Strategic Management: Ikea Case Study

вЂ?Strategic Management’ is a very complex term as many eminent researchers and scholars have had different views and conclusions on strategy. According to White (2004), “Strategic Management involves both systematically developing an idea together with its implications and testing the empirical validity & usefulness of that idea against the real world.” Thus strategy is not only about planning for future but also about confirming the validity of the hypothesis considered and implementing it successfully. Strategy formation may take various forms such as implicit, explicit or emergent. Implicit strategy is a strategy formed by intuitions of an individual. As per implicit strategists, strategic management is about reading the environment rightly to exploit opportunities contained within the environment and change the environment for those who follow. Emergent strategies on other hand are realized by patterns which are formed over a period of time, by iterative and selective process. (White, 2004; Mintzberg et al., 2005)

According to Johnson, Scholes and Whittington (2005),” Strategy is the direction and scope of an organization over the long term which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets & fulfill stakeholder expectations.” Since 1960’s several notions of strategy led to formation of different strategy schools. Each of these schools had different interpretations of a firm’s situation and different assumptions of the strategy process that go with them. McKiernan (1996) and Mintzberg et al. (1998) came up with ten different schools of strategic management. Three prescriptive schools, i.e., Design, Planning and Positional as identified by Mintzberg have dominated the literature and practice. (Haberberg & Rieple, 2001; Senior & Fleming, 2006)

The Design school has had a big impact on the strategy formation process. Simplicity is the essence of this school. General Manager or the CEO is usually in charge of the strategy making process and only board of directors must review the strategy. Design school initially focuses on studying external and internal environments and thereby finding out the relative strengths, weaknesses, threats and opportunities for the organization. A strategy for The Comfort zone could be based on principles of Design school. Strengths of the organization include 30 years of successful business and good support from employees who consider CEO as their father figure. From economic point of view they have good amount of cash reserves to open a new store. High level of absenteeism is one of the internal weaknesses. Other weakness is longer delivery period of a customer order. External environment looks at competition in the market and the biggest competitor would be IKEA, which plans to open a new store in the city. Based on environment analysis, a strategy to overcome its weakness and make full of the opportunities available can be designed. Beliefs and preferences of managers are then taken into account. Finally it must be made sure it doesn’t go against ethics of the society. Thus several alternative strategies are formed and they are evaluated to select the best one. The main highlight of this school is that, strategy formation is kept simple so that every individual in the organization can understand it. (Mintzberg et al., 2005)

Though Design school is simple and it looks at internal and external environments there are a lot of drawbacks associated with it. Strategy formulation does not include any other member of the organization. Hence many of the problems which are experienced by sales advisors through customer interaction are not taken in to consideration. Thus strategy may fail to improve on some weaknesses. As per design school, structure follows strategy, but it is not always necessary that such ploys are successful. Structure can be molded at times according to the strategy. But it is essential to know the strengths of the structure and the strategy best suited to it. Only if these considerations are made can the structure perform to the best of their abilities. Design school clearly separates formulation from implementation. Thus formulator has nothing to do with the implementation and implementers just have to follow the strategy given to them. CEO has already had problems of delegating responsibilities to staff. Hence even if good strategy is formed, poor implementation leads to failure of strategy. Design school encourages strategists to simplify the strategy which restricts their thinking and learning abilities. Thus design school gives a good framework for strategy building but fails to give the required path for success. (Ansoff, 1991)

Planning school model gave out a more formal approach towards strategy building. Strategy was formed by a sequence of process, divided in to distinct parts and represented by checklists. CEO approves the strategy but actual powers lie with planners who play a major role in the planning school.

First stage of planning model is about setting various goals of an organization. If strategy for The Comfort Zone was applied on the lines of planning school, it would set goals such as strengthening market position, expansion by entering new market and invest for better functioning of an organization. External and internal conditions which include forecasting competitive environment and study of strengths and weaknesses respectively are then studied. Evaluation of a project may be done using techniques such as PEST or value chain analysis. Strategy action gives the flexibility to change the organizational structure required for successful implementation of strategy. Finally the strategy is scheduled to be applied by set duration of time. Thus a timeframe can be developed for implementing each part of the strategy. (Haberberg & Rieple, 2001)

Advantages of planning school are that it gave a good frame work and main points towards which strategy could be formed. It made room for in-depth analysis and focus on future. There are some drawbacks of planning school as well. Firstly it restricted strategy on the lines of specified thoughts, i.e., it forces Comfort zone strategy to be based on given procedures such as merger or acquisition or divestment leaving creativity aside. It is difficult to forecast what is about to happen in future for long term planning such as technological advancement. Also Comfort zone can’t predict the market environment after one or two years. Planning school neglects cultural and political aspects of the environment. Too much analysis leads to more complications in strategies. Planning is focused more on mergers and acquisitions rather than focusing on overall business