IKEA STRATEGIC

MANAGEMENT
ANALYSIS

STUDENTS:

Hassna Al manji (426712)

Kaley Kam Lerida (485550)

Maria Poster (484911)

Nawal Al siyabi (441160)

Sophie Hotovska (483417

Yehin Lee (482806)

PROJECT SUPERVISOR:Oscar
Peters

CLASS:EIB3V.B

PLACE:Saxion University of Applied Sciences,

Enschede

DATA: 11 October 2019

INTERNATIONAL BUSINESS
AND MANAGEMENT STUDIES
Strategic management
assignment 2019-2020

Hassna Al manji (426712)

Kaley Kam Lerida (485550)

Maria Poster (484911)

Nawal Al siyabi (441160)

Sofiia Hotovska (483417)

 Yejiin Lee (482806)

PREFACE
This report is written by Sofiia Hotovska, Hassna Al Manji, Yejin Lee, Kaley Kam
Lerida, Nawal Al Siyabi and Maria Pastor - each of us has a different background.We
are all students of International Management and Business at Saxion Enschede. We
are going to use our theoretical knowledge about strategic management other
business fields into practice by applying it in this report.
We would like to thank our teachers for instructing us in terms of theoretical
knowledge.
PREFACE 3

INTRODUCTION 7

CHAPTER 1: STRATEGY 8
1.1 Competitive advantage 8
1.2 Mission and vision statement 8
1.3 Long term objective Error! Bookmark not defined.
1.4 Ikea Strategies 9
1.4.1 Ikea generic strategy: 9
1.4.2 Ikea intensive strategy Error! Bookmark not defined.

CHAPTER 3: INTERNAL AUDIT 11

3.1 Culture 11
3.2 Marketing 11
3.2.1 Customer Analysis 11
3.2.2 Selling Product and Service 11
3.2.3 Product / Service Planning 12
3.2.4 Pricing 12
3.2.5 Distribution Error! Bookmark not defined.
3.4 Value Chain 14
3.5 Benchmarking 14

CHAPTER 4 INTERNAL AND EXTERNAL ANALYSIS OF THE COMPANY IN MATRICES 16

4.1 SWOT Matrix 16
4.2 IFE Matrix 16
4.3 EFE Matrix 17
4.4. IE Matrix 18
4.5. The Competitive Profile Matrix 18

CHAPTER 5 STRATEGIC AND IMPLEMENTATION 21

5.1. Market segmentation 21
5.1.1Geographic 21
5.1.4. Psychographic 21
5.2. Product Positioning 22
5.3. Research and Development 22
 5.4. Management Information Systems (MIS) 22

CHAPTER 6 STRATEGY EXECUTION AND EVALUATION 24

6.1 Vision and Mission Statements 24
6.2 Generate, Evaluate and Select Strategies and Implementation Error! Bookmark not defined.
6.3 Strategic evaluation 25
6.4 Concluding Ikea’s strategies 25
6.4.1 Strategy Recommendation 26
6.4.2 Internal Recommendation 26
6.4.3 External Recommendation 26
6.5. S.M.A.R.T. Objectives 27

CHAPTER 7 CONCLUSION 27

BIBLIOGRAPHY: 29
SUMMARY
Our group is analysing the Ikea’s strategic management using the guidelines of the book
“Strategic Management” by Fred R. David and Forest R David. The aim of the study is to find
out if the company applies competent and effective strategic management tools in order to be
successful and competitive within the industry. In order to do this, such matrices, as: SWOT,
EFE, IFE, IE and Competitive one - will be provided and discussed, as well as in-depth
analysis, Value Chain, and SMART objective setting. Due to this report our group was able to
come up with the clear strategic recommendations based on the IFE matrix for the company's
performance.
Ikea is a strong furniture retailer which has a distinctive competitive advantage among other
companies. The company does not have a specific vision or a business idea that will be
connected to their vision. They express their vision as their mission statement. Ikea’s focus is
to make purchasing their production affordable for all the people.
The company uses genetic (cost leadership and differentiation) and intensive (market
penetration, market development and product development) strategies. The culture of the
company originated in enthusiasm. Ikea’s selling product and service can be called brilliant. It
dominates the art of video making, so approaches its customers through visual tools.
As from the SWOT matrix, it can be said that, although Ikea is a great brand with distinctive
strengths, it has to focus on its weaknesses that should be diminished, such as poor quality
of products and bad reputation because of it. The company has to pay attention to the market
threats and opportunities: expansion and partnership should be focused on. The Competitive
matrix identified the fact the Amazon company has an advantage over Ikea company. But Ikea
is stronger than Walmart. IE matrix showed that Ikea takes the position in the average score
“Hold and Maintain” that presents the ability of the company to penetrate the markets and
develop its products but it needs to consider great developments in order to get to a stronger
and more competitive position.
Moreover, as part of our business programme our group was asked to conduct a final element of the
report, which is Canvas Business Model, provided with an explanation of the analysis of the Ikea
company that can be found in the Attachments.
INTRODUCTION

A phenomenon that has changed the entire world's view of home furnishing and the most
famous furnishing in the furniture market, it is, of course, Ikea. Ikea is a Swedish furniture store
that offered smart and affordable home furniture products.

