LO1

Strategic
Management 

Ibrahim Alaffouri
Students Number: 19014469
Part 1

IKEA is a conglomerate that designs and sells ready-to-assemble furniture, kitchen appliances and home
accessories, among other goods and home services. Founded in Sweden in 1943 by 17-year-old Ingvar
Kamprad, IKEA has been the world's largest furniture retailer since 2008.

Ikea's mission and vision

And thier mission 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’.
Their vision also goes beyond home furnishing. They want to create a better every day
for all people impacted by their business.

IKEA Core Value (Analysis)

 Humbleness and Will Power: IKEA is reputed as a humble brand with respect to its business
operations, which is particularly evident in its treatment of suppliers and customers. Their will
power can be reflected in their desire to serve, innovate, and get things done.
 Leadership by Example: The leaders and managers at IKEA believe in the core idea of leading by
example by setting standards for their employees.
 Daring to be Different: A key aspect of IKEA’s business is based upon its idea of differentiation
and is considered something of increasing value at the entity. Old solutions are always under
check, while new options are always evaluated for implementation.
 Togetherness and Enthusiasm: Collaboration with enthusiasm is vital, and perhaps something of
increased value as it assists significantly in resolving issues. Thus, through collaboration and
enthusiasm, the biggest challenges and even complex problems are being solved.
 Constant Desire for Renewal: An important core value at IKEA is the desire for seeking
innovation and creativity. As a result, IKEA keeps innovating to ensure the provision of high-
quality products for its customers at economical prices.
 Cost Consciousness: In relation to the implementation of daily core values at IKEA, cost
consciousness is indeed a central value and a significant component of IKEA’s business strategy.
Thus, to pass the benefits to the customer and maintain low cost, IKEA is known to make
efficient use of its resources and manage costs effectively.
 Accept and Delegate Responsibility: At IKEA, they believe in authorizing and empowering
people. Accepting and delegating responsibilities are two of the ways to develop as independent
individuals. Being positive and forward-looking to inspire everyone to contribute and grow. This
attitude comes with trust. Promoting co-workers with potential and motivate them to outshine
their expectations, IKEA has infused a culture of acceptance and delegation in the organization.
IKEA objectives: To offer a wide range of home furnishing items of good design and function, excellent quality and
durability, at prices so low that the majority of people can afford to buy them.

Ikea’s core competencies:

include its designs of self-serving furniture that are highly reliable and
unique. It provides an experience to its customers that they choose their
product, take them home and assemble its according to their requirements.

SWOT analysis of IKEA:

Strengths
Market research.
IKEA knows the ins-and-outs of their customers. If they didn’t, the company would have a hard
time providing what their customers want. And what their customers want are a collection of
affordable furniture and home appliances.
If IKEA didn’t know this is what their customers want, they wouldn’t be able to sell so many
units. Nor would they bother to put in so much work into the development and design of their
countless products.
Countless designs.
IKEA designers create stylish, newly designed products. But it goes further than physical
decorations. The products are developed for easy transport and assembly. In the store, you’re
able to see the finished, assembled piece. But when you walk out, you’re given each item in bits
and pieces because it’s easier to put in your car and take home.
Affordability.
The inexpensiveness of IKEA products is the true strength of the brand. Maintaining that same
level of cost-effectiveness is what keeps customers coming back for more.
The company searches for new ways to drive down costs, but without affecting the appearance of
their products that consumers have come to expect.
A supplier’s dream.
IKEA is able to buy bulk quantities of products because of a long lasting relationship with their
suppliers. For IKEA, buying large quantities is cheaper than buying a few pieces at a time. It’s
also great for suppliers. The suppliers don’t worry about large quantities of inventory taking up
space in their warehouses. They know IKEA can take the inventory and sell it hundreds of
millions of customers.
Brand recognition.
IKEA is one of the most recognizable and well-known furniture brands worldwide. The brand
has more than 600 million customers annually. And you can currently shop for IKEA products in
more than 38 countries. Combine the brand recognition with the low-cost furniture options, and
it’s no wonder IKEA is as popular or as well-known as it is.
Weaknesses
Bad press.
IKEA has had a few run-ins with bad press. Employees have complained about poor treatment.
The brand has faced ridicule for advertising techniques in non-western countries. And the worst
offense: children being hurt or killed in relation to IKEA furniture. IKEA has also had to recall
dangerous products because they’ve led to injuries.
Although the saying “any press is good press” may come into mind, in IKEA’s case, bad press
leads to distrust from their customers.
Low quality.
IKEA products are known for being lesser quality. This seems to be a byproduct of offering
inexpensive products. How can it be affordable and high quality? IKEA has yet to find a
solution.
On social media, you’ll likely find someone criticizing IKEA’s less than stellar product quality.
And because they can’t live up to greater quality expectations, other companies now have the
opportunity. Whether these companies can provide both quality and cost-effective furniture and
kitchen appliances is yet to be determined.
Opportunities
Few countries.
IKEA is only in 38 countries. This is a relatively low number considering how well-known the
company is. They can branch out further, especially since IKEA is barely featured in developing
countries. Places like Malaysia, Mexico, and Brazil are just a few locations IKEA should
consider moving into.
Online shopping.
Additionally, you can purchase IKEA products through their website. Online shopping is
becoming more popular as years go on. Especially around holidays like Black Friday, where
people want to avoid long lines for fantastic sales.
IKEA is in a firm spot to accentuate their sales by offering more products online. Considering
the company has more than 800 million online visitors, it’s definitely a sales channel IKEA
should focus more efforts into.
Grocery stores.
Did you know about IKEA’s food outlets? With the growing demand for healthy food options,
IKEA can push its grocery businesses into grocery stores.
Threats
Some of the weaknesses of the IKEA brand are threats too.
Fast competition.
For instance, the competition for furniture products is growing. We’re seeing global brands like
Walmart offering inexpensive home products. Although their catalogue isn’t as expansive as
IKEA’s, that may only be a matter of time.
Possible lawsuits.
Then there’s the bad press. Depending on the specifics, IKEA may be subject to lawsuits from
consumers who were injured by IKEA products. In truth, it doesn’t even require a lawsuit to
crush a business. All it takes is a mob of angry consumers on social media to create more bad
buzz, bad reviews, and intense backlash. IKEA needs to be aware of how they’re viewed online
to counteract this perception.
Increase in cash.
Additionally, growing income can be a problem for the company too. As consumers have more
excess cash, they’re less likely to buy cheap, low-quality products. Unfortunately, that’s the basis
behind the IKEA brand. And since their quality is on the low-side, consumers will look for high
quality, even if it costs a bit more.

