IKEA Analysis Essay Example | Topics and Well Written Essays - 2500 words

IKEA Analysis - Essay Example Retaining competitive advantage is inevitable for firms to ensure profitability. This can be achieved by implementing effective management strategies and processes that allow them to conduct a thorough internal analysis of their businesses, such as benchmarking, value chain analysis etc., to name a few. For the purpose of this paper, benchmarking as a method of internal analysis is used and applied on IKEA. The process of benchmarking is of vital significance for organizations today, since it affords them the ability to compare their performance with that of their rivals or similar processes within their own organizations. The process was first used and introduced by Xerox Corporation, with a view to gain competitive advantage over their rivals in the industry, and capitalize on their strengths by overcoming their weaknesses and limitations (Zairi, 1996). The process of benchmarking is evolutionary in nature, whereby the companies involved begin by analyzing the various internal proc esses employed by them, and seek improvements in areas identified as problematic, thus ensuring best practices within the organizations (Wireman, 2004). Definitions: The concept of benchmarking has been widely used within the field of management and is defined differently by different authors. According to Zairi (1996: 35) "A benchmark refers to something that serves as a standard by which others may be served". However one of the most commonly and widely used definitions of benchmarking is the one developed by Xerox, which states describes benchmarking as "the continuous process of measuring our products, services and practices against the toughest competitors or those companies recognized as industry leaders" (cited in Kozak, 2004: 5). 2. Introduction: The global furniture retail industry comprises of various stakeholders and players. IKEA is one such international furniture retail chains, which dominates the global furniture market. It was founded by a Swedish furniture manufactu rer, Ingvar Kamprad, in the year 1943 (IKEA, 2012a). IKEA today, has grown into a global retail brand, with as many as 131,000 employees working in 41 countries across the globe, generating annual sales worth 24.7 billion Euros (IKEA, 2012b). IKEA, as is apparent from the statistics mentioned above, has come to become one of the most globally trusted and appreciated brands in the retail furniture industry. However by the turn of the 20th century, several new players entered the industry, thus making it imperative for the existing businesses to improve and enhance their product capabilities in order to retain their competitive positioning in the industry. In present day competitive climate, the firms within the retail furniture industry are required to lower their costs, improve product range and quality, and cater to a wide consumer segment spread across the globe, in order to increase their profitability. The situation is worsened with the highly volatile external economic environm ent, making it difficult for firms to offer good quality products at lower prices. Its core business mantra is â€Å"Low prices with meaning† which drives them to strive for lowering the costs of their