Business Strategy

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Introduction
Business strategy is a very crucial aspect for every business organisations. An organisation needs
to assess the most suitable business strategy for itself (Botten, 2013). The implementation of
appropriate business strategies is the key to success. IKEA is a multinational group, which was
founded in Sweden in 1943 by Ingvar Kamprad who was only just 17-year-old carpenter. In this
paper we will show the impacts of macro-economic factors on IKEA and its strategies with the
help of PESTLE analysis. Again we will use Resource-Based View (RBV) framework for
conducting the competitive analysis along with SWOT analysis to assess the internal capabilities
of IKEA. Moreover we will conduct Porter’s five forces analysis and Ansoff’s matrix model for
devising appropriate business strategies for IKEA. Lastly we will use Porter’s Generic strategies
model for creating sustainable strategic planning for IKEA.
Contents
Introduction......................................................................................................................................1

LO1 Analysis of the impact and influence which the macro environment has on IKEA and its
business strategies............................................................................................................................1

P1 Application of appropriate frameworks for analysing the impact and influence of the
macro-environment on IKEA and its strategies...........................................................................1

LO2 an Organisation’s internal environment and capabilities........................................................6

P2 Analysis of the internal environment and capabilities of IKEA using the appropriate
framework....................................................................................................................................6

LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a given
market sector..................................................................................................................................10

P3 Application of Porter’s Five Forces Model to Evaluate the Competitive Forces of Furniture
and Home Appliances Industry for IKEA.................................................................................10

LO4 Application of models, theories and concepts to assist with the understanding and
interpretation of strategic directions available to IKEA................................................................14

P4 Application of a Range of Theories, Concepts, and Models, Interpreting and Devising

Strategic Planning for IKEA......................................................................................................14

Conclusion:....................................................................................................................................18

References......................................................................................................................................19
LO1 Analysis of the impact and influence which the macro
environment has on IKEA and its business strategies

P1 Application of appropriate frameworks for analysing the impact and

influence of the macro-environment on IKEA and its strategies.

Macro Environment

The macro-environment can be described as an economic condition that prevails in the whole
economy rather than affecting a particular industry or sector (Villanueva, 2011). Again it can be
described as the economic environment in which business organisations are operating their
businesses often bears various macroeconomic situations affecting the business operations of the
business organisations. Macroeconomic conditions are those on which the business organisations
have no controlling power (Botten, 2013). So they take these macro environment conditions as
given and try to operate their businesses coping with these economic conditions. Common
examples of macro environment conditions are such as money inflation, monetary policy and
fiscal policy of the government, prevailing interest rate, Gross Domestic Product (GDP),
Employment, etc.

Identification of mission, vision, and objectives of IKEA:

Mission statements and its components for IKEA: The mission statement defines the overall
purpose of the organisation for which it has been established (Trott, 2017). It generally gives a
description of how the business organisation is going to achieve its visions. IKEA’s mission
statement is “Offer a wide range of well-designed, functional furnishing products at prices so
low that as many people as possible, will be able to afford them” (IKEA 1994).

The mission statement of IKEA includes:

1. The business purpose of IKEA: Making profit and wealth maximisation for its shareholders.

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2. The business operation of IKEA: Production and selling of furniture.

The vision of IKEA:

The vision of every business organisation is future-oriented which means what the organisation
tries to achieve in future. The vision of IKEA is ‘To create a better everyday life for the many
people’, (source: www.ikea.com).

Objectives of IKEA:

To become successful, every business organisations must have specific goals and objectives.
Business objectives can be defined as the outcomes that a business organisation pursues to obtain
(Villanueva, 2011). Generally, objectives include the specified goals of the business organisation.

IKEA’s objectives for the year 2018-19 (source: www.ikea.com):

 lower prices by 2.6%

 expand with the opening of 7 new stores
 invest EUR 40 million in solar panels and renewable installations in new-built stores
 dealing with competition from China and India

To understand the impacts of macro-environmental factor managers generally use the PESTLE
analysis model. PESTLE model assists in classifying these economic conditions or factors in
various categories and suggest appropriate business strategies and managerial decisions (Guscina,
2015).

