The Challenges In Ikeas Global Expansion Commerce Essay

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IKEA's global expansion has never been smooth. Its first Japan expansion failed in the 1980s (Carpell, 2006), but the second Japan, together with China, expansion was more successful. Some scholars have ascribed these successes to IKEA's organisational learning and market adaptation abilities (Chaletanone & Cheancharadpong, 2008; Johansson & Thelander, 2009).

Especially in China, Johansson (2009) observed that local market does not share

IKEA's affordable for everyone image as the rest of the world due to much lower income level in comparison to Western market. Hence, other than striving to continuously lower its prices in China, IKEA also adjusted other aspects of its marketing strategy, like; offering delivery and assembly services (Johansson & Thelander, 2009).

BUSINESS STRATEGY WITHIN A SMALL TO MEDIUM AND LARGE ORGANISATIONS.

Current Challenge: Most countries in the region are undergoing reforms that are opening their economies to greater international competition. However, domestic factor markets are not adequately developed to ensure the successful adaptation of SMEs to this new competitive environment. Unlike larger firms, which can more easily absorb the transaction costs, SMEs are at a disadvantage and require specific compensatory assistance.

Economic Role of SMEs: The importance of SMEs to longer-term economic stability derives from their size and structure which, under adequate conditions i.e. well developed factors market, allow them the flexibility and ability to weather adverse economic conditions. SMEs are more labor-intensive than larger firms and, therefore, have lower capital costs associated with the creation of jobs. Consequently, SMEs play an important role in fostering income stability, growth, and employment.

Constraints to Enterprise Development

Notwithstanding the wide-ranging economic reforms instituted in the region, SMEs face a variety of constraints owing to the difficulty of absorbing large fixed costs, the absence of economies of scale and scope in key factors of production, and the higher unit costs of providing services to smaller firms.

Strategy Implementation

Country Enterprise Development Strategy: In light of the diversity of instruments needed and the range of actions already undertaken by the Bank in each country, it is proposed that a coordinated and coherent effort be made to integrate those efforts and to take advantage of the unique opportunities and synergies offered by the joint actions of the Bank's various institutions

THE SIGNIFICANCE OF A BUSINESS STRATEGY TO STAKEHOLDERS.

According to Michael Porter, Corporate strategy refers to the overarching strategy of the diversified firm. Such a corporate strategy answers the questions of "which businesses should we be in?" and "how does being in these businesses create synergy and/or add to the competitive advantage of the corporation as a whole?" Business strategy refers to the aggregated strategies of single business firm or a strategic business unit (SBU) in a diversified corporation.

According to Michael Porter, a firm must formulate a business strategy that incorporates cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen areas or industries.

In 1988, Henry Mintzberg looked at the changing world around him and decided it was time to reexamine how strategic management was done. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning.

STRATEGIC PLANNING.

According to Peter Drucker, is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), PEST analysis (Political, Economic, Social, and Technological),

One of the core goals when drafting a strategic plan is to develop it in a way that is easily translatable into action plans. Most strategic plans address high level initiatives and over-arching goals, but don't get articulated (translated) into day-to-day projects and tasks that will be required to achieve the plan.

DIFFERENTIATE STRATEGY PLANNING FROM OPERATIONAL PLANNING.

According to Peter Drucker The relationship between strategic planning and organizational performance has been a subject of growing interest in the field of strategic management. Recent reviews have underscored the importance of the issue and have pointed to gaps in our knowledge of planning/performance relationships.

Additionally, the literature has clearly highlighted the importance of organization context and uncertainty in determining planning/performance relations. Indeed, strategic planning has been considered more or less salient due to organization type, relevant industry, and environmental uncertainty.

Strategic Planning and Performance

A strategic plan includes strategies indicating how objectives will be accomplished. Strategic planning is also considered to provide the substance from which overall company performance can be controlled and measured. Operational planning, on the other hand, is defined as the setting of short-term objectives for specific functional areas such as finance, marketing, and personnel.

