IKEA Thailand: Business Strategy, Corporate Structure & Expansion

This report provides a detailed analysis of IKEA's business strategy in Thailand, focusing on its operational changes and successful market penetration. It examines IKEA's business strategy, which targets a broad customer base with stylish, affordable products, and its corporate strategy, which emp...Read More

Running head: BUSINES STRATEGY OF IKEA THAILAND
BUSINES STRATEGY OF IKEA THAILAND
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Executive Summary
This report is based on the detailed analysis of the ways by which Ikea operates in Thailand.
The changes that have been made in the management of the company in Thailand has also
been analysed in detail in the report. The company has used different strategies of operating
in various areas of the world. The ways by which Ikea has operated in a successful manner in
Thailand has been analysed in the report in detail. The main point of discussion in the report
is thereby based on the successful operations of Ikea in the country. The report has been
concluded by stating that Ikea has changed its style of operations in Thailand.

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Table of Contents
Introduction....................................................................................................................3
Business strategy of Ikea................................................................................................3
Corporate strategy of Ikea..............................................................................................4
Acquisition and structure of Ikea...................................................................................5
International strategy of Ikea.........................................................................................8
Conclusion......................................................................................................................8
References......................................................................................................................8

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Introduction
Ikea was founded in the year 1943 by Ingvar Kamprad. The company started its
operations in the industry by selling various products like, pens, picture, wallet, table runners,
jewelleries, watches and nylon stockings. The furniture based products have been introduced
in the product line of the company in the year 1953. The first store of the organization was
opened in the year 1958 in Sweden. Ikea has been able to become the largest retailer of
furniture and furniture based products in the world. The company has more than 300 stores in
greater than 35 countries of the world. The organization has opened 12 stores in the various
areas of Thailand. The contract based on the production of the company was formed in the
year 2008 which was worth 15 billion baht. The contract was signed with a furniture maker
and the supplier named SPS Group. The operations if Ikea were started in Thailand in the
year 2011.
The report is based on the analysis of the various aspects of the organization which
include, the business strategy, the corporate strategy, the acquisitions and the structure of the
company and the international strategy that has been used by Ikea in Thailand.
Business strategy of Ikea
The business strategy of Ikea is based on targeting a majority of the people who
belong to a certain country. The positioning strategy is at the heart of the entire strategy that
has been implemented by Ikea in Thailand. The products of the organization are mainly
targeted towards the young customers who are interested in stylish products offered by the
company. The operations of the company in the have been based on the limited areas of
customer service and the self-selection of the products by customers. The manufacturing
costs of the company and the modular design of the products are also a major part of the
business strategy that has been implemented by Ikea in the market of Thailand. The

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experience that has been provided to the customers of Ikea was based on the major
philosophy of the company (Andreeva and Kianto 2016). The business strategy that has been
formulated by Ikea is mainly based on the concept of the company. The main concept of the
organization is based on providing the range of the home furniture related products which are
affordable for many people. The vision of the company has been achieved by the
combination of the functions, design, quality and the value that is held by the sustainability of
Ikea. The concept and the strategy of Ikea is present in all the parts of the company which
include, the designing, sourcing, distributing and packing (Chen, Delmas and Lieberman
2015). The main points that are considered to be the integral part of Ikea’s strategy include,
offering lowest prices to the customers which has helped the company to create a competitive
advantage in the industry. The huge variety pf the products that are offered to the customers
also form the strategy that is used by Ikea in the retail industry.
Corporate strategy of Ikea
The major corporate strategy that has been used by Ikea in the various areas of its
operations all over the world is based on globalization of the company. The corporate
strategy of Ikea has been mainly determined by the competitive advantage and sustainability
in the future competitors of the company. The globalization strategy of Ikea has been used in
the countries like, China and Thailand. The first part of the corporate strategy implemented
by
Ikea in Thailand is related to the joint ventures that have been formed with the local
companies (Durand, Grant and Madsen 2017). The second part of the corporate strategy is
based on the ways by which the company aims at suiting with the local culture of the area
where Ikea has its operations. The third and last part of the corporate strategy of the company
is related to the pricing strategy which helps the organization to compete with its rivals in the
market. The furniture industry of Thailand is considered to be the strongest in entire

