Fundamentals of Management: A Case Study of IKEA

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Fundamentals of Management: A Case Study of IKEA





FUNDAMENTALS OF MANAGEMENT





1. Introduction

Business organisations often apply strategic models that enable them to maintain performance levels while executing operations in the market. Similarly, the selection of a particular model is necessary in order to perceive the suitability of its application with business cultures. The study claims to provide an outline of the application of CVF in business processes of IKEA interrelating the operations executed in the market. Additionally, the study also prevails an in-depth analysis of the internal and external environment that affects the performance of IKEA while dealing with business management processes.

2. The Company

2.1 Profile

  • Activities: The company IKEA deals with the marketing and sales of retail products such as furniture, children products, plumbing items and other indoor accessories (ikea.com, 2021). The company utilises marketing strategies to gain operational details and meet customer demands throughout the business operational cycle.

  • Size: The company IKEA is preferably classified to be an SME comprising of 15000 employees working under their management (statista.com, 2021)

  • Finances: According to the recent reports that have been published by the CEO of IKEA, it has been observed that the company generated 39.6 billion as revenue growth (statista.com, 2021).

SWOT analysis

Strengths

  • IKEA possess strengths in engaging customers to prefer their services even in presence of alternatives

  • Having possessed the capability to produce high quality of furniture, the company is able to meet the needs of the customers effectively (ikea.com, 2021).

Weaknesses

  • The restrictions that are poised by the Brexit government prevent the company from expanding in global perspectives.

  • The sudden outbreak of COVID 19 over the business of IKEA affected their growth and stability from both customer and market perspectives

Opportunity

  • The advancement of technology addressed towards business development parameter allow the company to make their operational segments effective and efficient leading them to utilise online platforms to expand business

  • The inclusion of ERP and CRM systems would allow the company to evaluate customer management and resource management practices influencing growth and development

Threats

  • Being an organisation under the retail sector, IKEA suffers from threat to substitution from a customer’s perspective as because of the presence of alternatives throughout the market

  • The lack of expansion opportunity restricts the company to execute global operations which slow down their growth parameters.



Porter’s five forces

Force

Description

Threat to substitution

The company IKEA suffers from the threat to substitution as there exist large competitors which the customers might prefer if the company fails to identify their needs and demands through their products.

Threat to new entrant

The organisations that undertake a placement within the sector in which IKEA operates is expected to decrease their effectivity in performance leading them to lack growth opportunities

Competitive rivalry

The presence of competitors of IKEA indulges the company to apply continuous development so as to maintain their position in the market (ikea.com, 2021). Having this force dealt, the company would successfully address growth in a hierarchical and simultaneous way.

Bargaining power of suppliers

The company needs to reduce its production cost such that products offered in the market would be provided to the customers at lower prices (Kumar, 2019). In this way, the company would successfully be able to attract a huge customer base towards their products.

Bargaining power of customers

Customers often tend to purchase products from companies that offer them with satisfactory quality and low prices. In this aspect, IKEA is recommended to analyse the current market situation and thereafter offer their products to the customers such that they receive affordable products without compromising quality.



PESTLE analysis

Political

  • The impact of Brexit policies has laid a threat over organisations when dealing with growth and development perspective in the global aspect

  • The political stability of the UK lets organisations develop within local regions without facing legal obligations during the establishment

Economic

  • The inflation rate of the UK has been observed to vary between 0.9% and 0.8% leading organisations to keep their pricing strategies stable (ons.gov.uk, 2021)

  • The GDP rate of UK tends to 1.41% provides organisations with an opportunity to initiate growth within internal and external market segments (statista.com, 2021)

Social

  • The utilisation of online platforms to advertise products enhances the business executives of IKEA to influence virtual expansion

  • The engagement of customer demands within the products and services of IKEA lets them meet their satisfaction criteria

Technological

  • The application of technological advancement within the business processes of IKEA allows them to reduce the time of production and management allowing to increase productivity

  • Having the possession to online web-based platforms, organisations gain an opportunity to attract distant customers without having possessed a physical presence at that particular location