A brief discussion regarding the influence of the macro-environment on IKEA and its strategies
using PESTLE analysis is as follows:

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 Figure 1: PESTLE analysis for IKEA

Political Factors: Political factors have a great influence on the operations of a business
organisation. Generally, political factors affecting the activities of business organisations include
various policies, rules, and regulations introduced by the government (Trott, 2017). If the
government often changes the fiscal or monetary policies then it will create imbalance in the
business environment which in turn makes the business operating situation very much difficult
for organisations (Botten, 2013). For example, statistics show whenever UK govt. introduces new
fiscal or monetary policy it affects the business companies on a greater scale.

Economic Factors: Business organisations must access the economic factors of the business
environment in which it operates its business activities. Some of the most common economic
factors are inflation, deflation, unemployment, GDP, etc. Accessing these economic factors is
very much important for a business organisation (Guscina, 2015). The profitability of a business
organisation depends largely on the growth of the national economy. The overall condition of the
whole economy significantly affects the economic situations of the business organisations which
in turn affects the effectiveness of the business activities of those organisations (Villanueva, 2011).
For example, in UK the inflation rate significantly affects economic situations which have
greater impact on business organisations.

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Social Factors: Every business organisations have some duties and responsibilities towards the
society in which it operates its business activities. A business organisation needs to fulfill these
responsibilities in order to survive in that society (Trott, 2017). Business organisations need to
consider certain factors such as creation of employment opportunities for the unemployed, doing
various corporate and social (CSR) activities for the purpose of capturing the common people
trusts which leads to organisational success. For example, during the year 2015-16 small
businesses create employment for 5.4 million people in UK (source: The Royal Statistics).

Technological Factors: In today’s world, most of the business organisations are technology-
oriented. Nowadays technology plays a very important role in business organisations. A business
organisation needs to constantly update its system with the latest available technology in order to
gain comparative advantage and maintain its superiority (Botten, 2013). If a business organisation
fails to update its system with the latest technology then it’ll significantly hamper the business
operations of the organisation (Worthington, Britton and Thompson, 2010). For example, Nokia’s
later adaptation of android system causes a larger portion of its consumers to switch to its
competitors.

Legal Factors: In every country, there are certain legal rules and regulations that a business
organisation must follow to operate its business. If a business organisation doesn’t follow these
rules and regulations then there will be legal obligations against the organisation which will
significantly affect the business operations of that organisation (Guscina, 2015). For example, in
UK all the business organisations must comply with the prevailing laws of the country otherwise
their business operations will be banned.

Ecological Factors: Every business organisations need to fulfill some responsibilities towards
the environment in which it operates (Villanueva, 2011). It must preserve the natural climate,
weather by not polluting it. If a business organisation is found guilty of environmental pollution

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then legal petitions will be filed against it which will create difficulty in carrying out its business.
Again information regarding responsible for environmental pollution will create a negative
image of the company among the people of the society which will hamper the business on a
significant scale (Worthington, Britton and Thompson, 2010). For example, Xerox in china is
recycling its products while saving the environment from pollution along with making a good
amount of profit.

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Recommendations for IKEA’s strategic planning:

1. IKEA should consider the social factors to make its business strategies successful.

2. To avoid the adverse economic situations IKEA must analyse the economic factor time to
time.

3. Whenever any new policy or rule is introduced IKEA should adjust its strategies according to
that.

4. IKEA must upgrade its operating system with the latest available technology otherwise it may
lose a portion of market segment.

5. IKEA’s mission and vision statement should be crafted keeping harmony with prevailing laws
and regulations.

6. IKEA should consider the ecological factors in setting its business strategies and decision
making in order to gain support from the business environment.

The influence of the macro-environment on IKEA and its strategies using Stakeholder analysis
is as follows:

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Using Stakeholder matrix format we can identify the stakeholders of IKEA and the impact and
influence on the strategic decisions of IKEA also the appropriate strategies for them.

