E Commerce

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THE University of HUDDERSFIELD Business SchoolInternational Business BA (Hons) < BHO-0171 Electronic Commerce> (HKMA) Module Examiners : Abbdul Jabbar Year: 2010/2011 INDIVIDUAL ASSIGNMENT Case Study Analysis

A better everyday lifeBy Leung Sze Wa Teresa - 1078713

Contents Executive Summary Introduction Internal & External Analysis SWOT Analysis PESTLE Analysis Business Models Recommendations Analysis of Business Models Conclusion References Appendix 1 Website Navigation

Executive Summary Evaluate a global company IKEAs e-Business strategy by internal and external analysis under its current methods of working through the internet world with particular attention to security issues of improvements Introduction IKEA Concept and history IKEA has approached its world domination project with a missionary zeal since 1970s. Till today, IKEA is the No.1 retailer of furniture items in the world offering a wide range of welldesigned, functional and inexpensive home furniture products protruding the famous IKEA Concept. From modest background, for more than 65 years, IKEA has gradually expanding the market share starting from Europe, North America, Australia; now her focus is on merging markets especially in Asia including Hong Kong, in order to keep the organizational growth as well as sales turnover. The IKEA story begins in 1926 when founder Ingvar Kamprad. The first IKEA store opens in Almhult, Sweden 1958. IKEA is a worldwide furnishing company grand total with operations in 38 countries and 309 store and 272 stores in 25 countries are owned by the larges IKEA franchisee, the IKEA Group other 37 stores owned and run by other franchisors 17 countries, one store in Netherlands is owned and operated by Inter IKEA Systems B.V. all over the world. It is a Swedish-based company built on the idea of offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. IKEA was founded in the 1940s by the entrepreneur Ingvar Kamprad, who still has control over the company through the INGKA Foundation in the Netherlands. The name IKEA is an acronym for Ingvar Kamprad Elmtaryd Agunnaryd where Elmtaryd is Mr Kamprads native farm and Agunnaryd his native village. The IKEA group is solely owned by the foundation through a holding company (INGKA Holding B.V). It is therefore not listed on any stock exchange. The picture below illustrates the operational structure of the organization. The legal structure differs somewhat from the operational one.

The foundation is the main shareholder in the holding company. The purpose of the foundation is to support furniture design, education and training in the area of production and design. The group support functions (legal services, human resources) should be considered as strategic functions for the IKEA group as a whole and incorporated as IKEA Services AB under Swedish law and is also the legal basis for the EWC. Expert functions such as ICT, food services, and retail equipment operate under economies of scale and support the basic operations. From its inception in 1950 the company expanded at a moderate pace until the beginning of the 1980s. From an annual turnover of EUR 1.2 billion in 1984 there has been a rapid development to EUR 19.8 billion in 2007. The biggest expansion has been in the late 1990s. The first IKEA store opened in Sweden in 1958. The first store outside Scandinavia opened in 1973 in Switzerland. In 1975 the first IKEA opened at Tsim Sha Tsui, Hong Kong. Vision IKEA create a better life for everyone, everywhere, every day. Mission The business idea behind IKEA is to offer a wide range of home furnishings with good design and function at prices so low that as many people as possible are able to afford them and still have money to spend to create a better everyday life for the majority of people Internal & External Analysis SWOT AnalysisSwot Analysis Of Ikea(Hk)

SWOT analysis of IKEA(HK)

Strength -IKEA has the own industrial group, which produces wood-based furniture and wooden components. The industrial group of IKEA is called Swedwood, its operations cover ever step of production, from forestry, saw milling and board manufacture to furniture. As every production step is under the IKEA control, IKEA can have efficient productions which enable it to maximize productivity and minimize waste-generation.

-IKEA has its own design group. These can make sure that their products can match the trend of the industry. Whats more, the present of industrial group can co-operate with the design group, which efficiently convert the design into the finished product.

-IKEA has the strong brand image. By the recent research of Datamonitor, IKEA ranked 41st among the best global brands around the world in 2006 with a brand value of $8,763. The strong brands enhance customer loyalty and lead to repeat purchases.

