Why We Still Love IKEA - Case Study Example

Case study analysis “why I love IKEA” Background of the study IKEA Company is an international based organizationthat deals in the manufacture and distribution of furniture some of which include chair, beds and office desks among other domestic accessories. The organization has gained popularity as one of the leading furniture manufacturers globally. The organization was founded in early 1940, but it has since grown to over 35 countries with a customer margin of not less than 500 million buyers annually. Despite being initiated in Sweden, the organization has established numerous outlets in different countries as part of the diversification strategy so as to achieve the organizational competitive edge (Coombs & Holladay, 2012). Merits of IKEA’s diversification strategy based Bowman’s Strategy Clock According to Kwapong (2005), IKEA’s diversification strategy has been characterized by a direction and a scope targeting long term achievement through configuration of resources for manufacturing of the best furniture to fulfill the expectation of the customers. As clarified in the above case study, it is very clear how IKEA has implemented the Bowman’s Strategy Clock model together with the diversification strategy effectively through organizational activities. From an organizational perspective, IKEA Company has diversified into production of varied types of types of furniture stationed at different outlets across the world (Verbeke, 2013; Plunkett, 2008). As such, it has been possible for an organization to charge affordable cost on organizational products while still able to meet the market demand. Using the Bowman’s Strategy Clock, the case study has pointed out that the company communicates the organizational contents while encouraging the customers to adopt the concept of building IKEA’s brands in the market. Advantages of IKEA’s business strategy With the adoption of perceived value characterized by low pricing, IKEA Company has gained popularity in different outlets thus achieving the organizational competitive advantage. As such, it has embraced the Bowman’s strategy clock as a framework for achieving more edge against various competitors in the furniture industry. As mentioned below, IKEA has incorporated varied directions as part of the strategy to ensure that potential customers receive a more affordable pricing in the market clarifies (Thomson, 2009). Low price/ low added value Based on the In Doyle (2011) clarification, IKEA Company has never chosen to compete in the furniture trade. As such, it has embraced the concept of bargain basement since some of the organizational furniture has not drawn the element of differentiation in Asian countries. However, IKEA has won customers loyalty through the development of spectacular furniture that attracts the attention of most customers towards making purchases. Besides, the organization has put in place a lot of effort towards the sustainability of quality in position of pricing as an aid to convince customer’s loyalty in making purchases hence convincing the sustainability. Low price Through low price strategy, the organization has ventured into selection and manufacture of products with low-cost leaders. From the case study it has been pointed out that IKEA Company has incorporated low pricing strategy as a cornerstone of the business sustainability (Chiriki, 2010). That basic thinking of the managerial strategy is producing well-designed furniture to attract more customers hence able to win in a competitive business environment. Moreover, the organizational low pricing strategy improves sales returns to the organization. Hybrid strategy Following the Bowman’s clock model, the case study confirms that communicating the content of the product encourages customers experience with IKEA products. Therefore, it is through a joint effort the IKEA’s stakeholders and the customers that that the organization has built brands. Most of all, the company’s brand has been characterized by both emotional and rational values leading to the association between the stakeholders and the organization. Such values have improved the reputation of the organization across the international boundaries as compared to the competitors (Chiriki, 2010). Differentiation strategy From the study, it had been confirmed that the organization adopted differentiation strategy right before it opened the British outlet. Since then, the company has managed to enhance the industry dimensions that are mostly recognized by buyers. Moreover, by embracing sufficient attributes in the market that are within the interest of customers, the company has gained a unique position against the rivals that are also dealing with the same line of products (Becerra et al. 2013). Focused differentiation Together with the cost leadership strategy, the organization has embraced various types of differentiated features hence drawing the attention of the potential customers. For instance, the organization has revolutionized the furniture through production stylish and inexpensive chairs mainly by sourcing for raw materials in countries where the labor cost is affordable. In addition, the organization has put in place sufficient strategies by locating outlets in various countries. As such, it enhances the proximity to customers while lowering the cost of pricing hence attracting the business sustainability (Becerra et al. 2013). How the Bowman’s strategy clock has affected IKEA Company Various points have been drawn from the case study to show how bowman clock theory has helped at improving the organizational sustainability towards achieving of the competitive advantage of Company. However, various loopholes and demerits’ have also emerged in the course of the adoption of the above theory leading to an interference of the reputation and low returns at some given point. For instance, the low pricing value has subjected