Submitted by:

Niharika Deo (11)

Laxmi Deshpande (12)
Manisha Tripathy (55)
Strategies of company: IKEA
Introduction
Is a Swedish furniture company, well known for
its brightly colored furniture
Requiring customers to assemble their furniture
for themselves
Has 349 stores in 43 countries
Products are offered in a very competitive price

Contd..
Was founded in Almhud Sweden, 1943 by Ingvar
Kamprad Elmtaryd Agunnaryd
When it started IKEA sold pens, wallets, picture
frames, watches etc.
In the late 1940s furniture was added to its
products
To create a competitive advantage, IKEA decided
to reconfigure the furniture value chain

Ikeas Vision & Business Idea
The IKEA vision, business idea and market
positioning statement provide a framework for all
IKEA marketing communication worldwide
The IKEA vision is To create a better everyday life
for the many people
The IKEA business idea is To offer a wide range of
well designed, functional home furnishing
products at prices so low that as many people as
possible will be able to afford them
The IKEA market positioning statement is "Your
partner in better living. We do our part, you do
yours. Together we save money

Corporate structure of IKEA
IKEA is owned and operated by a complicated array of
not-for-profit and for-profit corporations
The corporate structure is divided into two main parts:
operations and franchising
Most of IKEA's operations, including the management
of the majority of its stores, the design and
manufacture of its furniture, and purchasing and supply
functions are overseen by INGKA Holding, a private,
for-profit Dutch company
Of the IKEA stores in 36 countries, 301 are run by the
INGKA Holding. The remaining 47 stores are run by
franchisees outside of the INGKA Holding, with the
exception of IKEA Delft which is not franchised
Corporate structure of IKEA
Ikeas Value Chain
IKEA's role in the value chain is to mobilize suppliers and customer
to help them further add value to the system.
Customers are clearly informed in the catalogs of the firm's business
systems provides, and what they are expected to add to the final
process.
In order to furnish the customer with good quality products at a low
cost, the firm must be able to find suppliers that can deliver high
quality items at low cost per unit. They must follow the IWAY.
The headquarters provides carefully selected suppliers with technical
assistance, leased equipment and the necessary skills needed to
produce high quality items.
The reconfiguration value chain gives IKEA several advantages:
less cost of maintaining manufacturing facilities
Cost savings from the outsources and delivery service
Creates wide market segments
Unique features stores
Ikeas Product Range
It produces wood-based furniture and wooden
components, manufacturing units in 11 countries
mostly in Europe
IKEA stores display the product range in room
settings, offering customers inspiring home
furnishing solutions
To help keep prices low, IKEA stores buy and
transport products in bulk, are located in less
expensive areas and take advantage of the self-
service and assembly concept
IKEAs core competency
IKEA has focused its strategy on core
competencies that have been leveraged as part
of a strategy to sustain profitability
The company develops its capabilities as a global
retailer by adding value to the supply chain
(thoughtful product design, local sourcing and
low-cost distribution hubs)
Constructing a low-cost business model that
enables consumers to reap the benefits of high
quality design furniture at some of the lowest
prices available
Building strong brand equity through unique
promotions and pioneering advertising campaigns
that recognize diversity

Core competency contd..
Developing a unique business culture designed
around a good lifestyle for employees and
customers
Corporate social responsibility that is dedicated to
environmental, labor, and ethical business
practices
IKEA core competencies have helped its efforts
to attain a sustainable business model in the
United States (US) as it continues opening new
stores throughout the region

Porters Generic Strategy
Its mission statement
indicates a cost
leadership strategy.
However, the
company is also
applying an indirect
differentiation
strategy due to its
unique way of
incorporating the
customer in the
value chain. This
combination
indicates a focus
strategy.

