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modern undercover work known as espionage, which include utilizing illicit and exploitative
strategies to have an advantage through wrongful means.
3.0 Importance of CI for IKEA
Now many people and business analysts questions that what actually makes IKEA such a
promising enterprise. It is actually something more than a vast variety and reasonable prices.
IKEA totally comprehends that they are not just in competition with other firms dealing in
furniture but also with external factors that have no direct link with furniture. These components
represent a danger to the reception, finishing, and nature of shopping experience of a customer.
IKEA has figured out how to utilize these "contenders" to their favorable position, as can any
organization looking to distinguish its items (Nelke, Hakansson, 2015).
CI is helping IKEA to create corporate or specialty unit methodologies. IKEA has been able to
devise counter-focused methodologies against one or more contenders. A whole new lot of
product range and market passage has been set up by the firm using competitive intelligence.
Moreover, smart moves have been taken as a result of CI which has enabled IKEA to mark a
significant difference strategically (Li, 2010). Reportedly IKEA foresees and gets itself ready for
future business sector opportunities and threats. Finally, IKEA surveys viability of rivals
business sector situating and item informing to move ahead of them.
4.0 Competitive Intelligence Segments
There is a lot of variety in terms of the dynamics that constitute the overall environment of IKEA
furniture business. Reason is that all the customers demand personalized offerings for them.
Therefore IKEA has to consider numerous factors for meeting varying preferences and tastes and
dig out intelligence from them accordingly. Some of them are listed below:
Social
Among a wide array of factors operating in the outside environment, social factors are among the
most considerable ones. Any business which intends successful functioning in the market has to
give due significance to them. IKEA pays a lot of attention to social factors as people of any area
are very possessive about them. IKEA understands that peoples way of living, desires and
aspirations are greatly linked to them. This is the reason that IKEA is greatly concerned about
component lifestyle. Realization that every persons hopes are to be met in the best possible
manner makes IKEA a pioneer. This is the reason that constant surveys are carried out by IKEA
to reap insights from the psychological perspective regarding what buyers are actually wanting.
Demographics
Demographic factors are very crucial to be considered. IKEA relies upon them to a great extent.
It uses them to find out the appropriate race for its customers. Moreover a fair idea of age groups
being served by the IKEA enables it to have a fair assessment of different requirements that
change with age. IKEA is selling products for babys and kids as well as teenagers and adults.
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Apart from that IKEA keeps on learning about the trends in population increase or decrease. This
is the reason that IKEA has become able to effectively serve kids and babies as well as its target
market through offerings that appeal the parents. Thus teenagers and adults are being satisfied
through IKEAs innovative items equally in comparison to young ones. That is all due to proper
and regular study of changing demographic trends. Other factors like income, occupation and
status are also examined on a continual basis so that people from all backgrounds are effectively
served.
Ethnic
IKEA also gives immense importance to ethnicity as a major segment while probing in the
changing dynamics. People from varying ethnic background differ greatly in terms of their liking
and disliking. IKEA comes up with the approach of simplicity yet innovativeness in its product
line so that the major segments with different ways of living can benefit from them. IKEA also
provides the ease of having own unique products for customers by joining the parts. However
aforesaid does not imply that IKEA ignores the ethnic aspects. IT does take them into account so
that a minimal level of differentiation is maintained which is necessary when a giant business
like IKEA is serving at such a vast level.
Economic Conditions
IKEA is following a basic philosophy of offering items that come into the range of maximum
customers possible in terms of reasonability and affordability. This is the reason that the
organization closely monitors the changing economic circumstances. GDP, GNP, Purchasing
Power Prosperity and other financial indicators are taken into account. This enables the firm to
find out the current condition of people belonging to a particular area which gives insights
regarding buying power, spending patterns and income and expenditure disparity. These figures
also help the business to have an understanding of trends that are going to be followed in the
consumption; thus making the firm in a comfortable competitive position. Reason is that it would
produce the items as per anticipated demand and economic prosperity. The most noticeable
factor is that a broad range of prices helps IKEA to attract customers from all financial
backgrounds-be it high, moderate or even low. IKEA is therefore appreciated worldwide for its
attractive
yet
most
cheap
and
economic
offerings.
Technological Factors
Unlike traditional firms, IKEA is quite savvy when it comes to use of appropriate technology that
gives the organization an unsurpassable edge over the rest. IKEA aims to transform the energy
sources used by them completely reusable. Gaining in depth idea from the changes taking place
in the modern era of sophisticated technology and understanding how they are transforming
businesses in terms of being cost effective and proficient, IKEA has hired experts to form solar
energy and wind turbine groups. This will help the firm to conserve the energy consumed by
them for use later on. It is in fact milestone advancement in furniture business which would not
have been possible to achieve if IKEA did not make an effective use of having information from
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multiple sources regarding changes happening in the business landscape. Moreover IKEA has a
resolve to build products that do not harm the environment in any way. This has helped the
business to create a favorable image in the minds of consumers worldwide that firm is socially
responsible and committed to ensure environmental sustenance. Finally organization has the
policy to seek services of firms own manufacturers and specialists instead of looking for people
from outside sources. This has played a positive role in enhancement of overall product quality
and
style
to
a
great
extent.
