IKEAs Competitive Standard, Its Management Strategies - Case Study Example

Heading: IKEA Your name: Course name: Professors’ name: Date Introduction In this fast growing corporate world, organizations are competing for wider markets than others through various ways. For an organization to succeed in the global market, it is essential that it adopts appropriate business models, marketing, management and leadership strategies that will compel the company towards success. Some of the management strategies that are essential in an organization include scientific management, administrative management, behavioral management, theory X and theory Y, management science theory, and organization environment theories. Therefore, this paper intends to analyze the IKEA’s competitive standard, its management strategies. IKEA background information IKEA is a private, global home products organization that deals in designing and selling ready-to-assemble furniture like appliances, desks and home accessories. This organization is largest furniture retailer in the globe. It was established in 1943 by a 17-year-old Ingvar Kamprad in Sweden, and the company was named as the founder name’s acronym that comprises of Ingvar Kamprad, and where he grew Elmtaryd, and the home parish Agunnaryd, in South Sweden (Mellen 2010, pp. 288-300). IKEA concept and trademark is regulated by a series of firms that are traceable to Interogo Foundation and Netherlands Antilles Liechtenstein. The companies forming IKEA are under INGKA Holding B.V., a Dutch corporation that is controlled by a tax-exempt, non-profit Dutch foundation. The INGKA Holding B.V. is the owner of the industrial group Swedwood that is the sources the IKEA manufacturing, its sales companies, and IKEA of Sweden, that is responsible for development and design of products in the IKEA variety (Mellen 2010, pp. 288-300). IKEA SWOT analysis IKEA’s objectives and goals environmental and sustainability design are critical to its business strategy. The company has launched a modern sustainability plan to carry the company forward through 2015. The strategy, therefore, environment, social, and economic issues. SWOT analysis is vital to the company because it facilitates the achievement of its objectives. This is a strategic planning instrumental that enables the firm to focus on major issues (Mellahi & Guermat 2004, pp. 199-215). Threats and opportunities entail external factors affecting the success of the company. This implies that there are outside factors that influence business and they include economic situation, environment, technological advances like internet, and social changes. Every business can from opportunities and counter threats through making a majority of its strengths and tackling its weaknesses (Fleisher, 2007, pp. 30-36). Strengths Some of the company’s strengths are based on its location and special marketing capability. These are any business features that add value to its service and product. Therefore, some of its strengths include a strong international brand that attracts major consumer groups, and it promises similar quality and variety globally. Secondly, Mellen (2010, pp. 109-120) says that the company’s vision is dedicated to create a better daily life for several people. The company also has a strong concept whose basis of offering a broad range of appropriately designed operational products at reduced prices. Additionally, the company’s effectiveness is brought out by a democratic design that enables the firm to reach an ideal balance between operation, design, quality, and price. IKEA’s cost consciousness implies that reduced prices are considered when every product is designed from the start. In addition, Mellahi and Guermat (2004, pp. 199-215) say that the company has increasingly employed renewable materials; the company enhanced its total utilization from 71%-75% in 2007 and 2009 respectively. Fleisher (2007, pp. 30-36) asserts the company has smartly used materials, that is, IKEA has increased the application of reclaimed or recycled waste products in the production of energy across its stores from 84-90% from 2007 and 2009 respectively. In terms of volume commitments, IKEA values the creation of permanent partnerships with its suppliers so as to achieve its objectives. Because of its commitment to buy large volumes over several years, the company can bargain reduced prices. This is also beneficial to its suppliers as they enjoy greater security of guaranteed orders (Mellahi & Guermat 2004, pp. 199-215). Another significant strength of IKEA concerns its economies of scale like buying products in bulk at affordable unit costs. It also has an advantage of getting its materials from the nearest supply chain in order to cut on its costs of transportation (Kolko 2011, pp, 29-32). What is more, the fact that it is involved in direct delivery of products from its suppliers to its stores. This is beneficial in that it reduces costs of handling, minimizes