IKEA Competitive Positioning

IKEA Competitive Positioning This report critically analyses the competitive position of IKEA which has led to its success and failures over the past five decades. IKEA has been well known for its low price concept and wide range of furnitures. IKEA has grown enormously and now operates in 55 countries. This report analyses the external environment of IKEA by using the PESTEL Analysis. The analysis shows that political factor plays most important role while other external factors such as economic, socio-cultural, legal, environmental and technological contribute to some extent in determining the expansion and success of IKEA. The resource and capability of IKEA is analysed by using the Michael Porters five force analysis. The study shows that IKEA has to dominate in all the five areas to succeed in future. The report also studies that marketing mix used by IKEA in different countries which have had a major part in IKEAs success. IKEA is committed to satisfy its customers. For customer satisfaction IKEA has worked hard to understand the needs of their customers. This report also examines the customer perception and the IKEA philosophy leading to happy and satisfies customers. The strengths and weaknesses of IKEA as well as opportunities for expansion and threats from competitors are revealed by conducting the SWOT analysis. Finally the causes that could lead to the demise of IKEA are discussed along with its future. Table of contents Page no. Introduction 4 PESTEL Analysis 4 Resource and Capabilities 6 Marketing Mix 8 Customer Perceived Values 10 SWOT Analysis 12 IKEAs Future 13 Conclusion 14 References 15 Introduction The economic slowdown has had a negative impact on most businesses world over. Despite the slowdown IKEA plans to open stores in china and world over. The business was started by entrepreneur Ingvar Kampard who had the idea of selling things cheaper than the market price. Thus IKEA came into existence in 1943, when he was just 17 in the small village of Agunnaryd in Sweden. Furniture was introduced in the IKEA product range in 1947 and there after IKEA designed its own furniture. After opening its first store in Almhult in 1958(IKEA, 2009), Ikea has expanded its business worldwide and now operates in 36 countries around the world. Its sales for 2008-09 were 21.2 billion euros and had 127,800 employees. IKEAs success in the retail industry is due to its vast experience which spans over five decades in the retail market. Ikea also achieves product differentiation and cost leadership by its unique concept of selling furnitures in kits that are assembled by customers at home .IKEAs visio n is to create a better every day life for many people (IKEAs Annual report 2009). Macro Analysis (PESTEL Analysis) Political/Legal According to Scherrer (2003), changes in political and legal environment adversely affect the market place as well as the sale and distribution of a product. The political factors include the nature, level of corruption and stability of the government. While the legal factors include import laws, taxation, employment law, competition law, health and safety laws. Europe accounts for large part of IKEAs business with 82% of its sales coming from there (IKEA, 2009). This is because the governments in Europe are been stable, encourage foreign trade and favorable taxation policies. IKEA relocated its Group management, finance and treasury departments to Leiden in the Netherlands from Denmark. This move can be attributed to the favorable government policies in Netherlands that benefited the company over and above any other country in Europe and even Sweden. Globalization influenced IKEA to enter the Chinese furniture market much later after the import control rules were relaxed and governm ent opened up property markets. According to Miller (2004), heavy import taxes have hit IKEA; thus IKEA has been having difficulty in setting a price which good for the customers and the company. IKEA plans to relocate production of many items in china. One the other hand IKEA has no plans of entering Indian markets due to its strict licensing laws for the foreign owned companies. Economic According to Scherrer (2003), economic growth of any country is reflected by its economic climate which influences its plans for expansion. IKEA has no plans on expansion into underdeveloped and developing countries like India. The economic conditions do not favor its business strategy as the buying power of the customers is low. Thus IKEAs main market is Europe where every ordinary person including students can afford to buy an IKEA product. IKEA faced massive problem in china due to its economic condition as it became a luxury furniture brand in the Chinese mind and not many could afford its products. Socio cultural Scherrer (2003) states that consumer preference; purchasing patterns and conditions under which products can be sold are affected by the socio cultural changes. IKEA