have affected largely in
injuries. It needs to ensure products to be safe, or otherwise lawsuits may
happen rigorously.
Table 1: Pestel Analysis
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(Source: Learner)
Supplier’s bargaining power It is low, as their number is large, their weak financial
position does not allow a major influence. As IKEA has
launched Conduct for suppliers, they would be liable to
communicate with code of conduct to the sub suppliers.
Buyer’s bargaining power As their pricing strategy suits customer pocket, it focuses
more on digital marketing to find a better experience.
Overall, it can be low to moderate (Jurevicius, 2013).
Threat from substitute
products
Since threat of IKEA is low, it has built a good brand image
where trust level between brand and customers may be high.
Threat from the new entrants It is moderate, since new brands can easily enter on small
scale. Besides, marketing is a generic cost, apart from the key
operations (Crain and Abraham, 2008).
Competitive rivalry This is not so high, as IKEA has lot of competitors in the
industry, but some companies’ sells furnishing products
directly to brand stores and supermarkets, which pose a
major threat.
Table 2: Porter’s five forces
(Source: Learner)
Structure-conduct-performance (SCP) model
To analyse the SCP model, it shows that the market situation may have a direct but a short-
term effect to the market structure. Therein, if the market formation of IKEA has a direct
control on economic behaviour, then it could relatively affect its market performance. In case,
the feedback of the key customers of IKEA occurs, such that the market performance may
relatively affect their market structure (Hill et al. 2014). This may have an intervention, by
the framework that the company has developed in terms of furnishings.
Strategic positioning: Ansoff’s growth vector matrix
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Increasin
g Risk Increasing Risk
Existing products New products
New
market
Market Development
It attains growth by aiming the current
products to the niche market.
Diversification
IKEA attains growth by diversification
in the new industries by establishing
new furnishing goods for the industry.
Existing
market
Market penetration
It attains growth with the current
products with relative to niche market
for boosting market share (IKEA,
2019).
Product development
It opts out for new products, which are
being aimed at the present niche
market in UK.
Table 3: Ansoff matrix
(Source: Learner)
Organisational audit: SWOT analysis,
Strengths Weaknesses
The brand value is in 46th position, and it stands
with high value of $11.9 billion. It also has
constant R&D to bring prices down for
customers.
IKEA major concern is to keep minimal cost, in
order to provide better quality service and effective
product performance. IKEA’s product portfolio is
not replicable in all locations (Bizfluent, 2019).
Opportunities Threats
As customers are becoming cost conscious, they
would tend to change furnishing periodically.
There is a rising demand for these eco-friendly
products among customers (Bizfluent, 2019).
Changing tax policies and government laws pose a
worse impact on IKEA’s products. While the
growth of the disposable income may lead the key,
customers for trading higher in market chain.
Table 4: SWOT Analysis
(Source: Learner)
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Benchmarking indicators
Some of the key benchmarking indicators of IKEA would be to enhance productivity, which
will develop the navigation on intranet. Getting social also has been a contributing factor of
IKEA, which has introduced the blogging features of the company.
LO2 Assess an organisation’s internal environment and capabilities
Organisational internal environment
Strategic capabilities of IKEA
It is identified that IKEA tend to exert a strategic approach, so that it can develop competitive
benefit in furniture industry. According to Hill et al. (2014), IKEA’s management is capable
to recognise the priorities of the industry, to make decisions with strategic direction. This can
place some of the considerations for stakeholders as well. IKEA would be competent, as it
finds internal and the external consumers for guaranteeing key customers remain loyal and
satisfied. Further, IKEA also ensures that they coach, motivate and guide the staffs for
realising their mission and objectives to be attained (Linkedin.com, 2018). It identifies its
suppliers, based on competitive benefit, so that it could diversity the overall business well.
Resource-based view strategy as a basis for competitive advantage
IKEA tend to select a feasible position when it comes for delivery of the key items. Thus,
their warehouse is situated located with diverse sectors for having larger control of the key
activities (Crain and Abraham, 2008). Further, the strategy identifies deployment of major
resources, queue times and processing time for varied actions. Their staffs are being rotated
to finish customer orders at the pick areas.
McKinsey’s 7S model as a management tool
Strategy It is built on quality, design and value with sustainability.
Structure IKEA has a hierarchical structure for the organisation because of large scope
in business operations.
Systems IKEA’s business relies on set of systems, including effective team
development and recruitment.
Skills IKEA employees have good managerial skills to work on key capabilities.
Shared values The company has large set of values, which guides them to valued behaviour
(Carlsson, 2015).
Staff Most of their staffs in UK are highly developed, motivated and trained.
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Style They use a transformative leadership style to bring new changes in the
company.
Table 5: McKinsey’s 7S model
(Source: Learner)
Analysis of strategic capabilities using the VRIO framework
Resources Value Rare Imitation
Supply chain Yes Yes Near competitors are flexible enough
Financial
resources
Yes No Financial equipments are available to near
competitors
Digital strategy Yes No Could be imitated by competitors
Brand positioning Yes Yes Could be imitated by competitors
Leadership Yes No Cannot be imitated by competitors
Table 5: VRIO framework
(Source: Learner)
Benchmarking strategic capabilities
As IKEA has a good response to its flexible business model, it tends to strengthen its measure
of sustainability by providing something effective. This will help to attain sustainability to fill
gaps in the market (Hultman et al. 2012). However, the company also directs that
sustainability will benchmark through enhancements, which will work in profitability,
customer service and supply chain.