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Southeast Asia. The country has thereby aimed to become the furniture hub of the in the
entire region with the help of the superior quality of the production, elegant and innovative
style of the products that are offered by the various organizations in the market (Engert,
Rauter and Baumgartner 2016). The Thai furniture industry consists of many players
including, S.B. Furniture, Index Living Mall, Rockworth, Modernform and Maxima. The
international players in the furniture market of Thailand are mainly, Dongha, Garant Moebel,
Habitat, Mobilia Flexy Living. The segmentation of the furniture market of Thailand is based
on three major parts which are, high end, low end and medium. The high end based furniture
market of Thailand is mainly based on imported products (Frynas and Mellahi 2015). The
medium furniture market of the country is based on the local brands which include the
international and domestic products. The low end market is based on the imported furniture
which are not identified under any brands. This market has thereby posed a challenge towards
Ikea and its operations in Thailand.
Acquisition and structure of Ikea
The major operating process of Ikea in the market of Thailand was based on the
franchise based systems. The company has further joined its operations with a local company
of Thailand. The organization has entered the Thai market in the year 2011. The company
with which Ikea has joined its operations in Thailand is Siam Future Development and
Ikano. The two companies will own 49% of the total share in the market in Thailand. The
major part of acquisition process of Ikea in Thailand is related to the ways by which the
company needs to acquire land in various areas for the purpose of building their stores (Hill,
Jones and Schilling 2014). The process of land acquisition in Thailand is quite tough. The
company has acquired areas in which they wish to open the stores of the company. The
growth rate of the company in Thailand has been around 6% with the help of the structure of
stores that have been applied by the company in the recent years of operations in the country.

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The political situation of the country has not been able to affect the operations and
profitability of Ikea. The booming market of the country has been able to provide huge
opportunities to Ikea regarding the ways by which the company can operate and further
increase its profitability in Thailand (Hubbard, Rice and Galvin 2014).
The organizational structure that has been implemented by Ikea has been quite unique
in nature. The structure of the company has been able to provide huge opportunities for
growth to Ikea. The various franchisees of the company that operate all over the world are
controlled by the central headquarters of Ikea. The operations of the company are divided
into two parts which include, the Inter Ikea Group and the Ingka Group. The domestic
operations of Ikea are controlled by the Inter Ikea Group and the international operations are
taken care by the Ingka Group. The founder of both the companies is same and Ikea has been
able to create a good position in the market with the help of successful operations in the areas
all over the world (Meyer, Neck and Meeks 2017). The organizational structure of Ikea had
gone through huge changes in the year 2016. The main aim behind the restructuring initiative
was based on the improvement of the franchises of Ikea in the different areas. The company
had planned to increase its flexibility of business with the help of restructuring the entire
structure. The structure of the company can thereby be classified as hierarchical which
reflects the huge size of the business in the various areas of its operations. The company has
its operations in more than 28 countries in the world. The hierarchical structure of the
company has led to many serious shortcomings which has an issue for the profitability of
Ikea in the industry (Michael, Storey and Thomas 2017). The quality of communication
between the management and the employees had become low due to which the decision
making process had been affected in an adverse manner. The restructuring of the operations
of Ikea had thereby led to the increase of decision making speed and had reduced the
shortcomings in the organizational profits. The organization had implemented the process of

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sourcing the raw materials that are required for its products in the different areas of its
production. The same concept had been used by Ikea to operate in a successful manner in the
operations in Thailand (Morschett, Schramm-Klein and Zentes 2015). The usage of the local
manufacturers had reduced the costs of the production and the products that were
manufactured had been based on the local feel that is provided to customers. The customised
designs of the products had been the main unique quality of Ikea. The customers of the
company in Thailand had accepted this concept which had further led to the increase in sales
of the company within a short period of time. The low costs of the company have further led
to the increase in the revenues and profitability. The recruitment structure that is followed by
Ikea is different in various countries. The company thereby aims at developing entire new
methods of recruitment in the different areas (Popkova et al. 2015). The marketing based
structure that has been developed by Ikea in the different countries of its operations is also
different. The organization had first entered the Asian market by starting its operations in
Japan. China and Japan had proved to be the major market areas of Ikea in Asia. Following
this the company had entered the market in Thailand. The origin of the country was not able
to affect the ways by which it operated in the market of the other countries. The policies that
were followed by Ikea was totally different as compared to the ways of operations in the
other areas or countries in the world (Sakas, Vlachos and Nasiopoulos 2014). The corporate
structure that is followed by Ikea is divided into two major parts which are, the franchising
and the operations. The major functions of Ikea which include its ways of operating and
franchising. The operations of the company which include, the management of the stores, the
designing and then manufacturing of the products. The entire management based system of
the stores are controlled by the management of the company in a centralised manner. The
foundation is thereby managed by a team of five members which is also controlled by the
founder of the company. The stores of Ikea need to pay a fee of around 3% on the entire sales

