Reference no: EM133341893

Radical Change at IKEA

A fundamental business idea at the global furniture retailer IKEA, known as the flat-pack furniture pioneer, has been that the customers are actively involved in the distribution process. Customers drive to a shop where they pick up the goods from stacking shelves, and transport and assemble them at home. In line with this idea, IKEA has for decades been building stores on the edges of cities in order to make it easier for customers to drive there. IKEA is currently radically transforming this concept. The new business model is built upon online shopping, home delivery and assembly services. Some of the stores on the outskirts of towns have therefore been turned into distribution centres. The company is instead experimenting with considerably smaller store formats located in city centres, such as a kitchen showroom in Stockholm and a showroom for bedrooms in Madrid. This is a radical shift for the global organisation as it fundamentally transforms the original business model.

The new ideas have been up and running for a while in different parts of the world. On the Spanish island of Mallorca, customers do not select the goods themselves; rather, this is done automatically by robots. In London and other large cities, around half of all goods are already home delivered. In Hong Kong, IKEA has established a smaller store where home delivery represents about 80% of the orders. Furthermore, the company is working with interactive technologies, such as augmented reality (AR) and virtual reality (VR), to make it possible for customers to project a piece of furniture into a room in their own home before buying it online. This technology is supposed to supersede visits to a physical store. A key ambition behind these changes is to take sales into the digital era and thus also reach new generations.

Discuss the reasons why radical changes are much more likely to cause conflict and resistance for IKEA than small-scale changes and explain how the application of the force-field analysis can help IKEA to manage change? Organisational culture and style of leadership can have a significant influence on IKEA's strategy, discuss the benefits and implications that these two parts have on a radical change programme.

Using examples to illustrate your answer, depict the value chain for IKEA and identify the core competencies, and suggest ways in which the core competencies could be developed, discuss why you think the value chain is a valuable tool in analysing a business.

Conduct an in-depth PESTLE analysis for IKEA and then from the perspective of the case study discuss the most significant factors you have identified in the PESTEL and suggest corporate and business strategies to address the identified challenges and opportunities. Your answer should give examples from the case study.