Table of content

1. Introduction2 2. Company Profile....2 3. Strategy Clock3 3.1 GAP analysis5 4. Why it is difficult to imitate?.................................................................................................6 5. Dealing with problems with hybrid strategy.9 6. Conclusion10 7. References10

1. Introduction
Over the time many changes have been observed in business environment. All these changes are driven in order to gain the competitive advantages in the era of immense competition today. Many effective and efficient business strategies have introduced and implemented in order to maximize the profit and reduce risk associated with the business. Business enterprises all around the world are looking for best desired business strategy which can bring the desired success to their business. (Jassawalla A.R., & Sashittal H.C., 2000). There are many international business enterprises can be found which have applied the core business strategy in order to gain the monopoly of their business in the competitive environment today. IKEA is one of such business enterprises which are successfully operating in many countries of the world. This report is presented is order to discuss the business strategies adopted and implemented by IKEA. There are specific and certain elements of such strategies which are responsible to earn the desired success for the firm. The report has focused on such factors which are responsible for bringing the success to IKEA.

2. Company Profile
The business enterprise which is being discussed in this specific report is the worlds largest furniture retailer. The company has been founded by a very young Swedish owner with the desire to provide the necessary accessories and equipments for house hold use. The company has made immense progress in its field and earn itself the award of the worlds largest furniture retailer. The company has its outlets in many countries of the world. Following figure illustrates the jump taken by the company in last century which givens the brief idea of its success.

Table 1: The IKEA time line of last century

This specific report has emphasized on the strategy of IKEA. Following section of this report givens the detail understanding of this concept.

3. Strategy clock
The 'Strategy Clock' is based upon the work of Cliff Bowman (1996). The strategy clock is utilized for analyzing the companys position in the competitive market in compare to its competitors. The strategy clock offers the precise knowledge of where the company is standing and how it is performing compared with its rivals. To analyze the performance of the firm, Bowmans has given some significant strategic measure in terms of strategy clock which provides the consideration of competitive advantage in relation to cost advantage or

differentiation advantage. There a six core strategic options in strategy clock which can be described by means of the following figure.

Figure 1: Bowmans strategy clock The above figure has certain elements which can be explained briefly as below. Option one - low price/low added value - Likely to be segment specific Option two - low price - Risk of price war and low margins/need to be a 'cost leader'. Option three - Hybrid differentiation Option four - Differentiation Without a price premium - Perceived added value by user, yielding market share benefits With a price premium -Perceived added value sufficient to bear price premium - Low cost base and reinvestment in low price and

Option five - focused differentiation - Perceived added value to a 'particular segment' warranting a premium price Option six - increased price/standard - Higher margins if competitors do not value follow/risk of losing market share. Option seven - increased price/low values - Only feasible in a monopoly situation Option eight - low value/standard price - Loss of market share

IKEA has also follows the tactic of strategy clock and gained the desire success. Moreover, the author has carried out some significant analysis in order to better understand the systematic approach of the strategy clock. Following are those analysis which has been carried out specifically for IKEA. 3.1 GAP analysis Gap analysis is a very useful tool for helping marketing managers to decide upon marketing strategies and tactics. (Anthony R.N., 2005). Again, the simple tools are the most effective. There's a straightforward structure to follow. The first step is to decide upon how you are going to judge the gap over time. For example, by market share, by profit, by sales and so on. This will help you to write SMART objectives. Then you simply ask two questions - where are we now? and where do we want to be? The difference between the two is the GAP - this is how you are going to get there . Take a look at the diagram below. The lower line is where you'll be if you do nothing. The upper line is where you want to be. Your next step is to close the gap. Firstly decide whether you view from a strategic or an operational/tactical perspective. If you are writing strategy, you will go on to write tactics see the lesson on marketing plans. The diagram below uses Ansoff's matrix to bridge the gap using strategies:

tactical

approaches. The marketing mix is ideal for this. So effectively, you modify the mix so that you get to where you want to be. That is to say you change price, or promotion to move from where you are today (or in fact any or all of the elements of the marketing mix.

This is how you close the gap by deciding upon strategies and tactics - and that's gap analysis.

4. Why it is difficult to imitate?

IKEAs mission was formulated by its founder, . The companys mission is to offer wide variety of functional furniture for the house, of a quality and at a price affordable by a majority of people. The core principles of IKEA that seeks to achieve the mission are quality
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and economy. The principle of quality is applied at three points in the life of the IKEA products creation, range and use.