Stakeholder Interest Impact Potential Strategies

s
Shareholders High High Maximising the wealth for the owners.
(owners)
Consumers High High Providing quality products to consumers while
charging them less.
Employees Moderate High Providing fair compensation to the employees, also
reward them for better performance.
Competitors Moderate High Differentiating products to get competitive advantage
over them.
Suppliers Moderate Moderate Setting strong backward linkage with the suppliers so
that they stay loyal to IKEA.
Government Low High Analysing important govt. policies and setting
decisions accordingly
Information Low High Upgrading the system with the latest IT
Technology
Environment Low Low Spending a certain portion of earning for CSR
activities

For IKEA, the most priority stakeholder is its consumers because if there were no consumers
then IKEA wouldn’t exist. Again all other stakeholders are benefited by the profit captured from
the consumers. After that the second most important stakeholder is the shareholders. The
organisation was established for its shareholders. So, they need to be benefited by the operations
of the organisation. After shareholders there are employees who actually carry out the whole
business. The suppliers generally have moderate interest and their impact on IKEA is also
moderate as IKEA can easily switch to another supplier (Guscina, 2015). IKEA’s competitors
such as Argos, Alibaba, etc. have great impact on it. After that IT is very much important for
IKEA as it helps in differentiating from competitors. Then the government sets the rules and
regulations which IKEA must follow. At last IKEA should consider environment issue though it
do not affect the company at a large scale.

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LO2 an Organisation’s internal environment and capabilities

P2 Analysis of the internal environment and capabilities of IKEA using the

appropriate framework

Application of Resource-Based View (RBV) framework in IKEA for its competitive

analysis:

The resource-based view (RBV) can be defined as a framework that is generally used by
managers for the purpose of determining the resources an organisation can utilize in order to
attain competitive advantage (Botten, 2013).

IKEA has many resources but all the resources of IKEA are not of equal importance. Again all of
its resources are not equally potential to generate sustainable competitive advantage (Fleisher and
Bensoussan, 2015). On the other hand the extent of sustainability of IKEA’s resources depends on
the extent to which those resources can be pursued and substituted.

As per RBV, the strategists of IKEA should select and implement those strategies that pursue the
internal resources and capabilities in the best manner comparing to the external opportunities
(West, Ford and Ibrahim, 2011). IKEA can adopt many competitive positions through its strategic
resources. Here the most important tasks for the managers of IKEA are as follows:

Tasks Description
Identification of IKEA’s resources can be classified into two categories:
IKEA’s potential 1. Tangible Resources: Tangible resources are those which can be
strategic physically seen and touched. For example, tangible assets can be plants,
resources: machines, etc. For IKEA, tangible resources include quality woods, cotton,
and automated machinery etc. which are used to produce quality furniture.
2. Intangible Resources: Intangible resources can be defined as the
resources which have no physical presence (Sadler, 2010). For IKEA,
intangible resources include its Human Resources (the skill of the
employees), trademarks and patents, etc. which are very much important to
carry out its overall business operations.

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Using VRIN Earlier we have mentioned that all resources of an organisation are not equal
criteria to assess and strategically potential (Fleisher and Bensoussan, 2015). But there are
the potentiality specific resources that are capable of creating a competitive advantage for
of the mentioned the business organisation. Usually, these resources hold VRIN
resources of characteristics. The VRIN characteristics of an organisation’s resources can
IKEA: be revealed by focusing on 4 important qualities:
 Value: Resources that capable of bringing value to the organisation
is a great source of competitive analysis. For IKEA it's quality wood
and its automated machinery along with its unique furniture design
patents and its highly qualified employees are a great source of
creating competitive advantage.
 Rareness: Resources that are not mostly available is also a great
source of competitive advantage (West, Ford and Ibrahim, 2011). For
IKEA, its upgraded automated machinery along with skillful
workers, unique and rare furniture design patents contributes as a
great source of creating competitive advantages.
 Imitability: Resources capable of bringing competitive advantage
can’t be obtained by the competitors. If competitors can’t copy the
quality and designs of IKEA’s products then the customers have no
other way than coming to IKEA for buying those products. The unique
quality and design patents provide IKEA this advantage (Worthington, Britton
and Thompson, 2010).
 Non-substitutable: Resources that can be easily substitutable are not
capable of bringing competitive advantage for the organisation. For IKEA,
its furniture designs and quality are so innovative and unique that
consumers can’t think of switching their products which produce
competitive advantage for IKEA.