road miles, and decreases carbon footprint. Its use of advanced technologies, like IKEA OGLA chair, improves the company’s competitiveness in the world market. The chair has been modified through many years so as to minimize the quantity of required materials (Hitt 2011, pp. 59-65). Opportunities Successful organizations use their strengths in taking advantage of the arising opportunities. IKEA Company is convinced that its environmentally alert business conduct will lead to excellent outputs even within the price sensitive market. Horn (2010, pp. 395-402) demonstrates that one of the company’s opportunities is that it has a growing demand for green products. It also has an opportunity of a high demand for reduced products of products. Trend in the present monetary climate can lead to customers trading down more costly stores. In addition, there is a high demand for minimized water utilization and reduced carbon footprints. What is more, Das (2010, pp. 12-19) the company has many areas of emphasis to its sustainability work, each of that it supports in a variety of ways that include long-term solutions for a continuous home life, and the company provides online tips and guidelines on this. Secondly, it aims at achieving zero waste to water treatment, landfill, and programs to minimize its utilization of water through its sustainable application of resources (Daft 2010, pp. 234-240). Further, the company is set to reduce carbon footprint, develop social responsibility. Its reduction of carbon footprint is brought about by the minimized energy use and its utilization of additional renewable sources of energy so as to cut on business flights in 2010 by 20% and 2015 by 60%. Its social responsibility development is facilitated by its policy that entails assistance for charities like UNICEF, Save the Children, and World Wildlife Fund. Most significantly, the company intends to be open with is stakeholders through building of trust by effective communication with clients, co-workers, major opinion creators, and the press. In a nutshell, the competiveness of the company is based on its central desire to enhance sustainability. Weaknesses IKEA recognizes that the acknowledgement of its weaknesses is indispensable in the improvement of its performance. Weaknesses have a big role in the setting of business objectives and development of new strategies. To start with, the company is experiencing a weakness in relation to the scale and size of its worldwide business. As a result, it is difficult to regulate quality and standards. For instance, some nations that have IKEA products have failed to enforce laws that control working conditions; hence representing a weak connection within the firm’s supply chain, and influencing client views of its products. Secondly, Smith, Bhattacharya and Vogel (2010, pp. 171-180) maintain that the company is facing a weakness due to the demand for low prices for products. This is because of the need to balance against the production of good quality. There is also a challenge of differentiating itself and the products from the competitors’. The company is convinced that there should not be compromise amid the ability to create quality products and reduced products. Thirdly, the organization should uphold a suitable communication with its clients and other stakeholders as regards its environmental operations. Because of its business scale, it is difficult to achieve it. Therefore, it offers online and printed publications and conducts main radio and television campaigns that facilitate it to communicate with distinct intended audiences. Threats A company that knows its potential external threats can sufficiently plan and prepare to offset them. Through the generation of new ideas, IKEA may employ a specific strength to protect itself against these threats in the global market (Berger 2011, 1-20). One of the threats in the company relates to social trends like slowed entry of first-time buyers in the housing market. Besides it is threatened by market forces in that many competitors enter markets with lowly priced furnishing and household markets. Lastly, the company is threatened by economic factors like recession that reduces client spending and their disposable income. Management strategies The company’s ability to withstand steep competition in the global market is brought about by its appropriate management practices. The company has managed to employ an integrated management system that encompasses many management theories. Some of its management strategies include: 1. Cross-cultural management This is a management system that is attributed to Aristotle who observed in the past two millennia have differences between people living in warm climates, who appear intelligent, but not heroic, as compared to those living in cold climates who are brave, but unintelligent (Hill & Jones 2011, pp. 95-100). The company employs the strategy through paying attention to different cultures in different