Strategic Management Analysis of IKEA Hong Kong Sample

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IntroductionIn order to understand what strategic place and way which IKEA takes in Hong Kong market so as to maintain doing successful concern, it is of import to carry on a strategic analysis of IKEA HK from internal, external factors to its strengths, failing, chances and menaces to measure this company. To surge over the economic crisis, most of the HK place furniture concern tends to “low monetary value strategy” so as to derive market portion, such as Pricerite, DSC. However, under the vision of “create a better mundane life for the many people” IKEA HK good understanding how of import of distinction and the hazard of merely concentrating on the “low-cost strategy” and that’s why IKEA put great afford on merchandise development and construct up the positive corporate images as “taking duty towards people and the environment” all these make IKEA HK becomes alone in the same industry sector in Hong Kong.

IKEA HK owns by The Dairy Farm Company Limited as franchisees run outside of the Dutch INGKA Holding to run IKEA place supplying retailing concern in Hong Kong. The mission of IKEA Hong Kong is to supply well-designed, functional and good quality place supplying with low monetary values for as many people as possible to be able to afford them. They are now holding 3 IKEA shops in Hong Kong which locates in Shatin, Causeway Bay and Kowloon Bay supplying service for client in the whole Hong Kong market. Peoples could be shop in IKEA HK easy.

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In order to maximise the net income to all stakeholders, IKEA non merely making cost leading but besides pays much attending on introducing their merchandise to be more distinction. Since 1956, IKEA utilizing their great construct of “flat-packed” packaging and “self-assembly” which increased the path burden capacity, reduced the transit, storage and labor cost, less fuel and exhaust pollution during each journey. It makes client willing to transport the IKEA furniture place and assembly by themselves. It besides helps IKEA could farther cut down their monetary values as they do non necessitate to construct the bringing and assembly costs into their merchandises. This helps IKEA to be much more outstanding in the market.

In order to run into client end, IKEA develops its merchandise scope to be modern but non voguish, functional yet attractive, people-focussed and child-friendly. The Swedish place supplying tradition makes IKEA place trappings become so typical in the market. Hong Kong immature people find this type of manner is truly modern and holding good gustatory sensation. It makes them believe purchasing place trappings in IKEA HK would convey certain individuality among peer group and friends. This is one of the grounds IKEA HK successfully won certain protagonist in the HK younger market..

To assist spread out their concern, IKEA HK merely relocated their Kowloon Bay shop from Telford Plaza ( 6,500? ) to new Mega Box ( 14,000? ) . The new shop holding much more infinite for merchandise show and besides supply big country for “Kid’s playroom” and eating house. IKEA HK denominates this is a “family friendly store” which client non merely profit from their low monetary value and good design merchandises but besides holding a great twenty-four hours with household in IKEA shop. They even promote sing IKEA shop would be a good weekend planning during the household twenty-four hours. And they gain much more friends from the household market.

To assist accomplishing sustained success in HK place supplying market, IKEA HK looking into several new service so as to increase their concern turnover and besides addition to increase the market portion. They are now supplying the new concern design service for the “home-office” client and besides making place design service particularly for the newly-wed twosomes.

External Environment influences much the development of IKEA in HK market, to assist analyse the attraction and likely-profitability of this portion, Porter’s Five Forces and PESTEL Analysis could be help on happening out the state of affairs and several forces which IKEA HK faced to.

Potential entrants, menace of entry:It is truly high competitory among the bing furniture market in HK. Due to the high operation cost and difficult to obtain certain market portion in the market, the hazard of new possible entrants are non truly high. Under the rapid population growing in HK, the demand of place furniture is maintaining lifting. As per the big market attractive force, there are two important rivals towards IKEA HK and besides doing great concern in the same market – DSC and Pricerite. However, under the beneficial of positive company image, the alone merchandise design and good quality furniture, IKEA HK still standing the front place far beyond the other two rivals which means the possible entrants force do non hold great influence to IKEA HK.

Buyers, dickering power:Even though there are much place furniture retail stores in HK which supplying many difference types of families furniture for choice. But most of them come from the traditional China makers which do non hold much design or merely tendency to the basic and ordinary form. This is another ground drives people to purchase in IKEA because of their low monetary value, modern design and good quality would be able to guarantee all facets could be satisfied their clients. IKEA HK besides makes utilizations of their good corporate duty image to pull their clients to be their trueness client. The “regular / customary buying mode” weakens the purchaser dickering power that means the “Buyers” forces do non supply great influence to IKEA HK.

Suppliers, dickering powerIKEA has their ain in-house interior decorators working on merchandise development in Sweden which help cut downing the development cost from the providers. They besides holding a broad scope provider web in all over the universe, about 1300 providers which providing wooden and steel furniture, family merchandises to the Global IKEA stores. Although the natural stuff cost maintain raising in the period of clip, under the big competitory among difference providers, IKEA still holding great power to compensate the provider cost. They have certain right thrust off the unqualified provider and to take appropriate provider which must be able to supply lower monetary value merchandises but in good quality. In short, the bargaining power of provider would non menace much net income of IKEA.