Value chain analysis
Primary Activities
Inbound logistics Distribution of products to about 42 centres
Outbound logistics Preferring customer to transport their product by them only
Operations Operations in 40 nations
Sales and Marketing Low prices and family-friendly environment
Services Low number of sales assistant
Support Activities
Infrastructure Hierarchical organisational structure
HRM High level of HR practices
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Technology
Development
R&D in Sweden
Table 6: Value chain Analysis
(Source: Learner)
Cost-benefit analysis
Proposed Actions Benefits Costs
Increase in employee numbers Increase Financial resources £9,000
Increasing new type of furniture Increase supply chain in
furnishings
£13,000
Use of promotional campaigns Increasing consumer response £11,000
Table 7: Cost-benefit analysis
(Source: Learner)
LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model
to a given market sector
Analytical tools and models of analysis
Balanced Scorecard to align organisation vision and strategy
Balanced Scorecard for IKEA will help to align growth and learning perspective of the firm
with financial and customer perspective. From the financial prospect, it identifies objective of
profitability while customer perspective points on developing dimensions of service/product
and market preferences. Besides, the process perspective aligns on the value chain of IKEA
including questions on sales, distribution and production (Frynas and Mellahi, 2015). It can
be inscribed that Balanced Scorecard is also concerned on organisational capabilities, like
intangible assets. However, it ensures that communicating well on a strategy will implement
IKEA’s strategy coherently.
Competitive analysis using Porter’s Five Forces model
From Porter’s five forces model, it can be aligned that IKEA tends to evaluate its strength, so
that competitive position in UK market can be gained. It is crucial to identify unfavourable
and favourable aspects for organisation’s attractiveness and performance to evaluate the key
results (Perchinunno and Schirone, 2012). In quest by realising each force of IKEA and
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discovering strength of that force, it will certainly evaluate the strength and capability to
attain a continual profit in retail furnishing industry. Thus, some indirect competitors of
IKEA could be Wayfair, Walmart, Amazon and Tesco.
Stakeholder analysis
Major stakeholders could be at first the shareholder that invests in IKEA, and tend to share
the profits. Employees here work in terms of interest, and growth linked with IKEA’s product
promotion (Ikea.com, 2017). Government has interest on IKEA where profits are larger to
pay high taxes. The key competitors will have large power to restrict them on eye of rivals
while suppliers tend to do the business, as they cannot take a major risk, if company fails.
Ansoff matrix to product/market strategy
As the firm is expanding to new market, the market development of IKEA could have a
major risk than penetration strategy. For instance, considering IKEA relation with some of
the suppliers in Vietnam, it could expand its base in Vietnam for growing presence in Asia.
While IKEA could be attracted heavily to Vietnam by inexpensive raw materials and low
labour cost. IKEA also drives demands with high quality at a low price, but the prospect may
offer a high volume for business relations (Schirone and Torkan, 2012). Thus, it can boost
productivity with management process and technical investments.
LO4 Apply models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to an organisation
Strategic choices and directions
Porter’s generic strategies:
In case of Cost leadership, IKEA must try to decrease its cost in furnishings. For being a top
player in retail industry, it needs to maintain cost for leadership but has to make certain that it
does not fail to notice on differentiation. If customer feels that the product is not effective,
them IKEA has to attain cost leadership by decreasing cost of the product. For differentiation,
IKEA opts for more features, which could be perceived by customers to remain in a certain
position, which would be distinctive (Gandini et al. 2014). Here, if extra cost for
differentiation would be less than premium cost, firm having competitive advantage can find
better profitability than others can. Lastly, in case of focus, IKEA should opt for a
competitive benefit on the result of industry, so that it offers effective customer service.
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Bowman’s strategy clock
Figure 2: Bowman’s strategy clock
(Source: Carlsson, 2015)
Bowman’s strategic clock helps to identify the company, which will indicate diverse kind of
strategies to reach competitive position within the sector. From the model, it assume that the
price that the major customers would be eager to pay. The second one would be benefit being
perceived by customers on a certain product. For IKEA, the Hybrid position will be effective,
as it refers to 3rd position and can acquire services and products, having high-perceived value
with low price (Grant, 2016). By the hybrid strategy, IKEA can work on the cost reduction
program to attain cost leadership, which may offer high-perceived products to customers. In
that case, IKEA contrasts a good linear example, because of its economic products having a
large value in functionality and design, when perceived by the key customers.
Diversification
IKEA’s diversification is aligned mainly for Asia countries where using Joint venture form of
Partnership could prove effective, despite having a high rate of failure. For instance, creative
owners of IKEA tend to use this business strategy to find good advantage, although linked
with large MNCs. While most joint ventures, tend to form for an ultimate purpose to save
money (Hadad, 2015). This can be attractive, as they enable firms to share costs and risks.
With Joint venture, IKEA can benefit largely by collaborating from local companies to gain
competitive advantage in huge succession.
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