Research Korner: Ikea Examples

STRATEGIC MANAGEMENT: THE COMFORT ZONE

Strategic Management: The Comfort Zone     Introduction             The furniture industry is well known for its resistance to change and has been furniture manufacturers have been pushed into the rapidly changing environment of the new century. The forces of internationalization and globalization are bringing fundamental changes to this industry. The purpose of this paper is to examine and better understand the management style and strategy that is needed for a furniture shop called Comfort Zone relative to the current issues it faces.             The owner’s management style has been mixed; at times the staff see him as paternalistic in that he takes an interest in the workers and their family members – at other times he seems to be very authoritarian, with a clear idea of what he wants to do. This is very much the owner’s company and he seems to have a clear idea of the direction that it should take. He still has the tendency to do a wide range of tasks and has difficulty in delegating tasks to subordinates. Management meetings are short and to the point with the owner directing the staff or telling them what he wants done. Comfort Zone relies on a banner that says Customer is King. No system was more responsive to the customer than craft-production such as what the production of furniture is all about. It’s hard to imagine that such a system could survive without delighting the customer. The furniture produced must therefore appeal to the customers in order for Comfort Zone to be successful.             Although some companies have striven to reach customer satisfaction excellence, this objective remains difficult to achieve. The question still is: Is it worth focusing on customer needs and requirements, evaluating and improving products and processes with the customer in mind, training the work force and providing the right kind of leadership to make it happen?             This banner of Comfort Zone that the Customer is King is not supported by some authors. According to ,  and  (2003), the customer is not king anymore, at least not any customer. Sales staff no longer let you return goods without question while rushing to shake your hand. There has been a fundamental shift in how companies assess customer value and apply their resources. Thanks to advanced technology, companies can measure exactly how much business a customer generates, what he/she is likely to buy, and how much it costs to answer the phone. That kind of information allows them to deliver a level of service based on each person’s potential to produce a profit. Customer service and satisfaction have become just another product for sale.             Now, the Comfort Zone furniture shop faces a competition in IKEA, which is set to open in the next year and will be located just a few kilometers from where Comfort Zone is located. A strategic plan has to be developed which can solve all the issues that the furniture company faces. Strategic Marketing Planning             Strategy is very important for any organization as it offers the direction the organization would like to pursue to attain its objectives. In the recent years, the integration of strategic planning and functional marketing has been perhaps the most relevant development in the field of marketing management as marketing managers have all the more realized that tactical marketing decisions must be made within a wider strategic framework.                     Strategic Marketing Planning In addition, it is necessary that management of the marketing function be built upon purposively defined and analytically based marketing strategies. Strategic marketing planning offers the analytical process which develops efficient marketing strategies. The strategic marketing planning, according to Allen (2006), involves basically three stages: (1) segmenting the market; (2) profiling the market segments; and (3) developing the market segment marketing strategy. Please refer to figure 1 for the outline.             After analysing the market segments, customer interests and the purchase process, the firm must then establish the strategic marketing plan. This strategic marketing plan document usually constitutes ( 2006): (1) situational analysis – Where is the company now? – i.e., characteristics of the market, key success factors, competition and product comparisons, technology considerations, legal environment, social environment and problems and opportunities; (2) marketing objectives – Where does the management want the company to go? – i.e., product profile, target market and target volume; and (3) marketing strategies - What should the initiatives be taken in order to attain its objectives? – i.e., product strategy, promotion strategy, pricing strategy, distribution strategy and marketing strategy projection. All large companies, however, do not look with favor on such a practice of division within the organization. Other large companies favor the adoption of a functional type of control structure. With this sort of arrangement, a company’s physical operations may be dispersed, but the managerial control for all of its different operations is centralized. This means that a single sales force sells all of its different products and manufacturing plants are directed from the home office. Such an arrangement focuses the responsibility centering on the president of the company. In a large company, this does not sound very good. This concentration of responsibility may overburden the chief executive with supervisory duties, leaving him too little time for creative thinking and acting. It also tends to create a shortage of potential managers because of the centralizing authority at the top. At all times a firm must be aware of the risks that are inherent in competition – chances for loss through shifts in the price level, changes in style and fashion, and the appearance of substitutes on the market that sometimes render present models obsolete. Consumers could switch from a furniture made of wood to a furniture made of glass although the wood furniture is still a new one and has no defects. Also, consumers could switch to a cheaper furniture of another competing furniture company but with the same quality. There is always a risk involved in the use of substitutes for materials formerly used. It must also be noted by Comfort Zone that an organization means that management endeavors to achieve its objectives by directing the efforts of the people under its supervision. This procedure is a necessity whether it be a large or a small company. This has been taken seriously by the owner of Comfort Zone. While the success of a Comfort Zone may be attributed to many other causes, the skills with which the owner directs and manages the organization is one of the major factors in the positive end result. Therefore, the owner must be more responsive to his employees and what his company needs most.             