History of Ikea and its Operations in Thailand

Ikea was founded in the year 1943 by Ingvar Kamprad. The company started its operations in the industry by selling various products like, pens, picture, wallet, table runners, jewelleries, watches and nylon stockings. The furniture based products have been introduced in the product line of the company in the year 1953. The first store of the organization was opened in the year 1958 in Sweden. Ikea has been able to become the largest retailer of furniture and furniture based products in the world. The company has more than 300 stores in greater than 35 countries of the world. The organization has opened 12 stores in the various areas of Thailand. The contract based on the production of the company was formed in the year 2008 which was worth 15 billion baht. The contract was signed with a furniture maker and the supplier named SPS Group. The operations if Ikea were started in Thailand in the year 2011.

The report is based on the analysis of the various aspects of the organization which include, the business strategy, the corporate strategy, the acquisitions and the structure of the company and the international strategy that has been used by Ikea in Thailand.

The business strategy of Ikea is based on targeting a majority of the people who belong to a certain country. The positioning strategy is at the heart of the entire strategy that has been implemented by Ikea in Thailand. The products of the organization are mainly targeted towards the young customers who are interested in stylish products offered by the company. The operations of the company in the have been based on the limited areas of customer service and the self-selection of the products by customers. The manufacturing costs of the company and the modular design of the products are also a major part of the business strategy that has been implemented by Ikea in the market of Thailand. The experience that has been provided to the customers of Ikea was based on the major philosophy of the company (Andreeva and Kianto 2016). The business strategy that has been formulated by Ikea is mainly based on the concept of the company. The main concept of the organization is based on providing the range of the home furniture related products which are affordable for many people. The vision of the company has been achieved by the combination of the functions, design, quality and the value that is held by the sustainability of Ikea. The concept and the strategy of Ikea is present in all the parts of the company which include, the designing, sourcing, distributing and packing (Chen, Delmas and Lieberman 2015). The main points that are considered to be the integral part of Ikea’s strategy include, offering lowest prices to the customers which has helped the company to create a competitive advantage in the industry. The huge variety pf the products that are offered to the customers also form the strategy that is used by Ikea in the retail industry. 

Business Strategy of Ikea in Thailand

The major corporate strategy that has been used by Ikea in the various areas of its operations all over the world is based on globalization of the company. The corporate strategy of Ikea has been mainly determined by the competitive advantage and sustainability in the future competitors of the company. The globalization strategy of Ikea has been used in the countries like, China and Thailand. The first part of the corporate strategy implemented by Ikea in Thailand is related to the joint ventures that have been formed with the local companies (Durand, Grant and Madsen 2017). The second part of the corporate strategy is based on the ways by which the company aims at suiting with the local culture of the area where Ikea has its operations. The third and last part of the corporate strategy of the company is related to the pricing strategy which helps the organization to compete with its rivals in the market. The furniture industry of Thailand is considered to be the strongest in entire Southeast Asia. The country has thereby aimed to become the furniture hub of the in the entire region with the help of the superior quality of the production, elegant and innovative style of the products that are offered by the various organizations in the market (Engert, Rauter and Baumgartner 2016). The Thai furniture industry consists of many players including, S.B. Furniture, Index Living Mall, Rockworth, Modernform and Maxima. The international players in the furniture market of Thailand are mainly, Dongha, Garant Moebel, Habitat, Mobilia Flexy Living. The segmentation of the furniture market of Thailand is based on three major parts which are, high end, low end and medium. The high end based furniture market of Thailand is mainly based on imported products (Frynas and Mellahi 2015). The medium furniture market of the country is based on the local brands which include the international and domestic products. The low end market is based on the imported furniture which are not identified under any brands. This market has thereby posed a challenge towards Ikea and its operations in Thailand. 

The major operating process of Ikea in the market of Thailand was based on the franchise based systems. The company has further joined its operations with a local company of Thailand. The organization has entered the Thai market in the year 2011. The company with which Ikea has joined its operations in Thailand is Siam Future Development and Ikano. The two companies will own 49% of the total share in the market in Thailand. The major part of acquisition process of Ikea in Thailand is related to the ways by which the company needs to acquire land in various areas for the purpose of building their stores (Hill, Jones and Schilling 2014). The process of land acquisition in Thailand is quite tough. The company has acquired areas in which they wish to open the stores of the company. The growth rate of the company in Thailand has been around 6% with the help of the structure of stores that have been applied by the company in the recent years of operations in the country. The political situation of the country has not been able to affect the operations and profitability of Ikea. The booming market of the country has been able to provide huge opportunities to Ikea regarding the ways by which the company can operate and further increase its profitability in Thailand (Hubbard, Rice and Galvin 2014).