Ikea is a home furniture retailer that offers home furniture at a low price, operating on more
than 300 stores around the world. Their furniture is sold whenever possible in compact "flat-
pack" form for in-home assembly by the customer.

This report aims to analyze all the aspects that the strategic management of Ikea consist of
and determine whether they are a successful company. This comparison is made with the
help of the Strategic Management book.
CHAPTER 1: STRATEGY

1.1 Competitive advantage

The competitive advantage of any company is any activity a company does well
compared to activities that are done by rival firms, or any resources a firm possesses
that rival firms desire (David). Ikea competitive advantage among its competitors in
the industry is that Ikea works with designers from all over the world to provide the
growing home furniture needs. However, Ikea works to deliver wide range, artistically
designed, eco-friendly and affordable furniture at low cost is the driving force for the
company.

1.2 Mission and vision statement

Talking about the mission and vision statement of Ikea, the following one does not
have a specific mission. However, they do have a business idea which is connected
to their vision. So, it’s fair to assume this phrase as IKEA’s mission statement.

“To create a better everyday life for the many people,'' this is the IKEA vision. Our
business idea is ‘to offer a wide range of well-designed, functional home furnishing
products at prices so low that as many people as possible will be able to afford them’.
Our vision also goes beyond home furnishing. We want to create a better every day
for all people impacted by our business. (Ikea, n.d.)

Ikea used their vision as their mission statement, even though each statement is
delivering different purpose. However, Ikea stated that their vision is to create a better
everyday life for many people. But the vision is missing to the reason for being, which
should be addressed by the vision of the company.
The mission statement of Ikea explains what Ikea wants to achieve a “high standard
of quality and to produce long-lasting products with lower prices”. And how the vision
of the company can be obtained, that by creating a better everyday life for the majority
of people. Lastly is address the value of Ikea, which is an excellent product at a low
price. Ikea mission statement did not address any stakeholders except customer,
which it seeks to satisfy them, so the mission of Ikea is customer oriented. However,
the mission statement of Ikea is missing five components of the nine essential of
mission components: markets, technology, concern for survival, public image and
employees.
To sum up, Ikea is poorly communicating its core purpose or reason for existing
to its stakeholders.

1.3 Long term objective

Ikea objective is to offer a wide range of home furnishing items of good design and
function, good quality and durability, at prices so low that the majority of people can
be able to buy them. The company aims to have a positive change and to have a
possibility to make a significant and lasting impact on the generations. (Ikea, n.d.)

1.4 Ikea Strategies

1.4.1 Ikea generic strategy:
A generic strategy is three strategies that can help brands to build and maintain their
competitive advantage. These strategies are called generic strategies – cost
leadership, differentiation and focus. Based on Porter’s model, Ikea uses both cost
leadership and differentiation.
Ikea uses a cost leadership strategy because they search for a supplier who could
supply them with well-designed subassemblies at the lowest cost. The customer
receives the product and assembles them by themselves. This method could save
delivery cost for both producer and customer. In that case, Ikea can offer an excellent
product at a low price.
Beside cost leadership, Ikea uses a differentiation strategy. Ikea has a unique
purchasing experience as each Ikea store is a unique building with the noted brand
symbol and style. They present its products in prototype rooms. It provides various
choices suggestions for customers to decorate their rooms. Furthermore, Ikea focus
on delivering a high-quality product with a competitive price, which is differentiation
compared to its competitors in the industry. (Kristin's, n.d.)

1.4.2 Ikea intensive strategy

The intensive strategy is strategies used by companies to increase market share and
brands customer base. There are four types of intensive strategy; they are market
penetration, market development, product development and diversification. Ikea uses
market penetration, market development and product development.
Market penetration is when a company sell more to the existing customer base either
by quality or low price. Ikea provides a great quality product at an affordable price.
Market development is selling to a new and larger customer base or entering new
markets or geographical areas. Ikea is expanding its business over the globe; there
are 296 IKEA stores in 36 countries/territories. IKEA Group owns 262 of them. Ikea
has faced some difficulties with the cultures of these countries, but they overcome
these difficulties by understanding local people’s needs and tastes and catering to
them. Market development strategy helped Ikea to growth globally.
Product development is bringing new products and innovation to the market. Ikea has
known for its product and design innovation. This strategy had helped Ikea to grow its
product range. (Pratap, 2018)
CHAPTER 3: INTERNAL AUDIT