Political and Legal Factors
In the past, few of the IKEAs advertisements were deemed inappropriate by the civil society and
customers resulting in getting them prohibited by the censor authorities. This put a negative mark
on the firms repute and overall credibility. However IKEA has excelled many others when it
comes to learning from mistakes and implementing the learning as soon as possible in the most
effective manner. This is a sign of adaptability possessed by rare entities. Thus IKEA
immediately took steps to have a more reasonable assessment of what people consider right and
appropriate in different parts of the world so that no such publicity is made again which results in
giving a feeling that cultural clash is occurring. A team of professional and competent lawyers
has been hired in every place being served by the organization. This has been done to make sure
that none of their offerings are in contradiction to the legitimate boundaries of any country.
Moreover adequate measures are continually opted by the management to ensure that all the
business proceedings and functionalities are in accordance with the legal framework of their
operating place. All of this contributes to success and betterment of the organization.
5.0 Using intelligence through different segments
An organization which was established around sixty years back has now been transformed in the
leading furniture business. Anyone can wonder that what has made this organization so
successful that it is offering items with such affordable prices and great value of customers
money. The vast setup of 226 locations in Europe, Asia and USA are enough to make anyone
bamboozled. Huge revenues of $17.7 billion are by no means a joke. The question lies-how is
IKEA successful in accomplishing this all?
Answer lies in effective scanning of the environment in which the business is operating whether
its local or international market. Strategies about products are only made after that. The first part
of this section will be based on how IKEA reaps insights from the competitive environment by
taking into account the ever changing dynamics of current and potential rival firms, suppliers,
customers and distributors; followed by other significant aspects that have to be considered.
They include: control global financial linkages and impact of trade policies, agreements, physical
and demographic landscape, environment friendly polices, cultural diversity, and following
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moral values in business along with meeting legal duties, political impact on business and its
repercussions on global relations, and the significance of technology.
5.1 Direct Competitors
The intelligence related with the direct competitors of IKEA can be described by the following
secondary data compiled to conduct Porters five forces analysis of the industry environment.
Threats of new entrants
In the global furniture industry, there are no or very little entry barriers; which implies that the
competition in the industry is fierce. Therefore, this fear of intensity of competition may scare off
the potential buyers. To compete effectively with IKEA, competitors must invest in a great deal
of amount, establish and maintain effective long term relationships with the clients, and identify
suitable locations for opening their outlets for which both patience and capital is essentially
required (Rogers, 2014). It is very difficult to open up with a new name in major cities and
attract suitable attention, therefore, the threats of new entrants for IKEA is not really a threat
because of the fierce market competition.
Bargaining power of suppliers
The bargaining power of suppliers in the industry in which IKEA is operating is relatively low.
IKEA has succeeded in developing and maintaining long term relationships with their suppliers
across the globe. The aforesaid implies that IKEA does not have any competition related threat
from its competitors in the aspect of availability of suppliers as the long term relationships of
IKEA with its suppliers cannot be under tapped (Lu, 2011).
Bargaining power of buyers
There are various retailers with an immediate value war happening, while there are numerous
elements who are importing from China included in direct rivalry with IKEA. Shoppers are
confronted with numerous decisions and options, and there is incredible measure of haggling
force at present with the purchaser, because of more prominent decision. The purchasers
themselves have a significant level of inuence over IKEA's product offering and heading; for
instance, as specified in the history, IKEA built up the idea of "at bundling" at a purchaser's
recommendation, making it advantageous for the purchaser. Because of heightening interest from
purchasers, IKEA will keep extending geologically, opening 50 stores in North America by 2010.
Rivalry among competing firms
This is a highly competitive industry, characterized by other low priced furniture producers such
as Galiform of England and retailers such as Wal-Mart of the United States In addition to local
competitors (Malmo, 2011). Due to the competition worldwide, IKEA has wisely attempted to
compete by entering the China and Japan, markets which pose the largest competition.Many
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retailers are present, and a number of them import products from China selling at a low price
signifying intense competition.
International Financial Linkages & Impact of Trade Policies and Agreements
As the organization is growing vast across several distinct locations of the world, it analyzes
buying capacity of people in varying areas before deciding about the prices. For this purpose,
degree of earnings, prices, savings, loans and other indicators are taken into account (Hennessey
and Gillespie, 2010). Some aspects that can shape purchasing power parity encompass financial
conditions, trade policies, and agreements. So while making global expansions, IKEA
established a proficient marketing mix and prices were chosen as per the prevailing conditions in
different parts of the world. This strategy led to a number of favorable outcomes for IKEA as it
did proper homework of hidden facts before proceeding further.