Weaknesses - Not enough distribution channels. As there are only three retail shops in Hong Kong, it is inconvenience to the customers. Whats worse, the potential customer of IKEA, especially those would like to buy the home accessory will have a chance to switch the buying from IKEA to the shop which is near home.

-The problem of product recalls. Sometimes IKEA recall the product due to faulty base. Just take an example, IKEA had recalled Parodi and Apelsin glass cases in January 2007. This act will give out a poor perception to the customer.

Opportunities -Sourcing from China is one opportunity. Sourcing from low cost countries like China would reduce its costs and enable IKEA to concentrate on increasing its market share through competitively priced product offerings.

-Bright prospect of online sales. There is an opportunities to gain more revenue in online retail sales. As the IKEA website is one of the most visited home furnishing websites in Hong Kong, a provision of purchasing the products online...

PESTLE Analysis

Organizations e-Business StrategyE- Business Of Ikea

IKEA is a Swedish based furniture and furnishings company that sells everything from cutlery to kitchens (Jones, G 2007). The business revolves around the philosophy of We do our bit, you do your bit and together we save money. The companys success is based on its ability to adapt to change, sensitivity to customers and acting sensibly with suppliers. In 2006, IKEA made plans to expand their e-commerce strategy to allow people from the United Kingdom to purchase goods online (Kemp, E 2006). However, e-commerce has had advantages such as increased accessibility and disadvantages such as increased costs, and by late 2007, IKEAs Chief Executive Officer and President, Anders Dahlvig announced that there would be no further investment in online stores (Carroll, B 2007). This suggests that the e-commerce site performed poorly (Paul Holding, cited Jones, G 2007).

Values at the core of IKEA IKEA integrates distribution with sales (Kapferer, J 2007), but in some cases also themanufactures the products. The logistical system, for managing the flow of components into warehouses and transferring the products to its stores, is reputed as one of the most refined in the world (Kippenberger, T 1997). There are 2300 suppliers to the business, located in several continents, such as Europe and Asia (Klevs, J 2005), and all are given technical assistance, help to secure loans, engineering support, and are aided to boost production to global standards (Kippenberger, T 1997). IKEA designers work with producers to find ways to save costs, as well as attempting to avoid waste in their designs, which is consistent with the values underpinning the business model.

IKEA values design for low cost production, bulk buying, flat packaging (Klevs, J 2005), and providing functional products at a very affordable price, while their customers provide self service, home transport and self assembly. This works in favour of both participants in an exchange, as it saves both the company...


E-Commerce @ IKEABROOKLYN IKEA announces a new website design, currently rolling out in 24 countries worldwide. The new website features an increased focus on the sharing of IKEA furnishing knowledge with consumers. Where other retailers are delivering basic data on products, prices, and promotions, IKEA is dedicated to granting the customer full access to its celebrated home furnishing knowledge.

Room images on the new site are fully interactive- users can engage with the images and see tips and ideas for a variety of products and everyday situations. "The trick was to develop a user interface that balances efficiency and discovery," says Gene Liebel, Partner and Director of User Experience at HUGE. "Research shows that IKEA customers have very high expectations for the IKEA website they expect an experience that is about much more than just the presentation of basic product information. They want to learn how to improve their lives at home, and they want everything integrated into a single, usable workflow, organized by the rooms of their house."

The new site architecture is based on the rooms of the house: Bedroom, Children's Room, Dining Room, Kitchen, Living Room, Workspace, Basement, Garage, Attic, Hallway & Entrance, Laundry Room, and Youth Room. Another change is an expanded role and more prominent position for "Ask Anna", the automated customer service chat character driven by artificial intelligence. Anna has proven to be very effective in providing 24/7 support and advice to millions of IKEA customers worldwide, reducing support costs.

Says Allan Lidforsen, IKEA Online Group Manager, "It is a great challenge to translate the IKEA brand values and visual identity to the Internet, and we are very content with the work HUGE has