Strategic Management Report: IKEA Case Study, Strategies Analysis

This report provides a comprehensive analysis of IKEA's strategic management practices. It begins with an introduction to strategic management, outlining the processes involved in planning, monitoring, and assessing organizational activities to achieve goals and objectives. The main body of the report includes a critical assessment of the strategic management process, evaluating models and tools such as SWOT and PEST analysis, and applying these models to IKEA. The report also appraises the importance of change management within the context of IKEA's transformation processes, considering the associated costs, risks, and sustainability. The analysis covers various aspects of IKEA's operations, including its strengths, weaknesses, opportunities, and threats, as well as the impact of political, economic, social, and technological factors. The report concludes with a summary of the key findings and recommendations for IKEA's strategic approach. References from various academic sources are included to support the analysis.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION................................................................................................................................3
MAIN BODY.......................................................................................................................................4
A critical assessment of the process used by organisations to determine their strategy..................4
An evaluation of the critical models and tools used by organisations to determine their strategy.. 5
Application of these model to IKEA...............................................................................................6
Critically appraise the importance of change management based on the complexity of the
transformation process, its costs, risks and sustainability. ..............................................................8
CONCLUSION..................................................................................................................................10
REFERENCES...................................................................................................................................11

INTRODUCTION
Strategic management means the planning, monitoring, analysing and assessment of all the
activities which the organisation performs to meet its goal and objectives. Strategic management
help the business in achieving its long term objectives as this help in changing the organisational
strategies of with the change in the environment. It provides an overall guide for the company
which helps in directing the organisation toward the achievement of there goals. These strategies are
made by considering the internal as well as external environment of the industry in which the
company is operating.
IKEA is a multinational company that designs and sells furniture, kitchen appliances and
home accessories. The company was founded by a 17 year old Ingvar Kamprad in the year 1943.
the company became the largest furniture retailer since 2008 and the owner Ingvar Kamprad is the
8th richest person with a net worth of $58.7 billion.
MAIN BODY
A critical assessment of the process used by organisations to determine their strategy.
The strategic management is a prediction of the organization's mission purpose and vision
for where the company wants to stand in the future. For this IKEA need to have a strategic plan to
beset for its short, medium and long term goal. So, through proper strategic management the
company can gain competitive advantage and stay ahead of its competitor in the industry.
For proper planning of strategic management IKEA could follow the strategic management
process which include 5 stages.(Meyer, Neck and Meeks, 2017) These stages are explained below:
Clarify your vision
The first and foremost thing that IKEA should do while forming strategies is to clarify there
vision of the business. For this the company should define there short, medium and long term goal,
then identify the process of how to achieve these goals and finally identifying the task force for
completion of these objectives. By doing this IKEA will be able to set the direction in which the
organisation will go to achieve its goals.
Gather and analyse information
This stage includes gathering as much information as the company can to accomplish a valid
and achievable vision. Then the company should analyse this information to understand the need
and requirement of the business. This stage include analysis of both internal and external
information available, for this IKEA could use SWOT analysis. As much information the company
have there will be more option for them to analyse and select the best for them.
Formulate a strategy

This stage includes the final plan for the strategy to be implemented. This mainly includes
the identification of the resource available to the firm, feasibility of the strategic plan means the
pros and cons of the strategy, prioritising the task according to the importance. This is the
comprehensive plan upon which IKEA will work.(Lasserre, 2017)
Implement your strategy
This is the stage where actually the whole plan is being brought into action. IKEA will have
to be extremely careful about this step because if this doesn't work then the organisation may face
serious consequences. Each and every individual is made clear about the roles and responsibilities
they have to perform. Any additional funds required will be procured by IKEA at this stage. Once
all these are in place the employee will be ready to execute the plan. There should be proper
monitoring at this stage and the leaders should always be there to support any problem faced by the
employee in the implementation of the strategies.
Evaluate and control
In this stage the performance measurement of the plan is done. IKEA will evaluate all the
issues that were being faced during the implementation of the strategic plan. This include the
internal as well as the external issues being faced. The variances of the plan must be study and the
company should work upon the adverse variance. IKEA will learn what they could have done right,
so that these variances do not occur in the future.
An evaluation of the critical models and tools used by organisations to determine their
strategy.
The company can use different types of model for the evaluation of the strategies being formed.
Two of these model which are SWOT and PEST are explained below:
SWOT ANALYSIS
SWOT analysis is done as a part of overall company analysis to ensure what are companies
strengths, weaknesses, opportunities and threats for strategic planning. Performing a SWOT
analysis of the business and market conditions can help you clarify the future course of action. This
is discussion about the what is the meaning and purpose of performing a SWOT analysis.
Strength
 The main strength of the IKEA company is that IKEA is very well known company.
 The strength of the company include they have huge competitive advantages.
 It has huge brand recognition. The IKEA has great affordability.
 The company do their best in their business operations, what are the competitive advantage
that the firm have over there competitors, what are the employee skills and knowledge etc.