3.1 Culture
The culture of the Company originated in enthusiasm, union and the “start” attitude,
and this is formed when we put these values into action. Togetherness is at the heart
of the IKEA culture, born from their roots in southern Sweden and inspired by the IKEA
founder, Ingvar Kamprad. Ikea is constantly trying to find better ways to get things
done and to bring out the best in ourselves and others.
Besides, the company has eight key values like:

● Caring for people and planet

● Cost- consciousness
● Simplicity
● Renew and improve
● Different with a meaning
● Give and take responsibility
● Lead by example
The corporate culture determines the way the company moves; whether in a positive
aspect or otherwise. So, it is not only the exciting and engaging IKEA’s culture that
brings the team together, but their culture really helps them have a community feeling
in the company.

3.2 Marketing
3.2.1 Customer Analysis
Customer analysis is the process of identifying and evaluating the characteristics of
customers in order to develop an effective mission statement.

Customers of IKEA are the working-class people who are looking for value for money
home furnishing solutions. These are majorly in the age group of 20-50 years. These
are the consumers who are inclined towards the stylish & modern home furnishing
solutions.

3.2.2 Selling Product and Service

Successful strategy implementation generally rests on the ability of an organization
to sell some product or service. Selling includes many marketing activities, such as
advertising, sales promotion, publicity, personal selling, sales force management,
customer relations, and dealer relations.

The brilliance of IKEA's digital marketing strategy in taking full advantage of Social
Media has helped its brand grow. IKEA knows its customers and knows where to find
them and how to increase reach and brand interaction. IKEA makes full use of the
potential of each social network, creating campaigns tailored to the details of each
one.

The Facebook content strategies of all local IKEA pages are similar and consist of
daily publications, usually with a short video or an attractive image of a room equipped
with IKEA furniture.

Moreover, IKEA dominates the art of video marketing, is one of IKEA's core content
marketing approaches and is intended to show (not tell) customers how to improve
their lives. The videos tell the IKEA story in fun, educational, instructive and inspiring
ways. In its videos, IKEA continues to convey the main message in a positive way.
One of the most inspiring campaigns is "The Wonderful Everyday”.

Therefore, IKEA follows its client to other social networks, where its buyers are active.
IKEA has established its presence on Facebook, Instagram, Twitter, YouTube,
Pinterest and Google+, with the aim of inspiring its audience. In all networks IKEA has
its local country accounts.

3.2.3 Product / Service Planning

The design of home furnishing products at IKEA starts with an understanding of
people’s everyday needs at home, especially the needs of the majority of people, who
have limited incomes and limited living spaces. This is how IKEA succeeds in offering
well-designed, functional products at prices so low that most people can afford them.

In order to make products saleable and right for the IKEA identity, IKEA co-workers in
product design and product development focus on price and quality, design and
function, environment and health. They scrutinize every product idea regarding the
best use of raw materials and manufacturing opportunities. Therefore, elements of the
design are often decided on the factory floor, where designers and manufacturers work
together.

3.2.4 Pricing
The IKEA uses reasonable and affordable prices for their furniture. Costs are cut and
way necessary to be able to sell the product for le ss and still turn a profit. They use
large volumes and flat packaging to cut cost.

Also, the transports are economic from the furnisher via the stores, to the customers,
there are more expensive than most competitors, and they are outside city centers to
keep prices even lower.

3.2.5 Distribution
Coordinating difference means of transport to make the movement of goods as quick
and efficient as possible is a real art. And it’s not only is to make sure the goods arrive
at the right stores and customers; they must also arrive in good shape.

Coping with the company’s expansion presents an enormous challenge for

distribution. Growth on this scale necessitates regular adaptations to our distribution
structure.

On the other side, a future challenge for our experts in distribution is to meet the
demands generated by remote shopping over the phone and Internet. Although we
expect IKEA customers will always enjoy an inspiring visit to the store, Internet
shopping and telephone orders are steeply on the rise, requiring new, quick and
flexible distribution solutions according to the customers’ expectations.

3.3 Management
Main structure of IKEA family comprises of “INGKA Holding” which is the main (parent)
company for all the IKEA group companies. IKEA Group company supervisory board
comprises of Goran Grosskopf, the chairman and Ingvar Kampard being senior
advisor and many others representing their own territories. This group of companies
is basically concerned with carrying out all the necessary functions to bring the right
product to markets. These companies include IKEA Sweden, Swedwood (Industrial
IKEA production company), purchasing, distribution, human resource services,
internet technology and communications departments (all working together).

