Strategic Managment of KEA company

Table of Content

The company started selling furniture in 1948, which were produced by the local companies, and then expanded TTS product line after receiving positive feedback from the customers. A significant moment in the growth of the KEA concept was the introduction of their first furniture showroom in 1953 in ?Minimal, Sweden. A price war between KEA and its major competitor had taken place; so at this point, the company opened the showroom to take over the competition. This innovative idea of the showroom provided a chance to KEA to prove that its low-price products have the features of functionality and quality.

The main reason behind this was that the customers could actually see and touch KEA products for he first time before ordering them and to choose the products offering the best value for money. To achieve more growth and to enter new markets, KEA opened stores in big markets such as the USA, Italy, France, UK and Belgium in asses The company introduced its new customer club card called “KEA FAMILY’ in 1984. Today’s modern KEA started its formation during this time. During asses, KEA became larger by introducing Kike’s children product line to the market.

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The company’s focus was to provide furnishing solutions for families with children to meet their needs accordingly. Furthermore, KEA Group was also created at this time. In 1990, the company introduced its first environmental policy and realized that doing good business was made possible by taking social and environmental responsibility into account. In 1991, KEA began cooperating with Greenback organization. In 2001, KEA was one of the manufacturers which took the initiative to introduce the print-on-board technique to make furniture with patterns shaped directly on fiberboard and particleboard.

In 2002, in order to reduce waste and to repair the returned products in more than 100 stores in Europe, the company implemented a reduce-recovery idea. In the same year, the company started cooperating with WFM to deal with matters related to forestry worldwide, and the result was the start-off of some forest projects both regionally and globally. This was to support the responsible forestry growth. In 2010, KEA had 1,074 home furnishing suppliers (including Edgewood and Seaweeds that are part of KEA Group) that operated in 55 countries worldwide.

The number of KEA transport service providers was 251 (excluding Customer Delivery vehicles). The company had 90 food suppliers globally and 39 catalogue suppliers. Today, KEA is the largest home furnishing company in the world that has wide variety of products from toys to plants to furniture, needed to furnish customer’s home and the whole kitchen. At the end of fiscal year 2010, KEA had operations in 41 countries, 29 trading service offices in 25 countries, 27 distribution centers and 11 customer distribution centers in 16 countries, 280 stores in 26 countries (as of August 31, 2010) as well as 127,000 co-workers globally.

KEA vision is ‘to create a better everyday life for the many people”. And the KEA business idea is “to offer wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”. However, in creating low prices KEA is not willing to sacrifice its principles. ‘Low price but not at any price’ is what KEA says. This means it wants its business to be sustainable. KEA supplies goods and services to individuals in a way that has an overall beneficial effect on people and the environment.

Mikhail Olsson, the president and CEO, states in the Sustainability Report 2010 of the company that ‘We believe that home is the most important place in the world. We offer affordable home furnishing products and solutions, while also taking responsibility for people and the environment. We want our customers to be able to freely choose from our range, knowing that they do not have to choose between sustainability, style, function or price”. According to Advertised et al. 2006), KEA has three core values namely price (economics), planet (environment) and people (social perspective) which interact and provide direction for brand meaning during the co-producing and co-creating learning process with customers and other stakeholders”. They explain that these core aloes lead to low prices, innovation, responsibility and leadership. Innovation at KEA Kike’s president and CEO, Mikhail Olsson, emphasizes on the importance of innovation as a tool for sustainable solutions by stating that “Innovation is needed to build sustainable solutions into the KEA range”.

In addition, KEA relies on the company’s own co-workers for new designs and product innovation; it creates the atmosphere in the factory where everybody feels free to share ideas and exchange information. Furthermore, Mikhail Olsson states that “We see sustainability as a catalyst for further innovation and change thin KEA. It will transform the way we economies with resources and do business, for future generations and continuing success. KEA is always about working together – customers, co-workers and suppliers. ” Flat packaging: Now KEA designs flat packs because it makes possible to load more material on vehicles, thus save costs.

By using flat packs KEA can transport more products by using less number of vehicles which will reduce CO emission. 1. Design- While most retailers use design to justify a higher price, KEA designers work in exactly the opposite way. Instead they use design to secure the lowest possible rice. KEA designers design every KEA product starting with a functional need and a price. Then they use their vast knowledge of innovative, low-cost manufacturing processes to create functional products, often coordinated in style. Then large volumes are purchased to push prices down even further.

Most KEA products are also designed to be transported in flat packs and assembled at the customer’s home. This lowers the price by minimizing transportation and storage costs. In this way, the KEA Concept Uses design to ensure that KEA products can be purchased and enjoyed by as many people as possible. 2. Function- The many people have many needs. They live with kids. They need more storage. They have to make the most out of a small space. So KEA designers are always seeking new ways to improve people’s lives – without emptying their wallets.

But how can good design and function be combined with good quality, all at a low price? It starts with focusing on what’s important. Will an expensive finish on the back of a shelf or under a table-top improve the function? Absolutely not! So KEA designers do not do it, because a product is of no use to the customer if it is not affordable. 3. Low Price- Low price is a prerequisite or the KEA Concept to realism the KEA vision – “to create a better everyday life for the many people”. As the KEA Concept aims to serve “the many people”, the KEA product range needs extremely low price levels.