the organization into a monopolistic type market. As such, the organization at one time concentrated into production of low-cost furniture that degenerated the innovative aspect of the business hence leading into production of furniture that are less associated with fashion trend (de Lemos, 2013). The aspect of differentiation that was also adopted with a positive intention to enhance the organizational sustainability met a stumbling block and disbanded the equation of production. From the case study it has been illustrated that the company concentrated in production different lines of domestic furniture hence it affected the real value of the products. Besides, the concentration in the Stockholm city drew the attention of someone of the biggest cartels who bought raw materials directly from the producers. It further opened up opportunity thus creating room for the organizational competitor Danish designers drawing much expansion in early sixties (de Lemos, 2013). Moreover, the discounting of payments certain outlets in different countries led to a reduction in quality value of some products hence it further the generation of low premiums. Analysis of IKEA Company using potters international strategy According to Ellram, et al. (2013) from the Industrial concept, it has been confirmed by potter’s international strategy how different forces and dimensions influences market demands in a competitive environment. From the potter’s findings, there is formative evidence that the structure of the industry competitive forces of the business environment determines the wins or loses of the organization (Rau et al. 2011). According to potters international strategy, the organization is considered as chain o activities consisting of various elements that influence performances in case of any situation. In relation to the IKEA’s international strategy, the following potter’s strategies have been implemented to enhance the organizational competitive advantage. Global strategy Despite the presence of barriers at the initial stages of the company initiation, IKEA organization fell into a wave of various global strategies so as to improve the competitive advantage in the furniture market. From the cases study, it has been pointed out that the global strategy formed part of IKEA’s success strategy (Ferrell & Hartline, 2008). Pointing from the past, the company’s success in the global arena has been characterized embracing managers who envision deep understanding of global business and dynamics associated with the global competitiveness. The case also points out that IKEA was initially a bit reluctant to indulge into the global trade fearing damages associated with furniture due to the shipping process and other forms of logistics. However, the Swedish company embraced customers in the international arena through the adoption of unassembled furniture that can be shipped easily and assembled upon customers’ delivery. Moreover, the organization lowered the cost of delivery by allowing for customers defecation on tastes and preferences depending on the origin including the United States and the United Kingdom (Ellram, et al. 2013). Multi-domestic strategy More similar to countries that are engaged to each other in terms of business, Swedish companies have never been left out. IKEA Company customizes each and every furniture product depending on the market. For instance, some furniture sold to China is designed to assimilate the Chinese cultural hence it brings am impression of the local culture of the Chinese community. Moreover, it draws much attention of potential customers that, further improves on the sales margin. Besides, the existence of varied initiatives in different countries, IKEA company expanding from Stockholm city to the rest of the countries in Asia and Europe simply to improve their competitive advantage. Besides, the company generated a low-cost supply in Poland that became the second-biggest supplier after China accounting for more than 30% of t5he total organizational return (Palepu, 2007). Meanwhile, IKEA has sustainable difference between countries that are believed to be smaller, but still sustainable to improve the economy of the organization. It has also been pointed out that through multi-domestic strategy; the organization has managed to improve the economies of scale while harmonizing and coordinating activities in different countries to foster the product development. Complex export strategy From the case study, it is very clear to note that export complex strategy forms part of one of the essential aspects of entrepreneurial activity. As such, IKEA has embraced the export strategy as an aid to accomplishing the entry into an already established furniture market with the already existing goods and services. Besides, the organizational act to venture into the export market has been characterized by international corporate venturing by the already existing companies in both the United Kingdom and Asian countries. With respect to complex export strategy, the organization has successfully managed to engage subsidiaries in the international arena with minimum coordination to the parent company in Sweden. Therefore, it has been able to meet the competitive edge in the international market (Zentes & Schramm, 2011). Besides, global export strategy has enable IKEA Company to be exposed to a variety of other international strategies including high-level and low-level adoption to the business environment. However, the organization has been met with the challenge of developing a specific strategy that ensures maintenance and flexibility to local, domestic business environment. Vogel (2005), explains that the existence of abundant profit associated with export extension. Therefore, the organization embraced the concept of cost leadership and differentiation to transfer competencies into areas that encountered a deficit of elegant furniture. Therefore, the