Posted at 01.01.2019
This report describes the perspective of IKEA, the primary internal and external factors impacting on its strategy development based on the articles and information publicized in press influencing the socio-economic activities of organisations.
The first area of the report is approximately the history of IKEA and the theory behind IKEA Group then we will discuss the company's social responsibility programmes and exactly how it strives to take advantage of public relations. Afterward, we will go forward the impacts of inner and exterior factors influencing the business's strategy development and finally how IKEA has performed since 2005.
The external factors show political, economical and cultural analysis affecting the IKEA Group. It can help visitors easily see what the key factors that IKEA should consider in its strategy development are.
The history of IKEA
Mr. Ingvar Kamprad, the creator of IKEA has been in his own business since he was five. At era of five, he bought matches in large cheaply in Stockholm and re-sold these to his neighbours at a lower-price but he was still making income. Thereafter, he expended his business to advertising bouquets and greeting card, Christmas tree designs and also pencils and ball-point pens. In 1961, IKEA starts its first quality test on the merchandise using Swedish tests standards. Since that time the business has been engaging innovating, producing and creating quality products with the lowest prices.
IKEA, as it says on its website, has a simple but challenging idea "To generate a better everyday life for the countless people. " The group will try to support this idea, perspective, by offering a variety of stylish home furnishing products at prices so low that everyone will be able to manage them.
Developing and creating quality products at low prices is not a simple task. To meet up this plan, high quality at the cheapest price, the company entails with diverse aspects of management, creation process and also development. However, the group will not scarify everything to meet its focuses on, keeping prices low but not at any price. IKEA works within an industry where there a wide range of rivals and stakeholders, new opponents come into the market with diverse products and target customers. In that market environment, it is not easy yet focal to monitor changes and forecast what your challengers' next thing would be. We will discuss the factors that contain an impact on IKEA later in the record.
"We will offer an array of well-designed, useful home furnishing products at process so low that as many people as possible will be able to manage them. "
THE IKEA Business Idea
Strategy Development Factors
Furniture retail industry is an enormous industry with numerous rivals. Hence, to achieve a considerable market talk about having impressive products predicated on customers' needs and wishes is crucial. In addition, advancement should be based on an inexpensive mind in order to keep the processing process cost as low as possible.
The External Factors
There are inside and exterior factors (makes) influencing the development process on every producer.
External factors mainly known as political, legal, communal/green, economical and competitive and technological forces tend to be seen by managers as forced factors, nevertheless they plan their strategies based on based pushes. These external factors could restrict some industries while open up new opportunity home windows for others.
Currently, there are two exterior forces that should be more considered in strategy development than others. These factors are interpersonal/green causes and economic pushes. In recent years, countries and people are more mindful about the environment because of global warming problem. This means that that companies should become more green and use new green solutions to reduce their negative effects on the surroundings. Becoming enviromentally friendly helps organisations to show their general population how responsible these are to the surroundings. IKEA has shared some documents and accounts on its public website to mirror its inexperienced activities.
"Cultural and environmental responsibility is a prerequisite for doing good business. IKEAґs sustainability route is that "IKEA`s business shall have an overall positive impact on people and the surroundings". The IKEA eyesight and business idea encourage the task with public and environmental responsibility. "
Anders Dahlvig, President and CEO, IKEA Group
It is important for firms to influence their customers about their activities and behaviour against different facets with their activities such as resources of raw materials, production process and standards, etc. all these needs are causes by external causes through new legislations and promotions. Therefore, IKEA like any other market player should think about reasonable reaction to such factors.
In addition, Monetary pushes are other external factor affecting companies' sales, profits and turnovers. Currently, the world market is battling huge problems and complications due to US credit crises and international credit crunch. The recent credit crises in the US has cause a recession in the US market where is the next main market place of IKEA1 quite simply, due to the economic difficulties, the US customers aren't willing to get new goods as same as before as they don't can pay for to cover it. Hence, the group should consider new strategies for the US market to not only keep its market share, also avoid any income loss.
