Strategic Plan Analysis: IKEA's Business Strategies and Issues

This report provides a comprehensive analysis of IKEA's strategic plan, beginning with an executive summary and an overview of the company's mission and vision. It identifies key strategic issues, such as maintaining competitive advantage and adapting to changing market preferences. The report critically reviews IKEA's current strategies and proposes solutions, including the Blue Ocean strategy and decentralization of the organizational hierarchy. It discusses the advantages and disadvantages of each strategy, ultimately recommending decentralization as the preferred approach. Furthermore, the report addresses implementation issues and offers recommendations for resolving them, covering financial and strategic benefits and providing insights into organizational hurdles and execution strategies. The analysis is supported by references to academic research and industry best practices.

RUNNING HEAD: Strategic plan
Strategic plan

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Executive summary
The report is going to discuss on Business Strategic Management and Planning in IKEA, one
of the giant furniture stores with headquarters in Netherlands. The first part depicts the
mission and vision statement of the IKEA and also highlights the strategic issues it is facing
in present and which need to resolve. In the second part of this assignment, the Business
strategies adopted by IKEA are critically reviewed. The strategies adopted to resolve the
issues are Blue Ocean strategy and Decentralisation of the organizational hierarchy. Then the
core advantage and disadvantages of both the strategies are discussed. After analysis, the best
strategy for the strategic issue is discussed. And in last part implementation issues and
recommendation for solving the issues of strategy is analysed.

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Table of Contents
Executive summary...............................................................................................................................2
Key strategic issues IKEA is facing..........................................................................................................4
Current strategy and link with mission and vision.................................................................................4
Proposed strategy for strategic issues...................................................................................................5
Blue ocean strategy:..........................................................................................................................5
Advantages of Blue Ocean strategy:..............................................................................................5
Implementing Blue Ocean strategy by IKEA...................................................................................6
Disadvantages of blue ocean strategy:..........................................................................................8
Decentralization................................................................................................................................8
Advantage of decentralisation...........................................................................................................9
Ways to implement decentralisation effectively...........................................................................9
Disadvantages of decentralization:..............................................................................................11
Recommended strategy for strategic issues........................................................................................11
Decentralisation is preferred because of following reason:............................................................11
Financial and strategic benefits which can be achieved..................................................................13
Decentralisation implementation issues.............................................................................................13
Issues effecting implementation of decentralisation.......................................................................13
Resolving implementation issues:...................................................................................................14
References...........................................................................................................................................16

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Key strategic issues IKEA is facing
• The issue which the organization is facing is that it turns out to be gradually bigger there
is a threat of the influences with the company culture getting thinner. The culture inside a
business is imperious, supposing a larger role, whether the association is an exultant and
healthy place to work. It leads staff what to do and what not to do, comprising practices,
qualities, and conventions about their work. Because of the absenteeism of hierarchical
culture, it can have an effect on various outcomes, including organizational efficiency that
prompts dissatisfaction of the organization performance in upcoming time.
• Another issue IKEA to manage the brand well has difficulty in maintaining the
competitive advantage because of growth of imitation. Since IKEA is arriving into new
markets in various countries to enlarge its chain, the proposals need to be modernized
because unlike customers in different countries have various preferences that might reduce
the demand if constantly selling same designs.
Current strategy and link with mission and vision
IKEA vision is to generate an improved daily life for the various people. Their
business strategy supports this vision by proposing a wide choice of elegant, stylish,
functional household furnishing products at lowest prices that will entail many people as the
possible will to afford them. The vision and mission decided by IKEA by adopting various
strategic analyses to improve its cost of production and enhanced productivity (Lindic,
Bavdaz, & Kovačič, 2012). The present strategies like porter five force models are analysing
about how the organization is facing its competitors and gaining the advantage over. The
value chain helps IKEA in finding the resources and advantages available with the company
and how these can be used by the company in achieving its mission of low-cost products by
reducing production cost. And SWOT analysis is enhancing the internal strengths to achieve

