Professional Documents
Culture Documents
March 2015
INDEX
1. Introduction
2. Strategic Focus
3
3
3
3
4
4
6
6
7
8
8
8
9
9
10
5. Conclusion
11
6. Literaturverzeichnis
12
7. Reflective Diary
14
7.1 Introduction
7.2 Feeling Concrete Experience (Kolb, 1984)
7.3 Watching Reflective Observation (Kolb 1984)
7.4 Thinking Abstract Conceptualisation (Kolb 1984)
7.5 Doing Active Experimentation (Kolb 1984)
7.6 Conclusion
8. Bibliography Reflective Diary
14
14
14
15
15
15
16
Strategic Management
March 2015
1. INTRODUCTION
In the following essay I would like to carry out an analytic process about the firm IKEA by
pointing out the strategic planning of the firm IKEA in a first part by describing its possible
issues and choices. Strategic implementation and the consequent solution management follow
these, with the focus being the differences in prescriptive and emergent approaches. Secondly
I will demonstrate a detailed SWOT (strength-weakness-opportunity-threat) analysis of the
firm and point out a few comparisons to its competitor ARGOS, based in the United Kingdom
and finally I will assess the impact of the main aspects towards the current strategic direction
its organisational structure and the consequences to the firm.
This assignment combines theoretical aspects with practical issues frequently coming up
when strategic management is used in order to analyse a companys current situation and
possible future changes.
Strategic Management
March 2015
2. STRATEGIC FOCUS
A strategic focus is laid on the ideal combination of resources and opportunities in order to
achieve a constant competitive advantage and generation of a solid profit. A strategic focus
usually takes into account the following three to five years, sometimes up to ten, which is
called medium or long term future planning consecutively considering changes in the
competitive environment (Kaplan, 1996).
2 . 1 . 2
E M E R G E N T
A P P R O A C H
Ideas can emerge from personnel, usually from employees closest to the customers, external
consultants, or from a certain situation with its upcoming circumstances. The emergent
approach is more creative and constantly adjusted to the current reality, therefore implies a
short-term possibility of change. (eHow, 1999-2015) An emergent approach does usually
have vague aims however do not include structured final objectives, as they tend to vary with
time. (Lynch, 2002) According to Mintzberg and McHugh, business strategies can be
compared to weed in a garden. If a harmful weed is found, it needs to be removed whereas the
fruitful, promising ones should be encouraged and supported. (Peters, 2011)
2 . 1 . 3
C O M P A R I S O N
Both strategies imply a similar initiatory analyse of the environment, its resources and
stakeholders. The emergent approach however continues then with a learning process, which
is rather experimental and can emerge at any time at any position within a business (Lynch,
2002). The emergent approach reviews its objectives more frequently and can be adjusted
easily to upcoming changes or updates by adapting current circumstances in order to meet the
businesses objectives. (Capon, 2008) It is recommended tough to always involve a
prescriptive approach in a business plan because it shows the business situation of a given
business period in time with its main objectives (Kaplan, 1996).
Strategic Management
March 2015
Strategic Management
March 2015
Based on the IKEA sustainability report from 2013 IKEA has currently 135,000 co-workers,
EUR 27.9 billions of total sales and 303 stores compared to 76,000 co-workers and EUR 11.4
billions of total sales back in 2003. Compared to 2012, the number of co-workers has been
reduced by 4,000 people. The number of store visits has slightly declined as well, however
total sales overall still increased by almost one billion Euros. The SWOT analysis can point
out a few reasons to these shifts in numbers and demonstrate details about further possible
strategies and changes that can be made in consequence (B.V., 2013). IKEA constantly uses
its SWOT analysis, the most well known strategic planning tool (B.K, 2007). In order to
identify key issues, which need to be improved to secure a constant improvement. In the
following chapter I will point out the aspects of IKEAs SWOT analysis in comparison to
ARGOS, one of its main competitors within the United Kingdom.
Strategic Management
March 2015
3.2 INTERNAL
ASPECTS
3 . 2 . 1 S T R E N G T H S
Being the most valuable furniture retailer brand in the world according to Interbrand, IKEA is
valued at $ US 12.8 billion in 2012. This fact undermines the brand reputation and awareness
of the firm, which is one of its key strengths. Furthermore IKEAs cost consciousness is
known as another strength in comparison to competitors. (B.V., 2013) It started already back
in 1943 with the founders intention to optimise the costs of the products in order for
everybody to use them (Barthlemy, 2006). IKEA kept that philosophy until today. In order to
keep the costs down, IKEA profits from the incorporation of continuously new technologies,
innovations, and its concise knowledge of its customers, efficiency solutions and costeffectiveness in packaging, handling or transport materials (Insight, 2015). In combination
with low prices IKEA also offers an enormous range of products and next to furniture and
deco it operates restaurants, houses and flats (IKEA case study, 2009). All products are
undermined by constant new stylish designs and an extraordinary shopping experience with
its organised way through the masses, which induce consumer decisions. Different than other
brands that are providing a vast amount of products, IKEA leads its customers through the
products in an ideal chronological order, which helps avoiding the customer to be
overwhelmed. Similarly to its competitors IKEA is aiming at long-term relationships with its
customers and therefore tries to optimise transport time and cost (Insight, 2015) (Times,
2009).