Demographics & Physical Infrastructure
Demographic influencers and physical atmosphere have always been given great consideration
by IKEA in establishing their policies. Demographic factors encompass gender type and
divergence, preference trends of customers, purchasing attitudes, norms differentiation, ethnic
backgrounds and caste system etc. to function effectively in the business environment. Analysis
of demographic background of specific area is treated as a major task by the firm. This is the
reason that firm has 83 designs for just fabric sofas and 50 designs for only leather. Some of the
products are very modest in outlook while others are quite ravishing. There are many options for
customers who have different aptitude and preferences only because of the examination in
demographics conducted by the business (Li, 2010).
Political factors
Majority of the stores of the business are found in Europe, with 177 outlets in European Union
(EU) (IKEA company website, 2009). The reason of relying on EU to such a great extent is due
to understanding the fact that about 50% of furniture manufacturing internationally is done in EU
which can be estimated 82 billion (European Commission, 2009). Another interesting fact is
that EU trades the most with Russia, covering about half of the Russias overall business
turnover in 2008 (European Commission, 2009).
The EU is the largest trading partner with Russia, accounting for over 50% of Russia's total trade
turnover in 2008 (European Commission, 2009). EU and Russian ties recently dedicated their
efforts on the current WTO bargaining and a new contract to provide a substitute to the current
Partnership and Mutual Assistance, apart from enacting the EU-Russia Common Economic
Space (CES). These two way contracts between the EU and Russia have the potential to enhance
trade between the two financial powers. Now if the firm had not effectively used its sources of
competitive intelligence in a timely manner, it would never have been able to gain benefits from
this lucrative market in such a beneficial manner.
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Economic factors
America is the biggest market and buyer of retail furniture, indicative of about 25% of global
furniture usage. Nonetheless, with the recent poor financial circumstances, diminishing property
prices and ever increasing ratio of jobless loss; buyers spending has faced downward trend to a
great extent. Therefore, demand for furniture has gone down to a noticeable lever in the past 2
years (wordfurnitureonline.com, 2008., Gulfnews, 2008).
However, the financial enhancement schemes introduced by the American government and other
European states have the potential to offer some assistance for buyer spending. Plus,
unprecedented lesser interest rates, specifically in the America (0.25%) and the Britain (0.5%),
can boost financial viability in these countries (BBC News, 2008). IKEA is using all this
information through its channels to come up with different offerings and strategies so that effects
of recession can be offset for the business.
Social factors
Buyers liking for furniture is basically dependent on a tendency to obtain a specific way of life.
Nonetheless, crucial elements encompass leisure, reliance, tangibility and affordable price
(Oztop et al., 2009). Like all other businesses, the furniture sector is influenced by international
social factors, which now comprises of a rising number of people growing old, financial
movement, enhanced trend of living in cities and reduction in the typical family size. For
instance, there is more buyers expectation for second master bedrooms utilized as either guest
rooms or for family members coming to meet (Furniture Today, 2008). IKEA decides its product
range in accordance to the above mentioned facts and figures.
Technological factors
The application of wireless LAN (WLAN) and a useful IT mechanism to develop storage
facilities and buyers shopping is critical for successful functioning and lessening the input costs.
Moreover, the utilization of modern computer software to facilitate the style and features of
furniture is a major part of the furniture market. Computer Aided Design (CAD) and other 3D
gadgets are needed to transform the primary design ideas to valued products which can be
conveniently integrated at home by buyers (EU Commission, 2008). IKEA has therefore come
up with easy assembling of products at home to save the customer from post shopping
dissonance.
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Moreover IKEA is working to offer the low cost, and providing value to buyers. Owing to this
digital era and revolution brought by it, promotion efforts have been redefined with the help of
Facebook and resulted in the triggering impact; to meet the needs of largest number of people
and integrating them.
Environmental factors
With an enhanced number of furniture manufacturing areas importing their raw material and
production requirements from underdeveloped countries; such as Brazil, China and Indonesia,
there is enhanced realization among people regarding social responsibilities towards
environmental sustenance. These encompass the utilization of retained forest plantations, waste
from packaging, pollution from the manufacturing mechanism and the atmospheric influence of
transport and disbursement (European Commission, 2008).
Moreover, there are other atmospheric elements having an influence on the furniture sector, like
the use of hazardous chemicals involved in the production process which are not only harmful to
the end users, such as buyers, but also influence the domestic localities (politicalaffairs.net.
2007). Owing to enhanced customers understanding of all these factors, IKEA has made a
remarkable success by promoting policies which are environment friendly and contribute to
saving the resources and utilizing them efficiently like wind turbine project explained earlier.
Legal factors
Majority of the furniture producers have to follow numerous legal factors in multiple areas.
These encompass both global and local legal requirements. As the EU is a leading destination for
furniture business, there are a lot of EU legal instructions in context of product safety rules,
allowed carbon levels, environmental requirements and employee working circumstances (The
Daily Mail, 2009).
Moreover, laws to prefer domestic markets, such as India and China, comprise of legal decisions
linked with the safety of intellectual property and import tariffs, which produce major
impediments for some of the prominent western furniture producers (ChinaStakes, 2009). IKEA
has therefore come up with the strategy to develop friendly relations with governments of all the
countries where it is operating and relying on local support by being a responsible organization
which complies with all the laws.
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