Ikea Case Anaylsis

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                    Table of Contents

Introduction.                                                                                                                                      3.

IKEA: Background                                                                                                                                 4.

Analysis: external environmental factors.                                                                                      6.

IKEA’s organisational culture                                                                 9.

Changes experienced by IKEA                                                                                                  12.                                                                

Six step strategic management analysis                                                                      14.

Two contemporary issues faced by IKEA and how IKEA faced the issues                                20.

IKEA: what the future holds                                                                                                        23.

Conclusion                                                                                                                                             25.

References.                                                                                                                                        26.

Introduction                                                                          

“If you keep your products superior and never diminish your quality, you will remain strong through obstacles” (Anders Dahvig, (2013) former CEO of IKEA.)

The Furniture Global Industry is a very complex model. IKEA is a business model that managed to do what seemed impossible, to think globally and act locally. IKEA sells ready-to -assemble furniture, appliances and household goods. IKEA’ s main strategy is to “create a better everyday life for the many people”. To meet this vision IKEA provides good quality functional furniture at low cost so that as many people as possible can afford to buy them. Building long term strong relationships with suppliers has enabled IKEA to become a cost leader in the furniture industry. It remains one of the best modern examples of what the Hybrid strategy actually means and why it is difficult to imitate.

However, it requires a considerable strategic management process to sustain this strategy, and there is a constant danger of drifting into a ‘stuck in the middle’ position and not being ‘out flanked’ by ‘low price’ competitors improving their products.

The purpose of this report is to: A) Analysis the external factors of the organisation IKEA.

B) Address IKEA’s cultural, ethical and social responsibilities.

C) Perform the six step strategic management on IKEA.

D) Determine current issues faced by IKEA and their use of    managerial theories implemented to address these issues.

E) What the future holds for IKEA.

IKEA: Background

IKEA was founded by Ingvar Kamprad(Kamprad) in 1943 in Agunnaryd, Sweden, when he was only 17 years old. A reward for doing well at school his father gave Kamprad a small amount of money. Kamprad turned around and opened a small business selling goods like pencils, wallets, jewellery, picture frames and watches. Kamprad tried to keep costs low by purchasing goods in large quantities and passed on the benefit to his customers. He derived the name IKEA from the initials of his name I and K, as well E for Elmtaryd and A for Agunnaryd, the farm and village where he grew up. In 1947, Kamprad introduced furniture in his product line and found that there was a good demand for it. He sourced furniture from manufactures in local forests again to keep costs low. As the scale of the business grew, Kamprad found it too difficult to make individual sales calls and so he started advertising in local newspapers. He also started a mail order service where he delivered using the local milk truck as a middleman between IKEA and the nearest train station. In 1951, he designed a product catalogue and distributed it to potential customers who lived nearby the store.

IKEA opened its first furniture showroom in Almhult, Sweden, in 1953 where customers could see and touch the products before ordering. IKEA was selling furniture at very low costs compared to its competitors, the competitors then forced the suppliers to boycott supplying to IKEA. Kamprad was forced to design and engineer IKEA’s furniture and outsource the manufacturing to Eastern European countries, particularly Poland, from 1955. IKEA’s management plan was to design furniture to cost less, look stylish and also be functional. In the same year one of IKEA’s co- workers decided to remove the legs of a table so that he could fit it in his car and minimize damage in transit. That idea lead to IKEA to test flat packing in 1956. IKEA realized that flat packing could bring down the costs of transportation and storage drastically. The company started designing its furniture to support the “flat pack” concept (refer to Appendix I). In 1958, IKEA opened its first store in Almhult, the largest store in Scandinavia. IKEA saw an opportunity to cut further cots by letting the customers, transport and assemble the products themselves. As a result, IKEA was able to sell furniture at 30% lower cost than other furniture retailers.