A Business Leader. Prepared under: Page 1 of 9

Transcription

1 A Business Leader Prepared under: Page 1 of 9

2 IKEA is a Swedish company which is operating globally in making furniture with different design and concept. Silent features of the company are: Initially, the company was formed in 1943 by a Swedish boy, Ingvar Kamprad, who was at the time only 17 years old. Now he is one of the richest people living in the world. Headquarter of the company is in Netherlands Annual revenues of the company are 30 Billion plus and its operating income is 4 Billion having more than 150,000 employees working all over the world. The company is best known for modern architectural designs and interior designing. There are 384 stores of IKEA operating globally i.e. in 48 countries. By manufacturing the furniture, the company is consuming the wood which is 1% of the world s wood being used as commercially. The company is dealing in the following products: Food Kitchens and appliances Outdoors furniture and tiling Wireless charging Dining Living room Bedroom Office furniture Children furniture Laundry Bathroom items Lighting Decoration Textiles and Rugs Cooking Eating Safety items What Strategy does IKEA follow? The vision of the IKEA Company is to build a better lifestyle of the people and make their life ease. In order to maintain this vision, the company is providing better quality products as well as at very low prices that even a middle-class person can easily buy their product. The strategy that is being followed by the company is highlighted as under: Product Quality: The products are innovated so that no other rivals possess that product. This innovated product gives the company a competitive edge in the industry. Similarly, the company has Page 2 of 9

3 got the patents of these innovated items and materials which will give it an opportunity to earn abnormal profits. Packaging the packaging of the products is flat and simple. This not only reduces the cost of the product but also reduce the prices for the consumers that is the reason, the prices of IKEA are far less than its rivals. This flat packaging also helps in transportation and logistics and are easy to move from one place to another. Low prices The prices of IKEA products are low as compared to other competitors this aspect is fully supported with the high sales and as a result, the sales boosts up as well as the profits of the company. Environment Friendly Products The products of the company are the environment and still, the company is trying to make complete environment-friendly products. For example, the wood that is being used by the company for making furniture is allergy free as well as the cotton that is being used in the furniture is of better quality. For such reason, the company is a member of better quality initiative and are committed to using the better quality cotton by the end of the year. E-Wheel Method IKEA has introduced new methods for decreasing the waste as well as decreasing the cost of the product. The company called it E-Wheel method. In this method, the company recycled the waste and use them for the productive purpose as well as for manufacturing other items. In this way, the company has not only minimized the waste but also it generates profits from the waste. Easily Accessible Stores The IKEA stores are located at the places where people are easy to buy at. Most of the stores are located in downtown where people go for shopping and eating only. That is why the customers are always keen to buy at the IKEA store. The company has also started online shopping which helps the consumer to save the time and increase the sales of the company. Recommendation / Suggestions for IKEA: IKEA needs to focus on the material other than wood like Plastic or recycled furniture which would be helpful for the company and through which the company can make more profits. Like IKEA became a member of BCI, it should also focus on alternates of cotton-like polyester or related items which bring new innovated ideas for the company and this will also reduce the cost of the product. Page 3 of 9

4 The management should involve the participation of employees while making a certain decision because lower management employees give better ideas as they are directly involved in the business activities and they can observe well where the problem is lying in the company and they can point out the specific problem which can result in the betterment of the company. SWOT ANALYSIS OF IKEA The strength of IKEA: IKEA has following strength due to which it has gained a competitive advantage. Low-cost provider The products of the company are of low cost/price which ultimately attracts the customers and this also helps the consumers to buy the products under their buying power. Superior Efficiency R&D of IKEA is far better than its rivals due to the reason that it bring innovated products in the market which are not only cost effective but also they are multi-function and easy to assemble. Good Quality Product Page 4 of 9

5 The products of IKEA-like Wood, Cotton, and food are made from high quality raw material and the finished goods are of also a high quality that is why consumers have become loyal to the brand via IKEA. Weakness in IKEA: Every expert and highly reputable company have some weaknesses which are needed to be minimized. Similarly, IKEA has following weaknesses. Primary problem The primary problem of the Swedish is of Human Resource, as the people working in the company are not happy with the company as compared to the other company employees working in that region. This unhappiness is due to the very low level of participation of employees in company s policy. The management is basically based on a bureaucratic hierarchy where management takes the decision on their own without the involvement of the employees. Depreciation Cost There is a possibility that some of the items are not sold by the company and at the end of the financial period, the company has to bear the depreciation cost over its inventory and this results in low-profit rate. Analyzing the process and structure of IKEA, the opportunities and threats of the company are as follows. IKEA main focus towards its customer is to provide the best quality product and at very low cost. This has led to the success of the company and it has reached so far to this level as what is in today. However, there are also some threats that the company may cater as well as new opportunities which may lead the company to gain more growth. Threats of the company: Critically speaking, the company is doing its best for catering the threats but these following threats should be kept in the mind of management of IKEA for future planning. Change in the government policies As the company is operating globally, so the policies of the government mostly in underdeveloped countries change drastically which may or may not be in favor of the company, so there is always a threat that new government or policy may harm the operations of the company. Controlling the standard and quality Page 5 of 9