organization successfully attained a competitive advantage. Moreover, IKEA’s move was meant for advanced economies in Europe; USA and Australia whose markets were more prevalent through differentiation of products and adaptation of various markets. Simple export With respect to simple export, all the organizational products are manufactured locally after which they are exported to other markets outside the national boundaries. From the cases study, it has been pointed out that IKEA Company was more hesitant to export the furniture product to the international market. The process was characterized by fear of damages that are likely to be sustained during the transportation process. However, the organization later adopted the manufacture of fixable furniture that can reassemble by the customers upon the delivery. The strategy has given the organization exemplary returns and improved sales margin in the international market across the world (Khanna, et al. 2010). Moreover, the strategy has enabled the organization to source for raw products and material that are needed for the production of furniture at an affordable price. Therefore, it does not only enhance consistency of the production process, it has also cut down the cost of production. With the variation in economies of different countries, IKEA Company embraced the concept of culture and lifestyle in their production process. For instance, the organizational venture into the Chinese and Japanese market was seen as a breakthrough towards the organizational sustainability in a very competitive environment. The development of the Chinese economy enhanced the market driving approach of IKEA Company thus attracting more customers to purchase IKEA products that revolutionized the value proposition. Ultimately, the developing economies in European and Asian countries were characterized by upcoming real estate’s thus that market for outdoor furniture continued to grow (Proctor & Roland, 2003). IKEA strategy is for sustainable success Since it was founded in early, Benn et al. (2014), States that it has been IKEA’s concern to ensure safety of both the society and the environment. Moreover, it has been the organizational vision to create a better life for all the societal members who are perceived to form part of the potential customers. The organization has responded to the sustainability by embracing different kinds of strategies as explained in the previous sections of the paper. However, all the strategies can be summarized into three basic categories namely; economy, society, and the environment. Economically, the organization has been engaged in bulk purchase of raw materials that has helped the organization to cut down the production cost by considerable amount of money. For the better part of the production process, the organization has been engaged into sourcing of most of its raw materials locally while designing the furniture locally and later exporting them. The whole process is done in a condition that that can be reassembled at the customers delivery point. As such, it has enabled the organization to reduce the cost of transportation cost for both raw materials and the already finished products. Ultimately, direct delivery of raw materials to IKEA Company has been a success since it reduces the cost of handling by reducing the load miles hence contributing to carbon footprint management (Edgeman & Eskildsen, 2014). Societal perspective Pointing at different kinds of organizations, Kandampully (2012), explains that the society does not only part with the values, but it also concerns the recognition to build a better future for the society. As such, the organizational adoption of the business landscape in the international level has brought various transformations including elimination of poverty in middle-class countries through bold plans and clear leadership. Through proper management mechanism, the organization has inspired most customers to embrace sustainable behavior that is steering up investments thus strengthening up the competitive advantage while ensuring that there is an improvement to the business opportunity. With the reduction of the energy footprints, IKEA has achieved the potentiality to improve energy efficiency by ensuring that there is proper utilization of energy within the area of the organizational operation. Therefore, it enhances significant investment in relation to energy consumption and efficient use in the future. Environmental sustainability Being a manufacturing industry that uses materials, it is the obligation of IKEAs management to ensure proper utilization and discharge of waste products hence ensuring a safe environment within the area of operation. IKEA’s environmental sustainability direction can be best achieved by ensuring that all the re-usable waste products such as veneer and chipboards are recycled. Alternatively, they can be made to manufacture other valuable products that are safer to the environment at a fordable cost. In essence, the organization may engage potential customers to return defective or already for refurbishment and resale of which, will ensure a reasonable amount of carbon emission into the atmosphere (Nattrass, 2009). Conclusion IKEA Company is a popular global brand that is engaged in manufacture and assembly of furniture with various outlets in different countries across the world. The paper has addressed how the organization different strategies to ensure it access both internal and external competitive environment. With the implementation of Bowman’s strategy clock as part of its diversification strategy, IKEA Company has received recommendable achievements in terms of resources and competitive advantage. Ultimately, it has been pointed out how the organization can adopt sustainable strategy for sustainable success. Reference list: Becerra, M., Santaló, J., & Silva, R. (2013). 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