Maximum number of firms in the present world engaged in the co-operative strategies for achieving their business goals, because this strategy is considered as an attempt made by any organization for the purpose of achieving its strategies with the cooperation of the other firms in the form of strategic alliance and partnerships. In this firms co-operate each other for realizing their goals, instead of competing with each other. It must be noted that in this global economy, there are number of strategic alliances which have international scope (elearn, n.d.).
This paper defines the co-operative strategy in context of the case study that is IKEA Melbourne (Case 10). It must be noted that, IKEA is also intended to adopt the international corporate-level strategy in Melbourne, and it seems that this strategy fits the best. This paper defines the meaning and scope of this strategy in connection with the stated case study. There are number of reasons which are stated below because of which IKEA adopt this strategy.
Structure of this paper includes the brief discussion of the company, discussion of the Cooperate strategy, cooperate strategy in context of the IKEA, and competitive dynamics of the industry within which the firm compete. Lastly, a small conclusion is provided for concluding the important facts of this paper.
IKEA is the Netherlands-based Swedish company, and this company extends its business in almost 44 countries across the globe which includes US, the UK, Russia, the EU region, Japan, China and Australia. This company is considered as the largest furniture retailer across the globe. This company announced different expansion plans for the east coast of the Australia, and open almost 9 stores in the east coast (IKEA, 2014).
Corporate structure of this company was constructed in such a way as it prevents the takeover and also provides protection to the business from taxes. Therefore, it can be said that structure of this organization is complicated in nature and this is the arrangement of not-for-profit and for profit organizations. The IKEA provides unique shopping experience to the customers and this experience is accompanied with the low price and solid quality modern designs, and the approach of do-it-yourself (DIY) products (IKEA, n.d.).
A business level cooperative strategy is the strategy under which two or more firms work together for the purpose of attaining some common goal. In this business organizations share their resources and capabilities with each other for the purpose of ensuring competitive advantage in the way of new product and services. It must be noted that, firms not only shares the resources and capabilities, but they also share costs in context of the new product.
This strategy helps he business organizations in diversifying their business and attain flexibility in context of the diversifying operations and also strengthens their position as compared to their competitors. This strategy also provides the facility of the growth and performance improvisation. It must be noted that, there are different types of business strategy which includes Joint Venture, Horizontal integration, vertical integration, Conglomerate diversification, etc (University of Birmingham, n.d.).
There are number of advantages which are offered by the cooperative strategy to those organizations which lacks particular competencies, knowledge or resources, and it also enables such company to secure these with the links to other companies possessing complementary skills or assets. This also provides the easier access to the new markets and ensures opportunities for business organization for mutual synergy and learning. It is proved that cooperative strategies are reliable for facilitating the international expansion of the business. There are number of reasons because of which this strategy becomes important part of the business:
It must be noted that, use of these strategies differentiates as per the market type, and this is stated below:
Slow-cycle markets- this strategy is used for entering those markets which restrict the new entrants and also help in establishing the franchises in the new markets in easy and speedy manner. Through this, firms get the better understanding of the market conditions and also gain knowledge in context of the relationships with key stakeholders.
Fast-cycle markets: in context of these markets, this strategy help the firm with excess resources and promising capabilities to achieve the objective which required to change markets and to gain rapid entry into new markets.
Standard-cycle markets: alliance between the large firms with economies of scale is likely to combines the complimentary resources for the purpose of gain market power. This alliance allowed the firm to learn new business techniques and technologies (Hajarian, 2004).
In Australia, IKEA operates almost five massive stores on the east coast of Australia, and these stores provide almost 24% jump in revenue to $649.97 million for the 12 months. Although it can be said that it becomes incredibly popular and profitable in Australia. In Australia, this company adopts slow store expansion strategy in the early years of their expansion and from last few years only put its foot on the accelerators (Greeblat, 2013). It must be noted that this company entered in the Australian market almost 30 years ago, and by 2011, IKEA had almost three east coast stores. Later company made number of land deals and construct new outlets. IKEA also launched online sites for providing new shopping experience to the shoppers of Australia, and company also enhance its floor space for the purpose of devoted to its eclectic line of Scandinavian groceries from which shoppers can choose Swedish delights such as marinated herring, sprats, chocolate, crackers or, of course, the famous meatballs. IKEA opened almost 4 stores in the Melbourne, and for this purpose these companies invest in the land (Insider retail, 2017).
It must be noted that this company is known for its competitive approach and also for its innovative creation results. Limited amount of products are produced by this company and it mainly depends on its network of suppliers. Expansion done by IKEA reflects number of challenges for this company in Melbourne such as challenge related to the distribution, adaptions to the future necessitates and regular adaptations to the distribution structure. One more challenge which is faced by the IKEA in future is the people with higher education prefer updated computer technology such as maximum customers prefer to place their order of customized design of furniture through online site launched by company. All these challenges are also considered as big opportunities for the IKEA also and in case company deals with these challenges in better way than it can result in competitive advantage for the company.
For dealing with all these challenges, it is necessary for the company to alliance with those organizations which hold expertise in these areas. Strategic alliance can be the best strategy which is choose by the organization for ensuring competitive advantage in Melbourne and expand its operations in this market.
