IKEA Business Information and Analysis

Introduction

Fist of all it should be emphasized that business analysis of the marketing and management activity if any company is generally regarded to be the key research tool for defining the business tendencies and processes, which are observed in the business sphere. Originally, the aim of this paper is to analyze the business activity by the IKEA corporation. The analysis will be arranged from the point of view of several aspects: Business profile, Management functions, HRM and marketing. The fact is that, these factors are regarded to be the central matters of the business performance, and, there is strong necessity to mention that proper analysis of the regarded business factors will be helpful for the further analysis of business processes. Thus, the definition of the principles of business procedures, which are generally performed within the frames of the marketing strategy, will be more complete and full-fledged.

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Profile of the Business

Originally the analysis of the business profile is generally divided into four sub-factors or sub-categories, which are:

  • Type and size of business
  • Name
  • Location
  • Legal status / ownership
  • Strategic Approach

In order to give the thorough analysis of the type and size of the business, there is strong necessity to overview the history of business development briefly. The fact is that, IKEA is the world’s largest furniture retailer, and the business history of the company was started up by entrepreneur Ingvar Kamprad in 1943 in Sweden. It is stated that the Group is still owned by Kamprad, nevertheless, in order to control the allover network of the stores, Kamprad had to resort to the services of the Stichting INGKA Foundation. This company is located in Netherlands, and owns private company INGKA Holding based in Leiden the holding company for IKEA, controlling 207 IKEA stores. The head office for the IKEA Group is also in the Netherlands. The IKEA concept and trademark are owned by Inter IKEA Systems BV, which is a separate company. The IKEA Group has 123, 000 employees in 25 countries generating annual sales of more than 21.5 billion Euro. The current CEO is Anders Dahlvig who took over in 1999.The first IKEA store in the UK was opened in Manchester in 1986, there are now 18 UK wide and in total 301 altogether worldwide.

In order to make the thorough analysis of the legal status and ownership, there is strong necessity to describe the details of the ownership practices, which are accepted by the CEO of the IKEA group. As it is stated in Håkansson and Waluszewski (2002, p. 410)

IKEA’s conservation drive extends naturally from this cost-cutting. Adding to the challenge, the suppliers and designers work to customize some Ikea products to make them sell better in local markets. That said, the global middle class, that IKEA targets, shares buying habits: The $120 Billy bookcase, $13 Lack side table, and $190 Ivar storage system are its best-sellers worldwide and average spending per customer globally is even similar: According to IKEA, the figure in Russia is $85 per store visit – exactly the same as in statistically more affluent Sweden.

In the light of this fact, there is strong necessity to mention that the ownership principles are generally associated with the matters of the necessity of growing. Originally, to keep growing, IKEA is accelerating store rollouts in both large outlet and new high-street formats. (Michman and Mazze, 2001).

The final aspect, which should be described within the issues of business profile is the strategic planning of the business performance. Originally, the managerial teams, which are involved into the planning process should be aware of the processes and tendencies in different regions of the world, consequently, the planning is performed by the CEO management and the managerial teams of every particular region of the world, where IKEA operates. These planning practices are regarded to be the most effective, and provide the necessary information for the Central Executive Office on the matters of perspectives, problems, growths or failures. Consequently, the differentiation of the managerial teams is highly appreciated and is regarded to be the central point of the strategic planning practices.

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Management Functions

Like in any other company or business group the business functions of the IKEA group are regarded to be planning, organizing, directing and controlling. In spite of the fact that strategic planning issues have been already described, the managerial function of planning will be regarded in this chapter.

Planning

In accordance with Håkansson and Waluszewski (2002, p. 184): “Planning is the logical thinking through goals and making the decision as to what needs to be accomplished in order to reach the organizations’ objectives. Managers use this process to plan for the future, like a blueprint to foresee problems, decide on the actions to evade difficult issues and to beat the competition.” In the light of this consideration, there is strong necessity to mention that the global vision of the IKEA business group is to promote the further prosperity of the company, and planning procedures of the company are closely intervened with the mission and vision of the company. In accordance with the planning procedures IKEA must live by its values which clarify the company’s objectives and goals.

Organizing

Organizing is the central task of any managerial practice. The fact is that, if the business activity is planned, launched and operated, there is strong necessity to regulate this activity and provide the necessary practices and actions for arranging the managerial and executive forces. As Sternquist and Kacker (2005) emphasize:

Organization is a matter of appointing individuals to assignments or responsibilities that blend together to develop one purpose, to accomplish the goals. These goals will be reached in accordance with the company’s values and procedures. This is achieved through management staffing the work division, setting up the training for the employees, acquiring resources, and organizing the work group into a productive team.