Weakness
 Weaknesses are the internal negative attributes of the company.
 IKEA products are known for bad quality.
 The weakness of the company includes what the company need to do to improve there
operations, what are the gaps of there team, what are the things that there competitors do
better from them etc.
Opportunities
 Opportunities are the external positive attributes of the company.
 IKEA has an opportunity to implement big grocery stores.
 IKEA famous for online shopping, so company can expand their business on online
networking sites.
 The opportunities available for any company are is the market going to grow in the near
future, is there any regulation that may impact the company positively, what the customer
think of the company etc.(Hitt and Duane Ireland, 2017)
Threats
 Threats are the internal negative attributes of the company.
 The threats the company may face are any new competitor may come into the market and
this may reduce the company's market share, supplier may increase the prices, consumer
taste may change etc.
 The company has also treat of lawsuits.
PEST ANALYSIS
Political
The political factors affects the long term profitability of the company, so the company
should be very careful while analysing these factors. These factors differ from country to country. It
mainly includes the political stability create positive impact on the business activities. employment
legislations also provide better advantages for company. The political instability create negative
impact on IKEA 's business performances.
Economic
Various economic factors that can positively and negatively affect the IKEA' s business
operations. These are the economic forces which impacts the overall success of the organisation.
These include the high inflation rates, interest rates, exchange rates etc. can diversely affect the

performance of business in market. The economic factors changes very often so the company must
be updated on the factors or they may act as a threat in the organisation.
Social
The many social factors such as changes in lifestyle and consumers trends affect the
organisation by both negatively and positively. social behaviour and cultural trend which impact the
working of the organisation. The regularly changes in the consumer trends can diversely affect the
business performance and also increase the technology cost or expenses of business because
company needs to adopt upgraded technologies time to time. These trends may require the
organisation to change the product or services being provided by them. These includes the attitudes
and shared beliefs of the individuals.
Technological
The many technology factors affect the company's performance and also influences its
market share. These factors affect the way the company make, distribute and market there products
and services. These include the technological advancement like online services, emerging
technologies etc. the company must adapt these changes to gain competitive advantage over there
competitor. It is beneficial for the IKEA company to run their business with the uses of effective
techniques. Many competitors of the IKEA company adopted new technology in their business
which can create negative impact on their business.
Application of these model to IKEA
The model which are being explained above are now applied to IKEA for there planning of the
strategic plan.
SWOT ANALYSIS OF IKEA
Strengths
The clear vision of IKEA is the biggest strength, which add values and brings quality in their
work and improve their image as according to the customers perspective. IKEA is global brand
which attracts key consumer group. IKEA has its key performance indicators which help them to
grown in the market and asses the progress of its vision and long term goals. With its single minded
focus on the cost leadership the company can save a lot of cost and provide there customers with
cheap products so the customer will switch to them.
Weaknesses
IKEA is the global brand where it is hard for them to maintain and match the standards and
the quality. Low cost products of IKEA needs to maintain the balance against producing good
quality products is a major challenge for them.

Opportunities
IKEA has a great opportunity as with the introduction of there new “green” business model
the customer will greatly be attracted toward them. Also, the company follows the cost leadership
which help there employee to focus on a single objective. The company is now emerging into new
market which will attract the untapped customers. This will increase there market share and there
sales and profitability will increase significantly.
Threats
IKEA has copied the business model of there competitor, the company need to innovate to
stay in the market and compete otherwise they will have to face serious consequences. With the
improvement in the technological factors if the company doesn't implement these technological
changes they will be ruled out of the market. They need to provide there product and services
through online channels like websites and apps so that they could also target larger customer base
and increase there market share.(Hill, 2017)
PEST ANALYSIS
Political
These factors affect the long term profitability of IKEA, the main factors which affect each
and every company is the political stability because to operate the business in any industry there
must be some stability. IKEA should especially make sure about this factors before entering into
any new market. For example IKEA has good relationship with India and China and both this
company have stable political government. (Noe, 2017.)
Economic
These factors can affect IKEA at both macro and micro level. The factors affecting IKEA at
macro level are inflation rates, interest rate etc., and at the micro level are the competition being
faced by the company. The 2008 recession is one of the best example of economic factor which has
affected IKEA the most as thousands of people lost there job resulting into high unemployment
rates.
Social
IKEA should keep in mind the belief and norms of the individual and the changing trend of
the market, this will affect the brand image of the company. If the company is being updated with
the changing trends of the company then they will be preferred by there company. IKEA is
delivering the apt and appropriate product to there customers as they have profit on there mind
which means that they are updated with the changing trends.
Technological
These are the factors which become very important for the company to follow in the last 5 –