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that is gained by the company in the market (Shah et al. 2015). The similar design of the
stores of Ikea like that in the other countries had an adverse effect on the revenues of the
company. The customers were not attracted towards the operations and the organization and
Ikea thereby had to face loss of sales in the Asian operations. The company had to thereby
change its way of operating in Thailand which is a major part of the Asian market of furniture
and other products. The designs of the stores of Ikea in Thailand were changed based on the
taste and the preferences of the customers (Simon, Fischbach and Schoder 2014).
International strategy of Ikea
The international strategy of Ikea has been established based on the wide network of
suppliers that is maintained by the company all over the world. The major strategy of the
company in all the areas of its operations is related to the customization of the products that
are offered to the customers. This helps the company to create products that are based on the
local choices and the ways by which the customers prefer their furniture. The network of the
suppliers of the company is quite complicated and Ikea has always aimed at creating a
sustainable supply chain network which can help the company in achieving its goals all over
the world (Slater 2015).
Conclusion
The report can be concluded by stating that Ikea has been able to create its unique
position in the market with the help of various innovative strategies that have been
implemented by the company in its domestic and international operations as well. The
analysis in this report is mainly based on the operations of Ikea where the company had to
change its store format for the purpose of achieving the desired goals. This has further been
helpful for the company to achieve the goals and objectives that has been set by Ikea.

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References
Andreeva, T. and Kianto, A., 2016. Does strategic management of knowledge matter for
organizational performance? An empirical test. In Academy of Management
Proceedings (Vol. 2016, No. 1, p. 17898). Briarcliff Manor, NY 10510: Academy of
Management.
Chen, C.M., Delmas, M.A. and Lieberman, M.B., 2015. Production frontier methodologies
and efficiency as a performance measure in strategic management research. Strategic
Management Journal, 36(1), pp.19-36.
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic
management research and the quest for integration. Strategic Management Journal, 38(1),
pp.4-16.
Engert, S., Rauter, R. and Baumgartner, R.J., 2016. Exploring the integration of corporate
sustainability into strategic management: a literature review. Journal of cleaner
production, 112, pp.2833-2850.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hubbard, G., Rice, J. and Galvin, P., 2014. Strategic management. Pearson Australia.
Ikea.com. (2018). Home - IKEA Thailand - IKEA. [online] Available at:
https://www.ikea.com/th/en/ [Accessed 30 May 2018].

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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.
Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic
management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset,
pp.45-65.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international
management (pp. 978-3658078836). Springer.
Popkova, E.G., Abramov, S.A., Ermolina, L.V. and Gandin, E.V., 2015. Strategic
effectiveness evaluation as integral part of the modern enterprise management. Asian social
science, 11(20), p.16.
Sakas, D., Vlachos, D. and Nasiopoulos, D., 2014. Modelling strategic management for the
development of competitive advantage, based on technology. Journal of Systems and
Information Technology, 16(3), pp.187-209.
Shah, S.T.H., Jamil, R.A., Shah, T.A. and Kazmi, A., 2015. Critical Exploration of
Prescriptive and Emergent approaches to Strategic management: A review
paper. International Journal of Information, Business and Management, 7(3), p.91.
Simon, D., Fischbach, K. and Schoder, D., 2014. Enterprise architecture management and its
role in corporate strategic management. Information Systems and e-Business
Management, 12(1), pp.5-42.
Slater, S., 2015. Leadership Style & Strategic Management: An Analysis of Hierarchical
Influence. In Marketing Dynamism & Sustainability: Things Change, Things Stay the
Same… (pp. 135-135). Springer, Cham.

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