Strategic Purpose
IKEA is a multinational customised furniture manufacturing and distributing organisations based in Sweden. The organisation was established in the year 1943 and the firm has strongly focused on the offering of the customised furniture depending upon the needs and satisfaction level of the target customers.
The mission of the management of IKEA is to offer high quality and differentiated customised furniture products to the target customer’s. It depends on the needs and satisfaction level of the target customers. The vision of IKEA is to lead the global market place through the implication of strong ethics and sustainability in the business operation process. The major corporate values of IKEA are to offer products and services according to the particular needs and demand of the target customers. Moreover, the organisation will also try to meet the developed corporate values regarding stakeholder satisfaction and stakeholder satisfaction. Stakeholders are regarded as the major business growth drivers of an organisation. Moreover, the management of the organisation is also responsible for taking care of the job satisfaction and workplace motivation of the employees including empowerment of the employees.
In terms of relationship and compatibility between the functional objectives as well as strategic statements of the organisation, it can be stated that the management of IKEA is always concerned about social sustainability, environmental sustainability, economic sustainability, stakeholder’s values including higher customer values and effective employee empowerment within the organisation. These are strategic statements of the organisation. On the other hand, the functional objective of the organisation also states that the firm will do business with the existing business clients maintaining the demand as well as needs of the target customers. Moreover, the organisation’s major functional objective is to maximise the business operation profit by ensuring strong ethics, corporate governance as well as sustainability in the overall business operation process. Hence, this is highly essential for the management of the organisation to focus on the development and implementation of the effective business operation approaches according to the developed business policies to justify the committed strategic statements. The management of IKEA effectively uses the important resources maintaining ethics and sustainability in the business operation process to justify the developed mission, vision and corporate values. Hence, it is proved that the functional objectives of the organisation and strategic statements are strongly related to each other. Effective stakeholder engagement in the strategy development process has helped the management of IKEA to ensure a strong compatibility between the functional objectives and strategic statements.
External Analysis
The researcher will adopt and implement both macro and micro external environmental analytical tool in order to determine the impact of the factors on the operation process of the organisation.
PESTLE is a vital macro external environmental analytical tool, which will help the organisation to ensure the impact of the macro environmental factors on the decision making process of the organisation.
The political environment of UK is stable and sustainable for IKEA as the government of UK is supporting the business operation process of the retail organisations as these organisations are effectively contributing to the social and economic growth of the country.
The economic environment of UK is not so favourable for the organisational management of IKEA considering low disposable income and limited purchasing power of people as the economic volatility and recession are major reasons, which may affect the sales growth rate of the organisation in near future.
The social environment is favourable for the management of IKEA. Considering the growing demand for the differentiated, high quality and customised furniture products at the economic price level.
The technological environment is sustainable and favourable for the management of IKEA. The management of IKEA generally uses high-quality technological resources in the business operation processes in order to ensure the quality business outcome. On the other hand, UK is also technologically developed. Hence, this is highly important to accept that the organisation will gain effective support from the external vendors regarding gaining access to the high-quality technological applications.
The legal environment is slightly challenging to the management of IKEA as the policy makers and government have developed some strict employment and other business operation policies. Violation of these particular policies may create sustainable challenges for the organisation (Espier et al., 2010).
The ecological environment is also challenging for IKEA. The management of IKEA uses natural resources, such as trees to manufacture the customised furniture products. Moreover, this is also important for the researcher to accept that the management of the organisation has focused on the utilisation of other natural resources to ensure high quality and efficient manufacturing process. Hence, this is highly important for the management of the organisation to focus on the development and implementation of the ecological standards to overcome the possibilities of carbon and GHG emission related problems (Lunenburg, 2011).
Hence, it is clear from the above macro environmental analysis that the political, social and technological environments are supportive of the business operation process of IKEA, but the management may face some critical economic, legal and ecological balance related challenges.
Macro Environment Analysis: PESTLE
It is also considered as a vital strategic marketing tool, which will help the management of the organisational management of IKEA to determine the impact of competitive micro external environmental factors on the business operation process of IKEA.
The bargaining power of the potential customers is high for the management of IKEA as the UK retail industry is full of different popular firms and the organisations have different types of options regarding the consumption of the products. Therefore, it is highly essential for the researcher to suggest that the customers can switch over other brands in case of any dissatisfaction regarding products, service or pricing (Lopez-Nicolas and Merono-Cerdan, 2011).
The management of IKEA will face limited bargaining power of the suppliers as the UK retail industry is full of skilled, efficient and cost effective suppliers. The organisations across the UK can find cheap supply chain network due to sufficient availability of the supply chain options. Hence, the threat of the bargaining power of the UK suppliers is quite low (Ferrell and Hillicks, 2013).
The threat of the new organisations also limited for the management of IKEA in the UK considering several important factors. First of all, it can be stated that a new venture has to invest huge capital before setting up a new business. On the other hand, the marketplace is already penetrated by the existing players (Bunderson and Boumgarden, 2010). Lastly, it is also important for the organisation to state that the new organisations have to face some legal entry barriers due to the consideration of strict policies developed by government and policy makers (O’Leary et al., 2011).
It is also important to determine that the threat of the substitute players is high for the management of IKEA as several organisations are coming up with the concept of plastic or steel furniture instead of wooden furniture focusing on flexibility and price effectiveness. On the other hand, demand for such furniture products is also increasing. Therefore, it is highly justified to state that the threat of substitute furniture products is high for the customised wooden furniture products of IKEA (Nair, 2014).