had to adapt to the cultural environment to expand its business in china. It had to get the Chinese customers to adapt to the do-it-yourself (DIY) concept. As labor is cheap in china, the DIY notion has not taken hold in china as in the western countries where customers know they save money by assembling the furniture Technological IKEA uses technology to stay ahead of the competition by producing furniture cheap and quality furniture. IKEA also uses technology by marketing and selling its products online. Thus IKEA is able to market its products to far many homes and increase its sales considerably. According to Rowley and Slack (2003), a new technology known as kiosk is used by IKEAs customers to view their choice of sofa covered in various fabrics available in that range. Environment IKEA is committed in using resources in an economic and careful way. (IKEA 2009, social and environmental responsibility). IKEA has been offering compact florescent light bulbs (CFLs) which can last up to 10 times longer and use 80 percent less energy than incandescent. IKEA is also committed in reducing the use of plastic bags and there by has introduced the Blue Bag which is cheap, reusable and durable. Resource and capabilities Resource and capability is illustrated by Porters Five Force Model Supplier Power Buyer power Rivalry Substitute Threat of Entry Michael Porters Five Forces Model Power of Suppliers Power of Customer/Buyer IKEA does not enter into actual production but has taken further steps thus keeping the suppliers in an even tighter grip. These suppliers are not only dependent on orders from IKEA but are also in direct financial debt to IKEA, because IKEA has paid for the assembly of their machinery. Hence IKEA has the buyers power to pressurize its suppliers to reduce manufacturing costs anyhow. To reduce the supplier power, IKEA has more than 1300 suppliers in 53 countries with majority of its products from Europe (64%), followed by Asia (33%) and North America (3%) (IKEA, 2009). Competitive Rivalry According to Hopkins (2008) there is more competitive pressure if there are more rivals in the industry. The number of rivals for IKEA is limited in Europe which is where major revenue is generated, as they are able to restrict competition due to their cost leadership and product differentiation. Apart from the competition IKEA faces from UK based BQ (the largest DIY retailer in Europe and third largest in the world) in china; its biggest worry is that it is facing competition from many international and Chinese chains who are copying its products. Many stores in china have IKEAs catalogue in their stores and they tell customers that they can reproduce the same furniture at a lower price. IKEAs online catalogue makes it easy to view and copy. Threat of Substitute Furniture made with wood can only be substituted by furniture made with plastic. But wood is bio degradable which is the reason wood is preferred over plastic. Threat of new Entrants Pass, Sturgess and Wilson (1994) state that it is difficult for entrants with unknown products to win viable market share as customer loyalty exists with the existing firm. IKEA enjoys loyalty from its customers which has been built up by huge and continuous investment in making its products better and cheaper. There is high barrier for entry set by IKEA which makes it almost impossible for a new entrant with unknown and untitled products to win a viable share of the market. Marketing Mix According to Armstrong and Kotler (2006), modern marketing consists of a major concept know as marketing mix. A firm needs get its marketing mix which includes product, price, place and promotion (the 4PS) right to get the response it wants from the target market. Marketing Mix Intended positioning/ Target Customers Product Variety Quality Design Features Brand name Packaging Services Price List price Discounts Allowances Payment period Credit limit Place Channels Coverage Assortments Locations Inventory Transportation Logistics Promotion Advertising Personal selling Sales promotion Public relations Source: Armstrong and Kotler (2006) Marketing an introduction. New Jersey: Pearson Education, Inc Product Product strategy forms the first of the 4PS of modern marketing strategy. Product includes goods as well as services the company wants to sell. IKEA has large range of products for almost everything that is needed at home. IKEA is positioned itself as a company which sells quality goods at affordable price. In terms of service, IKEA encourages the concept of DIY but makes technical help available for its customers when needed. This makes IKEAs products different from other products available in the market. Price According to Myers, Caustic and Diamantopoulos (2002) it is difficult to price products in the international markets as the competition increases. IKEAs adopts low price strategy which is achieved by keeping the costs low between then manufacturers and customers. IKEA