Q1. What is the business scenario of IKEA?
The company, founded in 1943, is the largest furniture retailer in the international setting. It offers a set of fashionable and affordable furniture that generally possess Scandinavian designs. Ikea’s expansion in the international market is through franchising. The company operates its franchising approach by looking for untapped market and consequently penetrating it either by joint ventures or by creating a direct subsidiary in that market. Though the head office provide certain restrictions in the operations particularly with the respective requirements for the products of the subsidiary, the franchise have some level of autonomy with regards to designing the products to fit with the taste of the market.
Q2. What is the market situation of IKEA from SWOT perspective?
Strengths
The company has a strong brand recall which appeals to the certain demographics. Moreover, the company does not have a direct competitor as it has a very distinct manner of doing business. In the same manner, the company is the primary provider of innovative and stylish designed functional products. It has ingrained in popular culture as synonymous to such items of furniture.
Weaknesses
The good thing about being an international brand is the ability of the consumers to relate it to quality. However, the case of Ikea is different as it ironically depends highly on the Western markets. It has yet to take on the challenge of Asia. Moreover, the low prices as well as the kits provided by Ikea appear to compromise the consumer relationship management of the company. Since the products are built by the customers by themselves in the comfort of their home, store employees appear to neglect the company’s goal of complete service.
Opportunities
The internet has great potential for the company. It could engage on e-commerce and cater to all types of demographics who like their products. Similarly the Asian market appears to be an enticing prospect for the company.
Threats
Mainly, the threat to the operations of Ikea, being an international company is the impending recession in some markets. The economic meltdown in the United States has considerably taken a toll in other economies dependent to it. To this end, exchange rates would fluctuate incessantly hence the cost leadership scheme of the company is widely compromised.
Q3. What is the competitive environment of which IKEA is operating?
The competitive environment of Ikea is neutralized by its strategic position. Traditional furniture companies tend to have showrooms where the consumer can experience the full shopping experience. Ikea doesn’t have that. It publishes a catalog containing all the available products that they sell and wait for the customers to inquire and consequently purchase the product. The products of Ikea are another work of wonder. When it is delivered to the customers, they are the ones who will assemble it. This is the value-added by Ikea on their products.
Q4 What is the generic business strategy being adopted as well as the strategic direction to go ahead by IKEA?
The company engages in two generic business strategy, cost leadership and product differentiation. Cost leadership means that the company is offering top quality products in the most affordable prices. On the other hand, their products are considerably different from the product mix of the other players in the furniture industry.
Q5. What you advise IKEA to diversify – if so in what ways?
The company should diversify by means of concentric diversification. This means that they should offer a total solution for home furnishing and a package of decoration including design & build. This should be done in order to meet the extended market segment which is willing to pay a premium for tailored-made home furnishing services based upon the provision of IKEA products.
Credit:ivythesis.typepad.com
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