ARGOS on the other hand is a national operating merchandising retailer, with 734 stores
within the United Kingdom. Thanks to its vast amount of stores, ARGOS follows a similar
concept of service concerning the supply chain with its storages close to its customers, which
makes it as easy as possible for its consumers to buy goods as well as very cost effective. This
leads to assume that the low cost and supply chain management are two shared strengths by
both firms. Additionally, ARGOS is also keeping lifestyle and design as its core value, since
the firm is operating on a national level though; it is highly probable, for ARGOS to keep
track of its customers taste and interests to be more convenient (MBASkool, 2011-2014).
Strategic Management
March 2015
3 . 2 . 2
W E A K N E S S E S
I will point out three currently great weaknesses of the Swedish firm: Weakness number one
is probably the negative publicity such as poor treatment of employees, lobbying or low
quality of products and services. Due to the great awareness of the firm, negative publicity or
word of mouth spreads quickly, especially thanks to the social media available nowadays.
According to an article by Verdict on the UK Customers view, the satisfaction with the
products has declined; customers claim that the quality has been decreasing over time,
(Insight, 2015) which initially is caused by IKEASs second problem; the need to produce at a
lot cost level in order to keep its attractiveness to customers. A third internal issue comes up
due to the firms size and scale. It is difficult to control standards, quality and a good
communication with its stakeholders in a global business, the greater the amount of locations
and stores, the harder to keep control. Additionally there are different legislations and
customs concerning working conditions in each part of the world (Times, 2009).
ARGOS in comparison has with its geographical dependence on the United Kingdom and
Ireland, limited possibility of market expansion. ARGOS is not specialised in furniture and
due to a high number of competitors within the United Kingdom, it can only reach out to a
limited market share (MBASkool, 2011-2014).
Strategic Management
March 2015
3 . 3 . 2
T H R E A T S
There are various external influences, which demonstrate a threat to the Swedish firm: Other
low cost retailers with a vast market share, for instance Walmart, Tesco, ZARA or ASDA,
start emerging into home ware specialists and therefore compete for market share.
Furthermore, the economic welfare situation is a constant factor to observe, would it suddenly
increase, the demand for low price goods would sink and it could be difficult for IKEA to fill
the gap. (Insight, 2015).
Similar threads to both firms, IKEA and ARGOS, would be a wage minimum by the
government or similar policies or regulations in the retail industry, or increasing labour cost,
which cannot be influenced by any business and is very likely to affect a firms finances
(MBASkool, 2011-2014).
Strategic Management
March 2015
4 . 1 . 2
T H E
I K E A
F R A N C H I S E
S T R U C T U R E
Owner of the IKEA Concept and Trademarks worldwide and being the worldwide IKEA
franchisor, Inter IKEA Systems B.V.; is financially independent in order to be secure and
improve overall continuous improvement and long life of the IKEA concept by following one
core division; the franchise plus the property and finance divisions.
The IKEA Group is representing the core values and strategies of IKEA by 100%. Torbjrn
Lf, head of the franchise division employs specialists in marketing, sales, logistics, design
areas and many more, in order to monitor the protection of the IKEA image and its perception
in currently over 360 IKEA stores in over 45 countries.
The property division, established in 1989, takes care of property investments on the long run
in order to create long-term value. Under the name Vastint, this division is not linked to the
IKEA Concept, they are managing portfolio properties, developing commercial real estate and
residential development and sales.
Last but not least, the finance division consists of an additional investment company Inter
IKEA Investments AB (Inter IKEA Holding, 2012). Each of the IKEA stores has to pay Inter
IKEA Systems 3% franchise fee, including the ones run by INGKA Holding (Inter IKEA
Systems (B.V.), 2014).
Strategic Management
March 2015
FOLLOW STRATEGY?
10
Strategic Management
March 2015
5. CONCLUSION
A combination of both, the prescriptive approach of having a quality product and offering at
a low price as a competitive advantage, and emergent approaches such as keeping track of
current designs and styles by quickly adapting them continuously and therefore providing
differentiated service, lead IKEA to where it stands today.
The SWOT analysis underlines that offering good value for money with the core philosophy
to reach as many people as possible, apparently really works IKEA. Focusing on its
knowledge by using a production process with an ideal cost efficiency allows the firm to sell a
vast range of various products, which are not only well designed but more importantly
reasonable and functional. With the message Live by today, forget about tomorrow
according to Shoulberg, IKEA has brought a new niche to the market whereby customers
decision making is made easier because it does not imply a high investment.
Nevertheless there have been some product recalls, which have to be qualitatively analysed
and improved in order to avoid unsatisfied customers and bad word of mouth. As for
opportunities, the only action IKEA can take in this direction is to collect information and
data from potential markets and continuously verify brand image and awareness by analysing
numbers and feedbacks. Threads on the other hand cannot be influenced preventatively.
