Ikea Defensive Strategy

Defensive Strategies

• Retrenchment

In the global recession that happened in 2008, IKEA was forced to make choices to maintain its revenue above break event point. Fortunately, by shaving some of its less profitable products line and changing the company’s strategy while keeping the number of lay-offs as low as possible, IKEA managed to remain profitable (even though under the initial target). Abandoning the rapid expansion strategy and the target of opening 20 new stores per year, IKEA adopted the cost-leadership strategy. The strategy helps IKEA bounce back into profit in the following years and it continues until today.

• Divestiture

On April 2016, IKEA Industry signed an agreement to divest IKEA Industry Latvia and 50 % of Incukalns Timber to Rettenmeier Baltic. IKEA Industry Latvia owns and operates a saw mill in Latvia and Incukalns Timber supplies the saw mill with logs. This decision was made in accordance with an advice from Mannheimer Swartling, a leading business law firm in the Nordic region.

Another divestiture was also done in 2014, in Karelia. IKEA Industry choose to focus production at Swedwood Tikhvin instead of Swedwood Karelia, since the later has been uncompetitive for years, and is 30% more expensive to operate than the Tikhvin site. By divesting the operation, IKEA manages to reduce cost while still getting the raw materials needed for production.

• Liquidation

While IKEA itself never meet the need to liquidate, Scanwood Canada Ltd. was forced to liquidate in 2011 after its plea to extend protection against creditors was rejected. IKEA was its only customers, which make sense since Scanwood was originally established as Swedwood by IKEA. In 2004, it was sold to Tommy Holmer, past President and CEO of Swedwood Canada Ltd.