Identification of the strengths and weaknesses of IKEA’s internal capabilities using SWOT
analysis:

The term SWOT analysis stands for analysing the operations of a firm through the identification
of its Strength, Weakness, Opportunity, and Threats. SWOT analysis assists an organization to
have a clear picture regarding its position in the industry (Sadler, 2010). Again SWOT analysis
can be proven very much helpful by making the business operations of a firm more effective
through make it aware of the threats and suggesting corrective actions for those (Fleisher and
Bensoussan, 2015). It also helps to identify those capabilities of the firm which can create
comparative advantage for the firm.

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STRENGTHS WEAKNESSES
 IKEA

OPPORTUNITY THREATS

Figure 2 : SWOT analysis for IKEA

Strengths:

 The main strength of IKEA is its transparent vision which is creating value for its
consumers without considering the prevailing market conditions. It has clear and well-
defined business strategies for promoting and selling its products (Worthington, Britton and
Thompson, 2010).

 Another potential strength of IKEA is its vivid concept which allows the products to get
assembled by the consumers themselves which enable the company to reduce a great
amount of cost (West, Ford and Ibrahim, 2011).
 Its cost leadership strategy is it’s another important strength.

Weaknesses:

 As IKEA is operating its business globally, it is facing problems in ensuring the standards
across different geographical locations.
 IKEA’s main resources include quality wood which comes from cutting down trees that’s
why IKEA is facing environmental concern for its operations (Jaeger, 2016).

Opportunities:

 Having cost leadership is the biggest opportunity for IKEA.

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  There is a huge scope for IKEA for expanding its business in developed countries and
emerging markets where consumers with high potential exist which in turn makes IKEA
even Bigger in size and profitability (Sadler, 2010).

Threats:

 Recently competitors have managed to copy the low-cost business of IKEA. So, IKEA
may lose a competitive advantage (Fleisher and Bensoussan, 2015).
 Online retailers are providing even lower cost which is turning into a big concern for
IKEA’s cost leadership strategy.

From the above discussion we can conclude that IKEA own a great number of resources having
VRIN characteristics. If these resources are properly utilised then they can produce a significant
competitive advantage for IKEA. Again the SWOT analysis shows that IKEA’s Strengths and
opportunities are much greater than its weaknesses and threats. IKEA can easily mitigate this
with proper strategic decisions.

LO3 Evaluate and apply the outcomes of an analysis using Porter’s

Five Forces model to a given market sector.

P3 Application of Porter’s Five Forces Model to Evaluate the Competitive

Forces of Furniture and Home Appliances Industry for IKEA
The analysis of the industry in which a business is operating is very much important because it
enables the business entity to attain certain competitive advantages (Fifer and Kaiser, 2012).
Porter’s 5-Forces are the model that has to consider at the time of decision making because the
factors of Porter’s 5-Forces is very much important issue that influences the decisions of a
business (Fleisher and Bensoussan, 2015). IKEA also needs to consider this model at the time of
decision making and operating their business. The model is as follows-

Existing Rivalry: Competition is the biggest challenge at the time of conducting business
because without considering this factor any business organisation can’t attain its objectives
(Noorderhaven, 2014). In furniture industry, competitive rivalry is quite intense as companies

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continuously attempt to differentiate their products and services in terms of designs, innovative
styles, and offerings respectively. The main competitors of IKEA are such as Argos, Ashley
Furniture, etc. Again the local smaller furniture retailers along with biggest online retailers such
as Amazon, Alibaba, etc. are imposing serious competition for IKEA (Nur Alya Farzana., 2016).

