Discuss about the Strategic Management and Business Policy.
Environmental awareness of consumers, enhanced globalization, and the fast IT development are major illustrations of market trends that have enforced companies to develop into more flexible for the purpose of staying competitive. This essay will provide the information regarding contemporary strategic management by taking one company. The vision statement of the company elaborates the aspiration of the company for future consequences and it should be converted into long-term goals and supported with strategies for how to attain these objectives. Moreover, there is a number of companies that are successful in comparison to others in attaining its vision. Hence, the role of strategy is kept great importance for most companies since it protects waste of time and resources. The unclear strategy of the company can lead to an analysis of what the company should be covering and outcome in unintelligible initiatives and activities.
IKEA is an international company that sells ready to accumulate furniture, appliances of the kitchen over and above accessories of home. This company is considered the huge furniture retailer in the world as it has around 400 stores in 49 countries. The company is known for its modernist design in furniture and appliance along with its interiors design which is relegated to eco-friendly simplicity. More than12000 products are produced by the company with high quality and approx 2.1 billion visitors visit its websites for the purpose of buying products online.
Strategic management can be regarded as the process and approach of identifying objectives of the company, enhancing policies, paradigms, programmes and plans to attain these aims, and assigning resources so as to execute the policies programmes, plans, and paradigms (Jonsson & Foss, 2011). On the other hand, strategic management can be considered as the management of united components of the three stages of the strategy process such as strategy implementation, strategy development and strategy evaluation. The role of strategic frameworks in IKEA Company is kept great importance as they help company to make decisions for the purpose of increasing the revenues of the company (Edvardsson & Enquist, 2008).
Strategic management entails understanding the strategic positions of a company, strategic options for the potential and overseeing strategy in action (Rothaermel, 2015). Along with that, the strategic management includes investigating and management of an organization corporate strategy. It also includes analyzing the entire corporate strategy of the system to involve the strategic position of the organization, strategic choices by the organization and strategy in action inside and around the company. It has been analyzed that there are three kinds of corporate strategies such as growth, stability, and renewal. The growth strategy is used in the organization at the time of expanding various products and services to the customers through current or new business. Stability strategy is referred in organization when the company continues to do what it is currently doing. The renewal strategy is considered in trouble condition of the organization and this action addresses declining performance. The renewal strategies have two kinds such as retrenchment and turnaround strategies.
Strategic frameworks are mentioned below by taking consideration of IKEA Company in which STP (Segmentation, Targeting and positioning) for the importance of strategic development, Marketing mix for strategic marketing, Porter’s Five forces for Competitive advantages, Generic strategies for managing strategic corporate change.
Market segmentation is referred as an adaptive strategy as it entails of the divider of the market with the aim of choosing one or more market segments which the company can target by the development of certain marketing mixes that get used to specific market needs. Segmentation, targeting, and positioning are the major concepts in evaluating the positions of the company and target the customers in a significant manner. With respect to segmentation, the segmentation for IKEA would be predominately demographic and psychographic (Baraldi, 2008). Customers are extremely sophisticated younger white collar populations with firm values regarding culture. The younger millennial are open-minded in the context of their cultural views in which they are more alert towards sustainability and humanitarian practices. With respect to targeting, the market for IKEA would be urban areas that have a large range of the population. As per the United States, 54% of the population of the world survives in urban areas, an amount that is expected to enhance from 54% to 66% by 2050 (HuffPost, 2012). The right targeting of the customer would be helpful in increasing sales and enlarge the business internationally. Positioning is the strategy that helps in establishing the identity of the products and services within the eyes of the purchaser (Grant, 2016). There is a number of variables related to the customer’s needs and motivation that can affect the positioning strategy of the company. IKEA is located as the leader of the world in the home furnishing retail chain. However, the company has limited distributors so there is more one on one with the customer providing IKEA a competitive advantage. Various locations of IKEA Company are situated in urban areas with franchise, investments and exports.