KEA designers do their part to keep prices low by using production capabilities from other areas in unique and previously unimagined ways – like having shirt factory produce furniture upholstery; or, using leftover materials from the production of one product to create an entirely new one. KEA customers also contribute to keeping prices low. They select and pick up the products themselves, transport them home and hen assemble them themselves. And they can enjoy them already later that day. Kike’s goals of sustainability and environmental design are central to its business strategy.

It has launched a new sustainability plan to take the company through to 2015. This will combine social, environmental and economic issues. KEA uses SOOT analysis to help it reach its objectives. This is a strategic planning tool. It helps the business to focus on key issues. SOOT is the first stage of planning and looks at the Strengths, Weaknesses, Opportunities and Threats involved in a project or business venture. Task 2 Q. 1. Assess the influence of vision and mission on generation of creative and innovative management processes in KEA.

Do the vision and mission statement aid the organization in its innovative management processes?. (AC 2. 1 assess the influence of vision and mission on generation of creative and innovative management processes in an organization. ) A 2. 1 In any leadership position, people count on the leader to set the direction and provide a bearing for the future. In broad terms, this is usually expressed and articulated in the vision or mission statement to serve as a guiding post for the organization. It sets the stage for the strategic planning and objectives, and illustrates a vision that is desirable, challenging and believable. . 1. 1 The Vision & Mission Vision – To create a better everyday life for the many people . Mission – Offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them 2. 1. 2 The impact of Kike’s vision & Mission Product Range and Innovation: KEA products are known for its quality and innovation, they try to create unique products that offer home furnishing solutions for every room in the home, aging sure that these products meet daily wants and needs of the customers.

Offering Low Prices: Focusing on cost control, operational management and product innovation allowed them to lower their prices by 2% or 3% over the last 10 years, keeping in mind that products are well-designed, efficient and cost effective. A better everyday life: KEA Company has taken the straightforward approach to the furniture business, by starting with developing furniture with the price tag in mind. This is the KEA way, to maximize the use of raw materials in order to fulfill people’s needs and references by offering quality products at an affordable price.

This can improve the life of the people 2. 1. 3 The Result Like the founder Angina Kampala said *Wasting resources is a mortal sin”. “This characterizes the whole company itself. This way of doing things is at the heart of the KEA approach to keeping prices low. But quality is not compromised for the sake of cost. Hence it is apt to quote the KEA slogan – “Low price -but not at any price ” Reference: Anon: Vision Of KEA [ONLINE] [N. D] [N. M Can be found at http://www. Essays. Com/essays/business/factors-of-kea. P [Accessed 1st July 2014) Sarah AAA-handmaid [n Leadership Leads to Product Innovation and Globalization [ONLINE] [N. P] [N. D] can be found at http://www. Academia. Du/5276306/lake_Leadership_Leads_to_Product _lamination_and_Globalization_Human_Resource_Management [Accessed 1st July 2014] Q. 2. What analytical tools does KEA use to identify potential creative and innovative management ideas?. (AC 2. 2 use analytical tools to identify potential creative and innovative management ideas. ) AAA. 2 Leaders should inspire employees to search for innovative ways of doing things.

This refers to lateral thinking, which is defined as a “set of techniques and approaches to look for radically new ways to approach the problems” (Edward De Bono) (1970). We analyses how KEA identifies potential creative and innovative management ideas 2. 2. 1 SOOT analysis Strengths of KEA A clear vision This means that KEA knows what they are dealing in which is furniture and only furniture, they are on that alone and perfecting that well. A strong global brand Furniture is a product that is used worldwide, every home has furniture and used one way or the other by this is global.

It has strength in production KEA has the use of renewable materials with a long-term partnership with suppliers meaning that the suppliers have been there for a long time and they know what is expected of them. Weaknesses of KEA It cannot control its standard because of its size and scale and because of the high quality of its product it doesn’t commiserate with the demand for low cost product. KEA has few distribution channels this means that the branches are not much if a product is needed it will have to be imported.

Opportunities of KEA Its opportunities come from joining its plan to the increasing demand from customers by Providing a well designed and easy to use website to help give customers idea for their home Reducing wastewater treatment and less water use Supporting charities to make it known Sourcing from China Sell some of their furniture in other retail stores Threats of KEA In the economic factor, the customer will prefer a low priced product even if it will affect its quality especially when the economy is tough. No direct competition Interests (Wall mart, Ashley Furniture’s, Hoover) Recession 2. . 2 PESTLE Analysis Political factor: This involves the regulation, legislation requirement by the government on reign investors for example the minimum wage policy which means that the workers are not paid anything less than the stipulated wage to avoid cheap labor. U. K has always been political stable and the political parties have always welcomed the foreign owned companies. Also the taxation policies are not tough on the companies to enter the market. At present the upcoming elections in the country will definitely show there impact in future.

