IKEA's Strategy Making: Competitive and Business-Level Strategies

This essay provides a detailed analysis of IKEA's strategy making, examining the competitive and business-level strategies the company has employed throughout its history. It discusses IKEA's structured value and distinct purpose, as well as its early stages as a mail-order business and its subsequent growth and adoption of strategies such as low-cost approaches, product differentiation, and international expansion. The essay also applies Mintzberg's theory of organizational structure to IKEA, highlighting the roles of the strategic apex, middle line, technostructure, support staff, and operating core. The essay concludes by suggesting ways IKEA can improve its strategy making in the future, emphasizing the importance of a competent strategic apex and the effective coordination of all organizational components. The analysis draws on multiple sources to support its claims, offering a comprehensive overview of IKEA's strategic development.

Running head: STRATEGY MAKING: IKEA 1
Strategy Making: IKEA
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Introduction
Established in 1943 by Kamprad, IKEA has lived to pursue many strategies throughout
its history to attain its current top position in the market. The Company has maintained a
structured value and a distinct purpose in both employees, customer relationships and business
achievements (Cooper, 2015). This essay has discussed the competitive and business-level
strategies employed by IKEA throughout its history that has made it competitive and how it can
improve its strategy making in future using Mintzberg’s theory.
Henry Mintzberg in 1979 identified five essential components of an organization-
operating core, strategic apex, middle line, support staff and the technostructure (Prasetyo & Lo,
2016). The strategic apex is at the top of the organization and is responsible for ensuring that the
organization’s mission is upheld, while the middle line consists of a group of managers who
work to convert the broad objectives of strategic apex into operational plans. As an organization
becomes bigger, a group called the technostructure is developed to perform specialized roles like
quality control. The organization also develops the support staff to help the technostructure in
administrative functions like public relations. The final component is the operating core
consisting of people who handle basic tasks of production or service offering.
In its early stages in 1943, IKEA operated as a small mail order business with only an
operating core headed by Kamprad who handled different operations of the firm. Five years later,
the company enlarged and started selling furniture. The company also employed different top-
level managers to occupy its strategic apex. During Anders Moberg's era, IKEA adopted a low-
cost strategy as its dominant competitive approach. Anders who was the CEO developed simple
operational tactics of understanding the needs of the clients and then fulfilling them (Chen,
Zhang, & Yang, 2013). He spearheaded the relocation of the company to Denmark to save

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Swedish taxation and redefined the company’s relationship with its suppliers by using one
supplier to offer a variety of materials.
The company continued to make different furniture brands using unique materials from
its suppliers. It also adopted product differentiation creating a need to develop and improve its
technostructure. IKEA’s technostructure is comprised of group analysts responsible for
redefining its furniture designs to make them more appealing to the customers. Also, the
company has maintained a group of motivated middle-level managers responsible for ensuring
that the technostructure and other employees, work towards achieving the goals of the firm
(Prasetyo & Lo, 2016). For instance, the company has maintained a marketing concept that “we
do our part" by concentrating on our part by developing valuable consumer products using
inexpensive materials in a novel way. The middle-level managers at IKEA have been dedicated
to ensuring that all employees maintain this concept through proper supervision of roles.
As IKEA developed further, it adopted an international expansion strategy by developing
its stores in other countries. In all these stores, the company has employed dedicated middle line
managers, support staffs and operational cores responsible for loading and unloading furniture
and doing other duties in the stores. Furthermore, IKEA split into three distinct groups in 1996,
comprising of retailing activities, a firm holding the trademarks and franchise and another one in
the finance and banking (Bogomyagkov & Machulskyi, 2012). This unique structure enabled the
company to obtain a unique influence on its governance and operate efficiently while preserving
both egalitarian culture and profitability.
The primary aspiration of every firm is to remain at the top of the market through proper
strategy making. For IKEA to improve its strategy making in future, it should maintain a
competent, creative and organized strategic apex, by employing innovative and qualified CEOs

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and other top-level managers. This is because the top level management is responsible for
formulating, implementing and evaluating strategic business missions. Furthermore, Mintzberg
suggested ten roles of a manager which can be grouped into three- interpersonal, informational
and decisional roles (Prasetyo & Lo, 2016). Only a competent strategic apex can conduct these
roles. The company should also ensure that the middle-level managers are committed to
supervising the strategic implementation process, the technostructure is composed of dedicated
employees who conduct accurate strategic analysis, the support staff is committed to their roles,
and the operating core is dedicated to their duties to ensure strategies are successfully
implemented.
In a nutshell, IKEA, a company which only started as a mail-order business has grown
over time to become a global furniture dealer. This growth has been necessitated by its accurate
strategies like low cost, product differentiation, and international expansion. For the company to
improve its strategy making in future, it must actively maintain the five components of its
structure as explained in this essay.

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References
Bogomyagkov, Y., & Machulskyi, I. (2012). Corporate and business level strategies at MNEs: A
managerial Practice View. Jonkoping International Business School, 1-3. Retrieved April
28, 2018, from http://www.diva-portal.se/smash/get/diva2:563234/FULLTEXT01.pdf
Chen, X., Zhang, J., & Yang, L. (2013). The Future of IKEA- Watch your expansion steps. 1-37.
Retrieved April 28, 2018, from
http://www.diva-portal.org/smash/get/diva2:639868/fulltext01.pdf
Cooper, H. M. (2015). IKEA hacking: A case study on design, marketing, and branding
strategies. 1-110.
Prasetyo, A. H., & Lo, W. (2016). Towards Strategic Mix 5P. International Journal of Business
Management and Economic Research(IJBMER), 7(3), 654-661. Retrieved April 28,
2018, from http://www.ijbmer.com/docs/volumes/vol7issue3/ijbmer2016070304.pdf