The pioneer in low-cost model
In looking at its low-cost model, this seems to be a key
strategy within todays global business environment and IKEA
was one of the companies to pioneer this type of model well
before airlines and other industries began to evolve their
business models
Everything that IKEA does involves carefully examining the
true cost involved in that particular product or process,
including the design, sourcing, and operational expenses
involved
IKEA doesnt have its own manufacturing facilities. Instead, it
is using subcontracted manufacturers all over the world for
supplies
Also, IKEA customers have to assemble the bought products
themselves. That creates innovation upstream, which help
suppliers to save costs, and downstream, as self-assembly
became a large cost saver for customers
Most furniture are also designed to fit into an efficient
packaging cube for low-cost transport, which benefits both the
customer and IKEA. Because the company is a very high
volume retailer, it gets good prices on what it procures.
Contd..
Whilst low-cost is important, IKEA believes that it
has the capability to be a low-cost leader without
sacrificing quality or compromise its corporate
social responsibility
One way in which IKEA has been able to do this
is by creating a global organization that provides
infrastructure, service and support to its various
business units and suppliers and helps them to
identify and implement the most cost-effective
technology available. This has led to a value-
added supply chain that IKEA has capitalized on
to maintain low costs whilst further growing its
operations

Ikea's strategy
IKEA successfully handles all aspects of marketing,
sales, employee relations, product development,
and supply chain management, creating a vivid
picture of how management theory can work
successfully when approached with a consistent
and clear strategy
Its winning strategy includes global sourcing of
components, accessible suburban stores, quality
products with sophisticated European design at a
low cost, and in-store amenities, such as coffee
shops, restaurants, and day-care facilities
IKEAs low-cost business model allows it to offer
quality furniture and home accessories at 25 per
cent to 50 per cent below its competitors
Competitive Advantage of IKEA

Competitiv
e
Advantage
Economies of
Scale:
Standardisati
on
Economies of
scope:
Furniture and
Restaurant
Share
facilities
Economic
Design
Logistics
Network of
Supply: 1300
suppliers in 53
Countries
Large
Warehouse
Showroom in
Sub-Urban
centres
Customers
included in
the value
chain,
minimum staff
Strength of
brand name
Distinctivenes
s in Design
Diversity in
Assortment
Resource Based View (IKEA )
PHYSICAL
ASSETS
OWN STORES WOLDWIDE AND ARE
USUALLY LOCATED OUTSIDE THE TOWN
37 STORES THAT ARE FRANCHISED
38 COUNTRIES
WORLDs LARGEST FURNITURE RETAILER
FINANCIAL
ASSETS
PROMOTION AND ADVERTISING
SOURCE FROM FRANCHISE
EXPERIENCED A 15% SALES INCREASE
BETWEEN 1990-2005
2005 THEY MADE 14.8 BILLION EURO
2010 THEY EXTIMATED $23 BILLION
INTELLECTUAL
RESOURCE

GOOD RELATIONSHIP WITH GOVERNMENT
UNIQUE FURNITURE STYLING
OPERATE 24 HOURS DAILY
GOOD RELATIONSHIP WITH SUPPLIERS
Resource Based View
REPUTION
RESOURCE
BRAND NAME
FRANCHISING
$128 MILLION FOR UNICEF IN 2015
WELL KNOWN IN EUROPE ASIA AND AMERICA
HUMAN
RESOURCE
127,000 STAFFS
SKILLED EMPLOYEES IN STORES AND
WOODS
GOOD TRANSPORT SYSTEM
EXPERT DESIGNERS
GOOD CUSTOMER SERVICE
MOTIVATION OF EMPLOYEES (REWARD
SYSTEM)
RELATIONAL
RESOURCE

28 DISTRIBUTION CENTER
2300 SUPPLIERS
GOOD INTERNET ACCESS
NETWORKING SYSYTEM
550 MILLION PEOPLE USING THEIR WEBSITE
EVERY YEAR
GOOD TRANSPORT SYSTEM
INTERNATIONAL BUSINESS STRATEGY (SMM 206) PRESENTATION
Porters Diamond Model:
IKEA
DEMAND
CONDITIONS
FACTOR
CONDITIONS
FIRM
STRATEGY,
STRUCTURE &
RIVALRY
SUPPORTING
INDUSTRIES
Low cost low price
strategy
Low bureaucracy
Rivalries:
British B&Q
WalMart