The UK furniture manufacturing g retail industry is highly competitive considering the price as well as service differentiation process. Moreover, different leading firms are also focusing on the consideration of economic pricing approach in order to support the affected purchasing power of common people. Hence, this is identical that the market is highly competitive (Botha et al., 2014).
Porter’s Five Force Analysis
It is clear from the above competition that the organisation will face challenges regarding the threat of the substitute players, competitive market place and high bargaining power of the potential customers. On the other hand, the threat of the bargaining power of suppliers and new entrant threats are low for the management of IKEA (Alvesson, 2012).
VRIN strategic approach will be considered and implemented by the researcher in order to determine the strategic capabilities in terms of the organisational competencies and resources. Moreover, the consideration of VRIN framework will also help the management of the organisation to determine the relationship between the resource capabilities and organisational objectives.
VRIN framework is also determined as an important strategic management framework, which will help the marketing department ad board members of IKEA to analyse the strategic capabilities of the valuable, rare, inimitable and non-substitutable.
This is highly important to state that human resources are the valuable resources, which generally assists that management of the organisation to ensure adequate strategic capabilities. The human resource department of IKEA always focuses on the organisation of the training and development programmes for the employees in order t o ensure adequate skill development of the employees (Misra et al., 2013).
Use of effective technological resources in the manufacturing and distribution process can be regarded as an important and adequate competitive advantage of the organisation (Armstrong, 2016). This is highly essential for the organisation to state that the firms need to capitalise on the rare opportunities in the business operation process in order to ensure effective strategic growth rate. However, the management of IKEA has strongly focused on the utilisation and application of rare ICT applications in the business operation process in order to take care of the growth of the business (Savery, 2015).
Use of effective marketing communication approaches can be considered as inimitable resources as the marketing department of IKEA strongly focuses on the use of the high quality and efficient promotional platforms in order to ensure strong product and brand awareness (Hunt, 2016).
The customized manufacturing process of IKEA is generally considered as one of the most unique and effective business operation approaches, which is quite difficult to get a substitute option and customization according to the preference of the target customers is really a preferable options, which ensures effective competitive advantages among other organizations within the industry (Truman, 2010).
Utilisation of these resources, as well as strategic capabilities, can help the management of IKEA to meet the developed objectives significantly. First of all, this is an essential aspect to state that the firm always focuses on the value addition in business operation process by taking care of the needs of the stakeholders (Singh and Hardaker, 2014). Hence, sustainable business operation process and effective consideration of the above-mentioned resources actually help the management of the organisation to ensure high-quality business operation process (Jag pal, 2008).
Before going into the in detailed discussion regarding the development of the competitive strategy, it is highly important for the management of IKEA to focus on the realisation of the segments of business level strategies and value of the each segment of the business level strategy (Johnson et al., 2014). The business level strategy is an important strategic management approach, which helps an organisation to develop strategies basis on the pricing of the products, quality of the products and functionality of the products. Hence, Michael Porter has developed an effective generic strategy approach to help the marketing professionals to develop a high-quality competitive marketing strategy for the organisations in the competitive marketplace (West et al., 2010)
This strategic marketing approaches three different marketing elements, such as cost leadership strategy, differentiation strategy and focus strategy.
Adoption of the cost leadership strategy generally helps an organisation to focus on the overall business cost reduction strategy in the business operation process without compromising the quality of the products in order to implement economic pricing strategy of the products to ensure strong competitive advantages (Welch, 2012).
In terms of differentiation strategy, the organisations generally focus on the differentiation of products and services without hampering the quality of the products to gain competitive advantages.
In terms of focus strategy, the organisations only focus on the focus cost leadership or focus differentiation process on taking care of the needs as well as satisfaction level of the target customers (Barker and Gower, 2010).
The management of IKEA generally focuses on the manufacturing and distribution of customised furniture products. Hence, this is highly essential to state that the management of the organisation has adopted product differentiation strategy in the business operation process.
Conclusion
It is clear from the above analysis and discussed facts that the management of IKEA always focuses on the high-quality business outcomes and significant value generation in the business operation process in order to take care of the needs as well as satisfaction level of the target customers. The organisational management generally tries to meet the satisfaction level of the target customers. Moreover, this is also important for the management of the organisation to accept that the growing market competition and low purchasing power of the target customers can affect the business growth of IKEA in near future. Hence, this is highly essential for the management of the organisation to focus on the adoption of some sustainable approaches in the business operation process in order to overcome the associated business operation challenges. Following recommendation plans will assist the management of IKEA to overcome the possible challenges.
First of all, the top management of the firm should focus on the consideration of the cost leadership, business level strategy for the business operation process. The adoption and implementation of cost leader’s hip business level strategy for the process business operation may assist the manufacturing team, operation management team and the top management of the organisation to reduce the overall business operation cost. It will automatically help the management of the organisation to implement economic pricing strategy. Now, the implication of the economic pricing strategy can help an organisation to mitigate the risk related to low purchasing power as this particular pricing strategy will assist the management of the organisation to support the low purchasing power of the target customers. Lastly, it is also important for the organisation to focus on the introduction of the high quality as well as significant differentiated customised furniture products made of steel or other materials in order to reduce the possibilities of the threat of the substitute products.
References
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