Essays on How Theoretical Concepts Influences Strategic Management Practices - IKEA Case Study

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The paper "How Theoretical Concepts Influences Strategic Management Practices - IKEA" is a great example of a management case study.   IKEA is one of the leading furnishing retailers in the world. The company was established in 1948 and has developed through the years to become what it is today. Its range of products is diverse and includes accessories and home furniture. By 2008, the company had about 253 stores in about 24 countries. It also had about 32 additional stores run under franchise. In the recent past, it has recorded huge profits due to the number of customers that visit its stores either physically or through its website.

Its sales exceeded the 21 billion Euro mark in 2008, a 7% increase from the previous year. Its biggest sale countries include the USA, Germany, Sweden, France, and the UK.   The company is known for its low prices and this is the reason why many customers flock to its stores. It also offers a wide range of products that cater for any life stage or lifestyle of its customers. On the other hand, it has fully embraced the concept of Community Social Responsibility in its policies.

It is involved in community services as well as the conservation of the environment. It has devised ways and means of making better use of energy and raw materials (Isc. hbs. edu, 2017). Industry Attractiveness The attractiveness of any industry can be determined by the porter’ s five forces model. These forces have influenced IKEA to develop a number of management strategies to increase their market share and increase its market expansion. At the initial stages, new entrants into the industry are unable to enjoy the same economies of scale-like IKEA owing to the size of the company.

They have confronted with barriers particularly the access to distribution channels. However, this situation is changing fast due to the emergence of new online furniture stores and retailers like Amazon, Alibaba Group, Zara, H& M and many others. This has compelled IKEA to improve the quality of its products and at the same time maintain lower costs to meet the expectations of consumers to mitigate against this threat by the new entrants. It has implemented this strategy by emulating strategies applied in the auto industry of creating platforms for product groups to attain economies of scale.

These platforms feature many models with varying price ranges. IKEA’ s customers are price sensitive and this makes them yield a huge bargaining power over the company. The furniture retail business is also common and provides buyers with a variety of places to buy from. This situation has made the company to maintain its price strategy. The company has been able to apply the low price model and at the same time remaining cost-effective.

By offering lower prices to its customers, IKEA can reduce the buyers bargaining power and equally attract more customers. IKEA has over 1,000 suppliers in over 50 countries who supply products that are not differentiated. This gives much bargaining power to the company and it can purchase products at very low prices. This situation has influenced the decision of the company to form alliances with its suppliers to improve its market share and also develop its innovations. By forming these partnerships and alliances the company has been able to impose its CSR programs on most of its suppliers.

It has been able to take advantage of its bargaining power to develop relationships and loyalty with its suppliers which are strategic. In the 2014 Financial Year, the company motivated its suppliers to improve their energy efficiency by 19%. This type of cooperative strategy has enabled the company to strive and meet its energy efficiency goals.

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Isc.hbs.edu. (2017). The Five Forces - Institute for Strategy and Competitiveness - Harvard

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