The threat of new entrants: The threat of new entrants is very high in case of furniture
manufacturing industry because a new company to enter this industry needs minimum legal
requirements. Again the knowledge barrier is also not strong enough to restrain the new entrants.
The only favourable thing is that the new firms can’t make as much profit as IKEA in their initial
stage. So, IKEA is exposed to a significant new entrant’s threat.

Bargaining power
of Buyers

Threat of
Threats of new Existing Rivalry substitutes
entrants

Bargaining power
of suppliers

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 Figure 3: Porter's 5 forces analysis for IKEA.

Bargaining power of Buyers: The bargaining power of consumers as individual is insignificant

for IKEA but as a group it is quite high. Because of the latest technologies consumers have
grown empowered (Fifer and Kaiser, 2012). This is the reason for which IKEA is focusing heavily
on its selling and marketing strategies. On average the bargaining power of buyers moves
between low to moderate. The quality of IKEA’s products and its marketing strategies are the
players which enable IKEA to maintain the buyers' bargaining power in a tolerable limit.

Bargaining power of suppliers: The Bargaining power of IKEA’s suppliers is quite low. The
reason behind it is the availability of numerous suppliers which are very much competitive in
nature. Moreover, the suppliers are of smaller sizes with generally weak financial positions that
can’t place their conditions to IKEA because IKEA will switch from one supplier to another and
the previous supplier will lose a huge client (Sadler, 2010). So, here IKEA is the rule makers and
the suppliers are compelled to follow them.

The threat of substitutes: The existence of the substituted products or services is the greatest
threat for successful survival of any kind of business entity (Fifer and Kaiser, 2012). The threat of
substitutes is low for IKEA because of non-availability of similar type products and services
which can meet the demand for furniture. But recently the internet and online-based products are
imposing an indirect substitute threat for IKEA.

Use of Ansoff’s matrix to produce valid strategic directions for IKEA:

Ansoff’s matrix is one type of planning tool which provides a model that assists the managers of
business organizations in composing future business strategies for that business organisation
(Noorderhaven, 2014). From the above mentioned Porter’s 5 forces analysis for IKEA we have
learned that in future IKEA may expose to a range of threats. That’s why IKEA uses Ansoff’s
matrix tool for the purpose of determining its products and most appropriate market strategy for

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that. As per Ansoff’s growth matrix some of the essential aspects for the growth of a business
firm are as follows:

Figure 4: Ansoff's matrix model.

Market Penetration: Market penetration refers to a business strategy in which a business

organisation wilfully keep selling its existing products in the existing market. In this situation,
the main objective is selling more and more products. For IKEA, market penetration strategy is
generally used for IKEA’s present products.

Product Development: Statistics show that every business organisations do incredibly well in
case of introducing a new product in the existing market (Christou and Vettas, 2015). For IKEA,
the latest furniture designs and innovative styles have been always a very effective tool for
capturing the attention of the consumers in the existing market.

Market Development: When a business organisation decides to sell its existing products in new
markets, it is referred to as market development strategy (Steiner, 2014). IKEA has already
implemented this business strategy and has experienced the Turkish market. But in case of
entering the market of China, though IKEA wished to hold its existing marketing mix strategies,
it had to adjust its marketing mix strategy for the purpose of meeting the consumers’ demands
(Trott, 2017).

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Diversification: Diversification is the business strategy in which a business organisation decides
to introduce new products in new markets (Sadler, 2010). IKEA used a conglomerate
diversification strategy when it decides to open restaurants and sell foods inside their stores.
IKEA’s strategy is very much innovative. The food and restaurant and the furniture selling
business can complement each other’s selling promotions.

Evaluation of Strategies: From the above-mentioned strategies, diversification seems very

much promising for IKEA. This strategy is expected to go a long way because-

 It’s the suitability with IKEA’s mission statement.

 There is a high buzz for acceptability by the people because of the reputation of IKEA.
 This strategy is highly feasible for IKEA as it owns many unique resources and
innovative application of those can introduce new product lines (Noorderhaven, 2014).

