Ikea free essay sample

IKEA, however, had repeatedly bucked market trends and industry norms. Over three and a half decades it had built a highly profitable worldwide network of furniture stores. (See Exhibit 1. ) Company Origins IKEA is an acronym for the initials of the founder, Ingvar Kamprad, his farm Elmtaryd, and his county, Agunnaryd, in SmDland, South Sweden. In 1943, at the age of 17, Kamprad began his entrepreneurial career by selling fish, Christmas magazines, and seeds. Within a few years he had established a mail-order business featuring products as diverse as ballpoint pens and furniture. It was in furniture, however, that he saw the greatest opportunity. Even as the pent-up wartime demand found expression in the post-war boom, the traditional Swedish practice of handing down custom-made furniture through generations was giving way to young householders looking for new, yet inexpensive, furniture. But while demand was growing, inter-association supply contracts and agreements between Swedish manufacturers and retailers kept prices high while foreclosing entry. Also, the furnitures in IKEA have many different functions. Besides, IKEA pays attention to the materials they used that all the materials are environmental and will not affect our health. 1. 1(b) Finances IKEA keeps profits flat during the global economic crisis. According to a DI estimate, the Swedish furniture giants profit was over 50 billion kronor in 2009. However, Ikea also had slashed 5,000 jobs to cope with the drop in demand brought about by the global economic crisis. 1. 1(c) Organizational structure Despite IKEA’s Swedish roots, the owner of IKEA is a Dutch company. The perator of the majority of the stores worldwide is a separate entity, the IKEA Group which is a private group of the companies owned by a Dutch charitable foundation. Of the 202 IKEA stores in 32 countries, 180 are run by the IKEA Group. Please refer to the diagram below for the structure. Diagram: [pic] 1. 1(d) Leadership IKEA is a successful family business by Ingvar Kamprad and one of the most important thing in this family is that every worker in this fa mily feels they are one of the part in it and they’d like to make their efforts to improve the family. Besides, Kamprad realized that the best way to encourage his employees is to set an example by his hard working, commit his mistakes,confident and so on. 2. 1 Strengths (a) IKEA has it’s strong global brand which attracts the key customer group. Now, almost everyone knows the brand of IKEA in developed and developing countries. (b) IKEA is famous for it’s cheap price that a large quantity of people can afford the cost for their furnitures. (c) The democratic design reaching an ideal balance between function, quality, design and price. IKEAs Cost Consciousness means that the low prices are taken into account when each product is designed from the outset. 2. 2 Weakness As we know, IKEA is an international company which may causes some problems. Because of the size and scale of its global business, it is hard to control the standards and quality. (b) Although IKEA believes there is no compromise between being able to offer good quality products and low prices, the cheaper price makes it hard to keep a balance of the quality. 2. 3 Opportunities Like other companies, IKEA also uses its strengths to take advantage of the opportunities that arise. In such a society which more and more pays attention to the environment, IKEA starts to make the environmental products that it begins to use the renewable energy. Similarly, facing the competitive environment, IKEA has to lower it’s price to attract more customers which should cut the use of air transport and reduce packaging. 2. 4 Threats The slow economic development slows down the consumer spending and disposable income that fewer people can afford the cost of their furnitures. The market ushered more competitors to enter in the low price furniture market that IKEA needs to strengthen its unique designs and qualities to compete with these competitors. 3. 1 Demographic trends The world population grew to 7. 06 billion in 2012 and the developing countries accounted for 97% of this growth that I think IKEA can open more stores in developing countries. Please refer to the diagram below for the trend. Diagram: [pic] 3. 2 Economic conditions Going through the global economic crisis, the global recovery is not as strong as expected. The financial market and sovereign stress in the euro area periphery have increased and the growth in a number of major emerging market economies has been lower than forecast. So, in order to survive in this danger economic environment, IKEA has to make use of it’s advantages and accept the challenges. 3. 3 Political forces (a) We know the Chinese marketing is an important part to IKEA. Luckily, the Chinese government made the new policy about the control and regulate in real estate in 2012 that make more people who really need the houses can have their owe houses that these people will need the furnitures to build their homes. b) With the fraud scandal of the European top furniture Da Vinci, a lot of customers start to loss the trust to the European top furnitures that they begin to change their styles to the modern minimalist furniture. Facing such a good situation, IKEA should catch the opportunity and design more popular furnitures to attract these high consumption people. 3. 