China China is a country with high centralized political system which means that they control by one party system and an increasingly decentralized economic system. Middle East Middle east follows a monarch rule and hence Trade is a bit more restricted when compared to other region’s trade union. Though most of the countries follow no particular wage protection system, KEA standardizes their wage policy keeping in mind the inflation. Economical factor: KEA has made it in such a way that their price is very reasonable for the public.

This has been of an advantage especially since KEA products are mainly made in China. As each country’s inflation rate differs, it adjusts according to the region and hence have better chances to grow and capture the market, which it was owing since long. Even during the recession it managed to stay true to the quality without affecting the cost. Social factor: KEA has maintained a fair social standing. KEA completely understands the life style of the people in each country and develop their stores accordingly.

As people have the flexible working hours and they tend to do shopping on odd hours or say late hours looking to this normally all KEA stores are opened till mid night. In the Middle East they keep their stores open post midnight during the holy month of Ramadan. Also stores have other acclivities like children playing area and restaurants which is helping the parents who are accompanied with their children. Technological factor: Technology has made it easier for KEA to promote their product through the internet.

It gives the customer detailed information about the product, the dimensions, the price, similar products of the same price range and different style which make it easier for the customer to know what they are buying. Apart from the catalogue services Kike’s strength is online service. It also provides the online help to the customers. The latest advancement in the stores are imputer operated lifts. Earlier after placing the order customer has to go to the warehouse for the pickup of the product but now KEA has centralized store and warehouse.

Customer has to place order and then has to put the code of product on the computed lifts provided and thus can receive the product. This saves the time of the customer and also the staff. Environmental factor: KEA Uses recyclable products which in this case it reduces waste and space consumption, the packaging is less fancy and more environment friendly KEA mission is to provide products at low price but not at any price. It does the foresting for the woods used in the furniture’s and with WFM partnership it is working on projects to focus on sustainable forestry, cotton manufacture and climate change.

KEA also does third party auditing on the material used by its suppliers to check the compliance of raw material used. In partnership with WFM it is also focusing on the countries like U. K, USA and China on the climatic change and low emission of fuel energy and encourages its staff by using public transport. Legal factor: Countries have legal laws for foreign investors to invest in their territory and hose laws have to be abided by to invest, this makes it a bit difficult for KEA to penetrate into some countries despite the fact that there is good market.

The policies which are followed by KEA are like minimum wages, no forced or bonded labor, discrimination acts, safety regulations, health and accidental insurances, freedom of associations, etc. KEA prevent child labor and works actively to prevent it as well as the necessity to have a local sponsor who shares a considerable say in their market(Middle East ). Anon: Vision Of KEA [ONLINE] [N. D] [N. P] Can be found at 2014] Chinese Students [2013] : Evaluation of Kike’s strategic choices and implications [24 May 2013] [ONLINE] Can be found at http://www. Chinatown. Et/evaluation-skies-strategic-choices-implications/ John Division [2012): KEA PEST Analysis [28 July 2012] [ONLINE] can be found at http://research-methodology. Net/kea-pest-analysis/[Accessed 2nd July 2014] Q. 3. How does KEA assess risks and benefits of creative and innovative management ideas? (AC 3. 3 assess risks and benefits of creative and innovative management ideas. ) AAA. 3 KEA continues to be a pioneer in innovation and it has its benefits. However it has its risks too. Below, we analyze the risk management involved with the Innovation & Management ideas of KEA. . 3. 1 Benefits KEA were one of the initial organizations if not the first to come up with high quality low cost products and continues to follow the trend. Hence there is a continued trust and market demand for the products of KEA KEA has the advantage of embracing the upscale-bargain divide as it carried the reputation for exclusive and sleek design clubbed with consumer friendly shopping experiences. They have a materials sourcing strategy which focuses on finding low cost trials from around the world and hence successfully implements the low cost strategy effectively.

Classic operation trade off of cost versus quality gives them unparalleled advantage. Ultimately, Kike’s approach towards dealing with its suppliers involved building deep, long-term relationships founded on trust and mutual dependency. Hence unlike Wall-Mart, for example, who is known to bully its suppliers to hit rock bottom prices, KEA had an unchallenged advantage on this stance. They have an ever improving market value as they allow franchises to run their shops . KEA is never stretched financially as it allows itself to establish local supply networks.

KEA settles well-collected experience room together with wide range of well- designed furniture and give customer opportunity to test tem freely, which beyond consumers” demand and brings more value to customers. Moreover, based on the non-hierarchy culture, KEA makes co-workers feel engagement, be trusted and willing to “lend a hand” to each other, which makes the execution into the strategy. 2. 3. 2 Risks Due, to its insistence on low priced products, inspire of its arguably good quality, few customers get frustrated at its low quality.

Poor knowledge or exposure to unknown culture results in poor understanding of consumer demographics. Due to its ever increasing demand, KEA has constantly runs the risk of the suppliers keeping up with the demand. Without high quality, low-cost suppliers on board within its ecosystem, KEA will not be able to offer its value proposition to customers. Demographic factors that affect the demand of the furniture market include household income, population growth, demographic trends, age, arbitration and income disparity between urban and rural areas.

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