Strategic Management

1. LEVEL 7 ASSIGNMENT SPECIFICATION DRAFT
Student name: Student number:
Programme: MBA
Module: Strategic Management Module Level: 7
Module code: SBLC7011
Contribution to Overall
Assignment 1A: 50%
Module Assessment (%): Assignment 1B: 50%
Lecturer: Mervyn Sookun Internal Verifier: N. Skandakumar
Assignment Title: Strategic Analysis and Implementation Assignment No (x of x): 1 and 2
Hand Out Date: 12/12/2017 Submission deadline: 23/02/2017
Referencing: In the main body of your submission you must give credit to authors on whose research your
work is based. Append to your submission a reference list that indicates the books, articles, etc.
that you have read or quoted in order to complete this assignment (e.g. for books: surname of
author and initials, year of publication, title of book, edition, publisher: place of publication).
Disclosure: I declare that this assignment is all my own work and that I have acknowledged all materials
used from the published or unpublished works of other people. All references have been duly
cited.
Student’s (Only where hard copies required)
Signature: Date:
Turnitin: Lecturer to tick to indicate if an electronic version of the assignment must be submitted to
Turnitin. Note: the Turnitin version is the primary submission and acts as a receipt for the student. All
students MUST submit their assessments by the specified deadline. Late submissions may be subject to
penalties.
YES x
NO
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2. Learning Outcomes tested Assessment Criteria to achieve each outcome a
(from module syllabus)
student must demonstrate the ability to:
 Critically research, analyse, interpret, and  Research, write and structure a report that analyses
evaluate the theories and interdisciplinary the current strategy of any organisation of your
factors which contribute to the identity, choosing, designs and justifies appropriate
formation, and application of strategy and strategies, drawing on theoretical and conceptual
strategic thinking in contemporary organisations models.
and contexts.  Deploy analytical frameworks systematically and
 Critically research, analyse, and interpret case
consistently.
 Synthesise theoretical material with practical case
study situations, sector scenarios, and strategic study based information to generate a critique.
contexts, and formulate strategic plans and
proposals, and make informed
recommendations on future strategy in
particular contexts.
 DO NOT put this form into Turnitin or it will match many similarities with other students’ submissions.
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3. TASK DESCRIPTION: Component 1A - 50% Written Assignment
As a strategy consultant, you have been approached by the Board of Directors of an existing company of
your choice to advise them on their future strategic direction. You are required to present your opinion,
based upon researched evidence, in the form of a report to cover the following five tasks:
Task 1
The strategic direction that the company has followed in the past and the way in which strategic thinking
has developed within the past 5 years.
Task 2
A detailed analysis of the industry in which the company is operating to include:
 The choice and use of appropriate frameworks for strategic analysis.
 A critical discussion of the company’s competitive advantage among its direct competitors.
 The probable industry scenarios facing the company within its existing market domains.
Task 3
Further analysis with regard to:
 Whether their mission and vision statements are aligned to the demands of the marketplace.
 The company's strategic capabilities.
Task 4
Discuss possible strategies that the company could follow to defend its core business.
Task 5
In the light of your discussion in tasks 1-4, analyse and evaluate the resource implications of your
recommendations that the company has to address.
LENGTH REQUIRED
3000 Words
3