Legal

  • The inclusion of legislative measures within the business processes of IKEA would allow them to maintain legal aspects of growth and development

  • With the inclusion of Companies Act 2006, IKEA is expected to abbreviate legal processes while planning for expansion in global regions (legislation.gov.uk, 2021)

Environmental

  • The attainment of sustainability factors within the business processes of organisations executing in the UK market would influence growth in a positive perspective gaining support from governing bodies

  • The maintenance of CSR values within products and services would allow the companies to achieve sustainable development throughout business processes



2.2. Management Approach

The application of Competing Values Framework is generally considered as a theoretical approach providing leaders and managers of an organisation to keep a track of their growth and development metrics with preferable indicators. In other words, Adams et al., (2017) underpinned that the identification of the factors that influence growth of the company could be acknowledged through the use of CVF as a mode to initiate organisational effectiveness in operations. In this section, the management approach has been focused on the SVF theory where the internal and the external factors that affect a business is aligned in terms of IKEA.

Shape1

Figure 1: CVF matrix

(Source: Influenced by Paulsen, 2019)

Having considered the first dimension of the Competitive Value Framework, the focus over organisations is gained through an internal emphasis that interconnects processes related to the development of people of the organisation. Similarly, in the case of IKEA, the managers of the organisation would preferably apply the organisational focus towards the employee benefits and satisfaction. In this way, the company would successfully be able to manage their productivity line and thereafter gain strengths in growth and development. On the other hand, Paulsen (2019) mentioned that the second dimension of the CVF framework specifies the organisational preference through structural analysis. In other words, the theory states that the external factors that indicate a business is differentiated in terms of stability and control influencing the aspects of flexibility and change management.

3. The business challenges

3.1 Description of the challenge

  • Demand of workforce

In present days, the demand of appropriate workforce have been increased on a large scale and it needs to be maintained with absolute efficiency to have proper results in the process. Having enough employee support is effective for the organisation to manage the operations and activities with maximum efficiency to have better results. Hence, organisations such as IKEA need to manage the workforce efficiency to increase the growth of the organisations in the respective market.

  • Lack of proper technologies

Technological supports are effective in the business process to have effective support in management activities. Advancement of the technologies is significantly beneficial to the organisations to have a proper condition in the organisation to conduct respective activities (Nel and Abdullah, 2017). In addition, lack of technological support in the organisation makes the business process less productive and it damages the profitability.

  • Inappropriate supply chain management

The supply chain is another essential area that needs to be managed with maximum efficacy to have proper support in the activities. In the following scenario, IKEA is failing to manage the supply chain with perfection, so the organisational process is not having appropriate productivity (Gielnik et al., 2017). The supply chain is considered as one of the most effective matters for the business process and it needs to be managed with maximum efficiency to have better results in the business area.

  • Lack of information to meet the requirements of competitive advantage

Having appropriate information about the marketing condition makes the organisation effective at managing the profitability and the competitive advantage with perfection. In respect to that, a gathering of information and the analysis of the information is not happening, and it is damaging the strategic measure of the organisations. Hence, the IKEA is required to manage the data about the marketing condition to have better results in the business process.

3.2 Impact of challenges on the company

  • Lack of productivity

Due to the ineffective management of the workforce, the productivity of the organisation is lacking on a large scale and it damages the profitability of the organisations to have better results. In addition, the impact of workforce demand is making the IKEA less effective at choosing employees, who will be providing the best possible efforts.

  • Improper work efficiency

According to Padilla-Vega et al., (2017), the efficiency of the working process is lacking as the technologies that are used in the workplaces are less effective to provide needed support. Lack of appropriate technological supports is making the IKEA less effective at fulfilling targets. Hence, the organisation requires to use the proper technologies to enhance organisational growth.

  • Negative impact on supplies

Supply of raw materials and the other related aspects are essential for IKEA to make the business more effective to have expected benefits. As per the opinion of Matalamäki et al., (2017), the management of supplies is essential to have effective support in the business process and to have expected results in the area of business growth.

  • Inappropriate strategies

Strategically measures are also essential to the organisation to have absolute results in the marketing process. An organisation like IKEA is required to develop absolute strategies that will be enhancing the performance of the organisation to have effective benefits. On the other hand, less effective strategies will be making the organisation less productive in the business area.