10 years. IKEA have implemented these technological changes but there is still hope for more
technological advancement.(Moutinho and Vargas-Sanchez, 2018.) The company still offers the
paper catalogue to promote there product when there is option for advertising online on social
media like Instagram, Facebook etc., which are cheap and can target the bigger customer base.
(Rothaermel, 2017)
Critically appraise the importance of change management based on the complexity
of the transformation process, its costs, risks and sustainability.
CHANGE MANAGEMENT
Change management means a systematic approach to deal with the transformation of an
organisation objectives, way of doing work and restructuring. This purpose behind the change
management is to implement the strategies in such a way that there is not much of the resistance
among the employee to adapt these changes. IKEA need to change the waste management
techniques because there is a lot of waste during the use of furniture, so they must form some
strategies to control these waste.
Complexities
There are a number of complexities being faced by IKEA when they will try to change there
waste management techniques. One of the complexities that is being faced by IKEA is to implement
the change. This is because the company will face a lot of resistance from there employees who are
not happy with the change in doing the work. New changes may include hiring new employees in
the organisation which is generally perceived as a threat for the existing employees. These
resistances should be deal with proper leadership or otherwise the employee will feel demotivated
and this may result in high labour turnover. Another complexity that may be faced by IKEA is that
if the change in the organisation does not occur according to there planning this might cost them a
great deal. IKEA should change there waste management techniques by keeping in mind these
complexities so that they can devise there strategies accordingly.
Costs
A change management is an organisation wide project which requires a significant amount
of investment to be made to implement as there might be a need of new tools and equipment being
required to carry out task, redundancy payment being made for terminating employees contacts etc.,

so a proper cost benefit analysis of this change management must be done to evaluate if the benefit
gained from the change management is exceeding the cost incurred or not. For this IKEA must do
research finding the cost of the change management.(Ginter, Duncan and Swayne, 2018) The
primary costs incurred in the change management are the additional resource cost, training cost,
travel and time cost, material costs, general expenses, reinforcement cost, meeting costs etc., if
these cost are too much and they cannot exceed the benefit gained from them then it would be
unreasonable for IKEA to go for the change. But given the rapid changing environment the
necessity of change is a must for operating in the market or the competitor will rule IKEA out of the
market.
Risk
There are a lot of risk which the organisation faces during the implementation of new
changes. (David and David, 2019)First and the biggest of all the risk is the resistance to adapt the
changes. This is the biggest reason for the failure of change management. This risk is being reduced
by proper leadership so that the employee won't have the fear of the changing process, also IKEA
should provide training for the proper assistance of the change. Another risk being faced is the
scope creep, which means that sometime these changes become larger overtime, this occurs when
the risk is not properly managed. To avoid these scope creeps IKEA while implementing the change
should be explicit when stating and communicating the changes, so that the employee won't go
beyond there stated boundaries.
Sustainability
The current change management of IKEA is considered to be very sustainable as they are
trying to generate techniques which will help them in reducing the current waste management to the
minimum. This change will improve the brand image of IKEA as we all know the current situation
of the environment which is degrading day by day so to take initiative for a change like that which
is taken by IKEA will be greatly supported by all the stakeholders including there employees.
Therefore, this change might be easy to implement in the organisation if especially the employees
are supportive in the change management.(Ansoff, 2018)
CONCLUSION
From this report we have reach to a conclusion that overall the company is performing well
in the market. The company strategies and there implementation is being discussed in the report. In
the report there is a brief discussion about SWOT and PEST analysis on IKEA. The company is also
performing well in the external environment but they can improve there technologies more to be
more effective and efficient in the market. Also, they should devise some strategies to overcome

there weaknesses. Comprehensively the company is seem to have good growth perspective in the
foreseeable future.

REFERENCES
Books and journals
Ansoff, H.I., and et.al., 2018. Implanting strategic management. Springer.
David, F.R. and David, F.R., 2019. Strategic management: A competitive advantage approach,
concepts and cases. Pearson.
Ginter, P.M., Duncan, W.J. and Swayne, L.E., 2018. The strategic management of health care
organizations. John Wiley & Sons.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset. pp.17-44.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI Tourism
Texts. Cabi.
Noe, R.A., and et.al., 2017. Human resource management: Gaining a competitive advantage. New
York, NY: McGraw-Hill Education.
Rothaermel, F.T., 2017. Strategic management. New York, NY: McGraw-Hill Education.