4. TASK DESCRIPTION: Component 1B - 50% Accompanying Professional Presentation Paper
Executive Summary and PP + notes
TASK
Students are required to submit a presentation paper based on the report done in Assignment 1A by way
of power point slides (not more than fifteen slides)
NOTE that Turnitin will not accept power point so you must submit your slides as word documents.
The submission of your slides package should be organized and clearly structured in a report format.
Total- 15 slides (One slide is equivalent to 200 words).
LENGTH REQUIRED
3000 words
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5. GUIDANCE FOR STUDENTS IN THE COMPLETION OF TASKS
NOTE: The guidance offered below is linked to the five common assessment criteria overleaf and specifically
aligned to the “exceptional” outcome category to which we anticipate students aspire.
1. Research-informed Literature
Your work must embed and be informed and supported by relevant and credible scholarly material that is accessible
in the learned journals listed on the module schedule. You should refer to at least 10 such sources. Additionally, you
should refer to text books, current news items and benchmark your organisation against other organisations to
ensure your assignment is current and up-to-date. High-level referencing skills using the Harvard Method must be
demonstrated throughout your work and all sources listed alphabetically within your bibliography.
2. Knowledge and Understanding of Subject
Your work must demonstrate the growing extent of your knowledge and understanding of concepts and underlying
principles associated with the subject area. This means that within your work, you should provide evidence of your
growing mastery in critical awareness of current challenges, new insights and the constant need for innovation
within the field. Furthermore, a critical awareness of the ambiguities and limitations of knowledge and even
understanding, should be considered and examples of such, illustrated within your work.
3. Analysis
To be considered masters worthy, your work must contain evidence of analysis, evaluation and synthesis. This means
not just describing “What!” but also justifying: Why? How? When? Who? Where? And at what cost! At all times, you
must provide justification of your arguments and judgements. Evidence that you have reflected upon the ideas of
others on matters occurring in the real world of business is crucial to you providing a reasoned and informed debate
within your work. Your choice of methodologies to gather data and information must be rigorously defended.
Furthermore, you should provide evidence that you are able to make sound judgements and convincing arguments
in the absence of complete data, since within the real world of work, we rarely have access to, or know all the
information! Persuasive conclusions are especially necessary and must be derived from the content of your work –
there should be no new information presented within your conclusion. Your work should aspire to resemble work
which is of journal publishable quality.
4. Practical Application and Deployment
It is essential that you rationalise how you decided upon certain methods, materials, tools and techniques to inform
and complete your work. You must demonstrate what informed your decision(s) to apply certain concepts that
enabled you to formulate innovative and creative solutions to the challenges presented to you or that you identified
for yourself. Plausible, costed and justifiable recommendations are demanded and where these are absent, your
work is undermined. Your work should provide evidence that you are growing in mastery in developing cutting edge
processes and techniques within the subject area.
Skills for Professional Practice
Your work must provide evidence of your attributes in the application of professional practice. This includes
demonstrating that you are highly capable of individual and collaborative working. Regarding the presentation of
your work, you must demonstrate your ability to select and deploy the appropriate media that is “fit for purpose.
Additionally, you must exhibit your ability to: communicate with an exceptionally high level of professionalism; work
professionally, autonomously and within a team; develop leadership skills; and produce/present work that is
coherent, cogent and specifically addresses the challenges set for you or you have set yourself. Importantly, your
work should be easily understood by specialists and non-specialists in the field.
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6. MARKING CRITERIA AND STUDENT FEEDBACK:
Assessment Component 1A
This section details the assessment criteria. The extent to which these are demonstrated by you determines your mark. The
marks available for each criterion are shown. Lecturers will use the space provided to comment on the achievement of the
task(s), including those areas in which you have performed well and areas that would benefit from development/improvement.
Common Assessment Criteria (applied to all parts of the project)
1. Research-informed Literature
Extent of research and/or own reading, selection of credible sources, application of appropriate referencing conventions.
Demonstrate a critical review of the literature on strategy and management drawn from a range
of academic sources to support their analysis.
2. Knowledge and Understanding of Subject
Extent of knowledge and understanding of concepts and underlying principles associated with the discipline.
Draw upon the academic research conducted and apply this knowledge to analyse the
strategic issues facing an existing company of their choice.
3. Analysis
Analysis, evaluation and synthesis; logic, argument and judgement; analytical reflection; organisation of ideas and evidence
Demonstrate a critical approach in terms of the interpretation of the varied concepts of
strategic analysis, choice and implementation.
4. Practical Application and Deployment
Deployment of methods, materials, tools and techniques; application of concepts; formulation of innovative and creative solutions to solve problems.
Provide a critical analysis of the practical implications of their recommendations and
derive meaningful conclusions from the analysis of their selected organisation.
5. Skills for Professional Practice
Attributes in professional practice: individual and collaborative working; deployment of appropriate media; presentation and organisation.
Demonstrate the ability to present their findings to an audience using appropriate visual aids.
Marks
available
Marks
awarded
10
25
25
25
15
TOTAL 100
Late Submission Penalties (tick if appropriate)
Assignment Mark (Assessment marks are subject to ratification at the Exam
%Board. These comments and marks are to give feedback on module work and are for
guidance only until they are confirmed. ) Up to one week late
6

7. MARKING CRITERIA AND STUDENT FEEDBACK:
Assessment Component 1B
This section details the assessment criteria. The extent to which these are demonstrated by you determines your mark. The
marks available for each criterion are shown. Lecturers will use the space provided to comment on the achievement of the
task(s), including those areas in which you have performed well and areas that would benefit from development/improvement.
Common Assessment Criteria (applied to all parts of the project)
Marks
available
Marks
awarded
1. Research-informed Literature 10
Extent of research and/or own reading, selection of credible sources, application of appropriate referencing conventions.
Draw upon critical academic sources to support their presentation.
2. Knowledge and Understanding of Subject 25
Extent of knowledge and understanding of concepts and underlying principles associated with the discipline.
Provide evidence of a sound knowledge of academic concepts and their practical benefits.
3. Analysis 25
Analysis, evaluation and synthesis; logic, argument and judgement; analytical reflection; organisation of ideas and evidence
Provide evidence of the ability to present the strategic analysis to a practitioner audience.
4. Practical Application and Deployment 25
Deployment of methods, materials, tools and techniques; application of concepts; formulation of innovative and creative solutions to solve problems.
Provide evidence of a sound knowledge of academic concepts in deriving practical
recommendations for the organisation in order to add value to their strategic and
operational activities.
5. Skills for Professional Practice 15
Attributes in professional practice: individual and collaborative working; deployment of appropriate media; presentation and organisation.
Students are expected to provide evidence of their ability to communicate to a
practitioner audience while maintaining an appropriate balance between academic rigour
and a professional approach.
TOTAL 100
Late Submission Penalties (tick if appropriate)
Assignment Mark (Assessment marks are subject to ratification at the Exam
%Board. These comments and marks are to give feedback on module work and are for
guidance only until they are confirmed. ) Up to one week late
7