The fact is that, organization is one of the strongest points of the IKEA group, as the organizational system is regarded to be flexible enough for the constant development of the group. The leadership of the group provides the required direction for staff in order to gain personal success that leads to organizational success.

Leading

Leadership is the power, which makes employees realize the authority of the management and CEO. The fact is that, the leadership in IKEA is not centralized like in lots of other business groups (IKEA, 2009), as the regional division of the activity presupposes decentralized management and regulation of the regional activity.

Controlling

In accordance with the generally accepted business practices, there is strong necessity to mention that controlling may be regarded as the cornerstone of the management in general. The fact is that, this process guarantees the implementation of the planned goals and mission, as well as the regulation of the leadership issues. In the light of this fact it should be emphasized that the original value of control is the regulation of the allover management process.

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The final point which should be described within the frames of managerial practices and purposes is the factor of importance of the management principles, performed by IKEA management. In accordance with the four management functions, the everyday success of the business group is assuming a great worth in the success of any business every day.

Human Resource Management

As for the matters of employing new workers, there is strong necessity to mention that the company is aiming to hire those people who are full of enthusiasm, and like communication process. The fact is that, multinational business groups like IKEA are based on properly arranged communication process, and, they need to participate actively in the communication process. As it is stated in Michman and Mazze (2001, p. 265):

IKEA’s vision in the HRM is to create a better everyday life for the many people. The company’s human resource philosophy subscribed to the belief that employees were more productive and committed when the company took care of them and their needs. Moreover, IKEA adopted a paternalistic stance toward employees and their needs and promoted employee empowerment. However, although the company had a positive HR philosophy and offered generous benefits, their application was more or less standardized and policies applied uniformly to all employees.

In the light of this perspective it should be emphasized that the original value of the HRM, which is pursued by the company is the flourishing business and satisfied employees, which automatically means successful business performance and satisfied customers.

The procedure is common: applicants send their CVs, they are subjected to interviewing, and they have test periods. The HR practices presuppose the system of fines and bonuses which are aimed to encourage the professional growth and the unity of the team. Originally, all these practices are aimed at keeping the warm and friendly atmosphere among workers, thus encourage them to work effectively, and with enthusiasm. Thus, as Håkansson and Waluszewski (2002, p. 345) claim: “Kamprad had once written in a manifesto that “the true IKEA spirit is still founded on our enthusiasm, on our constant will to renew, on our cost consciousness, on our willingness to assume responsibility and to help, on our humbleness before the task and on the simplicity in our behavior.”

Marketing

The marketing practices, which are performed by IKEA are not original or exclusive. The fact is that, these are the commonly accepted practices and principles, which are slightly modified in accordance with the requirements and realities of the market sector, IKEA is engaged in. As it is generally stated in business literature, the main emphasis, which marketing practices of IKEA business group pursue, is made on the uniqueness and originality of the vended goods. Thus, one of the main tasks of the marketing strategy is the issuing of the catalogues, for targeting the audience and attracting customers.

The only innovative decision which was implemented is the necessity of the customers to go through all the halls. Thus, as IKEA (2009) emphasizes: “When a customer enters a IKEA store, he can not go out without having seen all the furniture available in IKEA. In fact, IKEA stores are big (30 000 m² in average) and the customer is obliged to visit the two floors of the store before going out. It is impossible to go directly to the exit.” Thus, the marketing strategy, and the principles of attracting customers are far from perfect, as most customers, who are searching for some particular item are forced to see the entire range of the offered goods. Originally, it irritates, consequently, there is string necessity to change this marketing principle.

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Conclusion

Finally, it should be emphasized that the majority of the applied principles, which IKEA has incorporated into the marketing and strategic objectives are outdated. The fact is that, the origin of the goods and the offered production is not a widely consumed, and these are not the goods of the first necessity, consequently, the company has to restructure the marketing and management principles, which are oriented at customer care and customer communication principles. Thus, the business effectiveness of the IKEA business group is evaluated as low. In order to increase this effectiveness, the marketing principles should be restructures, and more attention should be paid to the customer care policies.

Finally, it should be emphasized that in spite of the fact that there are no similar companies in the world, IKEA group has almost failed to benefit with the high effectiveness level.

References

Håkansson, H., & Waluszewski, A. (2002). Managing Technological Development. London: Routledge.

IKEA (2009) “Facts and Figures” Web.

Michman, R. D., & Mazze, E. M. (2001). Specialty Retailers: Marketing Triumphs and Blunders. Westport, CT: Quorum Books.

Sternquist, B., & Kacker, M. (2005). European Retailing’s Vanishing Borders. Westport, CT: Quorum Books.

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