Global Strategy Presentation Handout IKEA Case Grenoble Ecole de Management BIB Group B 26-11-2015
Global Strategy Presentation Handout IKEA Case Grenoble Ecole de Management BIB Group B 26-11-2015
Global Strategy Presentation Handout IKEA Case Grenoble Ecole de Management BIB Group B 26-11-2015
Presentation Handout
IKEA case
26-11-2015
Introduction
Known for its minimalist Scandinavian design and low prices, IKEA is a
global furniture retailing giant that hosts 410 million shoppers a year in over
27 countries worldwide, boasting pre-tax operating profits of $1.7 billion (FY
2005) while keeping prices competitive.
Stakeholder Analysis
The company works with trade unions, organizations and other companies
sharing idea and cooperating to achieve greater success. Moreover IKEA
cooperates with several domestic and international stakeholders.
1. Identify stakeholders:
When choosing the board, and possible stakeholders the first step is to
brainstorm a group of individuals that could be stakeholders in your project.
Selecting a group that could work in harmony is difficult, however it is
crucial.
Some of the trade unions IKEA works with are BWI, which is a Global Union
Federation of democratic and free trade unions, and BSR, a global non-profit
organization that helps member companies to achieve success while
respecting people.
IKEA also works as a franchise, therefore its stakeholders are divided locally
depending on the concrete shop. The IKEA Group and all other IKEA
franchisees pay a franchise fee to Inter IKEA Systems B.V.
Competitors: IKEA has a very specific target, and a good strategy (hybrid)
meaning it is hard for other companies to compete with them.
Government: This are factors that change depending on the country IKEA is
in. However the headquarters and registration is settled in the Netherlands
so their main regulations follow this counties governance.
STEEPLE/C model is a strategic tool which expose the different factors that
can affect the environment of an organization. The acronyms represents
political, economic, social, technological, environmental and legal factors
that impact on a business.
IKEA revenues are subject to a wide range of social factors concerning the
environmental issues.
Nowadays, more and more people feel concerned about environmental
issues, mainly about the deforestation, the global warming or even the lack
of water... And IKEA uses every year 1% of the world's wood to build its
furnitures (it is currently the third-largest wood consumer in the world), and
according to the World Bank, all logging are not legal. Any important
companies like IKEA are expected by stakeholders, governments and
customers to behave in an eco-responsible way about the environmental
issues which concern all of us more and more. Mainly when their activity
implies logging and has a direct or indirect impact on the air pollution, the
global warming. Non supporting those causes and neglecting of this
environmental factors can for sure give a bad image of the brand and impact
on its revenues. Moreover, quite important climate changes forecasted in
certain regions of the planet could impact on how IKEA operates and the
products offer. We have already figured out that wooden furniture are
subject to damages when they are exposed to a climate change.
Ethics factors (trend to seek for lower possible prices to face competition,
increasing concern about labor conditions, deforestation)
IKEA brand image and revenues can be affected by ethics factors. Indeed as
the multinational company keeps seeking for lower prices to face
competition and satisfy its customers, they relocate manufacturing in low
labor cost countries. However, in some countries there is a risk of poor
labour conditions.
Moreover, more and more people and NGO fight against world deforestation,
and IKEA has been accused some years ago of logging old-growth forest in
Russia.
Analysis
Company holds:
· Tangible (machines, distribution centers, stores. And etc.),
· Financial (capital, cash and etc.)
· Human resources (mix of designers, suppliers, sales person from
different demographic backgrounds in different counties, 12 full time
designers 80 freelancers)
· Intangible assets (their adaptability, creativity and innovative
approaches, gained knowledge and experience, competence to deal with
customers and suppliers, and etc.)
Since 1943 company goal is to expand, correspondingly the one of the main
challenge is to sustain threshold capabilities in each market it operates.
To achieve this company constantly tries to reduce cost improve efficacy and
seeks for more innovative materials, and designs, what is the most
important customize product and make them sell better in a given market.