8. PG COMMON ASSESSMENT AND MARKING CRITERIA
OUTRIGHT FAIL FAIL UNSATISFACTORY SATISFACTORY GOOD EXCELLENT EXCEPTIONAL
Assessment Criteria
0-29% 30-39%* 40-49% 50-59% 60-69% 70-79% 80-100%
1. Research-informed Little or no evidence Poor evidence of References to a Inclusion of Inclusion of a wide A comprehensive Outstanding
Literature
of reading. reading and/or of limited range of research-informed range of research- range of research knowledge of
reliance on mostly relevant literature, including informed literature, informed literature research-informed
Views and findings inappropriate sources. Referencing sources retrieved including sources embedded in the literature embedded
Extent of research and/or unsupported and sources, and/or conventions not independently. retrieved work. Excellent in the work.
own reading, selection of non-authoritative. indiscriminate use of always applied Some omissions and independently. selection of relevant Outstanding
credible sources, sources. consistently. minor errors. and credible selection of relevant
sources. High-level and credible
application of appropriate Referencing Selection of relevant
referencing skills, sources. High-level
referencing conventions conventions largely
Referencing Referencing and credible
conventions used conventions mostly sources. Very good consistently applied. referencing skills
ignored.
consistently andinconsistently. consistently applied. use of referencing
conventions, professionally
consistently applied. applied
2. Knowledge and Major gaps in Gaps in knowledge, Some evidence of Knowledge is Knowledge is Excellent mastery of Exceptional mastery
Understanding of
knowledge and with only superficial knowledge and generally accurate extensive. Exhibits a complex and of a complex and
understanding of understanding. understanding of with a satisfactory understanding of specialised area of specialised area of
Subject material at this Some significant current and relevant understanding of the breadth and knowledge and knowledge and
level. Substantial inaccuracies. concepts and the field of study. depth of established skills, with an skills, with an
Extent of systematic inaccuracies. underlying principles and contemporary excellent critical exceptional critical
but with gaps or views. awareness of awareness of
knowledge,
errors. current problems current problems
understanding and critical
and/or new insights and/or new insights
awareness of concepts at the forefront of at the forefront of
and underlying principles the field. Clear the field. A critical
associated with the awareness of awareness of the
discipline. challenges to ambiguities and
established views limitations of
and the limitations knowledge.
of the knowledge
base.
3. Analysis Unsubstantiated Some evidence of Evidence of some Evidence of some Evaluates Excellent critical Exceptional critical
generalisations, analytical logical, critical logical, analytical, methodologies, evaluation of evaluation of
Analysis, evaluation and
made without use of intellectual skills, thinking and some critical thinking and current research and methodologies, methodologies,
any credible but for the most attempts to synthesis. Can ideas critically and, current research and current research and
synthesis; logic, argument evidence. Lack of part descriptive. synthesise, albeit analyse new and/or where appropriate, ideas and, where ideas and, where
and judgement; analytical logic, leading to Ideas/findings with weaknesses. complex data and proposes new appropriate, appropriate,
reflection; organisation unsupportable/ sometimes illogical situations without hypotheses/ideas. proposes new proposes new
of ideas and evidence missing conclusions. and contradictory. Some evidence to guidance. Evaluates and hypotheses/ ideas. hypotheses/ ideas.
Lack of any attempt Generalised synthesises complex Evaluates and Evaluates andsupport findings/
to analyse, statements made views, but evidence An emerging issues both synthesises complex synthesises complex
synthesise or with scant evidence. not consistently awareness of systematically and issues systematically issues at a high level
evaluate. Conclusions lack interpreted. different stances creatively. Makes and creatively. of mastery. Makes
relevance. and ability to use sound judgements Makes excellent outstanding
Some relevant evidence to support and proposes judgements and judgements and
convincing proposes convincing proposes highly
conclusions and the argument.
arguments in the arguments in the convincingrecommendations,
absence of complete absence of complete arguments in the
But not always well Some conclusions
data. Sound, data. Strong, absence of complete