6 Although the company has made better Standard and quality products but maintaining the same standard in all lots is really a difficult task so the management is needed to put their expertise so that the quality of the product may not be decreased. Keeping the user's demand In this dynamic world, the demand of users are changing day by day and they ask for something every time they go for shopping. For such reason, IKEA has to work hard to communicate with their customers as well as remain updated with the new inventions. New Opportunities for the company: There are different opportunities for IKEA for having a competitive advantage. Need for low price product As the process of innovation in IKEA is continuous, they have an opportunity to cut the cost of the product by enhancing the technology and other related things which reduce the cost of the product and when the cost is reduced, the price may also be decreased and this reduction in price give extreme competitive advantage and sales increases. Opportunity through BCI IKEA has become a member of Better Cotton Initiative and this step can increase the reputation of the company in the mind of customers as well as the society as this shows the social responsibility of the company that they are not only improving the product quality but also contributing towards the society. HOW TO ANALYZE IKEA USING PORTER S FIVE FORCES MODEL Porter presented a five force model for analyzing the company and its stakeholders along with the threat and new opportunities for the company. Page 6 of 9

7 Porter s five forces model which is graphically presented as above is described hereunder: 1. Supplier Power The first and foremost force that affects the business is the Supplier. This is because of the reason that all the manufacturing process is solely dependent on the supply of material and if the material is late, the production would be late and due to the supply of product is reduced, the price will also decrease or the user may switch to other alternatives. For such reason, the suppliers are given due importance. 2. Buyer Power According to the economics law of demand, when the demand is decreased the prices are decreased. Hence it can be said that the ultimate user has a power not to buy a product which leads to the reduction of price. Similarly, if buyer collectively boycotts some products, that product s price will decrease to the bottom. 3. Competitive Rivalry Page 7 of 9

8 Getting the competitive advantage is always a fight between the same companies. For such reason, the companies keep an eye on other so that they may always ahead of the other company for getting a maximum market share. So this force keeps the business to run and be dynamic always. 4. Threat of Substitution There is always some force exist that a substitute of the similar product can reduce the price. Like Japan Electronics had a monopoly on the world until China brings substituted electronic products at a very cheaper rate. 5. Threat of New Entry There is always threat for the existing companies, where entry of the new competitor is easy as when a new company comes in the market, it works hard to attract the customers with innovative facilities which will reduce the market share of the existing companies. RESOURCES AND CAPABILITIES OF IKEA Resources are the elements which drive the organization to manufacture/build their products in a way that is helpful in making the organization to earn profits. This utilization of resources is most difficult part is how to use these resources to get the maximum output. When an organization has an ability to use these resources to the maximum level, they are said to be capable organization and they have the capability of getting maximum utility from resources. Broadly speaking, resources are classified into two categories i.e. Tangible and Intangible resources. By the term tangible, it is meant that those resources which can be physically seen or touched like material, machinery, plant etc. These resources are used to build/manufacture the finished goods that are ultimately used by the consumers. Intangible resources are those which have no physical existence, for example, Human Resources, copyrights, patents etc. as they provide the services to the customers and this service has no physical existence. Talking about the IKEA s tangible resources, it includes Wood, Cotton, Waste and Food which are said to be material to produce the finish goods. And intangible resources of IKEA are human resources which are being used to run and operate the company. Core competencies of the company IKEA are as under: For maintaining the low cost of the products, the packaging made by the company is simpler and less costly. The company maintain its design and model and get its patent right so that whenever that design is seen by the customer, he automatically gets the image of the IKEA. Hence this helps in building the customer a brand loyal. Page 8 of 9

9 The policy of the IKEA is simple and flexible that it can target and start a business in any part of the world without any complex formalities and increase its cash flows with that. IKEA AND BETTER COTTON INITIATIVE (BCI) The company, IKEA, has made a commitment with Better cotton initiative BCI as the company will by entirely in line with the BCI. BCI is a non-profit organization which is working for the growing of better cotton that may be used in all products of IKEA and other member organizations. Due to BCI, the product quality of IKEA will be improved and the company is charging the same price that it was charging before. In this way, the company is offering a better product at the same price which will give it a competitive advantage. For such reason, IKEA is also working hard to reduce the cost as giving BCI products to the customers at a lower cost of production so that the leverage that the company is giving to its customers may be balanced out. Page 9 of 9