(Franchise structure, 2015) The vision of IKEA is “to create a better everyday life for the many people”. Their business idea is “to offer a wide-range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. This is achieved by offering quality at affordable prices to the customer through optimising the entire value of the chain, by building a long-term supplier relationship, with producing large volumes and by doing so, investing in highly automated production. (Business concept,
AC 2.1 – Evaluate the effectiveness of strategies used by IKEA to maintain supplier relationships and evaluate the effectiveness of these strategies. Proficient administration of suppliers is the vital path for assembling organizations can propel their execution. There are numerous huge parts of supplier administration; they join sourcing methodologies, and the way connections are overseen and the data trade arrangements embraced by IKEA. Taking into account the way that when in doubt, top of the line items are fabricated by various diverse suppliers. IKEA had 1,400 worldwide suppliers, 60% its suppliers are from European nations.
Therefor Ikea is more advanced than its competitors due to the showrooms and the cafeteria that they provide for the customers. This made Ikea being a unique place for customers to go. IKEA is also a standalone store, meaning shoppers do not have to go though shopping center traffic or any other similar conditions. Internationalization of IKEA was very important because it drove many IKEA’s top managers to positions of more responsibility, it increased profit, it enlarged the area of sales and it brought IKEA into new market places. It was also extremely important to make IKEA international because the Swedish furniture market was very adequate.
Besides, customers are willing to have self-assembly in exchange of lower prices. Secondly, IKEA sell the furniture by itself rather than employing an agent or retailer, so the price of product can sharply undercut as well as the cost can be lower. Moreover, IKEA did a clever decision of manufactured and outsourced in different countries which are lower cost in order to cut prices even further. For example, the furniture manufactured in Poland was 50% cheaper than furniture made in Sweden. Therefore IKEA transferred the production from Sweden to Poland.
According to UK Customer Insights report on IKEA by Verdict, IKEA’s customers are less than satisfied with both products and services as compared to other customers in UK buying at other stores. IKEA was also accused of putting low waged employee is unsafe working conditions as stated by Szkotak , Associated Press, (2011). Such negative publicity could have an impact on IKEA’s brand reputation and their customer’s loyalty. Rivalry Competition between IKEA and other existing major players in the industry such as, Home Depot, Wal-Mart, Argos and others are pretty intensive in the tight global market of discounted mass produced furniture due to these large retailers having the same similar traits with IKEA such as low cost products, a huge market presence and a well managed supply chain. With such intense competition competitors could very well gain some market share from IKEA through superior products, better service standards and positive publicity.
IKEA has also been always offer unique and differentiated products for that suits the customers’ preferences. This causes the threat of substitution for IKEA to be very low. There is also not much other alternative furniture company that provides the quality that IKEA has. 4. Bargaining power of customers There is moderate customers’ bargaining power in IKEA as the competition is averagely enough for the customers to switch from this company if they are not satisfied with the price that has been offered by IKEA.
IKEA for everyone IKEA is known as the largest and an international Swedish furniture retail provider (UK Essays, 2013) that vision “to create a better everyday life for the many people,” (IKEA, 2014). IKEA mainly provide all sorts of home furniture and appliances. The company operates in 27 countries with 315 stores, and home furnishing supplier in 51 countries (IKEA Group, 2014) offering the markets quality furniture at affordable prices. IKEA established a name in the market with their trademark of providing and making home furniture solutions that is just right for “everyone” where it operates, expressed blatantly in their so called “Democratic Design” business concept as solution for home problems by implementing three criteria; good
Due to different country’s policy, different business model are required for IKEA to run their business. For examples, IKEA will need to implement joint ventures as their business model to become successful in the Indian and China marketplace. Since the government for these countries requires that local business operations own about 51% control by Indian nationals, IKEA 's should find the right partner for its own. There are some advantages and disadvantages for IKEA to implement Joint venture as their business model. For the advantages are provide an opportunity to IKEA to access to the new markets and distribution networks, increased capacity to expand their business in foreign market, IKEA can share the risks and costs together with their partners and it will help IKEA to access to local resources, including specialised staff, technology and finance aspect.
IKEA’s vision and business idea clearly reflects it’s strategy. ‘‘To create a better everyday life for the many people’’, this is the IKEA vision. IKEA’s business idea is ‘‘To offer a wide range of well-designed, functional home furnishing products at price so low that as many people as possible will be able to afford them’’ Source B, I.I.S. 2013 About the IKEA group. Available at http://www.ikea.com/ms/en_US/this-is-ikea/company-information/(Accessed on:12 February 2016) Here are some crucial aspects to IKEA’s success.
From the research I did online, it argues that IKEA’s corporate and business level strategy is applied in a good manner. By asking how these strategies are best supported by operations strategies of IKEA. Assessing those performance goals are raising the quality, speed, dependability, flexibility and cost, which effect on the effectiveness of the results. Although all furniture retailer operations may be alike in that they all transform input resources into output products and services, they do differ in four important respects -namely the volume of their outputs, the variety of the outputs, the variation in demand for their output, as well as the degree of conspicuousness or customer contact that they have. From many traditional furniture retailers IKEAs success in the retail industry can be credited to its massive knowledge and skills in the retail market, product differentiation and cost leadership as