All scattered branches of IKEA (Franchisees) are connected to a common system

networking “inter IKEA system” at national as well as at international level (monitoring
all the sales, stocks, cash, inventory, demand and supply balances). The basic unit of
information is provided by managers at local stores (shift / branch/ area/ territory
managers), all collaborating to disseminate information from local up to international
level. This propagation of information is carried out through the internet using wide
area networks (ultimately spreading information from end user to main supplier).
So Human computer interaction results in:

● Cost reduction less staff needed

● Resource Land saving Tangible
● Deployment Business
● Improved More messages
● Productivity transmission
● New ideas/products
● Organizational new forms of integration
● Enhancement improved business
● Work Intangible
● Enhancement Business
● Human Resource Structure of IKEA:
 ● Human Resource is one of the strongest departments of IKEA as it gives
emphasis on IKEA’s vision
● Their HR philosophy believes that employees are more productive and
committed when company takes care of them and their needs.

3.4 Value Chain

The value chain is a strategic tool coined by Porter, whose objective is to provide the
greatest possible value to the customer through the services and activities provided
by the company.

This analysis allows to optimize the production process since we can appreciate in
detail the operation of the company. The study of the value chain facilitates achieving
a strategic advantage since there is the opportunity to generate a unique value
proposition in the market.
VALUE CHAIN OF IKEA:

3.5 Benchmarking
Benchmarking is a tool from the internal audit that seeks to assess the strategic
capabilities of the organization in relation to competition and then make improvements
and implement them. There are three types of benchmarking: competitive, internal and
functional.

● Competitive benchmarking: It seeks to measure the products, services,

processes and functions of the main competitors to make a comparison with
our company and to detect and carry out improvements that exceed those of
our competitors.
● Internal benchmarking: is a comparison of a business process to a similar
process inside the organization.
 ● Functional benchmarking: is a comparison to similar or identical practice
within the same or similar functions outside the immediate industry.

BENCHMARKING OF IKEA:

1. Define what process, product or system we will analyze: what do we want to

change?
2. Identify with what we are going to compare.
3. Collect the information.
4. Analyze the information.
5. Implementation: we will obtain the results of the analysis and they will be
communicated to the company, they will have to be accepted by the members
of the organization.

The purpose will be to identify the system process that we want to address and
improve the weak points of these and to reinforce the weaknesses of the company.
CHAPTER 4 INTERNAL AND EXTERNAL ANALYSIS OF THE COMPANY IN
MATRICES

4.1 SWOT Matrix

The SWOT Matrix is an essential matching tool that helps to develop strengths-
opportunities and weaknesses-threats strategies. In this part major strengths and
weaknesses in the functional areas of business are evaluated and summarized.

Strengths
- Recognizable brand worldwide;
- Permanent upgrade in production;
- Relationships with customers,
suppliers, distributors;
- Affordable prices.
Opportunities
- Further expansion of markets;
- Growing online shops;
- Partnership;
- Adding products of luxurious quality.
Weaknesses
- Low-level of quality;
- Bad reputation due to problems with
furniture, employees’ poor treatment
and dangerous products
- Demographic design concept is not
developed enough
Threats
- Intensifying competition;
- Customers’ lawsuits against the
company;
- Average level of income is increasing,
so the customers will prefer more
qualitative products.

4.2 IFE Matrix

Internal Factor Evaluation Matrix summarized the main strengths and weaknesses,
provides a foundation for distinguishing relationships among business areas in Ikea’s
company.

Strengths Weight Rating Weight score

-Brand reputation 0.06 3 0.18

-Stable innovation (upgrade of 0.08 4 0.32
design)
-Customer observation 0.06 3 0.18
-Worldwide presence 0.09 4 0.36

-Strong relationships with 0.1 4 0.4

distributors and suppliers
-Strong product portfolio 0.07 3 0.21
-Use of recycled products 0.05 3 0.15
-Affordable 0.1 4 0.4
Weaknesses:
-Low quality 0.1 1 0.1
-Not developed position in 0.08 1 0.08
Asian countries
 -Demographic design concept 0.05 2 0.1
which weakens competitive
advantage
-Children are hurt in relation to 0.09 1 0.09
furniture from IKEA
-Negative publicity 0.03 2 0.06
-Poor employees treatment 0.04 2 0.08

TOTAL 1.0 2.71

The Total Weighted Score of Ikea is 2.71 which is below average. Ikea should improve
quality and expand demographics in order to be more competitive within the market.
The managers of Ikea should change the way they treat their employees, check on a
regular basis the furniture so it will be safe for children (Olson, 2017).