4. Recommendations

For the organisation of IKEA to have successive results in the marketing process and business process, the strategies are,

  • Management of the workforce is effective for the organisations to have absolute efficiency in the process of business and to manage the activities of the business with perfection. It also will be developing the organisational scalability to have absolute growth in the process.

  • Development of the technological infrastructure is essential to the organisation such as IKEA to have productive results in the business process and to manage the aspects with perfection. Having appropriate technological support enhances the capability of the employees to have better results in the process.

  • Appropriate focus on the supply chain will also be beneficial to the organisation to have effective support in the business and to manage the business process. Proper management of the supply chain will be enhancing the scope of the business to have better results in the process.

  • On the other hand, development of strategies is effective to the organisation to have beneficial support in managing productivity and to have more efficiency in the process.

5. Conclusion

From the assessment of the following context, it can be concluded that the management of the business is essential to the organisations to have better results and to increase the profitability on a large scale. In that case, the attentive focus is required for the respective organisation to have more improved support in the process and to manage the other activities. Similarly, the implementation of appropriate technologies is essential to the organisation to have more effective support in managing the business aspects with perfection. On the other hand, the development of appropriate strategies will be providing more facilities to the organisation to handle the activities with perfection. In respect to that, access to the market data is essential for the relevant organisation to improve the efficiency of the business process. Business management is one of the most essential parts that need to be conducted with proper focus on the approaches and process to have the best possible results. Hence, the organisation is required to manage the internal and external factors of the organisation to have quality results in the process.



6. References

Adams, C., Dawson, A. and Foureur, M., 2017. Competing Values Framework: A useful tool to define the predominant culture in a maternity setting in Australia. Women and Birth30(2), pp.107-113.

Annual global sales of IKEA 2001-2020. https://www.statista.com/statistics/264433/annual-sales-of-ikea-worldwide/

Gielnik, M.M., Zacher, H. and Schmitt, A., 2017. How small business managers’ age and focus on opportunities affect business growth: a mediated moderation growth model. Journal of Small Business Management55(3), pp.460-483.

Ikea.com (2021). About Us. Available at: https://www.ikea.com/gb/en/ [Accessed on 28.1.2021]

Kumar, A., 2019. Oligopolistic suppliers, symbiotic value chains and workers' bargaining power: labour contestation in South China at an ascendant global footwear firm. Global Networks19(3), pp.394-422.

Matalamäki, M., Vuorinen, T., Varamäki, E. and Sorama, K., 2017. Business growth in established companies; roles of effectuation and causation. Journal of enterprising culture25(02), pp.123-148.

Nel, P. and Abdullah, M.A., 2017. Mediating effects of business success on the relation between business issues and business prospects amongst immigrant entrepreneurs in Malaysia.

ons.gov.uk (2021). Inflation and price indices. Available at: https://www.ons.gov.uk/economy/inflationandpriceindices [Accessed on 28.1.2021]

Padilla-Vega, R., Sénquiz-Díaz, C. and Ojeda, A., 2017. Toward a conceptual framework of technology adoption: factors impacting the acceptance of the mobile technology in the international business growth. International Journal of Scientific & Technology Research6(1), pp.81-86.

Paulsen, J.E., 2019. The Relationship between Organizational Commitment, Readiness for Change and Competing Values Framework in the Norwegian Police (Master's thesis).

statista.com (2021). Gross domestic product (GDP) growth rate in the United Kingdom 2025. Available at: https://www.statista.com/statistics/263613/gross-domestic-product-gdp-growth-rate-in-the-united-kingdom/#:~:text=The%20statistic%20shows%20the%20growth%20rate%20in%20the,as%20to%20the%20shape%20of%20a%20national%20economy. [Accessed on 28.1.2021]

Statista.com (2021). Number of co-workers of the IKEA Group worldwide from 2013 to 2020. Available at: https://www.statista.com/statistics/241825/number-of-employees-of-the-ikea-group-worldwide-by-function/ [Accessed on 28.1.2021]

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