Ingvar Kamprad - the Founder of IKEA Company - PowerPoint Presentation Example

IKEA case study in strategic management Introduction IKEA case study in strategic management Starting from selling fish in 1943, Ingvar Kamprad the founder of IKEA Company has managed to expand further his business to becoming the best international business company. IKEA is basically an acronym. I and K stands for Ingvar Kamprad, E and A stands for Elmtaryd and Agunnaryd, which are the names of the farm and village that he grew up. The setting up of IKEA draws back to the years between 1935 and 1946. This was the period when the prices of home furniture rose by 41% other than the other household goods. Having a vast knowledge in entrepreneurial skills, Ingvar took full advantage of the situation. IKEA is focused on producing good quality furniture at a lower price. This, he believes will transform the lives of many and help them live a better live other than selling expensive furniture which were to be bought by the rich people only. Working of IKEA model According to Magonelly, 2002 IKEA works in the building, distribution and selling of furniture in five processes; 1. Product and price; by the help of a price matrix, the product managers are able to determine any possible holes in the lineup of the products. They then come up with a final figure to be the price of the product made. This will ensure that the company does not go on a loss and retain the required amount. Prices are in three ranges which include high for the Scandinavian or sleek, medium for modern and low for the neo-traditional. The products made keep on changing depending on the demands of the customers and are tested for their quality. 2. Finding procedures; IKEA buys their resources from about 1800 in 55 countries (Magonelly 2002). The production package is searched by officers who vie to offer their suggestions. After a thorough scrutiny is when the settlements are reached. The products are distributed to all the stores in the branches. They make sure that a low price is maintained so long as they are of high quality. 3. Design and product; the products are designed by specialized, keeping in mind to maintain the demands from the customers. 4. Transport; transport takes place when transporting the goods from the factory to the stores where they shall be sold. On selling the items, the company provides packing facilities which includes carton boxes. In order for the furniture to be transported efficiently, IKEA transports items in joint parts to reduce space taken. 5. Selling; the furniture are finally sold to the consumers at the stores. These stores are large enough and have playing facilities for the children when their parents are buying the items. This gives the parents an ample time to buy the items they need. The organization of the IKEA is designed such that it meets the basic and normal activities of the day to day life. These activities include sleeping, eating, cleaning among other activities at home. IKEA model is mainly built on social responsibility (Johnson 1987). This is attributed by the environment in which Ingvar grew up in. Ingvar was brought up in Smaland, a province in the southern Sweden. Here, the environment does not favor other activities that may be possible channels for income. Example, the soil in this area does not favor the growth of plants and hence one is limited from venturing in the agriculture. This facts, made Ingvar to think of an innovative idea that would salvage the whole situation. At this point is when he started the furniture retail company. Globalization and Branding is not something to go by in IKEA. IKEA opened a lot of branches in various places. Ingvar did not only concentrate in one position but rather extended to different places by doing this, Ingvar expanded the business and thereby exposing it to other places. They needed to have a good image before getting into the ground. In Sweden, IKEA was well known for its good services offered to the customers, the good quality of its products and also the low prices of these goods that were all over the market (Johannes 2002). Reducing cost has been an agenda of priority in IKEA. Ingvar believed in reducing the total cost and saving the income got. On buying the items from IKEA, customers got a free delivery to their home. However, these items were transported in parts and joined to form the final furniture. By transporting this way, amount of space was reduced and hence the total cost was reduced in the contrary (Olsson 1996). The success of IKEA organization around the world is due to following factors: Globalization has been embraced more by IKEA this is the area where it realizes a lot of profits. However, when choosing the countries to develop a branch, a lot of factors are considered. They analyze whether the company will make profits and whether it will be received and embraced by the people of that particular place (Whittington 2001). They also chose the country on considering the needs of the people of that area and whether they are able to meet the demands and desires of the people of that area instead of just rushing to a place where you cannot meet the demands of the people (Thomson 1993) Another reason why IKEA have been successful is because of its brand. The brand strategy used displays a lot of information about the company. IKEA is popular compared to other companies. In Sweden, IKEA is known for its cheap and at the same time quality products. This will make the people to try out the products instead of going for expensive ones. The brand name has also been constructed using Swedish cultures which entails colors that are familiar to the people, majorly the colors of the flag, and also the Swedish furniture names. This creates a larger global market for these goods (Global Marketing 2008) IKEA, over the years have designed different models. These designs are also simple and not complex in their applications. The furniture made, capture the daily life and it therefore makes these items vital and necessities in every home. Their low prices provide markets for these items. However, despite all the successes IKEA has got some weaknesses which include the following; IKEA lacks factories; IKEA does not have their own factory. All their operations are given to other countries with low cost. “Cheap is expensive” will therefore be applied here. Most of the factories given the tender employ children to work in the factories since they will be paid low. If this will be exposed, the company will be tainted with a bad image which will have negative implications (Global Marketing 2008). IKEA, being the biggest furnishing company worldwide, requires adequate and plenty of wood for its operations. Getting a lot of wood for this purpose is a problem since it encourages deforestation. This means that the company will have to brush shoulders with the concern departments such as the environment. Most of the products from IKEA do not meet the demands of other people due to in availability of the resources. Most of the design from IKEA is the Scandinavian design yet other smaller companies have diverse in their design. Conclusion Ingvar has demonstrated a sense of hard work and good strategically planning. The challenges that Ingvar grew up with gave him an avenue to develop an alternative idea. The unique design of the furniture gives IKEA a constant market for the furniture. What provides the market more is the design of the furniture which is in Swedish culture? Other aspects also like the woods to be used in manufacturing these items pose great weaknesses since the IKEA will have to go against the laws of the environmental departments. References Freeman, R.,1984.,‘Strategic Management: A Stakeholder Approach’. Boston, Pitman Global Marketing,2008, ‘Global Marketing’ - IKEA Case. Internet; Grewal, L., 2008, Marketing’ Tata McGraw-Hill Publishers; Henry, M. & James, W.,1985, ‘What is strategic Management?’ New York Free Press; Johannes, Z., 2002, ‘IKEA International Marketing’ Sheffield University Press; Johnson, G.,1987,. ‘Strategic Change and the Management Process’, Oxford: Blackwell Press; Magonelly, Lisa,2005., How IKEA Designs Its Price Tags’. Retrieved 20th November, 2012. From; http://www.business2.com Olsson, J.,1996,. ‘IKEA of Sweden’, Retrieved 20th November, 2012 From http://www.geocities.com/TimesSquare/1848/ikea.html Publishing; Thompson, L.,1993, ‘Strategic Management: Awareness and Change’, University of Huddersfield Publishers; Whittington, R., 2001., ‘What is Strategy and What Does it Matter’? New York: Free Press; Read More