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the mission and vision with resources available. It is also helping in seeking various
opportunities that IKEA can avail and overcome the weakness in its structure. The threats
which company is facing also can be overcome by adopting low-cost techniques to retain
customers.
Proposed strategy for strategic issues
Blue ocean strategy:
IKEA can adopt blue ocean strategy in order to remove the strategic problem.
Definition: Blue Ocean Strategy is applied by organizations across their different business
sectors. It is not restricted to only single business but on the complete organization. When
there is limited room to grow, industries attempt and search for verticals or opportunities of
discovering new business where they can appreciate unconcealed marketplace share or 'Blue
Ocean'. A blue ocean occurs when there is the possibility for higher incomes, as there is no
rivalry or irrelevant competition.
Advantages of Blue Ocean strategy:
It is a Worth Innovation Strategy which competes in a recognized marketplace. It is
also a Combination Strategy which enables pursuing differentiation though monitoring costs.
The strategy signifies the immediate search of high product differentiation and low cost, thus
creating irrelevant competition. It is successful because it appeals large numbers of customers
while raising the cost of competition. It supports the business in making vast profits as the
product can be valued at little steep due to its unique features. The blue ocean strategy is
founded on continuous quest of differentiation as well as loss cost. It is also an “and-and
strategy” rather than “either or” kind of strategy. The strategy objective is to create the
rivalry inappropriate by rebuilding business borders. It also offers systematic tools and
outline to disrupt the competition in market and develop an unconcealed market area. It also

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creates IKEA resources of analytical tool and guideline to proficiently achieve target. It also
assesses the current role of company in market and then providing complete guide of 6 steps
to achieve new position in market beating competition. With the combined methodology,
Blue Ocean strategy displays the way to align to three approach proposals—value, benefit,
and individual ensuring IKEA is allied to new target and it also develops a victory for
consumers, the business and for workers and sponsors.
Implementing Blue Ocean strategy by IKEA
Restructure market borders – in a Blue Ocean strategy IKEA should evaluate the locations
that form the business’s expectations and outline IKEA’s business model (Posen & Levinthal,
2012). The simplest way to restructure market borders is to plan about an idea which can
improve the competitive advantage. As IKEA is facing competitive advantage so it should
increase its market area by entering to the new market with proper planning and strategy.
That does not only lead to the expanded value chain, but also into completely new markets
(Goodarz, Samin & Navid, 2012).
Focus on the big picture – IKEA should focus the eye on the overall vision and should not get
lost in the figures. Several corporate strategists get lost in the statistics; therefore often they
miss where they were and their rivalry is heading. IKEA should think customers’ needs and
demands. This will help IKEA in recognizing how it can provide successful results to the
customer. This can help IKEA to launch new products with ease by having the update of the
current trend in the market (Cirjevskis, Homenko & Lacinova, 2011).
Reach beyond existing demand – Industries generally focus on present customers, a
procedure which invariably takes to superior market segmentation analysis. But, actual
growth lies outside current demand. IKEA should put its efforts in order to recognize or
analyse the demand which in future can be asked by the customer. As IKEA’s highly focused

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pattern of product portfolio increases the effectiveness of brand identity with positive
implications on consumer loyalty (Kim & Mauborgne, 2005).
Get the strategic sequences right – Companies should execute strategy successively to attain
value innovation. To be convincing, the technology must provide expediency and safety.
IKEA for removing issues should focus on customer life to make it comfortable with its
products. IKEA should access its services and product effectiveness, luxury, convenience,
protection, and environmental friendliness. This helps IKEA to access all factors which
affects the customer upon purchasing it, carrying it home and disposing of it.
Overcome key organizational hurdles – Successful implementation needs that organization
should resolve inner departmental differences. IKEA should resolve and remove the key
organizational hindrances which are stopping it from performing well. If IKEA is having
some issues also then it should then it should affect the performance of the company in eyes
of customer. IKEA should not let inner politics, bureaucracy or other hindrances develop in
the middle of providing flawless customer experience every time.
Build execution into strategy- Companies should reduce management danger by integrating
Blue Ocean implementation into company’s current procedures. IKEA upcoming product
should teach public to think extraordinary all the time and make assure that they are
empowered to improve the processes (Chan Kim & Mauborgne, 2005). If IKEA does not
shape the performance of great customer experiences part in organization’s strategy, then the
employee will never do it. IKEA should consider and learn from other companies which are
small but performing extremely excellent in serving customer experience (Parvinen, et al.,
2011).
To prosper in Blue Ocean strategy, an important innovation must prove real investments and
a considerable profit that a customer can use directly. IKEA has to be capable to complete the