linked to other and
convincing persuasive, data. Highly
material. recommendations,
conclusions / conclusions, persuasive
where relevant
recommendations. justifiable conclusions. Work is
recommendations. of journal
Work is of publishable quality.
conference
publishable quality.
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9. 4. Practical Limited or no use of Rudimentary Some awareness A satisfactory and A very good An advanced Outstanding levels
Application and
methods, materials, application of and mostly appropriate application of a application of a of application and
tools and/or methods, materials, appropriate application of range of methods, range of methods, deployment skills.
Deployment techniques. tools and/or application of well- standard methods, materials, tools materials, tools Assimilation and
techniques but established materials, tools and/or techniques. and/or techniques. development of
Effective deployment of Little or no without methods, materials, and/or techniques. cutting edge
consideration and tools and/or processes and
appropriate methods, appreciation of the Very good The context of the
competence. Flawed techniques. techniques.
materials, tools and context of the Satisfactory consideration of the application is well
application. appreciation of the appreciation of the context of the considered, with
techniques; extent of skill context of the Some appreciation context of the application, with extensive use of
demonstrated in the application. of the context of the application, with perceptive use of relevant examples.
application of concepts to application. some use of examples, where
a variety of processes examples, where relevant. Application and
and/or contexts; relevant. deployment extend
formulation of Evidence of some beyond established
innovative, original and originality, conventions.
innovation and Originality,
creative solutions to solve
creativity. innovation and/or
problems. creativity evident
throughout.
5. Skills for Communication Media is poorly Communication is Can communicate Can communicate Can communicate Can communicate
Professional Practice
media is designed and/or not not clear. effectively in a well, confidently and professionally and, with an
inappropriate or suitable for the suitable format, but consistently in a confidently in a exceptionally high
misapplied. audience. Limited independent may have minor suitable format. suitable format. level of
Demonstrates attributes work and limited errors. professionalism.
expected in professional Little or no evidence Poor independent or involvement in Can work very well Can work
practice including: of autonomy in the collaborative group activities. Can work effectively autonomously and professionally Can work
individual initiative and completion of tasks. initiative. autonomously and as part of a team, autonomously and exceptionally well
collaborative working; Work lacks
as part of a team, with very good within a team, and professionally
with some contribution to showing leadership autonomously and
deployment of Work is poorly Work lacks coherence in places
structured and/or structure, and is in need of involvement in group activities. skills as appropriate, within a team,
appropriate media to
largely incoherent. organisation, and/or amendments to the group activities. managing conflict showing advanced
communicate (including coherence structure. Work is coherent and meeting leadership skills.
written and oral); clarity Mostly coherent and fluent and is obligations.
and effectiveness in work and is in a well structured and Work is
presentation and suitable structure. organised. Work is coherent, exceptionally
organisation. very fluent and is coherent, very
presented fluent and is
professionally. presented
professionally.
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10. Student Self Evaluation Form
Student name: Student number:
Programme: Year of
programme
Assignment Title:
This section repeats in brief the common assessment criteria detailed on previous pages. The extent to which these
are demonstrated by you determines your mark. Using these criteria, tick the box that best indicates the level of
achievement you feel you have achieved with regard to each of them. Please note that this self-assessment is used
as a developmental tool only and has no impact on the way in which your work will be marked.
Level of Achievement
Common Assessment
Criteria Applied
REFER PASS DISTINCTION
OUTRIGHT FAIL FAIL UNSATISFACTORY SATISFACTORY GOOD EXCELLENT EXCEPTIONAL
1. Research-informed 0-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-100%
Literature
      
