Strategic decision making

Strategic decision making Course Code: RUBG2009

Perspective on the External and Internal Environment for IKEA in China

Prepared for: Marius Louw Prepared by: chack 068BA007

Introduction

IKEA is global brand in furnishing industry. The company with unique design and DIY concept has been able to capture 45% of market share in China. Their strategy is to offer quality product with very low price. With China’s growing economy and increasing purchasing power of Chinese people, there is a very good chance that IKEA will have a massive growth in China.

The objective of this report is to highlight the external and internal environments that are affecting IKEA in China. The report also describes the theoretical overview of strategic management. The report has the following parts:

The first part is about company history where I talked about IKEA’S history, its vision, its mission, and its operations worldwide.

The second part depicts IKEA’S operation in China, its product, and location. The third part is about external audit where I done EFE matrix for IKEA.

The fourth part is Industry analysis that is competitive profile Matrix (CPM). This identifies IKEA’s major competitors and their strengths and weaknesses in relation to a sample firm’s strategic positions.

Part five is decision internal factor evaluation (IFE) of IKEA where analysis of strengths and weaknesses of IKEA were evaluated. Last. The report is ended with conclusion.

2. Company history

The following history shows how over six decades IKEA went from the woods of southern Sweden to being a major retail experience in 40 countries/territories around the world.

The IKEA story begins in 1926 when founder Ingvar Kamprad is born in Sm?land in southern Sweden. He is raised on 'Elmtaryd', a farm near the small village of Agunnaryd. Even as a young boy Ingvar knows he wants to develop a business. en as a young boy Ingvar knows he wants to develop a business.

IKEA was founded in ?lmhult, Sweden, in 1943 by Ingvar Kamprad. He founded the company at the age of 17. IKEA is an acronym incidentally similar to the Greek word οικ?α [oikia] which means (home) and to the Finnish word oikea (correct, right), but actually was originally an abbreviation for \Ingvar Kamprad Elmtaryd Agunnaryd comes from the address where Ingvar Kamprad started the company IKEA initially.

Originally, IKEA sold pens, wallets, picture frames, table runners, watches, jewelry and nylon stockings or practically anything Kamprad decided is a needed product on reduced price. Furniture was first added to the IKEA product range in 1948. In 1955, IKEA began to design its own furniture. The company motto is: \for Better Living.\

At first, Kamprad sold his goods out of his home and by mail order. Later a store was opened in the town of ?lmhult. It was also the location for the first IKEA \store which came to serve as a model for IKEA establishments elsewhere. On March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo.

IKEA has grown step by step into the world’s largest furniture retailer. There are 202 Ikea stores in 32 countries. Of these, 180 stores belong to the Ikea Group. The

remaining 22 stores are owned and run by franchisees outside the Ikea Group.

3. IKEA in China

IKEA opened its first store in China in 1998. Although the company's global strategy had worked well in the past in most of the markets it had entered, it quickly learnt that success in the Chinese market required a different strategy in the areas of Marketing and HR.

IKEA also had to alter two of the most important aspects of its time-tested and proven global strategy when it came to China; while elsewhere in the world, IKEA had always located its stores in less expensive areas and sold its furniture on the do-it-yourself (DIY) principle, these elements had to be changed in China. IKEA claimed that it had decentralized most of its functions including HR and stores management in China, but despite this, there was criticism that IKEA was far too bureaucratic with many of its operations being globally controlled and systematized. Commenting on this, Ian Duffy, IKEA's China retail manager commented, \time to learn and change in the (Chinese) market to become a success.

By the early 2000s, China had emerged as one of the most competitive markets in the world with several foreign players operating across many industries in the country. The transition of China's economy from a centrally planned to a market driven one in the 1980s, had attracted several MNCs from the US and Europe

4. External Factor evaluation Matrix (EFE)- IKEA

Ikea is one of the largest furniture retailers in the world. It sells more than 9,500 home furnishing products in about 301 stores in more than 36 countries. In FY2009, Ikea stores welcomed a total of 590 million visitors and Ikea websites attracted 561 million visits. Ikea’s strong presence enables the group to strengthen its brand equity and also enhance its profitability. However, reduced disposable incomes have impacted the demand for Ikea’s core product, furniture adversely.

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