can also sell its products cheap because it makes bulk orders. IKEA plans to lower its prices in china by 27% to increase its sales. This is possible as china produces 30% of its products. Also large proportion of its raw materials also comes from china. IKEA also offers payment and credit options for its customers. Place IKEA has been able to reduce its costs by locating its shops in the suburbs of the cities. In china it has opened its store in shanghai city knowing that only 20 percent of visitors in shanghai have their own cars. Promotion IKEA promotes its products by advertising on TV and newspapers. It also markets and sells its products online. Broachers and catalog are printed which have the latest offers and the new products for convenience of customers. IKEA is also involved in helping NGOs like UNICEF. This creates a good company image in the customers mind. Customer Perceived Value According to Eggert and Ulaga (2002), customer perceived value (CPA) comprises of three elements, the multiple components of value, the subjectivity of value perceived and the importance of competition. The difference between benefits and costs of an offering perceived by the customers can be stated as customer perceived value. According to Heinonen (2004), organisations cannot only focus on process and outcome of service delivery which are easy to manipulate. Managers have to put in effort to consider the temporal and spatial elements in service. IKEAs warehouses are open for customers to test and select the furnitures. Thus IKEA has been able to create value by providing an arena where customers can perform services at their own convenience. IKEA Philosophy IKEA philosophy is to increase customer perceived value by delivering extraordinary customer service. IKEA reduces perceived sacrifice for its customers by offering them a remarkable experience through their new designs, high quality and low cost furnitures. IKEA maintains its low prices by reducing its shipping costs, inventory costs and also by their DIY concept. IKEA PHILOSOPHY Source: Bernhard Schindlholzer, the Customer Experience Labs (2008) IKEA is able to maintain its focus on being easier, cheaper and faster. It is also able to provide excellent customer service by its cost cutting and process optimization techniques. SWOT Analysis Strength According to Lee and Ko (2000), the internal as well external customers should be considered while determining the strength of an organisation. IKEA is able to maximize productivity and minimize waste generation as maintains complete control over production process. All the steps in the production process from forestry saw milling and board manufacturing to furniture is handled by the industrial group of IKEA which is called Swedwood. IKEAs own design group makes sure that their products match the trend of the market. The design group also co-ordinates with the industrial group and vise versa to effectively convert the design into furnitures. IKEA has been a long term partner of UNICEF supporting UNICEFs programs benefiting children and their opportunities for learning and development in Asia, Africa and Central and Eastern Europe. IKEA has also been working with UN to abolish child labor. By fulfilling its corporate social responsibility and repeated customer satisfaction, IKEA has been able to build a strong brand image and thus enjoys enhances customer loyalty all over the world. IKEA was ranked 41st among the best global brands around the world in 2006. Weakness IKEA has to depend on sub contracted manufacturers as it has limited manufacturing capabilities, which makes it difficult for IKEA to coordinate and control quality standards in some regions. IKEA may also face competition from the subcontractors as they may manufacture their own line of products. IKEA products are also easy to replicate which the reason it is facing competition in china from the local suppliers. These suppliers in china are able to copy the IKEA products and sell at a cheaper cost. Opportunity Lee and Ko (2000) state that opportunities are present every where such as changes in government policies, social patterns and even technology. Asia accounts for small part of IKEAs business with only 3% of its sales generated from there. IKEA senses an opportunity to make its mark in Asia. IKEA plans to cut prices in china considerably and open new stores. IKEA can also expand by using e-commerce to its advantage. By using innovative technology IKEA can reach customers in parts of the world where it does not have a store. Threat The major threat to IKEA is distinct demand in different regions. In a vast country as china, IKEA has to adjust to the living style and culture which differ from one part to the other. IKEA plans to expand despite the business being hit by the global recession. IKEA will have to be cautious of the decisions it takes for its future in these difficult times. IKEAs Future IKEA success can be attributed to its