1. Creation IKEA designs its own products. Each product has a name rather tan a code because IKEA wants its products to be part of the family. 2. Range Each item for sale in the stores, whether furniture or other products, is part of a coherent whole, designed in accordance with the expectations of a specific segment which can be young or old, high or low income, modern or classic, etc. 3. Use IKEA furniture is submitted to three types of trial which test strength and workability as well as surface and resistance (1999). IKEA has a very strong and significant process which makes it quite different from all other its competitors which its process of transformation in business. Transformation processes are used in all types of businesses. A transformation process uses resources to convert inputs into some desired output. (Benbasat I., et al., 2001). Inputs may be raw material, a customer, or a finished product from another system. The different types of transformation processes are:
o o o o o o

Physical (as in manufacturing) Location (as in transportation) Exchange (as in retailing) Storage (as in warehousing) Physiological (as in healthcare) Informational (as in telecommunications) Moreover, the operations strategy of the company is founded on its mission of creating high quality products in affordable prices. IKEAs business model is based on a simple idea: Furniture, if well designed, can be cheap without being ugly. The elements of the model include: attractive, low-cost, reasonable quality furnishings, limited variety, self-assembly; young-family-oriented suburban mega-stores with nursery and plenty of parking space; catalogue-driven self-service; and no costly advertising. (Cash J.I. Jnr et al., 1988). These elements all keep expenses and prices down and they reinforce each other. Catalogue sales

and limited variety make it easy to get along with fewer sales personnel. Standardization and focus on the product line make it possible to rely on suppliers that can be closely monitored and controlled by IKEA. Flat packages save space in transportation and warehousing. Suburban locations and large store reduce expenses, self-select for young families with cars, and reduce delivery costs (Noe, R A,et al., 2008) Because the furniture industry is highly competitive and fragmented, most (if not all) furniture retailers seek to create a sustainable competitive advantage. Differentiation is the strategy that furniture retailers employ. In the case of IKEA, sustainable competitive advantage was achieved because of the companys added quality services. Potential purchasers try to find suppliers that offer them the greatest added value. As an added value and as a way to attract customers, IKEA offers superior customer service. IKEA meets customers with catalogues, tape measures, pens, and notepaper. The shortage of salespeople affords customers the opportunity to shop in freedom and to take notes. IKEA also offers services to parents while they shop such as the supervision of toddlers, infant-changing rooms, and attendants who warm baby bottles. Snack bars sell Swedish specialties at low prices. The strength of IKEA is its ability to shift a variety of cost burdens to the customer that might be found desirable or perceived as an added value. IKEA partners with its customers in ensuring that the customers save money by offering stylish, functional, low-cost home furnishings that customers must assemble themselves. Making the customers assemble their own furniture enables IKEA to save money on manufacturing and distribution, which they then pass on to customers in the form of lower prices at retail. To compensate for the customer having to do-it-themselves, IKEA offers other services that make this proposition attractive. These extra services include in-store child-care and play areas, restaurants, and longer hours of operations. (Gruner K.E. & Homburg. C., 2000) IKEA does not have its own manufacturing facilities. Instead, it is using subcontracted manufacturers all over the world for supplies. All research and development activities are, however, centralized in Sweden. In order to maintain low cost, IKEA lets its shoppers to assemble their own purchases. To facilitate shopping, IKEA provides catalogs, tape measure, shopping lists and pencils for writing note and measurements. IKEAs designs and styles are very popular to its customers because it is able to blend quality, stylish designs and affordability. These characteristics make IKEA products very attractive to the customers. The IKEA design approach according to (2007) retains a strong Scandinavian identity seen in the
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use of natural wood, minimalist shapes, high technology, new materials and strong colors (as shown in the photos below). The company has extended the image of 20th-century Scandinavian Modernism and ensured that is has become an immensely widespread domestic living style. IKEAs design is made synonymous with middle-class taste and thereby becomes the vehicle by which visible signs of affluence are made accessible to people of modest means. Of special relevance is the fact that the IKEA emphasis on design gives expression to the centrality of style in the contemporary marketplace. IKEA products could be roughly described as interior European modernism done in Scandinavian style. But the companys genius consists in joining the attractions of design to practicality and affordability along with versatility. By this means, it captures a broad demographic of consumers who can buy into a trendy middle-class lifestyle while gaining the satisfaction of purchasing highly functional and practical products at minimal cost. ( Kotler, 1997).