Competitive advantage:
company develops its capabilities as a global retailer by adding value to the
supply chain (thoughtful product design, local sourcing and low-cost
distribution). Constructing a low-cost business model that enables
consumers to reap the benefits and maximize satisfaction. Cohesion gained
through unique corporate culture with the help of training and coaching
motivating and guiding.
· Characteristic ambiguity as well as linkage ambiguity of the company
makes it difficult for competitors to imitate.
· It is apparent that IKEA chose to pursue cost leadership as their
strategy to be its attractiveness.
· Wholly-owned subsidiaries in order to maintain their brand image.
· Well-developed company culture
· Design the price tag first and then develop the product to suit that
price.
· Learning on failures and mistakes.
· Well designed, encouraging infrastructure of the store, accessorized
displays,
· Advertising, marketing campaign, giving awards and recognition to
best-performing store and employee
· Constantly working on new product development, design, cost
reduction, effective marketing strategies.
· Anti -bureaucracy tendencies and steely competitiveness acting
ethically and maintaining corporate social responsibility
· Standardization of manufacturing furniture as well as customization of
product to the different market needs.
· Management integrity in all actions guided by vision and mission of
the company culture
COST Analysis
The company’s goal is to achieve cost efficiency as well as create affordable
contemporary designs for the masses. IKEA knows that their customers are
price-sensitive and thus their designs are centred around the objective of
keeping prices low. With a standardized manufacturing process and
producing in vast quantities, IKEA also enjoys significant economies of
scale, where its fixed costs and overheads are spread over a higher volume
of output, lowering its cost per unit.
They have developed cheap and reliable supply chains, they try to have a
good contract with suppliers meanwhile the try to make suppliers enjoy the
agreement with them. Reciprocal profitability.
IKEA understand that improvements in capacity fill, product design and
labor productivity is very significant. Well-designed company culture as well
as qualified managers and designers are “going extra miles” to make
product as cost effective as possible. Flat-packaging is one of the most
significant issue. E.g. designer Chris Martin worked on creating dining chair
(with special features) for a year and a half. With the price 39.99$. 'Low
price but not at any price
Experience gained throughout its operation since 1943 is the main value of
the company.IKEA has developed activities ( product design, manufacturing,
transporting, retailing, and distribution.) which are the key resources of
company success, making modern furniture, manufacturing with low costs,
operating in variety of markets, having affordable prices targeted on global
middle class is the core competence of the company.
Value Train
Outbound logistics:
Trucks, boats and trains are used for distribution. IKEA uses two types of
delivery services: Parcel delivery and Truck delivery. On the other hand one
of the main feature of the company is that it uses unique kind of system of
transportation, as long as products are flat packed Transportation of
products can be done by customers. Customers select the furniture, retrieve
the packages themselves and take it home.
Service:
According to the chosen strategy IKEA has limited customer service (low
numbers of assistants) however IKEA has 100 day return service, loyalty
cards, provision of online cu telephone customer service, offering refunds
and exchange of goods. Company is always open to feedback.
Procurement:
IKEA suppliers and good relationships with them are among our greatest
assets. Purchasing co-workers builds win-win relations with competitive
suppliers who care about people and the environment. Efficient and reliable
production with high quality results and minimum waste are the basis for
creating the lowest price. Together we create optimal conditions and long-
term cooperation.
Technology:
They constantly develop products, seeking for cheaper and innovative uses
of unusual materials, they are searching for new trends needs and tastes in
various markets
HR management:
Company finds people as the main asset, they look after recruitment,
training, coaching and managing all the employees, transferring the main
competence and values to the staff for safeguarding and strengthening the
IKEA culture.
Infrastructure:
The have well developed planning quality controlling and information
management systems. Strong Corporate culture helps company to set
flexible as well as efficient structures and routines.