Substitutes, menace of replacements:As of now, there seems have no replacement to the “home furniture” , every place would necessitate to hold certain figure of place furniture. Even if there are many people tendency to hold a more simple living country, place furniture is indispensable to a place. So, the menace of replacements would be a “weak” force to IKEA HK.

Competitive Competition:IKEA HK seeking to maintain its competitory advantage among challengers in order to forestall the bing market portion “invade” by the other rivals. They have to set much more attempt on marketing promote and merchandise development. The good quality merchandises and their long life rhythm conveying the job of slow market growing. In order to do the continue success in HK market, IKEA have to come over this large issue of every lasting goods industry have to confront to. This becomes the great force toward IKEA HK.

Political:Due to the free trade port advantage in HK, there is 0 % revenue enhancement rate on importing Home Furnishing merchandises into HK. IKEA which derives from Sweden besides attracted by this revenue enhancement policy and started their concern in HK market since 1980’s. It shows the revenue enhancement rate policy provide a really positive influence toward IKEA on holding concern in HK.

Economic:Indebted the Government stableness and the CEPA Arrangement between Mainland China and HK, the economic and fiscal in HK market continued growing, the life environment of HK people have much improved and they are learnt to seek for a quality of life which provide a good concern environment for IKEA on developing their market in HK.

Sociocultural:Tend to hold “better life” becomes the chief watercourse among HK people particularly for the immature people. IKEA HK good understand such circumstance and they make usage of this chance to establish a series of new place trappings and design services which marketing to the younger and besides the immature twosomes. In add-on, IKEA HK besides seting much afford on developing their “business” merchandise line, harmonizing to the study information signifier a popular HK magazine – Recruit, the consequence shows there are much more HK people change their workplace civilization from the traditional “office” to the new construct “home office” which help salvaging the higher and higher office leasing cost.

Technological:Due to the turning information and communicating engineering ( ICT ) such as cyberspace to be more convenience, HK becomes an “Information society” . This is another ground, IKEA HK sells much more concern supplying during these few old ages, as most of HK office workers prefer to go forth office on clip and so switch their office work or self-study to be “work at home” under the velocity of ICT engineering development which besides assisting people to be more “work-life balance” .

Environmental:With much more people concern about the environment issue by the period of clip. Difference states make certain environmental protection jurisprudence in order to assist taking better attention of the environment and its resources. As a largest place supplying retail merchant in the universe IKEA pays great attending on this subject. IKEA non merely follow all these Torahs but besides set up an IKEA “Never Ending list” which lists out certain guideline to do certain all their providers, concern confederations and their whole company besides working on improves the environment and creates a more sustainable life to people.

Particularly for the wood provider control, IKEA participates in a figure of forestry undertakings with “WWF” , “Sow a Seed Foundation” and “Forest Stewardship Council” . They put much attempt Forth on battling illegal logging and concentrate on responsible direction patterns. IKEA HK besides focus on the importance about taking duty towards people and the environment. They held consecutive environmental friendly activities such as “Every Day No Plastic Bag” , Fluorescent Lamp & A ; Rechargeable Battery recycling programme and “Little Green Ambassador” programme. With aid of all these activities, IKEA build up a positive company image successfully.

Legal:Under legal ordinance, IKEA HK abides by every HK Torahs.To be a scruples corporate, they besides guide their work by their ain manner “IWAY” which formulates by the international conventions and declarations such as the United Nations Universal Declaration of Human Rights, the International Labour Organisation Declaration on Fundamental Principles and Rights at Work, and the Rio Declaration on Environment and Development. IKEA providers are required to guarantee “IWAY” are implemented at all their workplaces, such as prevent kid labor, the working environment should be wellness and safety to workers, taking responsible forestry direction on wood supply. Such ordinance helps IKEA HK to be a celebrated scruples corporate among their industry sector and supply a more positive company image to their client.

To assist analyse the IKEA HK resources and capablenesss, we may besides look into its external environment – menaces ( T ) , chances ( O ) and internal environment – failings ( W ) , strengths ( S ) by utilizing the SWOT analysis.

Strength:Internally, the strong set name and its positive company image provide IKEA some advantage while advancing in the HK market. Peoples buying their merchandises due to a certain extent trust on its well-known and good quality “band name” . Under the good consequence of being “conscience corporate” , IKEA HK made good repute among client. They advocate non merely concentrate on low cost but taking duty towards people and the environment would be much of import. IKEA in-house interior decorators focus on developing their engineering to happen out how to maximise every parts of each natural stuff and besides minimise the production cost and so export such engineering to their planetary providers. The cost advantages from proprietary know-how aid IKEA go more strength in the market. IKEA becomes the largest “home furnishing” retail merchant in the universe which made 22,713 million Euros turnover during 2009. The strong trade names enhance trueness client which would reiterate purchases in IKEA.

