Programme Cohort

MBA (Finance and

MBAFI/21B/PT
Investment)
MBA (Financial Risk
MBAFRM/21A/PT
Management)
MBA (General) MBAG/21B/PT
MBA (Project Management) MBAPM/21B/PT

Examinations for Academic Year 2022-2023

Semester I / Academic Year 2022 Semester II

MODULE : STRATEGIC MANAGEMENT

MODULE CODE : MGMT5310

Duration : 3 Hours

Instructions to Candidates:

1. This question paper consists of Section A and Section B.

2. Section A is compulsory.
3. Answer any two questions from Section B.
4. Always start a new question on a fresh page.
5. Total Marks: 100

This question paper contains 4 questions and 5 pages.

This question paper is printed on BOTH SIDES.

Rigz-Feb/Mar2023Ex-SM(MBA)
Strategic Management (MGMT5310) Page 1 of 5
 SECTION A: COMPULSORY

QUESTION 1: CASE STUDY (50 MARKS)

IKEA is a privately‐held, international home products retailer that sells flat pack
furniture, accessories, and bathroom and kitchen items in their retail stores around
the world. The company, which pioneered flat‐pack design furniture at affordable
prices, is now the world's largest furniture retailer. IKEA was founded in 1943 by
17‐year‐old Ingvar Kamprad in Sweden and it is owned by a Dutch registered
foundation controlled by the
Kamprad family. The first IKEA store opened in 1958 in Sweden distributes its
products through its retail outlets.
As of October 2022, the chain had 456 stores in 67 countries, most of them in
Europe, North America, Asia and Australia.
The IKEA Concept began when Ingvar Kamprad, an entrepreneur from the Småland
province in southern Sweden, had an innovative idea. In Småland, although the soil
is thin and poor, the people have a reputation for working hard, living frugally and
making the most out of limited resources. So when Ingvar started his furniture
business in the late 1940s, he applied the lessons he learned in Småland to the
home furnishings market. Ingvar's innovative idea was to offer home furnishing
products of good function and design at prices much lower than competitors by using
simple cost‐cutting solutions that did not affect the quality of products. Ingvar used
every opportunity to reduce costs, and he scraped and saved in every way possible ‐
except on ideas and quality. The name IKEA comes from the initials of Ingvar
Kamprad, I and K, plus the first letters of Elmtaryd and Agunnaryd, which are the
names of the farm and village where he grew up.
One brand, many companies, and many, many people – that’s IKEA in a nutshell.
Spread all over the world, IKEA has a passion for home furnishing and an inspiring
shared vision: to create a better everyday life for the many people. This, together
with a straightforward business idea, shared values, and a culture based on the spirit
of togetherness, guides the Company in everything it does.
Vision:
IKEA vision statement is "To create a better everyday life for the many people."
Mission:

Rigz-Feb/Mar2023Ex-SM(MBA)
Strategic Management (MGMT5310) Page 2 of 5
IKEA mission statement 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."
Market positioning:
IKEA market positioning statement is "Your partner in better living. We do our part,
you do yours. Together we save money."
The objectives of IKEA are:
‐ To produce cheap and affordable product for the public/customers.
‐ Better life for those who can't afford expensive products.
‐ Ensure the customer finds what they are looking for in store.
‐ Low prices.
Financial Year 2020(FY20) was an unpredictable year with the effects of the Covid
19 pandemic resulting in a financial crisis, still a reality for many of its customers.
The conditions in the markets ranged from favorable to difficult. However, the year
turned out to be a good year for the retail operations, with growth in most markets,
further increasing its market shares.
Increasing sales, gross margin and improvements in the cost structure, adjusted for
one‐off items, led to a strong result. New stores, refurbishments and other
investments were funded with IKEA’s own cash flow.
Sales increased to 23.1 billion EURO in 2021, an increase of 7.7% compared to the
previous year. The growth came both from existing stores, which grew by 2.4% and
new stores. Sales grew in almost all countries, with China, Russia and Portugal
showing the strongest increase.
Gross margin improved to 46.1% from 44.6% in 2021. This increase was driven by
higher sales and reduced costs in the supply chain, strongly supported by steps
taken together with our suppliers. As a franchisee of the IKEA concept, IKEA Group
pays a franchise fee of 3% of sales to the concept owner Inter IKEA Systems B.V.
Operating cost increased from 7.2 billion EURO in year 2020 to 7.9 billion EURO in
2021. The increase in expenses is mainly due to two one‐off items, being the
settlement of the dispute about the lease of diesel generators in Russia and the
impairment of assets in our industrial groups. Adjusted for these one‐off effects,
expenses as a percentage of total revenue decreased by 2.3% compared to FY
2020, reflecting an improvement in cost structure. This improved efficiency was to be
invested in lower prices for customers.
Rigz-Feb/Mar2023Ex-SM(MBA)
Strategic Management (MGMT5310) Page 3 of 5
The effective tax rate increased from 13.2% in FY20 to 17.6% in FY21. The increase
in effective tax was primarily due to higher taxable profits in countries with higher
nominal tax rates. Corporate income taxes amounted to 577 million EURO in FY21.
In addition, property taxes of 150 million EURO were incurred. Net income increased
by 6.1% to 2.7 billion EURO.
Total assets increased from 37.1 billion EURO to 41.3 billion EURO, mainly due to
investments in properties and a further increase in cash and securities.
The increase in property, plant and equipment is related to the establishment of 12
new stores and additional investments in IKEA stores and factories. The Company
also invested an amount of 66 million EURO in wind farms in accordance with its
strategy on renewable energy. The total investment in tangible fixed assets
amounted to 2.1 billion EURO, staying flat compared to the previous year.
During FY21 the organization was able to further grow the business in accordance
with its financial principles, and strengthened the company’s financial base for the
future. This last year was challenging for people everywhere. Inflation was a big part
of that, and people could afford less and less. These challenges continue to give
IKEA Management the perspective into people’s lives at home, its business and
priorities. Homes now fulfil more functions and solve more problems than ever
before, making the IKEA vision and business idea especially relevant: To create a
better everyday life for the many people 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.
IKEA retail sales benefited as the world re-opened after closures related to the
pandemic. On the other hand, inflation and supply chain issues impacted FY22 sales
and led to rising costs and higher prices. That means sales have grown in money,
but sales quantities have not kept up. This year, IKEA store sales grew 13%
compared to in FY21, when many stores were closed due to the pandemic. Overall,
they welcomed 822 million visitors in FY22 compared to 775 million in FY21. Store
sales grew mainly in Europe, where FY21 lockdowns were most severe. At the same
time, online sales were 10% lower compared to FY21, though they stabilised at a
higher level this spring. IKEA online channels hosted 4.3 billion visitors, down from 5
billion last year.
Source: IKEA: http://www.ikea.com

Rigz-Feb/Mar2023Ex-SM(MBA)
Strategic Management (MGMT5310) Page 4 of 5
 (a) Using the information from the case study, critically analyse the internal and
external environment of IKEA and explain how these factors have impacted on
the activities of the company. (20 marks)
(b) What strategies were adopted by IKEA which have enabled it to experience
sustained success in its business activities over the past years? Give
justifications for your answer. (15 marks)
(c) The challenge of many firms today is not how to build competitive advantage,
but rather to sustain it over time. Evaluate the capacity of IKEA to build and
sustain competitive advantage. (15 marks)

SECTION B: ANSWER ANY TWO QUESTIONS

QUESTION 2: (25 MARKS)

“Competitive strategy is driven by the search for sustainable competitive advantage.
However, there are arguments to suggest that this is not necessarily achievable and
that there are other bases of competitive strategies." Discuss.

QUESTION 3: (25 MARKS)

‘Growth is rarely a good end in itself. Public sector organisations are often accused
of growing out of-control bureaucracies; similarly, some private sector managers are
accused of empire building at the expense of shareholders.’
Taking into consideration the above statement and with the use of the Ansoff Matrix,
explain how alternative directions for strategic development can be generated.

QUESTION 4: (25 MARKS)

‘According to numerous business experts, appropriate market analysis is a crucial
component of a successful business. If you don't adequately assess your
competition or sector before starting your business, you run the risk of not properly
understanding the best ways to establish your business effectively.’
Using Porter’s five forces model, explain how competitive and comparative
advantage may not always be achieved by competing but collaboration between
organisations may be a way of achieving advantage or avoiding competition.

***END OF QUESTION PAPER***

Rigz-Feb/Mar2023Ex-SM(MBA)
Strategic Management (MGMT5310) Page 5 of 5