The marketing mix is the well known approach of the company to attain the goals of the company. This framework of strategic management helps company to distinguish the strategy into parts so that possible solution could be implemented within the time frame. The marketing mix is helpful for IKEA Company because with the help of this framework company is able to make effective price, easy to reach place for the customer, attractive promotion strategy and innovative products with high quality. The product dimension of this framework helps the company to attract a number of customers towards the product of the company (Oliver & Holzinger, 2008). IKEA is more concerned towards the business environment and that is why it brings change in the working environment. The designs have been fresh and this was considered as the effectual factor of differentiation for IKEA. IKEA is solely brand that does not depend on exclusive classification of products or administrations for its extension. The company offers a number of products to every kind of customers from the romantic to the minimalist. The company provide high quality products as per the choice of the customers at affordably low prices (Wheelen & Hunger, 2011). IKEA is relied on design modernism to carry immense excellence and attractive designs to the market.
Price dimension of this strategic marketing tool facilitates in bringing more customers because IKEA has got its strategy perfect. The company has adopted cost leadership strategy as the company believes in psychology pricing which shows the way in which the retailers appeal to emotional rather than a rational portion of customer decision-making process (Leonidou, Christodoulides, Kyrgidou & Palihawadana, 2017). The customers of IKEA’s company are more satisfied with its pricing strategy because it believes in matching prices with quality. The product of the company is not expensive but they are not too cheap either. In the context of promotion aspect, IKEA promotes itself in the form of multi-channel retailer efficiently incorporating online as well as offline sales channels.
In the context of promotion, the company has around more than 340 stores in 28 markets around the world. Moreover, IKEA has around 22 Pick-up and Order Points in 11 countries and more than 40 shopping centers in 15 countries. Along with that with the help of a strategic tool, the global furniture retailer is getting updates as per the latest technology and initiate to use online sales channel widely to sell its products to the target customer segment. The company has websites that attract around 2 billion people in 2016 and enlarge of 9% compared to the earlier period (Reimann & Rolfson, 2016).
It has apparent that the strategic framework-marketing mix helps in strategic marketing that facilitates the company to make strategy as per the customer’s demand. Strategic marketing planning processes help regarding business performance, market attractiveness and competitive advantages (Purce, 2014).
Sustainable development is the effective approach of strategic management that able to meet the requirements of the nearby without cooperating the aptitude of future generations to fulfill their own needs. It has been decided by IKEA to make strides in its mission to give sustainable products and transition to renewable energy. The mission of the company is to become energy independent by 2020 and that is why the company owns wind turbines in comparison of stores. The company has 416 wind turbines and 750,000 solar panels, developing the same of 73% of the energy it utilized last year. The company has around 500 various kinds of affordable products with functions that facilitate more sustainable living, like water and energy efficiency, renewable energy and waste sorting. It has been found that the new sustainability commitments were guided by the UN’s Sustainable Development Goals (SDGs), would force and helps the company to prepare value chain for the world of 2030. Sustainable development is indivisible from strategic management that permits evaluating process in a systematic way in order to attain the aims of the company in a coordinated way (Maon, Lindgreen & Swaen, 2009).
The five forces of Porter is another strategic tool that aids business to attain competitive advantages (Porter, 2008). Porter’s five forces help in attaining the objectives of the company as this tool understand the forces that shape competition within an industry. In the context of IKEA Company, Porter’s five forces help in getting a better understanding of the rivalry and their competitors’ strategy.
Porter’s five forces entail five aspects such as the threat of direct substitute products and services, the threat of new entrants, bargaining power of suppliers, bargaining power of buyers and rivalry among existing firms. According to Lo & Power, (2010), one of the aspect of porter that is the suppliers’ bargaining power is low since their figure is big their little size and weak monetary position do not permit them enough influence. In the context of the supplier, IKEA can easily switch from one supplier to another while if a supplier loses business from IKEA, it could be a hard position for the company. Consequently, IKEA gets to set the rules for their suppliers along with that the company has commenced a code of conduct for its suppliers called IWAY. More than 1000 audits are being conducted by the company each year and ensure frequently for any type of violations. The major focus of the company is on attracting and retaining customers in significantly in which the company has strategy to improve marketing and promotion as they would help in increasing revenues of the company. While the cost approach of the company is made to ensemble the customer’s pocket, it has focused on e-commerce and digital marketing for an effective shopping experience.