STRATEGIC PLAN FOR AN ORGANISATION.

Strategic planning recognizes that organizations have choices as to where and how they will develop and direct their efforts over and for the longer term. Every organization has these choices: even your competitors. Some choices are obvious and totally within your gift; others require careful identification, evaluation for they are more outside of your control. It is the identification, qualification and selection of the best combination high level choices that determine the paths the organization is committed to take in order to meet its declared purpose.

APPROACHES TO STRATEGIC EVALUATION AND SELECTION.

One of the critical challenges faced by purchasing managers is the selection of strategic partners that will furnish them with the necessary products, components, and materials in a timely and effective manner to help maintain a competitive advantage. Buyer-supplier relationships based solely on price are no longer acceptable for suppliers of critical materials or for organizations that wish to practice the latest innovations in supply chain management. Recent emphasis has also been on other important strategic and operational factors such as quality, delivery, and flexibility. Strategic relationships also play a vital role for the long-term well-being of a supply chain.

STRATEGIC SUPPLIER SELECTION, FACTORS, AND MODELS

Strategic supplier selection processes require consideration of a number of factors beyond those used in operational decisions. With increased emphasis on manufacturing and organizational philosophies such as JIT and total quality management (TQM), and the growing importance of supply chain management concepts, the need for considering supplier relationships from a strategic perspective has become even more apparent.

SWOT AND PESTEL ANALYSIS

The advocates say that it can be used to gauge the degree of "fit" between the organization's strategies and its environment, and to suggest ways in which the organisation can profit from strengths and opportunities and shield itself against weaknesses and threats (Adams, 2005). SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT is used to determine the current position of an organization. The first two components pertain to internal factors and the latter two concern external issues. Pestle (or PEST) is an acronym for Political, Economic, Social, Technical, Legal and Environmental analysis. Pestle is a tool for assessing the external context of an organization.

Pestle can be used alone or in combination with SWOT. If combined, Pestle analysis is done first to provide a context for SWOT analysis Basu, 2004. Pestle analysis delineates the broad environmental context that affects the business and the changes that occur in this context.

Significance of Pestle

Morgan, 2006. Classical management theories failed to consider the environment the organization and viewed organizations as closed, mechanical systems. Modern theory regards organizations as open systems. Organizations, like individuals, have needs. These needs are satisfied through contacts with the wider environment. Pestle is a tool that helps scan the broader environmental context.

Significance of SWOT analysis

SWOT analysis is a focusing device or framework in the process of formulating a business strategy. A strategy helps the organization build upon its achievements, plan for the future and monitor progress. An effective strategy should utilize unique strengths to distinguish the business from competitors. It should exploit links with the environment to fulfill organizational needs and be in harmony with the environmental changes.

SWOT and PESTEL Analysis of Manufacturing Industry

The purpose of a SWOT analysis of the manufacturing industry is to identify the key factors that affect the success of the industry. The four factors considered a part of a SWOT analysis are: strengths, weaknesses, opportunities and threats. A SWOT analysis estimates the risks for a particular industry.

Strengths

The strengths of the manufacturing industry are that it is relatively stable. Although the demand for manufacturing tends to fluctuate with the ups and downs of the economy, it is characterized by regular periods of recovery following any downturns. It determine an organisation's strong points. This should be from both internal and external customers. Strengths arise from the resources and competencies available to the firm.

IKEA's strengths emerge as a result of factors in terms of:

• A strong global brand which attracts key consumer groups. It promises the same quality and range worldwide

• Its vision - 'to create a better everyday life for many people'

a strong concept - based on offering a wide range of well designed, functional products at low prices

A 'democratic design' - reaching an ideal balance between function, quality, design and price.