ability of turning problems into opportunities. IKEA has been able to globalize and compete with local products in diverse markets due to its vision and business idea. IKEA is finding out ways to reduce costs in china and also plans to open 10 more outlets by 2010. IKEA expects china to be the second largest furniture consumption market by 2014 only after USA. Therefore, IKEA has streamlining its resources in Asia-Pacific and will moved its purchasing, financial, operation, security and other functional departments from Singapore to Shanghai. Rowley and Slack (2003), a new technology known as kiosk is used by IKEAs for customer convenience. Thus by using better technology like kiosk, IKEA will be able to satisfy more and more customers and will keep growing. IKEA has to constantly look out for new and innovative ways to reduce costs and improve quality to stay ahead of the competition. IKEA has to be in control of the huge expansion it has planned. Inability to reduce costs and inability to be in control of expansion could lead to the demise of IKEA. Conclusion Analyzing IKEA by PESTEL analysis reflects the external factors that IKEA has to counter to achieve its goals. IKEA has to deal with different external factors like taxation policies, government rules and regulations, exchange rate in different countries. IKEA product prices vary from country to country largely due to the external factors. IKEA has adopted a unique marketing mix which has resulted in the enormous growth of the company. IKEA has been so successful because it has been able to change its marketing strategy to suit the culture of the country. Most of IKEAs business comes from Europe but now its expanding in Asia. To be successful in the highly competitive Asian and especially Chinese markets, IKEA will have to adopt new strategies which suit the cultures of these markets which is different from the western culture. IKEAs plan of expansion in China could be quite risks as they have not been able to make their mark in the Chinese markets as they have been able to make in Europe. Moreover, IKEAs business has been hit by the financial crisis world wide; it could be strategic for IKEA to focus on increasing their sales in the existing stores than expansion in China.

Putting an End to School Violence †Is Zero Tolerance the Solution? :: Argumentative Persuasive Essays

Putting an End to School Violence – Is a Zero Tolerance Policy the Solution? There are very few people today who are unaware of the violence in schools. As college students we live in a world that is desperate to find prevention methods against violence. That makes this issue important to today's college students, considering the fact that we are the generation that could have been involved and directly effected by a school shooting like Columbine. Is this how we want our school systems to be when our children enroll? A school is defined as "an institution for teaching and learning". However, today's educational institutions include punishment, violence, and misbehavior. When we find ourselves glued to the television because of another school shooting, obviously something needs to be done about violence in schools. Unfortunately, the solution causes creates more problems. Schools around the world have recently adopted revolutionary solution and prevention methods. The controversy over school violence prevention is not "yes we should or, "no we shouldn't", because you will probably be hard pressed to find someone who thinks we shouldn't get involved. The debate lies in the method we use to prevent and solve school violence. The zero tolerance policy is one suggestion to implement punishment in schools. The zero tolerance policy is strict and devises rules for students and faculty alike. It is a policy that doesn't ask questions when a rule is broken which often results in suspension and expulsion. The policy also addresses the possession of weapons, drugs, and alcohol. Many schools have adopted this policy and have observed both positive and negative results. If the zero tolerance program is installed in the educational system, schools must decide when and how it should be enforced. This is a very complex issue and when open to debate you see three approaches to it. First, advocates of zero tolerance policies concentrate on positive changes in school security, ways of punishment, and change in student behavior. Those who oppose the policies argue that zero tolerance should be eliminated due to its lack of rationale and logic. Finally, the opposing viewpoint criticizes the zero tolerance policy for being too extreme and inappropriate for schools. The first group, those who favor the policy, dwell on school improvement due to zero tolerance. One positive change is reinstated safety in schools giving students, parents, teachers, and the community a breath of relief. Advocates of this positive change believe that schools should be a place of learning without safety concerns.