In the context of threat from substitute’s products, the rating of IKEA Company is low. There is a number of products and services available in the market that can satisfy the customers and become moderate this threat. The brand image of the company is attractive through years where the bonding between the customer and the company is valuable. The company is offered reasonable pricing strategy and customer service also moderate. On the other hand, the imperative aspect is accessibility of the huge variety of products under one roof. Barely one of the opponents provides like an ample variety of products.
The threat of new entrants inflowing the market and thieving share of the market is low to reasonable. It has been analyzed that the fresh brands can penetrate in this industry on a lesser extent but then they would not have a chief impact on the business of IKEA. The time is much needed for new brands to make a good image in the industry. In the context of the fifth factor of Porter’s forces, the stage of cut-throat competition in the home furnishing is reasonably high (David, 2011). An encounter for share of the market is not comparatively high as in various other industries but still the company IKEA has got a huge range of competitors. There are some direct sellers such as super markets and brand stores that sell home furnishing brand to the seller directly and pose a competitive threat to IKEA. The marketing strategy of IKEA and other factors such as reasonable pricing have facilitated it to attain wide purchaser support. These factors precede to modest the cut-throat threat from the other brands. In general, the level for competitive opposition gets to be fairly elevated.
The above-mentioned Porter’s five forces in the context of IKEA Company showed that with the help of this strategic framework, company is able to see the position among competitors. Five forces help the company to attain the competitive advantages significantly.
The generic strategies help in attaining the competitive advantages and managing the strategic corporate change. This strategy is followed by IKEA in which the company uses a mix of cost leadership and differentiation. It has upheld the low prices of products at the time of delivering great quality which is particularly very smart strategy for the millennial generation. Though, along with the leading in the relation to costs, it has also differentiated its industry on a few factors. These factors of differentiation are significant because they give somebody the employ of an exclusive uniqueness to IKEA and have made it an exceptional brand. It is not easy for the company to stand out from the crowd of brands. Initially, IKEA has centred on providing to the requirements of the middle class which is moderately a huge customer base worldwide. According to Kristin’s Blog, (2016), the middle class has desired to get good products at low prices. IKEA has been capable to assure these requirements of the middle class skilfully. This strategy make contemporary in style and do not burn the customers’ pockets either. The product quality of IKEA is a source of sustainable competitive advantage for the brand. Apart from that there are some aspects too those distinguish it from the other brands and make available it a exclusive brand distinctiveness. The major aspects of the company are to explore the suppliers who easily manufacture the effective designs sub-assemblies at the lower rate (Hill, 2017). This kind of procedure helps the company to save the delivery cost only for the suppliers but also for t he consumers of the company. It allows manufacturers of the company to reduce the cost by which the customer could purchase products at a lower rate.
Strategic change management is the method of overseeing modify in a structured way for the purpose of meeting organizational objectives, mission and goals. Change is essential for companies to constant to succeed and meet the competition of industry competitors. Strategic corporate change shows to how companies execute new processes, programs and initiatives. Change has the potential to build resistance in employees, especially in the deficiencies of proper communication. The key techniques of change management are planning and people level management. There is a number of organizations that fail to handle change because they do not connect in planning. IKEA understands from the technique of change that managing change needs understanding the risks, estimating the resources necessary and planning contingencies and what should occur before the change can be executed (Clark, 2017).
Conclusion
It can be concluded that the role of the strategic management in the companies keep huge importance. Strategic management can be considered as the management of united components of the three stages of the strategy process such as strategy implementation, strategy development and strategy evaluation. IKEA Company has been taken to emphasize the strategic frameworks and models so that the better understanding can be made regarding this framework. Strategic development is considered as the fundamental to create and run the business, the importance of strategic development has been shown under this essay. Various frameworks and models of strategic management have been elaborated to show the importance of them in the company. STP, marketing mix, porter’s five forces and generic strategies are accentuated to evaluate the contribution of strategic frameworks in contemporary strategic management.
References
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Edvardsson, B., & Enquist, B. (2008). Values-based service for sustainable business: Lessons from IKEA. Routledge.
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