Population: 7 billion
The raising of Middle
class
Cheap furniture
demand




Labour force: low
cost
Infrastructure:
poor => good
Government policy


Suppliers
Technology

Porters 5 Forces Analysis
Threat of Buyers growing bargaining power

There is a little power because of the existing low-price
options
IKEA ensure that their customers in all aspects will be
satisfied for quality service they provide
Focused their marketing approach on demands and
needs of the buyer
IKEA uses their corporate responsibility as a good
public image to their customers
IKEA Family -card as a membership

Threat of Suppliers growing bargaining
power

IKEA has its thousands of suppliers that set
standards in delivering the materials
Because of the low-pricing, IKEAs profit
margin also affects the prices in raw materials
than by prices in labour
IKEA has a wide network of 1300 suppliers.
They carefully select the manufacturer of its
products. The company has own production
factories and designers which makes it less
dependent on others
Bargaining power of supplier could be threat
for the profit of the company


Threat of Substitute Products

There is no specific product that can
be a substitute for the furniture but
IKEA at least, have to keep up with the
latest trends, to avoid becoming out of
style
Problems faced due to distribution
channels

Threat of Intense Segment Rivalry

The IKEAs furniture competitors offers different
styles and functionality
Conrin targets a new low cost in terms of
furniture line; Crate & Barrel offers a furniture in a
box which is subject in higher prices
Ethan Allen aimed at a more upscale market
Wal-Mart is equipped in a big box furniture that is
categorized under the general store must-have-
items, but dont have much of a style
IKEA is the most successful in delivering the
complete package for the customers that reflects
on weak rivalries
There will always be substitutes for furnitures but
IKEA competes with price and there isn't
competitors in same price range
Threat of New Entrants

IKEA stores do not reach many small
towns and this is an opportunity for the
new competitors to move into small and
midsize cities with smaller stores and
less selection. But not easier in city
because new entrants have to establish a
vast supply chain and create a unique
brand name
The furniture market is already highly
competitive - the risk of new entrants is
not extremely high - huge capital needed
to start the business
Ikea's strategy in US
The company faced several problems on entering
the US markets. it had to customize its products
based on local needs. American customers, for
instance, demanded bigger beds and bigger closets.
IKEA had to make a number of changes to its
marketing strategy in the US
IKEAs sustainability comes from taking a measured
approach to its expansion into the US by opening a
single store at a time in a particular area to more
effectively focus on getting the operations
established in a manner which makes the most
sense in terms of cost, training, and overall financial
controls
IKEA is requiring the US consumer to do change
how they shop. The company directs customers to
shop in the store instead of ordering onlinenoting
that customers willingness to pick up and assemble
items is critical to IKEAs ability to give customers the
lowest-cost items with an element of fashion and
style.

IKEA in China
The very core competency of low prices and
innovatively designed furniture posed a problem in
China
The low-price strategy created confusion among
aspirational Chinese consumers while local
competitors copied its designs
As the company opened more stores from Beijing to
Shanghai, the company's revenue grew rapidly
But prices of furniture made by local stores were
lower as they had access to cheaper labour and raw
materials, and because their design costs were
usually nil
Extra charges made for providing plastic bags as an
eco friendly effort by the company seemed to annoy
the price-sensitive Chinese customers
Changes in Strategy for China
The company started targeting the young middle-
class population.
This category of customers has relatively higher
incomes, is better educated and is more aware of
western styles.
Targeting this segment helped IKEA project itself as
an aspirational western brand.
This was a massive change in strategy, as IKEA was
targeting the mass market in other parts of the world.
Chinese competitors copied IKEA's designs from its
catalogue and then offered similar products at lower
prices
IKEA decided not to react, as it realized Chinese
laws were not strong enough to deter such activities.
Recommendations for expansion in India
In emerging markets, global brands may not be able to
replicate their success using a low-price strategy as there
always will be local manufacturers who will have a lower
cost structure
The company should also realize that emerging economies
are not ready for environment-friendly practices, especially
if they result in higher prices
IKEA, famous for its flat-pack furniture which consumers
have to assemble themselves, should understand that the
local culture is important - Chinese people hate the do-it-
yourself concept and Indians likely do so even more
IKEA may face some India-specific challenges such as
varying laws in different states ruled by different political
parties
IKEA should target India's urban middle-class buyers who
are keen on decorating their homes with stylish international
brands