4.3 EFE Matrix

The External Factor Evaluation Matrix enables strategists to evaluate economic,
social, cultural, demographic, environmental, political, governmental, legal,
technological, and competitive information.
Opportunities Weight Rating Weight score

-Online shopping 0.2 4 0.8

-Food outlets 0.09 4 0.36
-Emerging 0.08 3 0.24
markets
-Strategic 0.1 4 0.4
partnership with
other brands
-Adding 0.04 3 0.12
luxurious
products
Threats:
-Intensive 0.2 1 0.2
competition
-Government 0.08 2 0.16
policies
-Lawsuits from 0.1 1 0.1
customers
-Increase of 0.07 2 0.14
average income
level
-Growing demand 0.05 2 0.1
for premium
products
 TOTAL 1.0 2.62

Ikea reacts to the opportunities of the industry quite quickly. Online shopping is
developed, food outlets are implemented so it attracts more people. Market evolves
day-to-day and corresponds to the current trends. However, the company should be
concerned about the customers lawsuits which can create bad press and spoil the
brand reputation.

4.4. IE Matrix
The Internal-External Matrix analyses the actual condition of the divisions and gives
suggestions for future strategies. It is based on the analysis of internal and external
factors which are combined in one model.

Strong Average Weak

4.0 3.0 2.0 1.0

I II III

IV V VI

VII VIII IX

According to the IFE and EFE total scores, Ikea has its position in the middle of the IE
Matrix (Total Weighted Score is 2.63).
V (average - medium) – means “Hold and Maintain”. The firm uses market penetration
and product development. The company should decrease its weaknesses and this
way Ikea will be able to switch to “Growth and Build” ((II) – average – high) when it
passes 3.0 point if improves IFE matrix. If Ikea wants to expand and open new stores
in new countries, it should develop its production in the first place and maintain
remained strategies and decisions, so this way it will be able to reach “Grow and Build”
score which will allow the company to move further. It can improve some of the internal
factors and address external factors.

4.5. The Competitive Profile Matrix

The Competitive Profile Matrix indicates a company’s main competitors, its strengths,
weaknesses and provides crucial internal strategic information. It helps to identify the
company’s competitive advantage.

Ikea
 Walmart
Amazon
Critical Weights Rating Weighte Rating Weighte Rating Weighte
Success d Score d Score d Score
Factors
Advertisi 0.10 4 0.40 3 0.30 4 0.40
ng
0.09 4 0.36 3 0.27 4 0.36
Custome
rs
Loyalty
0.08 3 0.24 2 0.16 3 0.24
Global
Expansio
n
0.10 2 0.20 3 0.30 3 0.30
Product
Quality 0.14 3 0.42 3 0.42 4 0.56
Market 0.16 4 0.64 3 0.48 4 0.64
Share

Price
0.03 4 0.27 3 0.09 4 0.27
Online
presence
0.02 3 0.06 3 0.06 3 0.06
Social
Account 0.13 4 0.52 3 0.39 3 0.39
ability

Innovatio
0.06 3 0.18 3 0.18 4 0.24
n

Custome 0.04 3 0.12 3 0.12 3 0.12

r Service
0.05 3 0.15 3 0.15 3 0.15
Guarante
e
1.0 3.56 2.94 3.73
Growth

TOTALS

As the table shows, so far Amazon has stronger positions than Ikea does. The
reason is that Amazon covers more countries since it is about online sales. That is
easier to buy furniture and different things on Amazon since it does not require any
efforts to order anything a customer may want. It also has more developed
demographics. The Ikea’s weaknesses about demographics and market
development are described in IFE matrix above. However, Ikea has a big advantage
in innovation field. Walmart loses its positions in relation to Ikea and Amazon. Ikea
should improve the quality of their products, expand their markets and improve
online stores. By upgrading the strategy and implementing some adjustments, Ikea
can exceed its competitors.
CHAPTER 5 STRATEGIC AND IMPLEMENTATION
Strategic implementation is a procedure through which Company puts methods and
plans into action, so as to achieve the long-term goals of the Company. Strategy
implementation focus on two main variables, which are: market segmentation and
product positioning.

5.1. Market segmentation

Ikea’s segments its market into different types:

5.1.1Geographic
There are about 330 stores in around 39 countries in different regions (Europe,
Americas, Asia & Australia, Russia). Those regions have different familiar
backgrounds, with market segmentation, so Ikea mainly divided into geographical
segmentation of the European market and Asian Market. In fact, Ikea’s stores can be
found in urban sectors.