2. Knowledge and 0-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-100%
Understanding of
      Subject
3. Analysis 0-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-100%
      
4. Practical 0-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-100%
Application and
Deployment
      
5. Skills for 0-29% 30-39% 40-49% 50-59% 60-69% 70-79% 80-100%
Professional Practice
      
10

11. PLEASE COMMENT ON AREAS IN WHICH YOU FEEL
THAT YOU HAVE PERFORMED WELL
PLEASE COMMENT ON AREAS YOU FEEL THAT YOU
NEED TO DEVELOP
Student’s Name Date
Student’s Signature
11

12. IKEA - Future strategic direction
Table of Contents
1. Company overview .................................................................................................................. 2
2. IKEA’s strategic direction over the past 5 years - Hybrid-strategy ........................................ 2
3. Industry analysis ...................................................................................................................... 3
3.1 Porters’ Five Force analysis ............................................................................................. 3
3.2 Analysis of IKEA’s competitive advantages ................................................................... 5
3.3 Probable scenarios for furnishing industry ...................................................................... 7
4. IKEA’s strategic capabilities ................................................................................................... 8
4.1 IKEA’s mission and vision statements............................................................................. 8
4.2 IKEA’s company's strategic capabilities .......................................................................... 9
5. Recommended strategies and resource implications for IKEA .............................................10
6. Conclusion .............................................................................................................................11
References ..................................................................................................................................... 13
Appendix 1: Cliff Bowman's Strategy Clock and Eight Competitive Directions for Edge .......... 15
Appendix 2: IKEA’s main competitors ........................................................................................ 15
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13. 1. Company overview
IKEA, a Swedish based company is well-known for its leading position in furnishing market that
sells functional, well-designed, and affordable Scandinavian-style furniture and other home-
based products. IKEA is now operating with around 230 stores across 42 countries with
approximately 70 000 people. The stores serve about 410 million shoppers annually (IKEA
2016).
This report is designed to look at the furnishing industry environment and analyse IKEA’s past
strategic direction, current market position in terms of competitive advantages, competencies and
capabilities, as well as resources as to advise the business on their future strategic direction.
Several appropriate frameworks for strategic analysis like Cliff Bowman's Strategy Clock,
Porter’s Five Forces analysis, Ansoff Matrix, VIRO model will be applied to reach the findings.
2. IKEA’s strategic direction over the past 5 years - Hybrid-strategy
Applying Cliff Bowman's Strategy Clock into the case of IKEA (see Appendix 1 for more
information), it can be seen that IKEA has pursued Hybrid-strategy over the last 5 years,
meaning that the business to simultaneously provide added-value to customers while keeping
prices down.
In specific, for Differentiation Strategy, IKEA understands the emerging trend in furniture
products consumption that what customers want for their furniture products are products with
excellent quality, nice design, and high flexibility, rather than the most durable ones. Therefore,
IKEA pays close attention to provide customers with modern design products and high speed
delivery services to catch up the trend (Lutz 2015). Together, IKEA also brings customers with
new and unique shopping experiences, for example, by combining a furniture showroom and
cafeteria/buffet restaurant in one place to create a unique shopping destination with service
convenience for customers (Lutz 2015). Likewise, different decorating concepts and themes are
used for different stores in different regions at different time, for instance, turning into family
event with children areas in family holiday or at weekend. This becomes a unique characteristic
of IKEA that distinguishes the business from other competitors (Roger et al. 1998).
For pursuing Low cost strategy to keep the prices down, IKEA’s competitive strategy is
presented in the harmony way of selling products to customers at low prices in large range of
2

14. variety but good value for money with high product quality. For IKEA, as cheap prices is the key
tool for competition, the business makes lots of efforts on reducing the price as much as possible,
but not any price. Specifically, the business has been attempting to make more from less by
managing works on ‘zero-waste’ principle. At IKEA, employees have been taught to promote the
awareness of saving through a sustainable e-learning program and practice of saying “NO” with
waste (Green Business Singapore 2011). Moreover, waste are turned into resources for
manufacturing and sourcing policies for materials are implemented in a responsible way to
maintain low manufacturing costs (IKEA 2015). Most notably, as to reduce costs and bring
added-value to customers, IKEA offers customers with unique delivery service, called model of
knock-down furniture products. With this delivery service, additional value is created upon
delivery by allowing customers to themselves assemble products at the delivery destination.
During the transportation, furniture products are delivered in standardised flat boxes (Roger et al.
1998). Doing this helps IKEA not only takes up less storage space, low inventory cost and low
transportation costs but also enhances customers’ shopping experiences by having them involve
in product assembly. Apparently, this is a very successful strategy of IKEA to keep costs low
while create the differentiation in preference to competitors.
Besides, recognising that environmental protection is now not only a big concern of country
governments around the world but also a requirement of society to a responsible business, IKEA
therefore always abides with regulations regarding environmental protection by building up a
green business model by increasing products per load to reduce CO2 emissions from
transportation, reducing waste in manufacturing and daily operation, and moving into online
sales services.
3. Industry analysis
3.1 Porters’ Five Force analysis
Porter's Five Forces model by Porter (1979) is a swell-known framework for evaluating the
competitive intensity of an industry and market position of an organisation in that market (Porter
1985).
Threats of new entrants
 High costs to enter the furnishing market because of large set up costs to build up a chain
of similar scale and economies of scale needed
3

15.  Highly intensive competition and high requirements from customers for diverse range of
innovative furniture products at low costs becomes a big challenge for newcomers.

 Large power of existing players with established chain of large scale, reputed brand with
high quality and well-designed products are the biggest barriers for new entrants.

 Ikea is a well-known brand in global market for its innovative product, cheap offering,
and unique store with Swedish heritage and design. Thus, for IKEA, threat of new
entrants is insignificant.
Threats of substitutes
 Basic requirements of customers are remained over years as quality and Price are still the
two most important criteria for furniture product purchase, and IKEA has advantages
over competitors in two these areas.
Bargaining power of supplier
 Multi choice of supplier for material sources, particularly suppliers from regions with
cheap material sources such as ASEAN countries

 Materials for furniture manufacturing are quite homogeneous and easy to get, helping
IKEA easily switch to other suppliers with more competitive and more balance cost-
effective offers

 Large scale and reputed buyer increases IKEA’s power over suppliers.
Bargaining power of buyers
 Furniture is not classified as a necessity product, making lower spending on furniture
product due to economic slowdown and customers more careful in purchase for saving
purpose.

 Lots of choices and alternatives available in the market offered by different large chain of
furniture brand

 Price Sensitive customers.

 Highly intensive and competitive market with highly flexible price points

 Lower spending on furniture product caused by economic slowdown
Competitive rivalry
 Very many players with reputed brand and same scale in furniture sector.

4

16.  Low switching costs for customers.

 Low customer loyalty because price and quality are the most important considerations for
purchase decision, accompanying with large bargaining power of customer increases the
extent of rivalry in the market

 Many players offer appealing promotion programs to attract customers.