So, it can be concluded that diversification will be a very strong strategy for IKEA in case of
obtaining a competitive advantage over its competitors and capturing a greater portion of
revenue from consumers.

LO4 Application of models, theories and concepts to assist with the

understanding and interpretation of strategic directions available to
IKEA.

P4 Application of a Range of Theories, Concepts, and Models, Interpreting

and Devising Strategic Planning for IKEA
For most of the business organisations the main challenge is obtaining a competitive advantage
over the competitors that can be sustained (Steiner, 2014). Competitive advantage can be defined
as an advantage that can be attained by an organisation by providing greater value to its
customers (Fleisher and Bensoussan, 2015). It can be done by lowering the prices of the products
or ensuring higher quality which supports charging higher prices.

Wheelen’s Corporate-level strategy:

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According to Wheelen corporate level strategy serves as the path maker for all the individual
business organisations who belong to the conglomerate. Corporate level strategy is a broader
concept. Here all the smaller business level strategies are being synchronised in order to produce
a coordinated business attempt to attain the overall organisations visions and objectives. As per
Wheelen an organisation needs to consider 3 important issues for planning its business strategies.
This are-

1. The directional strategy: It assists the organisation in building its stability while having a
positive growth. This strategy enables the firms to effectively carry out their operations in the
market while ensuring the sustainability issue regarding the firm.

2. The portfolio strategy: Portfolio strategy of a firm helps to reduce the risk of the firm. A
firm may be exposed to various kinds of risks such as market risk or unsystematic risk (risk
related to the firm itself). Portfolio strategy assists to reduce the unsystematic risk for the
firm.

3. The parenting strategy: The parenting strategy is related to the overall activities of the
business firm such as allocation of funds and resources, HRM etc.

Michael Porter’s Business-level strategy:

According to Porter, there are 4 generic business strategies that a business organisation can adopt
for the purpose of gaining a competitive advantage. Application of Porter’s generic business
strategies for strategic planning of IKEA is as follows:

1. Cost Leadership: The key objective of this strategy is becoming the lowest-cost producer
(Brady and Spence, 2016). Cost leadership strategy is most appropriate to those business
organisations which have large production scale and relatively less product differentiation
(Steiner, 2014). For this strategy to work, all the functional sections of the organisation are
required to cooperate very closely. For becoming the lowest cost producer an organisation needs
to fulfill the following condition:

 A large scale of production.

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  Having bargaining power over its suppliers.
 Just in Time (JIT) production method.
 Use of technology in manufacturing operations.
 Having access to the most efficient distribution system.

IKEA has been practicing this business strategy for a long time as it has got a large production
facility with upgraded technology, more controlling power over its materials suppliers
(Noorderhaven, 2014).

Figure 5: Porter’s generic strategies (Source: Googleimage.com).

2. Cost Focus: In cost focus strategy, a business organisation pursues lower-cost benefits in a
few market sections (Trott, 2017). In this strategy the product will be quite similar to those high
priced ones but enough numbers of customers will accept it. These kinds of products often
referred as “me-too’s”.

3. Differentiating Focus: In differentiating focus strategy, a business organisation tries to

differentiate its products or services within a few target market sections (Christou and Vettas,
2015). This strategy will be proven effective in that market in which customers have different
needs and the existing competitors’ products are failing to satisfy those needs. It is one kind of
niche marketing strategy.

4. Differentiating Leadership: In differentiating leadership strategy a business organisation

aims at capturing a larger portion of the market and tries to attain a competitive advantage by

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differentiating its products across the overall industry (Steiner, 2014). This strategy tries to
differentiate the products of the business firms by adding more value, again charging the
consumers higher prices for these products. The main advantage of this strategy is through
differentiation the firm is allowed to charge the consumers more which will compensate for the
cost of extra value addition as well as a source of extra revenue for the firm (Brady and Spence,
2016). A business firm can achieve this position through the following ways:

 Higher quality products.

 Very strong social recognition leads to increase in brand value.
 Continuous promotions.