5. Dealing against problem of hybrid strategy

Hybrid Organization Definitions Two main strategies for businesses is implementing international activities. One of these multi-national (Multi-domestic) strategy and one global strategy. Organizational structure is formed by the hybrid strategy in the global strategy is a step ahead. Hybrid organizational structure of departments in large enterprises in different directions in the organization and structure expresses. Large enterprises and product diversity of the complex activities of the environment, more than one application requires a combination of organizational structure. This type of environment managers, product-related activities, the environment and the strategies required to prefer structure. According to geographical areas in a section, other than a section and another section for the following functions according to the team in question could be restructured. This type of basic issues in organizational structure, effective coordination by senior management and audit system is that you can install. (Smith, R. P. and Morrow, J. A., 1999) According to Miller and Dess'e; hybrid strategy units in various countries continue their activities but not only from the center of an international relations also with each other in the execution as. These three strategies related to the properties can be explained as follows (Rust et al., 2003)
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To manage this decentralized structure, IKEA, providing easy access to product information that can be used company-wide focus on systems investments made. Furthermore, go to the customers request and will respond to the needs "search solutions" team was set up for each area of expertise. This team development, licensing, marketing, sales and product supply is composed of experts, different teams for internal management, marketing is a different team. These teams, from different disciplines working solutions-oriented business unit or business unit teams are the teams that support professional. (Lai, et al., 2005)

6. Conclusion
To manage this decentralized structure, IKEA, providing easy access to product information that can be used company-wide focus on systems investments made. Furthermore, go to the customers request and will respond to the needs "drug solutions" team was set up for each area of expertise. This team development, licensing, marketing, sales and product supply is composed of experts, different teams for internal medicine, urology is a different team. These teams, from different disciplines working solutions-oriented business unit or business unit teams are the teams that support professional.

7. References
Anthony R.N. (2005) Planning and Control Systems: A Framework for Analysis, Harvard University Press, Cambridge, Mass. Benbasat I., Goldstein D.K. and Mead M. (2007) The Case Research Strategy in Studies of Information Systems MIS Quarterly, Vol. 11, No. 3, September, 369-386 Cash J.I. Jnr, McFarlan F.W. and McKenney J.L. (1988) Corporate Information Systems Management: the Issues Facing Senior Executives, 2nd Edition, Dow Jones Irwin, Homewood, Ill. Lai, Vincent S. and Wong, Bo K (2005). Business types, e-strategies, and performance. Communications of the ACM, May Vol. 48, No. 5 Agarwal R., (2007), survival of firms over the product life cycle. Sothern Economic Journal, Vol-63, no-3, pp: 571-585

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Ansoff H. I., (1957), Strategies of diversification. Harvard Business Review, pp:113-124 Bonne L.E. & Kurtz D. L., (2006), Contemporary Business. 2nd edition, fort Worth, the Dryden Press, pp: 145 Gruner K.E. & Homburg. C., (2000), does customer interaction enhance new product success? Journal of business research, vol-49, no-10, pp: 1-9 Hofer, C.W., (2005), Toward a contingency theory of business strategy, Academy of Management Journal, Vol-18, no-1, pp:784-810 Jassawalla A.R., & Sashittal H.C., (2000), Strategies of effective new product team leaders, California management review, vol-42, no-2, pp:34 Kotler, (1997) Strategic business marketing managementAnalysis, Planning,

Implementation and Control, 9th ed., USA, Prentice Hall, pp: 89-93 Noe, R A, Hollenbeck, J. R, Gerhart, B. and Wright, P.M (2003) Strategic management: gaining a competitive advantage, McGraw-Hill Companies, New York. Sproles, G.B., (2001), Product life cycles: A key to strategic business planning, Vol-21, no-3, pp: 116-124 Smith, R. P. and Morrow, J. A., (1999), Product development process modelling, Design Studies, Vol. 20, No. 3, pp. 237-261 Rust, Roland T. and Kannan, P.K. (2003). E-service: a new paradigm for business in the electronic environment. Communications of the ACM, June Vol. 46, No. 6 Web-References http://tutor2u.net/business/presentations/strategy/stakeholders/default.html http://www.scribd.com/doc/15001315/Mc-Donald-Management-Audit http://www.gesci.org/assets/files/Organizational%20Capacity%20Audit%20Tool.pdf http://www.managementandthearts.com/pdf/OrgAuditandBoardSurvey.pdf
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