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requirements of consumers constantly every time. The notion of Blue Ocean strategy is to
develop new businesses where nothing was present before and the best way to do is to start
rationally about procedures from the consumer point of view.
Disadvantages of blue ocean strategy:
The Blue Ocean Strategy as a whole seems not very compatible toward fostering the kind of
inspiration that is desirable for rising unique strategies. Furthermore, the framework also
reduces the creativity by proposing approach making is a numerous choice exercise. The only
chances would be to go for low costs, high differentiation or a niche. Another disadvantage of
Blue Ocean is implementation if not effected properly will lead to market complicacy. This
will again take organization top backstage rather than innovation and growth. It also becomes
red ocean strategy at the time of implementation. Many a times blue oceans decided by
companies are not popular in market or demanded by consumers. It is also observed that
being after creating new innovative idea launched by company, customers is not ready to
accept it or purchase it. In that case rather than solving competitive problem, companies faces
new problem of failure of newly developed products (Upadrista, 2015). More problems occur
for companies when organization directions need to be changed in accordance with new
target. This creates internal problem like employee resistance to change, lack of guidance,
budgetary issues and many more.
Decentralization
Definition: One of the vital issues to be chosen by the administration of a business concern is
that how much authority to be concentrated in the hands of best supervisors and the amount
of it ought to be appointed to the chiefs at lower levels. At the end of the day, it is an issue
worried about the level of decentralization (Lyons, 2016). Nonetheless, it might be noticed
that it is not important to decentralize every single administrative action. IKEA can
decentralize the sales service in the organization while the staff capacity may not be

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delegated (Yang, 2013). IKEA may delegate more prominent level of decentralization while
some others may have less of it. The IKEA can also choose to decentralize routine and
repetitive responsibilities that subordinates at the junior level can carry out without many
directions from supervisors. This would enable IKEA managers to focus their attention on
strategic and important issues.
Advantage of decentralisation
Decentralisation creates development of the managerial employees. Because as the company
grows in dimensions, it will necessitates the capabilities and skills of a huge amount of
directors and decentralization offers a training ground for the upcoming managers. The
directors acquire the skills by knowledge inside the business concerned. Decentralisation also
satisfies the human needs. It is a significant method for fulfilling employee’s desires of
control, individuality, position and respect. This type of accomplishment helps in developing
a team of fulfilled directors, who will feel their sense of responsibility in the direction of
company’s target. The decentralization will help IKEA in taking quick decision-making of
problems occurring at hierarchical level.
Ways to implement decentralisation effectively
Develop initiative among subordinates:
A delegation of authority by IKEA at central and lower level will build the trust and
confidence of upper authority in their subordinates and this belief and reliance encourage the
workers employed at various levels as they are permitted to take decisions without seeking
the approval of superiors (Fatke, 2016). This will help IKEA to resolve the hierarchical
structure problem it facing in present so adopting decentralization can benefit it.
Create administrative ability for future:

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In the decentralization administrators working at lower and centre level additionally take in
the art of decision-making (McElheran, 2012). IKEA structural problem of organization can
be resolved by delegating the powers to juniors. They get the experience of performing
exercises of best administrators and figure out how to deal with the expert given to them. So
decentralization process readies the administrators working at lower and centre level to play
out the assignment of best level. IKEA will be having future managers prepared by adopting
decentralization.
Quick decision process:
In the decentralization procedure, basic leadership is not confined to few hands just but rather
basic leadership control is endowed to every one of the directors who is taking activities or
playing out the exercises (Slava & Hapak, 2016). The decentralization will let IKEA take
quick decision-making of problems occurring at hierarchical level. The quicker decision
power enables a junior manager also to remove the defects in planning due to which IKEA
performance is getting affected.
Reducing overburden of management:
Decentralization eases the best officials of the burden of performing different capacities.
Centralisation of specialist puts the entire duty on the shoulders of an official and his quick
gathering. These will IKEA to diminish the time at the transfer of best administrators who
should focus on other imperative administrative capacities. Along these lines, the best way to
diminish their weight is to decentralize the basic leadership energy to the subordinates. IKEA
can be benefitted by decentralization as this will reduce the authority of top managers who
are overburdened (Indjejikian & Matejka, 2012).

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Disadvantages of decentralization:
Decentralisation places more burden on central heads to recognize incomes at any cost. Often
in meeting their new profit plans, bring clashes among supervisors (Zhao, et al., 2016). The
achievement of decentralization will depend upon the excellence of personnel operating the
distributed units. In many cases the training, understanding, and learning of the personnel are
insufficient then decentralization of delegating authority and decision-making would be
destructive for the enterprise. There will be wrong conclusions, misperception, and
contradictions (Ribot & Larson, 2013). IKEA hierarchical structure will suffer if
decentralization is not implemented efficiently. Decentralisation also fragments the company
structure. Due to this the units or departments which worked together in centralised structure
will lose their motive working like a team. This strategy many a times also brings the interest
if individual to priority rather than of company. The areas of business like productivity,
quality of customer service, willingness of individuals to perform for company will also
suffer. Moreover the innovative ideas which were freely rotating in companies may lose their
value and ideas will limit to individuals only. A major difficulty of a decentralized
organization is that company have to surrender a part of control. Company should put faith in
co-workers to continue to convey out company's vision and mission.
Recommended strategy for strategic issues
Decentralisation is preferred because of following reason:
Better workforce:
A powerful corporation culture in IKEA will be an influential recruiting point. Corporations
with an exposed participative workplace, where individuals appreciate working and have the
wide range of opportunities for progress and vision attract other people also to join the IKEA.
One of the measures of an outstanding work culture is that current employees will urge their
groups to join bringing more talent to the company. When workers do this, they are usually

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highly selective; engaging only people who they know will excel in the company (Becker,
Kugeler & Rosemann, 2013).
Motivation:
Motivation blossoms in a decentralized culture that identifies the employee’s individual work
needs and requirements and permits individuals to complete these needs through the
organization tasks. When employees talents are recognized and appreciated for who they are
and what they can add, the reciprocal welfares are large and never-ending. The motivation of
employees of IKEA will enhance their confidence level and they will be performing
according to the expectation of organization (Bannink & Ossewaarde, 2012).
Response to change:
A decentralized culture brings an outstandingly improved sincerity to transformation and the
desire of workers to make changes work. As belief and accountability increases, workers
don’t just initiate important progress in current procedures; they aggressively reach out to
their surroundings, conveying development concepts and enterprises that make the
corporation further market reasonable. For example, IKEA customer service representatives
through casual discussions with the customer should learn about abundant deal fulfilling the
customer’s needs and strategies. In a powerful culture, these facts are efficiently connected to
advertising and product expansion (Packard, 2017).
Help in merger and acquisition:
Decentralised and improved cultures help in bringing smoother mergers and acquisitions,
with greater accomplishment rates. Individuals get more involved during the merger and
make everyone to work (Pasmore, Woodman & Shani, 2010). And when an enhanced culture
attains a less established culture acquiring then supervisors recognize how to lead the culture