Ikea Strategic in Action Essay

Part strategic position and strategic choice which mention above are underlining company environment, capability, and its strategy. Strategy in action will consider on how strategy act in organisation (Johnson et al., 2011a).This part of report will evaluate them considering their suitability. Evaluation IKEA strategies regards Suitability Suitability refers to the strategy is used to evaluate whether the strategies address the key ‘opportunities’ and ‘constraints’ underlined by the organisation’s strategic position (Johnson et al., 2008). This criterion can be examined by checking the strategic options against the environment, capabilities and the stakeholder expectations. Therefore, the analysing of PESTEL, Five Forces and strategic capabilities of IKEA in section above will be helpful for evaluating and understanding suitability. It appears that suitability is used to evaluate whether overall rationale of strategy is suitable in terms of environment and capabilities and stakeholder expectations or not. Therefore, this part of report not only evaluates IKEA strategies and capabilities regard in suitability but its successes and difficulties will be analysed. Firstly, from PESTEL analysis, IKEA takes advantage from ‘hybrid’ and ‘cost leadership’ strategy to response to its environment. IKEA’s products are cheap and differentiate; these are good opportunities to survive in economic recession. Additionally, IKEA’s core customers (middle class with moderate disposable income) are affordable to buy products even if in economic recession. Moreover, IKEA capabilities are strong global brand and low cost products with flat packaging which is its core resource and competence. Combining its capabilities and its strategies will benefit IKEA to achieve in environment changed and competitive circumstance. However, the difficulty is about import issue. All IKEA normally sources products from the same places in order to keep it standard. However, in some countries the import taxes are very high. For example in China, the import taxes on products from Poland to China are up to 22% (Burt el al., 2011). However, to stand its low price strategy and survive in China market, IKEA overcome this difficulty by sourcing goods from local country to reduce cost of taxation (Burt el al., 2011). In overall, it can be seen that in these circumstances and environmental change, the strategies IKEA has been used is a good opportunities to overcome those threats and suitable in its environment. Secondly, from Five Forces analysis, IKEA strategies and its capabilities can go along with external environment very well. It is normal that buyers are looking for cheap products but high quality. IKEA strategies are support customer needs. Furthermore, IKEA unique resources such as strong brand combining with its ‘hybrid’ strategy will maintain existing customers and gain more new buyers. In a term of power of supplier, IKEA’s strategies are suitable to supplier expectations. To generate low cost products, IKEA has to reduce cost of sale per unit by purchasing a large volume of material s from supplier. As well as suppliers, they also want to sell their products as much as possible. Moreover, considering in threat of new entry, IKEA strategies and capabilities are difficult for new entrants to compete. These are the reasons why IKEA takes opportunity from its strategies and capabilities among these threats. In addition, in the rivalry situation, it can be assumed that whether other companies offer low cost products but its quality, design, and brand image may not be the same as IKEA. IKEA considers in quality as well as the price. However, in high competitive markets, IKEA may face difficulties. For example in China which local products are normally cheap, IKEA low price strategy may not attract to this market. Giving a suggestion, in order to offer only low cost products, IKEA should build brand image as a high quality brand and offer Swedish-designed product which differentiate in Chinese customer perception. In overall, it appears that IKEA capabilities and its strategies are suitable to compete in the rivalry situation. IKEA generates its strengths and overcome the weaknesses in a suitable way. Thirdly, evaluation of suitability of IKEA strategies and capabilities according to Ansoff analysis of 4 possible development directions will be examined. The suitability will be evaluated whether these options will match to future scenario. The future scenario which matches in a term of economical environment is predicted that the world economy will maintain very weak in 2013 and slightly decrease between 2014 and 2016 (The Guardian, 2012). Apart from evaluation the suitability of IKEA strategies and capability, the suitability will be used to assessment whether IKEA strategic options meet the stakeholder expectations (Johnson et al., 2008). Table 5 Evaluation of suitability – Direction of growth In overall, IKEA strategies and capabilities are suitable in the environment and meet the expectation of stakeholders. Market penetration may be the most appropriate direction that IKEA should carry on at the present time to the future scenario predicted. There is no major investment needed. The IKEA current strategies and its capabilities is now effective under this circumstance. However, there is a difficulty in IKEA’s strategies. IKEA is a global company which generates same strategies almost every market called one-size-fit-all approach (Stern, 2012). Although, one-size-fit-all approach will benefit IKEA to control it global strategies easily, the difficulty will occur. The problem is every market is all difference. The one-size-fits-all approach on all IKEA staff and customers is good to share the same value but for all market is not suitable. The different markets have different circumstance. For example, according to Anders Dahlvig cited in Stern (2012), the differences between countries were great in China and Sweden. China is different territory. Chinese labour policies are poor for IKEA co-worker vision. Chinese workforce depends on the authority of the boss which is difficult to adapt to the more free and easy way of the new employer (Stern, 2012). Moreover, in the future, if IKEA wants to expand their market and make the differentiation, the policy and restriction in some countries may be serious such as in Islamic countries, and the differentiation needs lots of investment and knowledge. IKEA should consider how to stay the low price while a lot of investment is needed.