Failings:The distribution channels is truly weak in IKEA HK, there are merely 3 IKEA shops in HK which are non to the full cover the whole HK market. It might cut down the desire to purchase in IKEA, if they live far off from the IKEA shops. The high cost construction besides weakens the development of IKEA in HK. Due to the limited land supply in HK, the leasing cost maintain raising in a truly high degree. To expose their place trappings as a “show flat” IKEA needs to afford highly high cost on leasing big store country. Besides, to seek for a big and appropriate location to put up the IKEA shop is truly hard in HK and it becomes the great barrier of IKEA HK.

Opportunities:Externally, IKEA HK taking great chance about sourcing in China, the low natural stuff cost and low labor cost reduced a certain big figure on production cost. IKEA would so be able to switch much more resources on merchandise development and dressed ore on increasing its market portion through its more competitively monetary value merchandises. By the aid of rapid growing about utilizing cyberspace during these old ages, IKEA HK put much afford to construct up their company web-site and supply much more online service. Peoples would now be able to read the IKEA online catalog. And IKEA HK good uses this panel to be a good chance to air all their publicity.

Menaces:Keep lifting on natural stuff cost and higher environment concern becomes the of import menaces to IKEA HK. Under their guideline “IWAY” , IKEA declare non to utilize any wooden stuff which comes from the illegal logging. And that would be one of the ground which taking the raw-material cost rises because the wooden stuff which comes from legal logging is much expensive than the illegal 1. However, under the drift of higher environment concern, IKEA would necessitate to follow the ambiance and pay more cost on raw-material.

TOWS Strategic Alternatives MatrixExternal Opportunities ( O )1. Sourcing in China2. low natural stuff cost, low labor cost3. more online service External Threats ( T )1. lifting on natural stuff cost2. higher environment concernInternal Strengths ( S )1. strong set name2. good repute among client3. cost advantages from proprietary know-how4. trueness client SO“Maxi-Maxi” StrategySchemes that use strengths to maximise chances. ST“Maxi-Mini” StrategySchemes that use strengths to minimise menaces.Internal Weaknesses ( W )1. weak distribution channels2.High leasing cost WO“Mini-Maxi” StrategySchemes that minimize failings by taking advantage of chances. WT “Mini-Mini” StrategySchemes that minimize failings and avoid menaces.Harmonizing to the TOWS matrix, IKEA HK should do usage of “Maxi-Maxi” scheme which means they should utilize all their strengths to maximise all their chances.

There are many ways to maintain sustainable success to the concern, utilizing Ansoff matrix would be easy to place which schemes would be most suited to IKEA HK. There are including market incursion, market development, merchandise development and variegation.

As per the analysis consequence from Ansoff Matrix, IKEA HK which already set up their concern in HK market for about 30 old ages, to advance their bing “home furniture” merchandises among the bing market, the effectual “Market Penetration” would be truly of import. In these old ages, IKEA HK attends a certain figure of activities such as taking duty on societal and environment. Their selling non merely aim to the household or immature people but besides the childhood. IKEA HK develops much more child merchandises to the kids. IKEA besides held “Little Green Ambassador” programme which provides a panel for parent and their kids to take portion in the environment friendly activity.

Through this activity, all household members would hold a opportunity to see the IKEA services. The freshly “Soft Toy Movement” would be another programme which IKEA make usage of market incursion to allow much more parent and their kids could be experiencing the societal duty which IKEA had been taken. Among all these plants, IKEA becomes a celebrated set name which non merely focuses on making concern but besides caring the society. This successfully marketing incursion provides a truly positive company image to IKEA and besides brings much more trueness clients to IKEA HK. The childhood would so be the new client of IKEA, it helps IKEA HK increase their market portion in the HK market.

To sum up the strengths and failing of IKEA HK, it is clearly found they are doing a successful concern in HK place supplying retail market. It indebted by the centralize merchandise development in their headquarter – Sweden. And they merely need to do a small modify on some of furniture in order to suitable for certain single market. It saves much development cost and doing more net income of the company which should be a long term scheme IKEA HK would take advantage on it.

The low monetary value scheme helps IKEA HK attracts a certain figure of client in the past 10 old ages. But the economic environment maintain improving and much more people learnt to seek for a better quality life, people tendency to looking for some furniture and family to be more modern, good quality and functional. To make more new design and functional furniture becomes the mainstream among the market. Peoples are now paying much attending on safety and wellness life. The market penchant is driving toward more biotechnologies furniture but IKEA is behind in development of such engineering. This is a important clip to IKEA HK on developing this engineering so as to avoid far behind the market.

IKEA HK successfully builds up a great “social responsible company” image among the whole HK market. It would go more success on farther promote the of import relationship between “environment friendly” and “safety and wellness life” . There is much more information shows, a more green environment which would wash up lesser baneful stuff. That means environment friendly help supplying a better life to people. Under such influence, IKEA HK could be promote as a place furnitureretail merchant which supplying “sustainability wellness life” to HK people. It should assist on increasing the market portion of IKEA HK.

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