Furniture retail industry like other sectors needs technology to survive and contend in perfect markets. Innovation is the main element to create and produce services at competitive prices. However, about 50% of services aren't successful and are failed for different reasons. An organization like IKEA with powerful existence in international market segments should always recognise new product and opportunities to produce new innovated successful products.
The Internal Factors
The inside factors that should be considered in strategy development will be more centered on factors that are controllable and can be expected. E. g. customer services, product advertising, etc.
The group is likely to increase its size and build 20 new factories within the next five years based on the group. This new growth requires significant strategies and plans to the group's focuses on. However, building new facilities do not promise the success of the business. The idea behind IKEA is to create quality products at low prices that charm to the most people as you possibly can. Going to this target, the group needs creativity to create competitive products in one side; on the other palm, it will exploit new technology to help make the production lines more efficient. A report posted by Jeanette Martens child there are serious problems concerning the store task cost follow ups. Moreover, he argues that the store project cost follow up is too inflexible and a deliberate deviation from the specs needs to be done in order to study costs for different items specifically.
In addition to cost management, marketing strategies and advertising programmes are inner factors that needs to be planned and considered in the strategy development plan.
1- IKEA financial fiscal record published on the Internet
IKEA since 2005
IKEA Group is a multinational company possessing 231 stores extended 24 countries. The group has developed 45 trading service office buildings in 31 countries, along with31 circulation centres and 11 customer distribution centres in 16 countries. According to the financial figures released by the group, there is a steady go up in the sales results, increased by 1. 34% from 2005 to 2007, struck a fresh record of 19. 8 billion euros in 2007. As the state results illustrates, IKEA's main market places are Europe, North America with 82% and 15% respectively. Asia and Australia experienced only 3% of sales contribution in the same financial period. Nevertheless, China with 22% and Poland with 16% are the countries with higher purchasing figures. Italy with 8%, and Sweden and Germany both with 8% are other countries where customers were more enthusiastic about the merchandise of the group. Apart from financial information, IKEA has method of trading with 1, 350 suppliers in 50 countries. In addition, the group has used 96, 300 people in European countries, 16, 450 personnel in THE UNITED STATES and also 5, 250 employees in Asia and Australia.
Apart from the published financial data, the group has been wanting to increase its commercial social responsibilities and be more environmentally friendly by become greener and also utilizing new systems with the lowest negative impact on the environment. Furthermore, the business is concerned about resources of raw materials used in the creation lines.
IKEA code of do - IWAY
Showing responsibility for people and the surroundings is a prerequisite for doing good business. That is why IKEA requires suppliers to comply with the company's code of do, "The IKEA Way on Purchasing Home Furnishing Products" (IWAY).
IWAY defines in detail criteria associated with working conditions, minimum wages, overtime obligations, the to belong to a trade union, emissions to normal water and air, misuse and substance management, and bans on child labour and discrimination in the workplace.
In conclusion, planning for a proper development plan requires numerous concerns and aspects. Every strategy development plan includes two main factors, inside factors and exterior factors. The external factors are those factors that are not manipulated by companies whereas the internal factors are managed by companies.
Furniture retail industry is a huge industry using its especial potentials. However, there are a few factors in retail sectors that have direct effect on sales and also future success of each member of retail industries. Economic influences are part of these motivations. IKEA Group, as a multi-national group should think about the current economic recession in the US as THE UNITED STATES is its second major market. Recent mortgage crises, credit crunch and economic downturn have induced financial difficulties for US economy; hence, customers aren't ready to buy services as they can not find the money for it.
IKEA is considered as a prominent furniture retail market player in European countries and it is recognised as a significant competitor in North America market; nonetheless, IKEA is not accepted as a significant market player in Asia and Australia corresponding the group's standard annual survey. Therefore, theses marketplaces should be targeted in the foreseeable future development and marketing ideas if IKEA searches for new customers from these areas and also higher turnover.