3 Explain how IKEA tries to ensure that their hybrid strategy remains sustainable and does not become

Question:

3 Explain how IKEA tries to ensure that their ‘hybrid’

strategy remains sustainable and does not become

‘stuck-in-the-middle’. By the time of his death IKEA was the world’s largest home furnishings company with some 10,000 products in 422 stores in 50 markets. For the year ending 31 August 20182 revenue had grown to €38.8bn (an increase of 4.5 per cent on 2016) and net profits were €1.4bn. The company had 208,000 co-workers (of which 40,000 were in production and distribution).3 There were almost 1 billion store visits each year.

IKEA and the home furnishings market By the late 2010s home furnishings was a huge market worldwide with retail sales almost $US600bn in items such as furniture, household textiles and floor coverings.

IKEA sales by region reflected their European heritage with 60 per cent of sales in Europe (including Russia); 19 per cent in North America and 11 per cent in Asia.4 IKEA’s competitors The home furnishings market was highly fragmented with competition occurring locally rather than globally and included competitors of several types:

• Multi-national furniture retailers (like IKEA) all of whom were considerably smaller than IKEA. These included, for example, the Danish company Jysk (turnover

– €3.4bn).

• Companies specialising in just part of the furniture product range and operating in several countries –

such as Poggenpohl from Germany in kitchens.

• Multi-branch retail furniture outlets whose sales were mainly in one country such as DFS in the UK. The USA market was dominated by such players (e.g. Bed, Bath

& Beyond Inc. with revenues of some $US12bn).

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Fundamentals Of Strategy

ISBN: 9781292351377

5th Edition

Authors: Richard Whittington, Patrick Regner, Duncan Angwin, Gerry Johnson, Kevan Scholes

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