5.1.2. Demographic
Moreover, the demographic segmentation consists of different criteria. Such as, the
age group (22 and older), gender (female and male), Family life cycle (new families
and couples), income level (low and middle) and the occupation (students, employees,
professional).
Moreover, Ikea has a great value because of its best quality and incredibly cheap
prices. Therefore, Ikea targets the people who are looking to buy furniture for the first
time. Such as, College students and young adults, who tend to be in the low-income
category

5.1.3. Behavioural
This segmentation is linked to behavior. The behavioral segmentation comprises of
the degree of loyalty (Hard core loyal, softcore loyal and Switchers), Personality
(easygoing and determined) and User status (non-users, potential users, first-time
users and regular users).
Ikea develop their customer brand loyal in order to make a profit. Therefore, IKEA
needs to focus on how to make non-loyal customer loyal, so it requires buyer-seller
relationship.

5.1.4. Psychographic
This is the last segmentation, which is based on the lifestyle of the customers. Indeed,
Ikea targets customers with a “do it yourself and save money doing it”. IKEA focuses
on this kind of customer with this lifestyle, so in order to save their money, they don't
mind traveling a little bit and assembling the furniture on their own.
5.2. Product Positioning
The Company has been completed with the market segmentation, so it is able to target
specific customer groups. Therefore, the next process is to find out what are the
customer’s needs and wants through product positioning.
Product positioning is a part of an organization’s marketing plan and to determine how
to communicate their product to the target groups. Ikea’s positioning strategy helps
the company to reach different people by using different marketing channels.
Moreover, Ikea Catalog is one of the most important tools in the marketing strategy
because they use their employees to showcase in new product. Beside that, Ikea use
several communication channels such as, Ikea website, advertisements, brochures,
publications and public relations.
Ikea also use the latest digital marketing strategy to effectively interact with their
customers. For example, they have the latest technology, which is called Augmented
reality. It is one of the interactive experience technologies of a real-world environment
and use the existing environment to apply the new information on top of it. So, this
program allows the customers to see how the furniture will fit their homes.
Ikea’s goal from their product positioning is to attract more customers to their product
and let them more loyal to their brand. All over the world, Ikea use insights from real
life at home, learning about the needs and dreams of people.

5.3. Research and Development

Research and Development encompass improving new products and developing
existing products in a way that will allow effective strategy implementation. Moreover,
the R&D of Ikea focus on addressing customers need by providing new technology
beside their product. For example, Ikea came up with innovative tools and well-
designed product, functional products at low price that most customers can afford
them.
Ikea develop their products based on price, quality, design, environment and health.
Therefore, Ikea’s materials go through testing department to check the best use of raw
materials and the opportunities of the manufacturing.

5.4. Management Information Systems (MIS)

Management Information system is the effective management information system,
which defined the favorable outcome of the Company. The company collects data from
multiple systems, then processes it, stores, analyzes the information, and reports data
in order to have decision-making in management.
The MIS of Ikea helps the organization to reduce cost through hiring and attracting
less staff, develop productivity to introduce new product and enhance organizational
integration and operations.
Types of information systems that are used in Ikea’s are:
1- Geographical information systems: Ikea uses this system in order to find solutions
for business operation problems, then they store the data and information from the
problem as reference which can be reviewed by the management.
2- Point-of-sale System: Ikea work together with Wincor Nixdorf who helps Ikea and
provide them with Point-of-sale infrastructure solution. This system can check out
transaction of data through the retail group.
3- Express checkout systems (ePOS): it is self-service checkout system, which is
used by Ikea to help the customers who want to pay by card.
4- Vendor Managed Management System: the idea from this system is to guide
operating cost and make it low in order to provide more services to the customers.
5- Proprietary Inventory System: Ikea Logistics managers use this tracking system as
a technique to forecast sales and Inventory level to meet the demand.
6- Cash Management System: It is also known as CINEO system, and Ikea use this
system for transparent and secure cash management process.
CHAPTER 6 STRATEGY EXECUTION AND EVALUATION

6.1 Vision and Mission Statements

Ikea's vision and mission statements are the same. It can be defined as a short
sentence. “To create a better everyday life for the many people” (Vision & Business
idea , 2018). The people they mention include not only customers, but also their
employees and those who work for their suppliers. They do not aim to simply make
furniture and sell them. They try to improve the quality of people's lives. Their business
idea supports this vision by offering a wide range of well-designed, functional home
furnishing products at prices so low that as many people as possible will be able to
afford them (Our vision and business idea, 2018). They have taken a direct approach
to the business by starting with developing furniture with price in mind. By providing
high quality products at reasonable prices, we have maximized the use of raw
materials to meet people's needs and preferences. Their attractive products lead to
many people's purchases, and they believe they can use economies of scale to
provide quality products at low prices.