Semester Reflection

As the semester started, I had set my mind that I was destined to achieve a lot. During the start of the semester, I had several difficulties writing English assignments especially in terms of grammar. During the first week of the semester, I sat down, organized my thoughts and comprehended that throughout the semester, I had to achieve all that I had planned for. As a student of English, I had planned that throughout the semester, I had to improve my skills as a scholar, writer and critical thinker. Now that the semester has ended, I can reflect all the semester activities to depict how my writing skills and critical thinking skills have drastically improved. This paper presents a reflection paper of how this semester’s assignments have shaped me as a writer, critical thinker and scholar. Since the start of this semester, I have encountered many aspects of English that I can now understand. There are several ways through which I have shaped my writing skills over the course of the semester but one major activity of the semester that has helped me a lot especially in my writing and critical thinking skills is the semester writing assignments. During this semester, I got the opportunity to write several assignments. The two major writing assignments that helped me a lot in comprehending about the several aspects of writing were writing on â€Å"Obama’s acceptance speech† and â€Å"Downloading from torrent. † During these semester writings, it was quite interesting to learn the use of English writing skills under different circumstances. First, writing a paper on â€Å"Obama’s acceptance speech† instilled me with knowledge on how to analyze a speech and present the ideas and themes of the speaker. This assignment was also critical in shaping my critical thinking skills since I was able to critically analyze Obama’s speech in relation to its purpose and context. Writing this speech also enabled me acquire the skills of writing papers from first person context. I acquired the skills to use strong introductory phrases that hold the capability of capturing the reader. Flateby (p 190) argues that critical and creative writers must use descriptive words. I am now able to utilize descriptive words in my writings that are capable of creating a scenic imagination to the reader. I am also able to write a reported speech. These are writing skills that I gained after writing the paper on Obama’s acceptance speech. I believe that these are very critical skills that will help me throughout my entire course and even after my studies. Throughout the semester, I have gained skills necessary for understanding and utilizing logic while writing. I am now aware that for any writing to be scholarly, it must possess an introductory section, a body and a conclusion section. Further, I am now able to understand as well as utilize most of the basic techniques useful in pre-writing, revision and editing. Through writing the â€Å"downloading from torrents† paper, I acquired skills in word processing, sentence elements, and punctuation. Further, I developed some special skills in writing a website analysis which is a critical aspect in contemporary learning as argued by Flateby (p 182). As the semester folds, I believe that I have gained the prerequisite skills in writing and critical thinking. However, I need to improve much on some of the common problems in writing that seems to disturb me especially grammar. In regard to the development of my critical thinking aspects which cannot be depicted from my writings, I have gained several critical thinking skills from my writing assignments throughout the semester. Through writing assignments such as â€Å"downloading from torrents† and â€Å"Obama’s acceptance speech† I gained the skills necessary in summarizing a given reading using my original thoughts. When I was writing â€Å"Obama’s acceptance speech†, it was a required that one had to read and understand the speech then analyze it using own thoughts and perceptions. This helped in shaping my critical thinking aspects. As denoted by Flateby (p 190), critical thinkers must have the ability to form opinions. This is a skill that I have also gained through the semester’s writing assignments. This was acquired through writing the â€Å"downloading from torrents† assignment that required the students to form personal opinions about the website. I can now form opinions with ease as well as express it with precision and clarity through writing. Further, I am also able to deduce the premise of most writers after reading a number of scholarly writings. In deed, this semester’s assignments have shaped my writing and critical thinking skills. I am now able to understand the meaning of several written works, conduct a rhetoric examination, write opinion papers, and analyze speeches, write critical analysis papers as well as effectively reference my assignments. Though I found it challenging throughout the semester, I am now able to use several examples while writing my assignments. The semester’s activities have really paid me out. As the semester started, I had a mediocre performance but I can now ascertain that as the semester ends, I am now among the best students in the whole class. To improve my grammar in the coming semester, I aim at visiting the university English writing center where I will get help on grammar. I am also planning to enroll in a part time grammar class. Though the semester’s assignments helped me in improving my performance, I still owe it the efforts of my instructor and my fellow students who tirelessly helped me in my path to becoming a great writer, a better critical thinker and a scholar.