nations in which it operates, particularly when considering employees in the overseas market. This is because the company intends to takes its values to wherever its businesses are allocated. As a result, this calls for a critical comprehension of the cross-cultural theories of management. IKEA’s move to the Spanish market is aided by the Swedish culture (IKEA 2005, pp. 1-27). Even though there are cultural differences, the consensus-seeking culture facilitates an easier transformation. The fact that it has adopted a structured management is also essential in its competitive success. It has managed to create an agreed transfer of culture, expectations and ideas, for both Spanish and Swedish managers (Berglund & Rapp 2010, pp. 1-35). Moreover, the use of seminars is helpful in fostering discussions between both sides so as to minimize employee turnover because of frustration. Therefore, the management strategy is vital in strengthening the firm’s competitiveness in the global market. 2. Scientific management theory Here, the company intends to improve its efficiency so as to effectively compete with other companies in the world. According to F.W. Taylor, time and energy that every worker applies during work to produce desired outputs can be greatly minimized through division of labor and specialization, and in turn, the company will enhance its effectiveness (Sapru 2006, pp. 3-17). Therefore, IKEA has employed the strategy in order to improve its performance in the world market. 3. Administrative management theory As Fayol put it, the company is applying the strategy that consists of initiative, order, personnel remuneration, espirit de corps, and subordination of firm’s interests to the employees’, in its management system. Here, there is an involvement of employees in decision-making as well as in giving opinions on how the company operations should be conducted (Hill & Jones 2010, pp. 105-200). 4. Behavioral management theory As per the principles provided by Mayo, the company knows that the kind of leadership adopted by a firm has a great impact on the employees’ performance. Therefore, here, the company ensures that its managers and leaders behave appropriately so as to motivate workers to enhance its performance through commitment towards the attainment of its set goals (Adetule 2011, pp. 4-20). 5. Theory Y The company applies this management strategy in order to enhance working conditions so as o encourage employees to perform highly. This is because the theory asserts that working environment plays a big role in shaping employees attitude towards work; and thus the company’s performance (Adetule 2011, pp. 4-20). 6. Management science theory Here, the company has effectively applied quantitative methods in order to facilitate managers’ maximum use of its resources. Besides, the company has focused on quantitative techniques, operations management, absolute quality management, and management information systems (Heldman 2011, pp. 40-56). 7. Organization environment management theory This theory has been employed by the firm so as set conditions and forces, which work beyond its boundaries, and influence managers’ capability to acquire and use resources (Adetule 2011, pp. 4-20). Consequently, the company has gained a wider market share than its competitors. Conclusion IKEA is the largest private company that handles the designing and selling ready-to-assemble furniture like appliances, desks and home accessories. IKEA has strong competitive advantage as demonstrated by its SWOT analysis, and appropriate management strategies it employs. Some of the strengths include strong international brand, vision, democratic design, use of renewable materials, lowly priced goods and reduced carbon footprint. Its opportunities include high demand for green products, enhancement of sustainability, reduction of carbon footprint, and social responsibility. Moreover, the weaknesses include need for balance between prices and quality, communication with stakeholders. Threats include slow entry to market by first buyers, recession, and market forces. Besides, the company also employs cross-cultural, scientific management, human relations, behavioral management, administrative management, theory Y, management scientific, and organization environment management theories. References Adetule, PJ 2011, Handbook on management theories, Author House, Bloomington. Pp. 4-20. Berger, A 2011, Operations Management: IKEA, GRIN Verlag, Norderstedt, Germany. Pp. 1-20. Berglund, M & Rapp, G 2010, The Management Control System Package of IKEA Backebol- A Case Study. Spring terms. Pp. 1-35.http://gupea.ub.gu.se/bitstream/2077/23217/1/gupea_2077_23217_1.pdf Daft, R 2010, Management, South-Western/Cengage Learning, Andover. Pp. 234-240. 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Smith, NC, Bhattacharya, CB &Vogel, D 2010, Global challenges in responsible business, Cambridge University Press, Cambridge New York. Pp. 171-180. Read More