Bowman’s Strategy Clock:

Bowman’s strategy clock is a detailed version of Porter’s 4 generic strategies model. Bowman
introduced a clock in which there is a number of business strategic positions related to a business
organisation. That’s why it is called the Bowman’s strategy clock. A graphical presentation of it
is as follows:

Figure 6: Bowman’s Strategy Clock.

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1. Cost leadership strategy: The key objective of this strategy is becoming the lowest-cost
producer. Cost leadership strategy is most appropriate to those business organisations which
have large production scale and relatively less product differentiation (Steiner, 2014). For this
strategy to work, all the functional sections of the organisation are required to cooperate very
closely.

2. Hybrid Strategy: Hybrid strategy is the combination of cost leadership and differentiating
strategy. In this strategy business firm tries to remain the lowest cost-producer while
differentiating their products in order to gain competitive advantage (Brady and Spence, 2016).

3. Differentiation Strategy: In differentiating strategy a business organisation aims at capturing a

larger portion of the market and tries to attain a competitive advantage by differentiating its
products across the overall industry (Steiner, 2014). This strategy tries to differentiate the products
of the business firms by adding more value, again charging the consumers higher prices for these
products.

4. Focus Strategy: In focus strategy business firms attempts to cover a portion of the market not
the whole market. It can differentiate its product or pursue to be the lowest cost-producer for a
segment of the market.

5. Risky-high Margins: This decision is quite risky for the business firm as it is charging highly
from the consumers. This strategy is suitable for oligopolistic market where a few business
organisations operate their firm and have a very little scope for product differentiating.

6. Monopoly Pricing: A business organisation can implement the monopoly pricing policy only
when it can ensure that there is no competitor and the consumers have high demand for the
product.

7. Market Share Loss: Whenever a business organisation realise that its product is failing to
satisfy the demand of the consumers and as a result the consumers are switching their products to
competitors in that situation a business firm should implement this strategy.

Suitable Business Strategy for IKEA:

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From the above-mentioned business strategy, the most appropriate business strategy for IKEA
should be the Hybrid business strategy (combination of cost leadership and differentiating
focus). IKEA mainly uses the cost leadership strategy as it has got the bargaining power over its
suppliers. Again IKEA manufactures a large scale of products. So it can easily reduce the cost of
its operations and emerged as the lowest-cost producer in the furniture manufacturing industry
(Trott, 2017). Again IKEA also seeks differentiation strategy in its products, selling and
promotions, providing customer services, etc. Every year through product differentiation IKEA
manages to produce 2500 new products (source: The National Statistics).

So, a hybrid business strategy will allow IKEA to remain the lowest-cost producers in the
furniture manufacturing industry and the product differentiation focus will help IKEA to capture
a greater portion of revenue from the consumers which ultimately enable the company to achieve
sustainable competitive advantage.

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Conclusion:
Business strategy is a very crucial aspect for every business organisations (Botten, 2013). An
organisation needs to assess the most suitable business strategy for itself. For the analysis of the
suitable business strategy, the organisation can conduct Porter’s five forces analysis. Again an
organisation must consider the macroeconomic factors as it has a great impact on the overall
business operations of an organisation (Noorderhaven, 2014). For analysing the factors and
impacts of macroeconomic factors the organisation can conduct PESTLE analysis (Steiner, 2014).
Moreover knowing the internal capabilities is very much important for every firm. In order to
assess the internal capabilities a firm can conduct the SWOT analysis. Lastly having a
competitive advantage is significantly important for a firm that can be achieved by implementing
the RBV framework (Fleisher and Bensoussan, 2015).

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References
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Bank.
Christou, C. and Vettas, N. (2015). Informative advertising and product
differentiation. London: Centre for Economic Policy Research.
Fifer, R. and Kaiser, M. (2012). Developing industry strategies. Vienna, Va. (1595
Springhill Rd., Suite 700, Vienna 22180): Kaiser Associates.
Fleisher, C. and Bensoussan, B. (2015). Business and competitive analysis methods.
Indianapolis: Financial Times Press.
Guscina, A. (2015). Impact of macroeconomic, political, and institutional factors on
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