Strategic management is devoted to an entire business as a whole. For example when a company wants to start a business, they will first have to know what the business aims to achieve in terms of its objectives and the various methods they will use in order to achieve these objectives. Des et al (2005) agrees to that point by saying that strategic management is also the various actions and steps which an organization develops in order to create and sustain competitive advantage.
Ikea is one of the largest furniture since 1990s and since then, Ikea has successfully expanded into 34 countries and opened up 300 retail stores in Asia, Australia, Europe and the US. It has also been able to open new outlets in big cities like Beijing and Shanghai. This company offers a variety of beautiful designed home furnishing products at a very low price in order to enable most people to afford it. The main aim of Ikea is to make furnishing products affordable to customers by having beautifully designed furniture which ranges from bathroom supplies, kitchen, supplies and other furnitures.at a very and unbeatable price so that people can be able to afford them in order to live a more comfortable life at home.
Mission and Vision Statement
A mission and vision statement is what defines the main objectives and purposes of the organization as they do so in terms of the organization’s values. Ikea’s vision statement is to make life better for many people across the world and by selling beautiful furniture designs at low prices definitely makes life much easier for people as they can afford it. But isn’t funny even though they sell low affordable products, the real question is how low are those prices? even though Ikea’s main objective is to sell affordable products, the low prices it guarantees won’t be that low as it wants the business to be maintainable. The vision and mission statement of Ikea has been able to attract Chinese customers as Ikea adopted a low and affordable cost strategy plan by providing fine quality, well designed products at a discounted price which proved to be a successful one.
How Ikea identified and evaluated alternative strategies
When Ikea entered the Chinese markets, most people thought it was an expensive brand. Even though its prices were relatively low in Europe and the US, unlike china their prices were considered quite expensive for its consumers. This made it one of the biggest barriers in China as most people couldn’t afford Ikea’s products due to high prices of its products and given that Ikea’s mission statement promised low and affordable goods to its customers did not work well in China. Ikea then realized what was happening and decided to target the middle class population as they had higher incomes, they are better educated and they were also aware of the variety of western style products Ikea sells. And so by targeting the middle class population has helped Ikea to venture out as an aspirational western brand and by adopting an alternative strategy in China was a massive change in strategy as Ikea mostly targets the mass markets other countries.
Legal Systems and Trade Barriers
Easy access to trade barriers nowadays have made trading in certain countries much easier as this has continued to boost the increase of growth in these firms. Multinational corporations (MNE) and also most Small Business Enterprises (SME) are beginning to expand their markets and firm production in order to exploit the opportunities these markets have to offer. One of the biggest challenges Ikea faced when it first entered the Chinese market was the legal systems and trade barriers. When Ikea first entered the China market, it created most of its products purchasing materials from other stores in China and then later on in 1998, in order to reduce the trade barriers, Ikea decided to open its first store in shanghai as part of a joint venture with another company (Beijing Northern Sweden Limited Company) since the trade policies barred foreign companies from building wholly chained stores. This in turn was an opportunity for Ikea not only to get over trade barriers, but to better understand the market by working alongside the other company who had a vast amount of knowledge about the Chinese market and also learned from them. After China joined the WTO, international firms had the access of building wholly owned stores and Ikea opted out of the joint venture and used that to their advantage by buying of the other company’s shares and expanding into the china market and by owning the chain of stores, Ikea was also able to adjust its layouts so as to guarantee Chinese consumer experience which since then, as reported by (BBC, 2013) as one of the fastest growing markets.
Culture values and norms
In order for business to be successful in a foreign market, it’s important for managers to understand the culture in the foreign market. () describes culture as a group of people who share the same patterns of behaviors, language, religion and also the way they interact with each other. It should be noted that culture also plays an important role on business activities in the global markets. As countries continue to trade with other countries and carry out business transactions with each other, different cultures will always meet at some point and most people from diverse culture find it hard to communicate with each other which may be due to language barrier and also the difference in culture styles and it’s important to know how to tackle such an issue. For example In Europe and Canada for example, Ikea’s stores can be located mostly in the suburbs since most people use their own personal cars for transportation whereas in China, most customers rely on public transportation. This posed as a hindrance for Ikea as finding a location that will be big enough for the store and a close public transport system was hard to come but fortunately for Ikea they were able to identify such a difference and acted upon it by setting up most of its outlets on the outskirts of the city in other to make it more accessible for its customers as they all connected by the rail networks. One could say that Ikea is really a strong brand as not only has it made its business strategies in different more flexible but it has also been able to adapt to changes. Ikea understood that in order to be globally successful, they have to be willing and prepared to make some sacrifices and they should also be ready to listen and learn from the local environment.
Human rights and environmental concerns
Different people and perhaps different cultures share different ideas when it comes to knowing what human rights is actually all about. Every country has its own environmental regulations which must adhered to. Ikea Is a company which abides by the environmental protection and as such, Ikea has been working on becoming more ecofriendly like for instance customers have to pay extra money for plastic bags and they are also increasing the use of renewable energy in its stores and to some extent, it wasn’t easy for Ikea implementing all those factors in China. Some Chinese customers who are price cautious will definitely not be pleased with spending extra money for a plastic bag and some of them may also find it annoying to always be bringing their own shopping bags to stores. Also, the majority of suppliers in China did not have the necessary technologies to provide green products that met Ikea’s standards and also helping them adopt new technologies meant higher cost, which would not be good for its business. So Ikea decided to just continue to offer low prices for their products In order to stay in business.
Competitive advantage in Ikea will be examined using porter’s five forces
Supply bargaining power
China has been known as the industrial world because of its low production and also cheap labour. This have attracted a wide varitety of suppliers across the world to international firms like Ikea. Due to the low production cost, Ikea has not restricted itself to just one supplier and this has benefited Ikea as they can order fine quality from its products at a low price and if one supplier turns down the offer, another supplier will definitely accept it. Recently, Ikea cancelled its contracts with Joyme a supplying because they wanted an increase in the contract prices and Ikea declined.