IKEA risks losing market share to new online-mainly furniture stores such as Amazon,
Alibaba Group, etc. (Reuters 2016).
Porters Five Forces Analysis ‐ Conclusion
Looking at the five forces for furnishing market, some conclusions can be made:
1) Threat of Substitution: Low to medium: customers are more likely to switch to other
brands that run heavily discounted promotions
2) Threat of New Entry: Low: the barrier costs of entering the market is extremely high due
many existing players with established scale, highly reputed brand, and stable market
share in the market.
3) The Power of Buyers: High: due to the fact that customers are very price sensitive, no
switching cost for customers to move to other brands, and the availability of many big
players in the market
4) The Power of Suppliers: Low as the large number of suppliers for homogeneous
materials and large buying volume of IKEA
5) Competitor Rivalry: Extremely high since the vast array of competitors in the market
coupled with very high bargaining power of customers.
The most important highlighted point of this analysis is: As to compete to intensive competition
in the market, IKEA must consider continuous keeping price down and offering customers with
high quality and nice design products to match customers’ needs and win over the competitors.
3.2 Analysis of IKEA’s competitive advantages
See Appendix for IKEA’s main competitors.
IKEA’s key competitive advantage points includes:
Table 1: IKEA’s key Competitive Advantage Points
Primary activities
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17. Inbound Standardised product strategy helps with ensuring quality on the global basis
logistics while long-term contracting relationship with suppliers ensures the smooth
flow of production schedule
Operation Sourcing manufacturing activities mostly through subcontractor suppliers, but
keeping designs of all furniture in-house to protect core competitive
advantages
Outbound Manufactures hold responsibilities for shipping the components to central
Logistics distribution destination, and then products will be delivered in flax box
package to end-customers. Doing this ensures share-responsibility with
suppliers to reduce risks and costs while brings additional value to customers.
Sales and Uses catalogue for promotion and deals directly with customers to get direct
Marketing feedback
Promotion campaign with deep discounted rate on events
Unique store concept with a combination of furniture showroom and
cafeteria/buffet restaurant in one place to offer service convenience to
customers
Services Generous return policies in some markets, such as in Europe and North
America
Support activities
Procurement Sourcing with nearly 2000 subcontractor manufacturer in different parts of
world. IKEA provides long term contract with technical and equipment
support (Inter IKEA Systems B.V. 2014a). Sourcing activities helps IKEA
achieve cost-effective balance to pursue low cost strategy.
IKEA Way on Purchasing Products, Materials and Services (IWAY)
containing IKEA’s standardised requirements regarding Ikea’s partners
behaviours and working practices helps secure contracting relationship
between IKEA and suppliers (Inter IKEA Systems B.V. 2014b).
Technology & IKEA’s designers are working closely with customers at the early stage for
Development attaining customers’ ideas and feedbacks to create adaptive fit products
(Harapiak 2013).
6

18. Moreover, IKEA’s successful hybrid strategy is also a big competitive advantage. IKEA’s
sourcing policies and waste management are the key practices for low cost strategy (IKEA
2011), while IKEA’s differentiation strategy is implemented in a harmony way between pressure
for global integration and for local responsiveness. In specific, IKE focuses on standardisation
whenever possible where 90% of its product line is similar across the global markets and
marketing strategy is centrally developed at headquarter (Harapiak 2013). However, local
adaptation is required when necessary, for example, local adjustment in marketing to fit local
language and catalogue and modification of furniture products to suit different requirements of
local market. The flexible in strategy is also a key strength of IKEA over competitors. Coupled
with those, IKEA also creates differentiation in its unique store concept. Stylish stores with
excellent shopping experience is the key tool for IKEA to compete with online furniture retailers.
In sum, IKEA’s key competitive advantages can be summarised as the following:
 Large network of supply with more than 2000 subcontractor manufacturers in 55
countries (Inter IKEA Systems B.V. 2014a).

 Big warehouse showroom in sub-urban centres coupled with chain of unique stores
across the regions.

 Entering in economies of scale through standardization while also achieving economies
of scope by combining furniture showroom with restaurant share facilities.

 Economic design through Inbound and Outbound Logistics.

 Include customers’ involvement value chain to get direct feedback, for example, in
designing stage and delivery.

 Strong brand image with distinctiveness in design and diversity in assortment.
3.3 Probable scenarios for furnishing industry
In this section, panorama of direction the furnishing industry will take in the next decades will be
discussed by analysing current context of the sector and the main factors that influence it and
discovering emerging trend that will strongly direct the movement of the industry.
As a result of market research, some trends are identified as determinant for the furniture
industry, such as:
7