Probably the most foremost responsibility of management at all levels, but especially top management –is the making of decisions. In many, if not most, instances, the decisions that chief executive officers have involve the making of choices between two or more alternative courses of action. The company therefore rests on whether the owner will choose the right decision or not.   Importance of Understanding Competitors             Understanding the competitors of a business in a given industry and developing methods as to distinguish it from them is a very relevant and critical aspect which influences the development of the competitive strategy of the firm. In addition, it is also an important aspect of the strategic planning process as it (1) facilitates the management to understand their competitive advantage or disadvantages associated to their competitors; (2) creates understanding of the competitors past, present, and future strategies; (3) offer an informed basis to develop strategies to gain and maintain competitive advantage in the future; and (4) to facilitate the firm in forecasting the returns that may be made from future investments.              (2000) notes that understanding competitors is the core to making marketing plans and strategy. A firm has to compare its products, prices, channels of distribution and promotional methods with those of its competitors on a regular basis to make sure that it is not at a disadvantage. The process of the competitor analysis basically constitutes three steps. The first step is to identify the firm’s competitors. As for Comfort Zone, it has several competitors in the furniture industry, but it has to take into consideration the new furniture company which is about to start business near their location.             The second step of the competitor analysis is the assessment of its competitors. This may be done through benchmarking as the firms will first have to determine the objectives of its competitors as well as their objectives, then later on assessing the strengths and weaknesses of its competitors. ,  and  (1997) notes that benchmarking sustains organizational growth as well as facilitates world-class competitive status.             Finally, the third step in the competitor analysis is the selection of competitors to avoid or to attack. After the assessment of the firm’s competitors, the firm will have to formulate the specific strategies that will give them the competitive advantage against its competitors.             It must be noted that during the process of competitor analysis and the implementations of its strategies, the firm will have to assess which of the competitors’ strategies that they will have to follow or not. The second stage which allows the company to compare their operations with others will necessitate some degree of change within the organization. Thus it should be very well noted that the company only as to follow the strategies that will apply to their business as every business is unique in their own nature. These strategies will have to be in lined with the company’s philosophies as well.             Some of the major changes that should be made by Comfort Zone should be induced by changes in the environment and industry or by the existence of a vacuum in strategic groups. In the midst of such change, or in the absence of competitors, Comfort Zone must be able to apply its market knowledge to capture greater value The basis of customer trust should be reputation, built on financial probity and the ability of the firm to absorb trading risk while profiting from the experience. To absorb the risk of others, Comfort Zone itself requires long-term internal and external relationships built on high trust and the avoidance of speculation in commodities or in other business interests about which information about individual investments and commitments was incomplete.             Cost and high quality are no longer the only competitive factors a company should consider. Flexibility is another component that should be considered as a critical success factor. Some authors also advocate the concept of performance evaluations and control systems when new strategies are to be implemented, especially in the manufacturing area. At the operational level, it is critical to measure and control the new strategies after they have been put to work ( & , 2007).   Conclusion The furniture industry has already extended throughout the world. Firms that operate within the furniture industry are categorized as a market structure that is highly competitive yet volatile. Many customers can opt for substitutes to a specific furniture offered by a company. In this paper, the case of Comfort Zone was analyzed. The strategic marketing planning for Comfort Zone provides the company a methodical and logical process that develops efficient marketing strategies. This strategic marketing planning has three stages namely: (1) segmentation of the market, (2) summarization of the market segments, and (3) development of the market segment marketing strategy. This paper has strongly recognized the importance of understanding competitors in strategic marketing planning for the benefits that it gives to the successful planning of marketing activities. These benefits and advantages include the following. First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors. Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm. Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future. Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.                 References

STRATEGIC MANAGEMENT: THE COMFORT ZONE

Strategic Management: The Comfort Zone Introduction The furniture industry is well known for its resistance to cha...