6.2 Generate, Evaluate and Select Strategies and Implementation

IKEA is already a successful company in many countries, despite the labor of having
to assemble furniture on its own. They are following a cost leadership strategy. Most
companies want to provide people with good products and services at affordable
prices. But this is never easy. IKEA has a strategy to provide our customers with quality
furniture at an affordable price. Other companies failed to implement their own
strategies as follows. They used a trade off strategy. Instead of offering their products
at an affordable price, they have to pay for it. They gave up a variety of products to
lower prices. They offer their customers a limited and narrow choice of Nordic styles.
However, the mass production of small props reduces the cost of the product and
rewards it with a low price. They also give up services in stores. IKEA's store has very
few employees. The customers of IKEA can view different furniture combinations in
one setting which that eliminates the need for sales people helping the user to imagine
how furniture arrangements will look like in the customer’s house (Strategic and
planning management Assignment Help, 2013). By doing so, they can reduce human
rights costs. And they gave up the convenience of customers. They sell prefabricated
products that allow consumers to assemble their own furniture. At the same price,
many people would have bought the finished product. But they developed this with
their own emotions. The IKEA effect is that the increased valuation that people have
for self-assembled products compared to objectively similar products which they did
not assemble (Michael I. NortonDaniel, 2011). In other words, it is no exaggeration to
say that IKEA created a new culture of DIY. They have a recognizable brand name
and strong positioning in the global market.

IKEA is a global company. Consumers in all countries do not have the same needs.
IKEA's core operating strategy of selling affordable, quality furniture is the same
everywhere in the world, but with slightly different strategies for each country.
Considering the cultures and laws of each country, products such as the size of raw
materials and furniture had to be customized to meet current needs. For example,
when IKEA first entered the United States, American customers demanded larger
beds and larger wardrobes. As a result, they had to change the US marketing strategy
several times. This example shows that IKEA enthusiastically implements their strategies and
improves and changes them as needed.

6.3 Strategic evaluation

We can see that IKEA used some of the strategy-evaluation frames. When a major
change or problem occurs, they take corrective action as quickly as they can. Even if
nothing happens, they continue to develop and strive for better results.

Ikea usually evaluates the performance of an organization based on figures. They set target
outcomes for their activities, compare actual and expected outcomes, calculate deviations,
and evaluate individual performance. It also identifies progress toward short and long term
goals. They operate with three years business plan. Actions to the three-year goal and follow-
up to the degree of achievement are carried out once a year. Follow-up is mainly based on
relevant data assessed by the staff and a more thorough evaluation is made after 3 years.
They found it important to clearly communicate the strategy. Individual performance
assessments follow a nearly identical and clear process at the global level of the entire IKEA
Group, making it easier to transfer between countries and departments. Conduct annual
performance assessments to set goals for the following year and work towards them. They
use S.M.A.R.T to set individual goals to maintain the objectivity and subjectivity of individual
employees' evaluations (Massimo CirilloChristina, 2018).

6.4 Concluding Ikea’s strategies

This report shows that IKEA has a very strong business model. They are recognized furniture
companies around the world and are leading the way in improving and innovating the furniture
industry. They took the necessary steps to improve their business model and continued to
stay ahead of their competitors. In addition, IKEA is investing heavily in smart home
technology by selling smart blind and smart lighting according to the rapidly growing smart
device market. They have teamed up with Ori, an American startup, to establish “ROGNAN”
to provide robotic furniture (COLLABORATIONS INNOVATIONS, 2019). They are continually
evolving and their business model is a very strong model, an excellent example of global
business operations.

They have a strong position in the market and continue to expand their reach. They are always
regarded as best practices for marketing strategies.

IKEA's strategy has already been successful and achieved, but some recommendations can
be made.
6.4.1 Strategy Recommendation

First of all, using a cost leadership strategy, IKEA has a stable position in the market. They
can improve the competitiveness of their brands through low-priced products. But by
emphasizing their strongest point, cheap prices, they are suffering from a lack of product
innovation and face the problem of providing very similar designs. Standardized products
attract fewer customer segments, which allows competitors to fill the niche markets and
strengthen their position. To minimize this fundamental problem, IKEA should constantly study
for creative attempts and various design strategies. It may also be helpful to expand your
range of employment. The mix of people of diverse backgrounds and personalities will
promote diversity and the creation of new ideas.

Another problem with IKEA is that it has some negative issues. Swedish environmental
protection group Protect the Forest (PTF) has suspended IKEA’s FSC certification for violating
environmental regulations (FSC Suspends IKEA's Certification After Discovering Use of Old-
Growth Forests in Russia, 2014). IKEA was attacked as a paper-wasting company because
of a huge catalog of plastic being distributed, and were also accused of using PVC, a type of
plastic. In addition, the company has been criticized several times for issues such as poor
treatment of employees, suspicious advertising practices or lobbying of government
authorities. IKEA is well known for coping with these crises, but negative public relations
undermine brand reputation and customer loyalty. IKEA needs care and attention before
problems arise, such as environmental issues, employment issues and political issues.

