CMSE10002 Strategic Management : Investigating Short Term Strategies

Investigate IKEA business model and sources of competitive advantage as depicted in the case.
Why do you think it has been so successful in the fragmented furniture industry?
What do you consider to be IKEA main weaknesses?

Analyse IKEA Cultural Web.
Does the cultural web of IKEA support its current strategy?
Recommend cultural and corporate strategy changes for IKEA.

Introduction

The report will discuss in detail about the case study based on IKEA called IKEA- Managing global expansion. The company is a multinational organization where there are many corners to view at to analyze the company. So, the report will also provide attention on the analyzing the globalization models as well as outstanding options along with threats faced by the company. The company will also discuss in detail about the cultural web and how it helps the present strategies (Larsson, 2015).

Investigate IKEA’s business model and sources of competitive advantage as depicted in the case. 

Following is the business of model of IKEA: -

1. Process for product design: to reach the store, it is critical for a product to meet all the criteria. The criteria are affordability, better design, sustainability as well as operational value or functioning in a proper manner. The planning of the design of any products initiates first by establishing a price where the product can be sold properly. Also, designers also have to pick what kind of elements in designs, techniques used for production and raw material can be used to decrease the cost of production. Also, the person who design the furniture also work on the floor of the factory and communicate directly with a production team to be clearer about the capacities and limitation of the production department. It is is based on streamlining the process used in the design and reducing the overall cost of prototyping it correctly (Grant, 2016).
2. Manufacturing and distribution: the company has over fifty thousand SKU's that is placed to free the issue of variability of products and the company depend on extensive forecasting and normally planning phase for five years well in advance. The company depends on the planning in the long term to properly balancing the volume in production which comes across the network of more than thousand third party producers. It is important to understand that expanding the production demand that permits the suppliers to have a similar time for the cycle and it also leads to low level of production per unit. Just after the manufacturing process, the products are later sent to a network of forty-seven IKEA owned, distribution centers situated in seventeen countries (Grant, 2016). Therefore, to optimize on the concept of warehousing and needs for transportation, the finished products are packed tightly into some the flat format of packages.
3. Retail: when a consumer looks around in the store and a select number of products to purchase, they usually head to the warehouse of stores to come up with some packages. Since the consumers are accountable for picking up the packages, IKEA does not have to recruit labor or the workforce that can take the accountability otherwise. This is done to pick up the packages, and the company does not have to recruit labor that can make an assumption such accountabilities (Grant, 2016).

Why do you think it has been so successful in the fragmented furniture industry?

The basic idea of the company is to provide the broad range of products in home furnishing with better designs and also work at prices that are so low that many people can afford it easily. Many times, better design home furnishings are based on creating for the some who can afford it properly. In the beginning, the company has adopted a different path, and we have to determine to side with the many concepts, and it further means responding to needs of products of people occurred all across the world and people with diverse needs, dreams, and tastes. People also want to improve the home and lives of people every day (Ngai and Falkheimer, 2017). This can be challenging to produce an expensive range of products and also spend the money by letting the customer pay for the high prices. To make it more beautiful, durable furniture at low prices is not an easy task, and it also needs the different approach. It is true that one must find simple kind of answers as well as savings in every way, procedure or adopted approach but based on ideas or concepts. The business idea is also based on the basic association of the consumers. The company focuses on doing their part honestly, which initiates with the designers working with production to find a smart method to make furniture utilizing the present production methods (Ngai and Falkheimer, 2017).

What do you consider to be IKEA’s main weaknesses?

Following are the weaknesses: -

1. The overall structure and scale of the international business and this can make it very hard to control particular quality or standards. Some nations where the company's products are manufactured that are not implemented in the legislation to control every kind of working situation. This can also show as a weak link in the company's supply chain, and it also impacts the views of the customers of company's products. The process of IWAY code is supported by training that visits factories to ensure that suppliers can meet the basic requirements (Lu, 2014).
2. The overall need is based on low-cost products. This requires having the right balance which is built against of producing a high-quality product. It is important to have a clear distinction itself and the products from some competitors. The company has a belief that there should be no compromise between the able to offer low prices and quality based products.
3. The company also requires keeping cordial interaction with the customers and other associated stakeholders based on the current environmental functions. The overall scale of the business makes it more difficult work (Mariani, 2016).

Analyze IKEA’s Cultural Web.