7Ps Analysis for ikea

Product
 sells its products under 5 broad categories, and each of these serves as separate product
lines. All of its products are sold under the brand name of.
 sells products with a lot of variety available, which allows customers to select the product
variety that best suits them.
 sells products that are highly differentiated, with various features offered to customers
that competitors don’t offer. Its products are therefore considered to be unique.
 Its products are perceived to be of higher quality than that of competitors. Therefore,
customers are willing to pay a higher price for these.
 sells products that are famous for its traditional design that is also practical for customers
to use.
Price
 The current pricing strategy to set the price level that follows is a competitive based
pricing strategy. This is because the data on competitors is easily available due to a large
number of competitors that exists within the industry.
 It also takes costs into consideration to set prices for a few products for which either
information is not available on competitors, or are costlier to make,
 sells its products at a higher price than competitors. This is because it offers more
features, and the high price makes up for these.
 It currently uses product bundle pricing as well, where products are bundled together and
sold at prices lower than the total of individual items.
 It also uses an optional product pricing strategy for certain products, where it offers a
price for the base product and separate prices for the accessories that come along with it.
 It charges a greater price for the products it sells online. This is because delivery costs
have been included in the price of the product.
 has fixed the prices of the final product. Channel members; retailers and wholesalers, buy
the product at a lower price and earn through their own margins.
Place
 sells its products through two marketing channels. The first is where it sells directly to its
customer through its online website. The second is where it sells to wholesalers who then
sell to different retailers located all over the country. These then sell to its customers.
 has its products present on over 500 retailers throughout the country. It follows an
intensive marketing strategy where it tries to include its products on as many retailers as
possible. This ensures that its products are available to customers easily in different parts
of the country.
 has a substantial amount of online sales with frequent traffic on its websites. In order to
run its online operations, has partnered with numerous delivery service providers in order
to provide timely deliveries.
 It follows an omni-channel distribution system where it has integrated its online and
offline stores to allow customers easy access to its products.
 has a network of over 500 suppliers that provide it with the raw materials needed for
production. It has developed a close working relationship with its suppliers allowing the
 company to work with them to innovate and introduce new and attractive features on its
products.
Promotions
 uses multiple media channels to promote its products. It uses traditional media, which
includes an advertisement on television and radio. This is beneficial due to its large reach
and ability to attract a large number of people. It uses online and social media
advertising, which is cheaper and beneficial due to the increasing usage of the internet.
 It advertises on various social media platforms with a focus on YouTube, Facebook and
Twitter due to the high monthly usage of these. It has over one hundred thousand likes or
customer following on these pages, which are exposed to frequent content uploaded by.
 undergoes various sales promotion taking part in various trade exhibitions and events
around the year.
 undergoes personal selling, with a large sales force to increase its presence in retail
stores.
 uses a percentage of sales method to determine the promotions budget for the year.