Generally five types of modes are used by the organizations for entering into the international market that are exporting, licensing, strategic alliances, acquisitions and new wholly owned subsidiary. IKEA preferred the mode of is new wholly owned subsidiary. In other words, IKEA is a privately-owned company and whenever this company enters into a new market, it generally binds its own retail space and implements a global international strategy. Wholly owned subsidiary is the company in which common stock of the company is owned another company which is known as parent company. In this company, no minority shareholders are there and the subsidiary stock of the company is not traded publically. Through this IKEA directly invest in the market of Melbourne. However, it can be said that this company had number of advantages and disadvantages such as it allowed the IKEA to get maximum control and highest potential of returns, but it is costly and involved high amount of risk. IKEA adopt this strategy because need for global integration is high, and through this company secures stronger presence in the markets.
Above stated facts, clearly describes the need of IKEA because of which they adopt cooperative strategy for the market, and this strategy allowed them to get competitive advantage of online shopping in the market.
IKEA is considered as largest retailer of the furniture across the globe and the industry in which this company competes is the retail industry. Competitive dynamics is considered as the analysis of the competition at the action and response level for the purpose of predicting, how a firm will act or react against any opponents. In other words, it is the term which is used for describing the actions and reactions of the firm which is taking part in the competitive environment of the business. Competitive dynamics of the retail industry in context of IKEA are defined in this section of the report.
Currently, retail industry is the industry which witnessed most intense rivalry across the globe, and these major advances in the production, technology, and distribution allowed the participants in the retail industry to use their resources for the purpose of developing new resources and strategies which are faster as compared to their business competitors. Retail industry highlights the three major forms of the rivalry (Aguirregabiria & Mira, 2007). These forms include the focus on the rivals of the competitors, attract and develop the potential customers, and also competing for sales to the customers which are shared between the two or more number of the competitors. Lastly, in this firms captured the rivals of competitors who involves offering such product or service which is better that the product or service offered by the competitors. Firms can also provide similar products or services at more affordable prices to the consumers as compared to their competitors (Beresteanu, Ellicksony & Misra, 2010; Dhar & Ray, 2000).
Conclusion:
After considering the above facts, it can be said that cooperative strategy is the most useful strategy in the present business environment because it provides number of advantages to the firm and opportunities. Cooperative strategy makes it easy for the organization to entry in the international market. It helps the business organizations in diversifying their business and attains flexibility in context of the diversifying operations and also strengthens their position as compared to their competitors. This strategy also provides the facility of the growth and performance improvisation. There are number of reasons because of which IKEA’s intended international corporate-level strategy in Melbourne, and this strategy fits the best. IKEA preferred the mode of is new wholly owned subsidiary. In other words, IKEA is a privately-owned company and whenever this company enters into a new market, it generally binds its own retail space and implements a global international strategy.
References:
Elearn. Chapter 7: Cooperative Strategy. Available at: https://elearn.uta.edu/bbcswebdav/users/jmcgee/Syllabus/Content/Syllabus%20and%20Course%20Content/pdf/Chapter%2007.pdf. Accessed on the 29th May 2018.
University of Birmingham. Cooperative Strategy. Available at: https://www.birmingham.ac.uk/postgraduate/courses/taught/business/msc-ib-modules/cooperative-strategy.aspx. Accessed on the 29th May 2018.
Nielson, B. (2003). Cooperative Strategies and Alliances. Journal of International Business Studies, volume 34(5):489-491.
IKEA. Welcome inside our company. Available at: https://www.ikea.com/ms/en_ID/this-is-ikea/about-the-ikea-group/index.html. Accessed on the 29th May 2018.
Aguirregabiria, V. & Mira P. (2007): Sequential Estimation of Dynamic Discrete Games,Econom, volume 75, pp 1-53.
Beresteanu, A. Ellicksony, P. & Misra, S. (2010). The Dynamics of Retail Oligopoly. Available at: https://www.pitt.edu/~arie/PDFs/SMdynamics.pdf. Accessed on the 29th May 2018.
Dhar, T. & Ray, S. (2000). Understanding Dynamic Retail Competition through the Analysis of Strategic Price Response Using Time Series Techniques. Available at: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.6383&rep=rep1&type=pdf. Accessed on the 29th May 2018.
Hajarian, (2004). Cooperative Strategy. Available at: https://www.hajarian.com/mosharekati/44285–ch09notes.pdf. Accessed on the 29th May 2018.
Strand, R. (2013). Scandinavian Cooperative Advantage: The Case of IKEA. Available at: https://www.researchgate.net/publication/304807170_Scandinavian_Cooperative_Advantage_The_Case_of_IKEA. Accessed on the 29th May 2018.
IKEA, (2014). IKEA Australia announces major expansion plans. Available at: https://www.ikea.com/au/en/about_ikea/newsitem/2014_02_canberra_news. Accessed on the 29th May 2018.
Insider retail, (2017). Ikea to revamp Melbourne location. Available at: https://www.insideretail.com.au/news/ikea-to-revamp-melbourne-location-201709. Accessed on the 29th May 2018.
Greeblat, E. (2013). IKEA aims for $1b in local sales. Available at: https://www.smh.com.au/business/ikea-aims-for-1b-in-local-sales-20130908-2tdz6.html. Accessed on the 29th May 2018
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