Following are elements of cultural web: -

1. Stories: the main star of the company is Ingvar Kamprad which is seen by the workforce as the primary visionary who has put a lot of efforts, lived a simple life and provided some concrete examples to everyone. In IKEA, all the local nationals are based on simple kind of culture with values with a simple process, humble approach, and teamwork.
2. Routines and rituals: the organization also believe strongly in staying near to the consumers and every store is friendly for parents and them people stands first. At the same time, the company is committed to its people and working methods. The workforce is asked to dress up in an informal manner and also work in the more relaxed way along with open plan floors (Komassi and Pal, 2015).
3. Symbols: it is usual to understand same characteristics in every kind of store of the company. For example, all the stores and the associated staff dress in a particular uniform which is similar to Swedish flag. As discussed before, IKEA is all about custom followed by the citizens of the people with little attention on minimum and simple kind of design delivered in a custom based flat packages (Larsson and Gadde, 2016).
4. The structure of organization: the company typically relies on informal management which builds on any non-hierarchical manner. Typically there is three level of the hierarchy of responsibility that exists between the store managers and the workforces.
5. Control structure: in the center, the control system of the company is done to control the quality. The primary focus is based on providing a quality product with sturdy products that can pass the basic standards. Also, the control on the functions is by ensuring that work of management exists closely with the workforce by making sure that the warehouses can be labeled with the help of products.
6. Structure based on power: the high level of management is based on Scandinavian culture and in last five years is based on the strategy of only forwarding the workforce who is Swedish by nature based on management that has transformed (McNamara et al., 2016).

Does the cultural web of IKEA support its current strategy? 

The cultural web completely supports the IKEA present strategy and in the past the company can be favored the Sweden citizens for helping different managerial program and but in coming five years, global career management is now critical to sustaining global growth. However, many steps must be taken to calculate the needs to be taken to make sure that other kinds of backgrounds are fitting into many programs on managerial level. The career culture highly supports the basic corporate strategy with right kind of structure and rewards. The cultural values of the company are based on consciousness on cost and informal structure and a very humble beginning as passed towards by Kamprad associated with accountability and teamwork and making sure that their workforce is highly motivated (Ehsan Ullah et al., 2016).

Recommend cultural and corporate strategy changes for IKEA.

It is important to focus and work on the workforce of another kind of background to generate a multicultural environment by creating a diverse management also strengthen the corporate of company's view as a multinational group. All the company's store out in the market with many consumer based big citifies have a right base for transportation to be able to market in IKEA, and this is why a possible strategy can transform the structure of IKEA and have small retail outlets.

There are so many competitors of the company that offers services like free delivery on purchase above a specific amount. This is why, measures taken by the company must make sure that the overall profits are taking, by putting reduced spending limits to pass for free delivery (Mendibil et al., 2013).

Another great suggestion is based on attracting more consumers will be to have quick assembly base in stores for non-disoriented consumers. The company IKEA is all about providing some services to self however not many consumers are well trained to deal with DIY or assembly based process. The calculation will ensure that products are initiated to every kind of consumers.

Conclusion:

The primary focus of the company remains the same, and overall success makes sure that adoption of aggressive prices strategy along with aggressive advertising along with a huge range of product, unlike any competition. Services also require coming in attention to improve the purchasing of customers and also maintain the position where the cheaper players can enter the market like supermarkets (Mendibil et al., 2013).

Reference:

Larsson, R.G., 2015. Ikea's Almost Fabless Global Supply Chain—A Rightsourcing Strategy for Profit, Planet, and People. Lean Management of Global Supply Chain, 12, p.65.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Ngai, S.B.C. and Falkheimer, J., 2017. How IKEA turned a crisis into an opportunity. Public Relations Review, 43(1), pp.246-248.

Lu, C., 2014. IKEA, S inventory management strategy: how does IKEA do it. Retrieved from.

Mariani, G., 2016. Influence of consumer behaviour on the circular economy application. The case study of a revival strategy for home textiles at IKEA. IIIEE Masters Theses.

Komassi, E. and Pal, R., 2015. Investigating short term strategies in product sustainability index implementation, a case study at IKEA. Universitätsverlag der TU Berlin.

Larsson, J. and Gadde, J., 2016. Modularity and its Effects on Operations and Logistics-A Case Study at IKEA Industry.

McNamara, T., McNamara, T., Descubes, I. and Descubes, I., 2016. Can IKEA adapt its service experience to India?. Emerald Emerging Markets Case Studies, 6(1), pp.1-14.

Ehsan Ullah, E., Karlsson, B. and Dada Olanrewaju, D., 2016. Foreign Market Entry Srategies.: A Case study of IKEA entering Indian Market.

Mendibil, K., Rudberg, M., Baines, T. and Errasti, A., 2013. Operations Strategy and Deployment. In Global Production Networks: Operations Design and Management, Second Edition (pp. 61-92). CRC Press.