This option includes putting a lot more money and focus into research and
development. This will follow a more traditional approach, but attempt to
gain as much as possible from it. In this option we have decided to send top
designers from IKEA to live in some of the countries we intend to move into.
By actually being in these countries and talking to the people, IKEA will gain
a much greater understanding of these peoples wants and needs, as well as
many cultural and social differences. IKEA will also bring in top designers
from these other countries to help teach and train local IKEA designers. The
true goal of this option is to combine the experience knowledge gained from
traveling and living in this other countries, with the concrete knowledge
learned from their designers.
Suitability
“high”
Suitability is high because it is coherent with the aim of reaching out and
satisfy new customer segments whose needs were not matching with current
ikea proposing products. These measures will allow the brand to grow some
stores attendance and even open new ones in countries Ikea is not
implanted yet, which will result in a raise of revenues.
Feasibility
“medium”
There would be an increase in capital expenditures for the company due to
the hiring of more people with great competencies and knowledge from
different cultures, the differentiation of some products, but also due to the
deeper research and market tests. Moreover, figuring out what products has
to be adapted to new markets, finding great foreign designers to train and
collaborate with Swedish ones, and handling the production and distribution
of new products is time consuming.
Adaptability
“medium”
We then attempted to figure out what are the key competences and
capabilities of IKEA. (Pg.13) From this we concluded that IKEA was truly a
hybrid company due to their ability to continuously cut cost and
differentiate. We then used the TOWS matrix to plot out the key
opportunities and threats IKEA faces. From this we generated a list of key
strategic issues. We then chose to attempt to find a solution that would
prevent IKEA from getting stuck in the middle, and allow them continue to
operate as a true hybrid company. Though this is a two part problem,
consisting of cost strategy as well as differentiation, we decided to only focus
on the differentiation portion. Due to IKEA’s implicit knowledge with regards
to cutting cost we did not believe there was a need to create a plan for
sustaining this. Cutting cost has been something IKEA on has focused on
from their start. This is done time and time again because of the control
IKEA has over its whole manufacturing and distribution process. Even down
to how big each of their boxes are, “the good designers, the experienced
ones, they have this in their backbone,” said Mr. Dickner. He said “IKEA’s
designers use software that calculates optimal sizes and shapes, helping the
company avoid having to tweak designs or scrap ideas entirely because
they’re deemed too expensive to ship.” Once realizing all this we began
thinking of options to help IKEA continue to differentiate.
As stated earlier in this paper, our team came up with three
interesting options. Option one, which was to start performing road shows
where IKEA would take mobile show rooms to rural cities, surrounding
countries we intend to move into. This would allow IKEA to reach people who
would not normally be able to reach their main stores. Though this option is
good great for the reason stated above, it is even better for the information
we will receive by doing so. The intended purposes of these road shows is to
gain a better understanding of what the natives of these untapped countries
think about IKEA products. In addition to these road shows, IKEA will also
set up virtual stores within major cities. These stores again will be intended
to receive feedback on traditional IKEA products from locals.These two
services will really help IKEA to reach targets that have traditionally been
unavailable, and use their input to help them begin to create an
understanding of the culture and interests of these people.
Though option one will provide a lot of value to IKEA, we believe they
still to really differentiate themselves they will need to acquire more in-depth
cultural knowledge and advice. Therefor we believe they should also
implement option three. This option includes spending more money on R&D
in the form of sending top IKEA designers to live in foreign countries and see
firsthand what their houses are like. It would also include bringing in top
designers from these foreign countries into IKEA to help teach and train
IKEA designers. We believe this perfect combination will allow IKEA to apply
the firsthand knowledge and experiences they gain to the expert knowledge
provided by the foreign designers.
In conclusion, we have great faith based of the research we have done
that, if IKEA implements options one and two stated above, they will then
obtain a truly genuine and useful understanding of the differences in cultures
and lifestyles between the countries they operate in. This knowledge
combined with the proven ability to find ways to cut costs time and time
again will
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