19. Increased attention to environmentally friendly products: customers will continue to demand
more and more eco-friendly products and require every business to act in a socially responsible
manner.
Europe crisis continues to cause lots of constraint worldwide, resulting in increased
demand for superior quality products at cheap price: this trend forces IKEA to contiguously
keep prices down without compromising quality. Due to fast changing lifestyle, furniture
products is no longer a twenty - year investment that changes purchase criteria from the most
durable products to fashionable, nice, good quality, and cheap products. This change will shape
strategic direction in terms of pricing strategies and product development strategy of IKEA.
Next decades will be where the emerging markets are going. This trend means that emerging
markets like China and other Asian countries will be the promising destination for the giant
IKEA when existing markets turn to mature.
4. IKEA’s strategic capabilities
4.1 IKEA’s mission and vision statements
IKEA’s vision is to “create a better everyday life for the many people” (IKEA 2011), and to
support that vision, the business manufactures and sells a wide range of home furnishing
products at excellent quality, nice design, and at an affordable price. Since its inception, as to
achieve the ethos of making good quality products at affordable price, IKEA makes lots of
efforts on developing innovative and cost effective production methods, and the company has
long succeeded in adapting the products to meet customers’ needs. Currently, imperatives of the
furnishing market are toward simple design, cheap, and eco-friendly products, excellent service,
and business’s respect to environmental and sustainability issues. With these, it can be said that
current mission and vision statements of IKEA are aligned to the demands of the marketplace.
The company does not only offers customers with high quality products at cheap price and
excellent services and shopping experiences, but it also enters Green Business model as a part of
its efforts on being a socially responsible business by abiding with eco regulations and
reinforcing ethical practices such as child labour use when working with suppliers. Moreover,
most recently, IKEA’s innovations include a concept called “product recovery concept” where
returned products are repaired instead of being disposed (Inter IKEA Systems B.V 2016). Or
8

20. customers are now can shop online instead of directing visiting showrooms that helps customers
save time and reduces the CO2 emission caused by travelling. Together, IKEA’s allows
customers to actively involve in the shopping experience for choosing, collecting, transporting,
and assembling products themselves, which contributes to cost leadership strategy. Additionally,
the idea behind “you do your part, we do our part, together we save money” is far more than a
furniture merchant, IKEA sells recognised value and a better lifestyle for customers around the
world (Inter IKEA Systems B.V. 2016). Likewise, IKEA’s attention is also to new products
development in line with eco design and lifestyle changes, and follow the Swedish “Möbelfakta”
labelling to draw its particular focus on quality, environmental and social concerns (Larson
1996). Under the adverse economic situation and increasing concerns regarding environmental
protection, it is clear that IKEA’s vision and mission appears to best fit the demands of the
marketplace.
4.2 IKEA’s company's strategic capabilities
Applying VIRO model, Ikea’s capabilities and competencies include:
 Price advantage (20% to 30% below other distributors) brings IKEA’s production
capabilities to work with suppliers from different part of worlds to ensure best prices flow
to customers (Harapiak 2013).

 Strong financial performance allows IKEA to raise capital for marketing and new store
strategy as well as increases its ability to control distribution network and supply chain
from production to end customers

 High brand reputation spells huge opportunities for marketing campaign and leverage off
its brand

 Large network of supply and chain of warehouse showroom in sub-urban centres and
unique stores across the regions coupled with diversity of assortment helps the business
easily access to a wide variety of markets

 Economies of scale through standardisation, economies of scope by combining furniture
showroom with restaurant share facilities, and economic design increases capacity
investment with its cash flow and ability to adapt to new markets.

 Early involvement of customers in supply chain and flat box delivery service make a
significant contribution to perceived customer benefits.
9

21.  Comprehensive pattern of internal coordination and learning, such as excellent value
chain, close relationship between designers and customers to get direct feedbacks and
create best adaptive fit products, etc. make it difficult for competitors to imitate and
therefore allow IKEA to maintain its core values.

5. Recommended strategies and resource implications for IKEA
Figure 1: Ansoff Matrix (Source: Team FME 2013, p.7)
Referring to Ansoff Matrix strategy, there are three possible strategies that IKEA could follow to
defend its core business. These are:
Market penetration and product development
Currently, IKEA’s sales by region are: European (81%), North American (16%), and Asia
&Australia (3%). As we can see, there are still lots of opportunities open for IKEA in North
American and especially Asia market. As to expand in those market, IKEA must understand the
consumer trend and then formulate strategy accordingly. Also, market penetration strategy also
requires IKEA to understand the forces from external environment that have influence on
profitability perspectives and create opportunities/threats for the business to have reasonable
adjustment in its operational strategy. For example, IKEA does well in moving into Green model
to capture emerging concern of society toward environmental issues. Or IKEA’s hybrid strategy
10