6.4.2 Internal Recommendation

IKEA has many advantages related to the internal environment, such as strong brand equity,
reputation and brand awareness. But they also have some weaknesses. I would like to make
a recommendation for them to develop further. They need to be more confident in Asian
markets. They did not perform as well in Asian markets as in other markets. Its presence and
demand in the Asian market were low. And they have to compete with big and small brands
in Asia that offer affordable furniture. There are not many Ikea stores in Asia compared to the
population. IKEA deserves to pioneer Asian markets. They must study Asian culture, trends,
interiors, and lifestyles carefully to develop furniture tailored to them. They must actively
pursue marketing strategies to increase brand awareness in Asia. They can partner with local
retail brands to lay the groundwork for emerging markets. And they should create stores in the
city center, not on the outskirts, so that customers can easily access them. If they have their
stable position in Asia, they will be able to develop further globally.

6.4.3 External Recommendation

To survive in a changing environment, IKEA must constantly embrace change and recognize
trends in customer preferences. They can focus on improving their value proposition and
maintaining a competitive advantage. Their target customers are middle class. They sell good
quality and durable but affordable home furnishing products. However, as the world economy
improved, the demand for premium products increased. It can be a threat to IKEA, which sells
mainly on inexpensive products. So, IKEA needs to add luxury premium quality products to its
portfolio. It can also offer more options to customers, including more innovations, and they
already do some but can do more.
6.5. S.M.A.R.T. Objectives

SMART Objectives help to make the ideas and strategies clearer and more sensible in order
to understand and achieve them without any problems that can happen during the
implementation. This is a guide which supports the goal setting.
Specific (What is to be done?): the company should develop its production in Asian countries
so it will target more customers and increase the revenue and make the quality of products
better so it will omit lawsuits from customers, accidents caused by the furniture and full
refunds. Also, it should expand its services via internet so it will help Ikea to surpass Amazon.
Measurable (How will it be known that it meets expectations?): company can use customers
satisfaction rate in order to know the improvements of the products and what should be
improved. In case of opening new stores in Asia it can check the amount of people visiting the
stores. In case of online shopping is can check the customer attendance of the websites and
the amount of purchases they make a day.
Achievable (Are the objectives achievable and attainable?): Ikea has all the necessary
resources in order to open new stores considering number of employees and its cash flow.
Moreover, it can also achieve the mission with improving product quality, although it might
require an increase in price. Ikea has already made a website, but it should be improved and
become more visible in order to be more attractive to the customers.
Realistic (Is the business likely to achieve the objectives with the resources available?): Ikea
is a worldwide known company which attracts millions of people every year, develops on a
regular basis and has strong relationships with suppliers and distributors. It can expand its
business having a minimum amount of problems. Ikea already has loyal customers and a lot
of different people from different countries want to approach the store that is why developed
online shopping will be successful.
Timely (When is it going to be implemented?): Ikea can make the final program outline by
February and implement it by April during Easter holidays so more people will notice new
actions from the side of the company. After implementation every store can be opened each
year in a new city or a country (capital). Supplying more qualitative production can be done
already with the usage of old materials. Developed online shopping should be done as soon
as possible.

CHAPTER 7 CONCLUSION
IKEA is a worldwide recognized and valued company that has continued and balanced growth
since its inception. The good position in the market segment in which it operates, with a wide
range of products, lower prices than those of its competitors and an attractive product make
its sales grow and its expansion continues.
The low price is sought before having the product completely designed and, of course, long
before it is manufactured. In addition, once the product has been incorporated into the
company's range, the search for a cost reduction is not abandoned and IKEA can thus
maintain prices or even reduce them.

On the other hand, control of the supply chain is essential for the proper development of the
company. The combination of own production with a network of external suppliers allows you
to obtain advantages, due to the bargaining power of your high purchase volume, and to solve
supply problems where it is not.

Finally, through financially sustainable growth, it has been seen that the group advocates
financial independence to stay away from the instabilities that foreign financing could lead to
in its growth. This provides the necessary resources to continue its expansion without being
forced to go to the capital market or borrow. In fact, the company even operates with a surplus
of idle resources that can harm its growth.
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“COLLABORATIONS INNOVATIONS”. (2019/6/4). ikea: https://ikea.today/rognan-

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Massimo CirilloPoensgen, Arjun Sheerbahadursing, Thanh VoChristina. (2018/1).

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Michael I. NortonMochon, and Dan ArielyDaniel. (2011). “The “IKEA Effect”: When
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myassignmenthelp: https://myassignmenthelp.info/assignments/strategic-planning-
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“Vision & Business idea ”. (2018). ikea: The management's directive to reduce the
number of steel suppliers refers to the influence of ________ factors affecting the
business buying behavior of Alpha.