Weaknesses

A weakness of the manufacturing industry is that much of it is built on the production of non-essential goods. This means that a severe downturn in the economy can have a crippling effect on it. Another weakness is that it is a mature industry. This means that there is heavy competition and little room for growth. IKEA weak points are:

• The size and scale of its global business. This could make it hard to control standards and quality.

• The need for low cost products. This needs to be balanced against producing good quality. IKEA also needs to differentiate itself and its products from competitors.

• IKEA needs to keep good communication with its consumers and other stakeholders about its environmental activities. The scale of the business makes this a difficult task.

Opportunities

Opportunities in the manufacturing industry are in the technology and bio-technology areas. These are growing market segments with higher profit margins. IKEA has the following opportunities:

• a growing demand for greener products

• a growing demand for low priced products.

• demand for reduced water usage and lower carbon footprints.

Threats

The largest threats to the manufacturing industry in developed nations are from low wage countries. The low wages of these countries have made it impossible for many businesses in developed nations to compete, requiring them to either close or move overseas to find cheap labor.. For Ikea, major threats include:

• Social trends - such as the slowdown in first time buyers entering the housing market.

• Market forces - more competitors entering the low price household and furnishings markets. IKEA will need to reinforce its unique qualities to compete with these

• Economic factors - the recession slows down consumer spending and disposable income reduces.

BUSINESS STRATEGIES IMPLEMENTATION

By Victor Cascella and Valerie Graeser

Major changes in the business environment are forcing organizations to revisit and revamp business strategy on a more frequent basis. To stay competitive 20 years ago, a six- or eight-year strategy cycle may have been sufficient. Today, thanks to globalization, increasing shareholder pressures, enhanced corporate governance, shorter product and service lifecycles, and the exponential growth and availability of information, the timeline for success with a business strategy may be three years or less.

Today's long-term strategies need to satisfy short-term horizons by allowing retooling flexibility. With higher stakes, stakeholders' tolerance for strategic missteps is slim. Success with a new business strategy can catapult an organization past its competition especially if it has succeeded with other equally decisive and positive strategic initiatives.

RESOURCE REQUIREMENTS TO IMPLEMENT A NEW STRATEGY FOR A BUSINESS

1. Set aside a day a month.

Start by taking one day each month and using that day as a planning and discussion day or as a communication day. Use the time to meet with your team (or bring in an outside expert) and discuss a vision or broad strategy for what you would like to be doing. The process will allow you to explore new approaches and give you an opportunity to broach innovation and change with your staff. Most likely there will be some resistance to change, but the discussions you have with your team will be a valuable educational experience for you and set the stage for future change.

2. Set the stage with your boss and stakeholders.

Acting without support and understanding from those you work with will usually result in failure. Find opportunities to discuss your ideas with your boss and with hiring managers. Stress the benefits and advantages this will bring to them. You will have to lay out a business-oriented case for making these changes.

3. Experiment a lot.

The next step is to actually begin doing things differently, even on a small scale. Find an ally on your team and introduce a change or two. Some argue that big, quickly introduced changes are the best way to make things happen. If you are in a culture that is supportive of that approach, go for it. However, in my experience it is often more practical and more acceptable to move in incremental ways. By introducing small changes over time you can get more lasting and better accepted results than by making big changes and moving quickly.

4. Reward those who move forward often.

Rather than punish those who do not support your change efforts, reward those who do. The rewards don't have to be bonuses or salary increases, although those are fine. You can offer time off, a dinner, or some other small tangible reward. You can also simply make sure they get recognized publicly and often for their contribution. We are all eager to be liked and recognized for what we do.

In conclusion

Business strategies usually include a measurement component as well. The measurement component of the business strategy is derived from the overall goals established to accomplish the business mission. Goals are broken down, usually by both business unit and time estimated to accomplish them.

The business strategy includes a component to periodically compare current progress against goals. Based on how well the business strategy has led to goal achievement, the strategic analysis process is repeated to adjust the strategy as necessary.

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