22. to offer customers good products at reasonable rates and excellent services are the successful
response to the demand of market.
In current markets, IKEA can increase market share through new product development strategy
or through distribution network expansion. Apparently, the furnishing market is currently
fragmented with the participation of large number of players that represents an opportunities for
IKEA to increase market share through buying strategically. At the same time, IKEA should
improve its distribution chain by entering partnership with transportation agents for exclusive
rights to bring customers with cheap model of transportation.
Market development
Targeting new markets and designing separate for that segment (meaning combining
diversification strategy) can also be the future strategy of IKEA. Currently, IKEA is sourcing its
materials mainly from the biggest market China, and the business can take advantages from
continued development of this market to expand to neighbouring ASEAN countries.
Moreover, as mentioned above, IKEA’s position is now being threatened by new online retailers.
Thus, to defend its core business, IKEA should continually promote its e-commerce business to
beat online competitors. Apparently, with current scale and market position, Ikea could easily
move toward this direction in the future.
Resource implications
As to follow this strategy, some resources are required:
- Funding for investment into new product development, buying strategy, and distribution
network expansion.
- Large network of supply and chain of distribution
- Brand name as a strong asset for entering new partnership with transportation companies
- Human resources: in-house research team to make intensive market research to
understand consumer trend and young talents with open mind set to work with insights
from the market.
6. Conclusion
In the intense competitive, uncertain and rapidly changing furnishing industry, IKEA has to pay
attention to emerging trends in the market to come up with strategies to respond to the
uncertainties and to catch up opportunities for developing the market. With abundant resources,
11

23. strong capabilities and competencies, IKEA is more likely to continue to develop in the way
forward.
12

24. References
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http://www.argos.co.uk/static/StaticDisplay/includeName/AboutArgos.htm [Accessed:
12 February 2017].
Bowman, C. and Faulkner, D. 1996. Competitive and Corporate Strategy. London: Irwin.
Green Business Singapore 2011. How IKEA Embraces Sustainability Globally and in
Singapore [Online] Available at: http://www.greenbusiness.sg/2011/05/24/how-IKEA-
embraces-sustainability-globally-and-in-singapore/ [Accessed: 10 February 2017].
Harapiak, C. 2013. IKEA’s International Expansion. International Journal of Business
Knowledge and Innovation in Practice 1(1). Available at: https://mpra.ub.uni-
muenchen.de/52946/1/IJBKIP-01-1 [Accessed: 11 February 2017].
IKEA 2011. The IKEA Group approach to sustainability [Online] Available at:
http://www.ikea.com/ms/en_KW/pdf/sustainability_report/group_approach_sustainability_f
y11.pdf [Accessed: 11 February 2017].
IKEA 2015. IKEA Group FY15 [Online] Available at:
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[Accessed: 11 February 2017].
IKEA 2016. Facts & Figures [Online] Available at:
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[Accessed: 10 February 2017].
Inter IKEA Systems B.V 2016. 2000s [Online] Available at:
http://www.ikea.com/ms/en_SG/about_ikea/the_ikea_way/history/2000.html [Accessed: 11
February 2017].
Inter IKEA Systems B.V. 2014a. FAQ [Online] Available at:
http://www.ikea.com/ms/en_JP/customer_service/faq/faq07.html [Accessed: 11 February
2017].
13

25. Inter IKEA Systems B.V. 2014b. IWAY, Our code of conduct - IKEA [Online] Available at:
http://www.ikea.com/ms/en_JP/about_ikea/our_responsibility/iway/index.html
[Accessed: 11 February 2017].
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http://www.ikea.com/ms/en_US/the_ikea_story/the_ikea_store/the_ikea_concept.html
[Accessed: 11 February 2017].
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Charlottesville, VA.
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[Online] Available at: http://www.businessinsider.my/IKEAs-strategy-for-success-
2015-1/#6QH9lyfBvQOmi1DS.97 [Accessed: 10 February 2017].
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February 2017].
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management-ebooks.com/dldebk-pdf/fme-ansoff-matrix.pdf [Accessed: 12 February 2017].
14

26. Appendix 1: Cliff Bowman's Strategy Clock and Eight Competitive Directions for Edge
Source: Bowman and Faulkner (1996)
Appendix 2: IKEA’s main competitors
Competitors Comment
1 Argos Argos is a street retailer online as a part of Home Retail Group, the UK's
largest home and general merchandise retailer that offers more than
33,000 products through www.argos.co.uk, from furniture, mobile
channels, etc.
Revenue in 2012 around £3.9 billion and operates with approximately
31,000 employees across the business (Argos 2016).
2 Ashley Established in 1945, An American furniture store chain is well-known for
Furniture #1 Furniture Manufacturer in the World that designs, manufactures, and
HomeStore sells Ashley Furniture products.
Revenue in 2015 around $4.2 Billion.
Operate with around 22,500 employees globally.
3 British B&Q The UK’s leading home improvement and garden living retailer, helping
customers have smarter homes since 1969. The company offers great
prices across 40,000 products in our 300 stores and on diy.com, and our
15

27. 27,000 colleagues are respected nation-wide for providing great advice to
customers. Revenue is about £3.8 billion in 2015
4 Bob's Bob's Discount Furniture is an American regional chain of privately
Discount owned furniture stores. Revenue is around 1.1 billion USD and operates
with 2,500 globally.
5 Other rivals Emerging but big rivals are new online-mainly furniture stores like
Amazon, Alibaba Group, and fashion brands Next , Zara, and H&M are
also adding home furnishing to their offerings.
16

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