4 Technological changes We believe the technology offers the significant influences to the economic growth and it drives the entrepreneurs and companies to enhance the innovative products and services. (a) We can communicate with others by e-mails, phones and other chat means. We can chat with the partners and customers at any time when you have some problems or new ideas. In this advanced communication age, we save much time and talk easily that help us improve our careers. (b) Similarly, the development of the transportation industry also plays an important role to the furniture industry. On the one hand, it is convenient for people to work around the world that they can use the shortest time to travel. On the other hand, the furnitures can made in the labor-intensive areas or resource-rich areas or different areas and transport to the suitable areas to sell which is also very convenient. . 1 Rivalry IKEA’s business philosophy was â€Å"affordable solutions for everyday living†. The idea of offering a wide range of home furnishings that combine good designs, good functions, and good qualities at the low prices which made it possible for people to buy them. The company culture which is guided by the organizational objectives enables their cu stomers to keep coming back. The company believes in providing customers with quality home furnitures at low prices which means weakening the competitors’ competitive. 4. 2 Entrants There are many entrants in the furniture industry every year and there are only a little entrants can survive. We should know that the furniture industry is a high cost field which needs a large amount of money to pay the raw materials, the machining and the propaganda for a new brand. We know the brand is a very important and it is very difficult for people to trust a new brand that we need a really long time to build the brand image. While IKEA is an international brand and it has a very good brand image that it is rather hard to compete to IKEA. 4. 3 Substitutes America furniture market was highly fragmented. It consisted of many low-end and high-end retailers. Low-end retailers, e. g. Walmart who offers low prices but poor designs and services. High-end retailers, e. g. Ethan Allen who provides high quality products and services with high prices. IKEA’S competitors are more low-end rather than high-end retailers. IKEA’s strengths are affordable prices with modern designs, cheaper and easier assembled products, customer involved from product selection to final assemble. 4. 4 Suppliers IKEA is responding to the public concern of the needs for sustainable development. nd the needs to demonstrate the environmental problem and responsibility. The company wants to develop long term relationships with suppliers who definitely share their values that they made the IWAY rule to supervise each other. 4. 5 Customers IKEA attracts large quantities of people every day and there are about 1 million customers come to IKEA every day. In these customers, the average age is 42 and there are about 60% are the female. As an international company, there are 202 IKEA stores in 32 countries and 20% IKEA sales are made in Germany and 12% are made in the UK. . 1 Resource Types There are many resource types in IKEA like the human resource, the financial resource, the information resource and the marketing resource. IKEA always hires the straightforward and down-to-earth people because they need these people to make a warm atmosphere to customers and they think their teams are also the big families. (b) IKEA’s Property Division and Finance Division contribute to the financial resources which needed to ensure the independence of inter IKEA group, as well as the future investments in long-term growth of the company. 5. Firm Capabilities IKEA’s capabilities have originated from the company’s unique resources and its core competencies that revolve around a successful retail strategy, making it the â€Å"worldâ₠¬â„¢s largest retailer of home furnishings. † IKEA’s low cost business model allows it to offer the quality furniture at 25% to 50% below its other competitors. The founder of IKEA saw the culture as a key competency and with the development of the company, the culture will be the firm capabilities. 6. Conclusion Overall, IKEA is a well-known global brand with hundreds of stores across the world. In order to improve performance, it must estimate its external and internal environment. This will show the key opportunities which can take advantage of and the threats which must deal with. IKEA’s characteristics combine the design, low prices, best possible use of resources, and the responsibility for people and environment. The companys products, processes and systems all prove its environmental stance. IKEA believes that there is no compromise between doing good business and being a good business. It aims to go beyond the profits and reputation to create a better day life for the customers. 7. Recommendations As a famous furniture company, IKEA should guarantee it’s quality and pay more attention to the customer service to make more people trust them and support them. Also, IKEA should do some charities to build a good brand image and return to the community. The most important thing is that IKEA should insist using the environmental and green material to make a better world. IKEA should discover a business truth being sustainable and responsible is not just good for customers and the planet, it is also good for business! References: Author: AFP (22 February 2010) Title: IKEA made $7 billion profit-despite the crisis http://www. wedishwire. com/business/3008-ikea-made-7-billion-profit-despite-the-crisis Author:Hine (6 May 2011) Title: IKEA-Strengths, weakness, opportunities and threats http://highn. me/ikea-strengths-weaknesses-opportunities-and-threats/ Author: Carl Haub (2013)