People
 has people working under its sales team that play a vital role in its marketing efforts.
These people have been trained in persuasive techniques, but also to show respect to the
business customers taking into consideration their preferences.
 has people working in its customer service department. These are contacted by customers
in case of any issues within the product, and these people guide customers through the
process of getting the issues resolved. These people are trained to respect the customers
and try their best to get their issues resolved.
 has people working with suppliers to obtain raw materials. These people play a vital role
in maintaining or improving the quality of the final product produced.
 has people working at retail stores who help the customer on site, by answering any
questions or helping them decide the product that best suits their needs.
Process
 to make sure that its products are always available at retail stores has systems installed
where retailers can notify when their inventory levels are low. provides them with more
products while ordering its productions to replenish its stock. This ensures that products
are always available to customers when needed.
 has an online delivery process, where orders are received in the computer system and
based on these orders, the relevant product from the inventory is shipped to the delivery
service provider.
 is actively involved in researching market opportunities in order to understand customer
needs. It also develops understanding regarding customer needs through feedback
collected at store, its helpline or social media pages.
Physical Evidence
 sells its products in a distinct color packaging that easily identifiable on retail shelves.
These are placed on special shelves provided by the company, which also have a distinct
color and design. This makes it easier for customers to locate such shelves in busy retail
stores.
 has an online website that is user-friendly and allows customers to view its products in
high quality images taken from various angles.

Part 2

What is the Ansoff Matrix?

The Ansoff Matrix, also called the Product/Market Expansion Grid, is a tool used by
firms to analyze and plan their strategies for growth. The matrix shows four strategies
that can be used to help a firm grow and also analyzes the risk associated with each
strategy. Learn more about business strategy in CFI’s Business Strategy Course.

The four strategies of the Ansoff Matrix are:

 1. Market Penetration: This focuses on increasing sales of existing products to an
existing market.
2. Product Development: Focuses on introducing new products to an existing
market.
3. Market Development: This strategy focuses on entering a new market using
existing products.
4. Diversification: Focuses on entering a new market with the introduction of new
products.

Market Development
In a market development strategy, the firm enters a new market with its existing
product(s). In this context, expanding into new markets may mean expanding into new
geographic regions, customer segments, etc
Diversification
In a diversification strategy, the firm enters a new market with a new product.
Although such a strategy is the riskiest, as both market and product development are
required, the risk can be mitigated somewhat through related diversification.
Product Development
In a product development strategy, the firm develops a new product to cater to the
existing market. The move typically involves extensive research and development and
expansion of the company’s product range
Market Penetration
In a market penetration strategy, the firm uses its products in the existing market. In
other words, a firm is aiming to increase its market share with a market penetration
strategy.
Within the scope of Ansoff Matrix, IKEA uses all four growth strategies in an integrated manner:

1. Market penetration. Market penetration implies selling existing products to existing markets. IKEA uses
market penetration strategy aggressively. Effective marketing strategy in general and IKEA catalogues in
particular play an instrumental role in increasing the efficiency of market penetration for the furniture retailer.

2. Product development. This involves developing new products to sell to existing markets. Product
development is one of the main growth strategies for IKEA. The home improvement and furnishing chain has
more than 9500 types of products in its range and it launches about 2500 new products every year.[1] The
company makes some of its products in-house, as well as, purchases from suppliers.

3. Market development. Market development strategy is associated with finding new markets for existing
products. The world’s largest furniture retailer engages in market development extensively. IKEA Group
operates 422 stores in 50 markets around the world.[2] 19 new IKEA stores opened in 2018 alone.[3] The
company is forecasted to enter into more developing markets in short and medium term perspective.
4. Diversification. Diversification involves developing new products to sell to new markets and this is
considered to be the riskiest strategy. IKEA experiments with diversification business strategy occasionally.
IKEA restaurants within furniture retail shops can be mentioned as a stark example of diversification by the
company. It has to be mentioned that although the furniture retailer has expanded its business strategies of cost
advantage and no-frills products to foods offered at IKEA restaurants.

Mergers and acquisitions

 One of the ways through which the IKEA may explore conglomeratic growth of entering
new businesses is through mergers and acquisitions
 The IKEA can partner with, or acquire companies and businesses that interest it in an
effort to diversify into new markets and new consume groups with products and services
that are completely new, and not related to existing offerings
Refrenceas:

https://en.wikipedia.org/wiki/IKEA