Subduction The Sinking of Tectonic Plates

Subduction, Latin for carried under, is a term used for a specific type of plate interaction. It happens when one lithospheric plate meets another—that is, in  convergent zones—and the denser plate sinks down into the mantle. How Subduction Happens Continents are made up of rocks that are too buoyant to be carried much farther than about 100 kilometers deep. So when a continent meets a continent, no subduction occurs (instead, the plates collide and thicken). True subduction happens only to oceanic lithosphere. When oceanic lithosphere meets continental lithosphere, the continent always stays on top while the oceanic plate subducts.  When two oceanic plates meet, the older plate subducts.   Oceanic lithosphere is formed hot and thin at mid-ocean ridges and grows thick as more rock hardens underneath it. As it moves away from the ridge, it cools. Rocks shrink as they cool, so the plate becomes more dense and sits lower than younger, hotter plates. Therefore, when two plates meet, the younger, higher plate has an edge and does not sink. Oceanic plates do not float on the asthenosphere like ice on water—they are more like sheets of paper on water, ready to sink as soon as one edge can start the process. They are gravitationally unstable. Once a plate begins to subduct, gravity takes over. A descending plate is usually referred to as a slab. Where very old seafloor is being subducted, the slab falls almost straight down, and where younger plates are being subducted, the slab descends at a shallow angle. Subduction, in the form of gravitational slab pull, is thought to be the largest force driving plate tectonics. At a certain depth, the high pressure turns the basalt in the slab to a denser rock, eclogite (that is, a feldspar-pyroxene mixture becomes garnet-pyroxene). This makes the slab even more eager to descend. Its a mistake to picture subduction as a sumo match, a battle of plates in which the top plate forces the lower one down. In many cases its more like jiu-jitsu: the lower plate is actively sinking as the bend along its front edge works backward (slab rollback), so that the upper plate is actually sucked over the lower plate. This explains why there are often zones of stretching, or crustal extension, in the upper plate at subduction zones. Ocean Trenches and Accretionary Wedges Where the subducting slab bends downward, a deep-sea trench forms. The deepest of these is the Mariana Trench, at over 36,000 feet below sea level. Trenches capture a lot of sediment from nearby land masses, much of which is carried down along with the slab. In about half the worlds trenches, some of that sediment is instead scraped off. It remains on top as a wedge of material, known as an accretionary wedge or prism,  like snow in front of a plow. Slowly, the trench is pushed offshore as the upper plate grows.  Ã¢â‚¬â€¹ Volcanoes, Earthquakes and the Pacific Ring of Fire Once subduction begins, the materials on top of the slab—sediments, water, and delicate minerals—are carried down with it. The water, thick with dissolved minerals, rises into the upper plate. There, this chemically active fluid enters an energetic cycle of volcanism and tectonic activity.  This process forms arc volcanism and is sometimes known as the subduction factory. The rest of the slab keeps descending and leaves the realm of plate tectonics.   Subduction also forms some of Earths  most powerful earthquakes. Slabs normally subduct at a rate of a few centimeters per year, but sometimes the crust may stick and cause strain. This stores potential energy, which releases itself as an earthquake whenever the weakest point along the fault ruptures. Subduction earthquakes can be very powerful, as the faults they occur along have a very large surface area to accumulate strain. The Cascadia Subduction Zone off the coast of northwest North America, for example, is over 600 miles long. A magnitude ~9 earthquake occurred along this zone in 1700 AD, and seismologists think the area may see another one soon.   Subduction-caused volcanism and earthquake activity occur frequently along the outer edges of the Pacific Ocean in an area known as the Pacific Ring of Fire. In fact, this area has seen the eight most powerful earthquakes ever recorded  and is home to over 75 percent of the worlds active and dormant volcanoes.   Edited by Brooks Mitchell