Corporate Strategy of Ikea in Thailand

The organizational structure that has been implemented by Ikea has been quite unique in nature. The structure of the company has been able to provide huge opportunities for growth to Ikea. The various franchisees of the company that operate all over the world are controlled by the central headquarters of Ikea. The operations of the company are divided into two parts which include, the Inter Ikea Group and the Ingka Group. The domestic operations of Ikea are controlled by the Inter Ikea Group and the international operations are taken care by the Ingka Group. The founder of both the companies is same and Ikea has been able to create a good position in the market with the help of successful operations in the areas all over the world (Meyer, Neck and Meeks 2017). The organizational structure of Ikea had gone through huge changes in the year 2016. The main aim behind the restructuring initiative was based on the improvement of the franchises of Ikea in the different areas. The company had planned to increase its flexibility of business with the help of restructuring the entire structure. The structure of the company can thereby be classified as hierarchical which reflects the huge size of the business in the various areas of its operations. The company has its operations in more than 28 countries in the world. The hierarchical structure of the company has led to many serious shortcomings which has an issue for the profitability of Ikea in the industry (Michael, Storey and Thomas 2017). The quality of communication between the management and the employees had become low due to which the decision making process had been affected in an adverse manner. The restructuring of the operations of Ikea had thereby led to the increase of decision making speed and had reduced the shortcomings in the organizational profits. The organization had implemented the process of sourcing the raw materials that are required for its products in the different areas of its production. The same concept had been used by Ikea to operate in a successful manner in the operations in Thailand (Morschett, Schramm-Klein and Zentes 2015). The usage of the local manufacturers had reduced the costs of the production and the products that were manufactured had been based on the local feel that is provided to customers. The customised designs of the products had been the main unique quality of Ikea. 

Challenges faced by Ikea in the Thai Market and its Solutions

The customers of the company in Thailand had accepted this concept which had further led to the increase in sales of the company within a short period of time. The low costs of the company have further led to the increase in the revenues and profitability. The recruitment structure that is followed by Ikea is different in various countries. The company thereby aims at developing entire new methods of recruitment in the different areas (Popkova et al. 2015). The marketing based structure that has been developed by Ikea in the different countries of its operations is also different. The organization had first entered the Asian market by starting its operations in Japan. China and Japan had proved to be the major market areas of Ikea in Asia. Following this the company had entered the market in Thailand. The origin of the country was not able to affect the ways by which it operated in the market of the other countries. The policies that were followed by Ikea was totally different as compared to the ways of operations in the other areas or countries in the world (Sakas, Vlachos and Nasiopoulos 2014). The corporate structure that is followed by Ikea is divided into two major parts which are, the franchising and the operations. The major functions of Ikea which include its ways of operating and franchising. The operations of the company which include, the management of the stores, the designing and then manufacturing of the products. The entire management based system of the stores are controlled by the management of the company in a centralised manner. The foundation is thereby managed by a team of five members which is also controlled by the founder of the company. The stores of Ikea need to pay a fee of around 3% on the entire sales that is gained by the company in the market (Shah et al. 2015). The similar design of the stores of Ikea like that in the other countries had an adverse effect on the revenues of the company. The customers were not attracted towards the operations and the organization and Ikea thereby had to face loss of sales in the Asian operations. The company had to thereby change its way of operating in Thailand which is a major part of the Asian market of furniture and other products. The designs of the stores of Ikea in Thailand were changed based on the taste and the preferences of the customers (Simon, Fischbach and Schoder 2014). 

Organizational Structure of Ikea

The international strategy of Ikea has been established based on the wide network of suppliers that is maintained by the company all over the world. The major strategy of the company in all the areas of its operations is related to the customization of the products that are offered to the customers. This helps the company to create products that are based on the local choices and the ways by which the customers prefer their furniture. The network of the suppliers of the company is quite complicated and Ikea has always aimed at creating a sustainable supply chain network which can help the company in achieving its goals all over the world (Slater 2015).

Conclusion

The report can be concluded by stating that Ikea has been able to create its unique position in the market with the help of various innovative strategies that have been implemented by the company in its domestic and international operations as well. The analysis in this report is mainly based on the operations of Ikea where the company had to change its store format for the purpose of achieving the desired goals. This has further been helpful for the company to achieve the goals and objectives that has been set by Ikea. 

References 

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