Compared to ARGOS the SWOT aspects are converging, probably mainly due to the fact that
ARGOS is a national operating firm, the threats of economic and environmental changes
remain the same though for both firms.
If IKEA is based on the theory of implying structure based on strategies or inversely is not
entirely similar throughout the global matrix structure. On one hand IKEA adapts structure to
its strategy by remaining with the same initial concept of reaching as many people as possible,
however strategy needs to be able to be adapted as well when external issues such as labour
cost increase for example. It can be said that the Swedish company is based on a general
concept and in order to achieve the core value, structure as well as strategies can be adapted
accordingly.
11
Strategic Management
March 2015
6.
LITERATURVERZEICHNIS
1. B.V., I.I.S., 2013. IKEA Group Sustainability Report FY13. [Online] Available at:
http://www.ikea.com/ms/en_US/pdf/sustainability_report/sustainability_report_2013.p
df [Accessed 19 March 2015].
2. B.V., I.I.S., 2013. IKEA Group Sustainability Report FY13. [Online] Available at:
http://www.ikea.com/ms/en_US/pdf/sustainability_report/sustainability_report_2013.p
df [Accessed 19 March 2015].
3. Baraldi, E., 2008. EXPERIENCES FROM IKEA. In Strategy in Industrial Networks.
CA: California Manageent Review. pp.99-126.
4. Barthlemy, J., 2006. The Experimental Roots of Revolutionary Vision. [Online]
Available
at:
http://sloanreview.mit.edu/article/the-experimental-roots-ofrevolutionary-vision/ [Accessed 11 March 2015].
5. Capon, C., 2008. Understanding Strategic Management. Harlow: Pearson Education
Limited.
6. eHow, 1999-2015. What is prescriptive approach to strategic management? [Online]
Available at: http://www.ehow.com/facts_7606569_prescriptive-approach-strategicmanagement.html [Accessed 20 march 2015].
7. Gerry Johnson, K.S.R.W., 2005. Exploring Corporate Strategy. England: Pearson
Eduction Limited.
8. IKEA case study, 2009. IKEA case study. IKEA.
9. Insight, S.M., 2015. SWOT Analysis of IKEA. [Online] Available at:
http://www.strategicmanagementinsight.com/swot-analyses/ikea-swot-analysis.html
[Accessed 17 March 2015].
10. Inter IKEA Holding, S., 2012. Inter IKEA Business. [Online] Available at:
http://inter.ikea.com/en/ [Accessed 11 MArch 2015].
11. Inter IKEA Systems (B.V.), 2014. About IKEA Group. [Online] Available at:
http://www.ikea.com/ms/en_JP/about_ikea/facts_and_figures/about_ikea_group/index
.html [Accessed 11 March 2015].
12. Kaplan, R.S.a.N.D.P., 1996. Strategic Planning. In H.B.S. Press, ed. The Balanced
Scorecard: Translating Strategy into Action. Harvard: ISBN 0-87584-651-3. pp.24-30.
13. Lynch, R., 2002. Corporate Strategy. Prentice Hall .
14. MBASkool, 2011-2014. ARGOS competitor Analysis. [Online] Available at:
http://www.mbaskool.com/brandguide/lifestyle-and-retail/2043-argos.html [Accessed
19 march 2015].
12
Strategic Management
March 2015
13
Strategic Management
March 2015
7. REFLECTIVE DIARY
7.1 INTRODUCTION
This Assignment in strategic management being the fourth paper of the Bachelor of Arts,
there can be analysed an evaluation, therefore I am pointing out below what my
improvements and impressions have been during this assessment compared to previous ones.
Generally I have experienced this assignment to be very demanding in terms of the specific
aspects to it. I have read a great amount of statements, theories and theses whereas most of
them were written very complexly and it was difficult to find the essential and useful
sentences or parts within the text. At times I was not sure whether my answers were
answering the tasks correctly because strategic management has been an entirely new topic to
me. I have additionally felt the pressure of only having 3000 words to use in order to
describe the entire conceptualisation and structure of a company.
14
Strategic Management
March 2015
Each assignment comes with a new challenge, on the other hand it becomes less difficult to
know where to start with each new task and in spite of the broad range of topics there are
some similarities that can be repeatedly be understood and aimed at in order to proceed
quicker. I am feeling a lot more confident about my time management since I have gained
some experience in how and when my most productive phases are and what motivates me
during low motivation periods.
7.6 CONCLUSION
Throughout the assignment in spite of at times (especially in the beginning) having a hard
time to motivate me while reading through complex associations and statements I have
learned some interesting facts and reading and creating my own analyse of a firms strategy
and structure has made me feel more confident and looking forward to take some facts with
me in the future. I think this experience can be helpful for job experiences in the future if I
will be asked about certain aspects of a firm I now have a broader knowledge on how to see
or explore it at the very least.
15
Strategic Management
March 2015
16