Edexcel AS Business Studies - IKEA case Study

Our Edexcel AS Business Studies revision notes for the IKEA case study are now complete. As part of the exercise, Mark Tottman has produced an excellent series of guided revision questions that help lead students through the key issues raised by the case study. Here are the questions:

Note: or model answers and advice on approaching these case study areas, please refer to Mark’s detailed study notes for the Edexcel case study.

Unit 1 – Business Structures, Objectives and External Influences

What business sectors are considered in the IKEA case study?
Evaluate the merits of IKEA’s complex ownership structure.
“Most of these stores are owned by IKEA and the other stores are owned and run by franchisees outside IKEA” (lines 2-3). Evaluate the benefits to IKEA of operating a franchising model.
Analyse the advantages and disadvantages to IKEA of being a multi national company (MNC)
“Competition is expected to increase from MFI, up-market rivals like the Danish company Ilva, and from other unexpected sources” (lines 86-87). Who are the main competitors to IKEA?
“To create a better everyday life for the many people… You do your part. We do our part. Together we save money” (extract from lines 12-16). To what extent does Ingvar Kamprad’s vision for IKEA remain true in his retirement?
Explain why profits are important to Barnsley Beds Ltd
Analyse the implications of social and environmental objectives on the culture and operations of IKEA.
Assess the main macro-economic factors and other influences that affect the demand for IKEA products.
With reference to key demographic, lifestyle, political and social trends, evaluate the likely success of IKEA worldwide in the next few years.
Analyse the organisational structure of IKEA with reference to its functions, product and geography.
What are the issues of communicating with IKEA’s large workforce of 118,000 co-workers.
With reference to motivational theorists, evaluate the ways in which IKEA motivates its co-workers.
“… his alleged obsessive personality and zealous frugality have seeped into every corner of IKEA; senior executives travel around Europe on budget airlines and Kamprad himself has been known to replace fizzy drinks from hotel minibars with cheaper supermarket products” (lines 20-22). Analyse how Ingvar Kamprad’s leadership style has influenced the culture of IKEA.
Examine how jobs are designed at IKEA.

Unit 2 – Marketing and Production

Does IKEA operate in a mass market or a niche market?
“IKEA does much less market research than many companies because it so often decides what the customer is going to need in advance” (lines 32-33). Analyse whether IKEA is a product-oriented or a market-oriented company.
Evaluate which component of the marketing mix is most important to IKEA.
Analyse how IKEA uses market segmentation to target its customers.
How does the IKEA product range meet the needs of its customers?
Analyse the ways in which the IKEA Concept uses product design to secure very low product prices.
How does IKEA use branding to sell its products?
Each IKEA store is laid out so customers will not only find what they came for but will also be tempted to ‘impulse buy’ (lines 41-42). Evaluate the role of ‘place’ in IKEA’s marketing mix.
Analyse IKEA’s pricing strategy.
Analyse the methods of Promotion used by IKEA.
To what extent does IKEA benefit from lean production techniques?
“Buyers look all over the world for good suppliers with the most suitable raw materials. These materials are then bought in bulk on a global scale”. (lines 30-31). Analyse how does IKEA benefit from economies of scale?
Analyse the importance to IKEA of having a world class stock control system.

Unit 3 – Financial Management

Why does IKEA not produce a full set of company accounts?
With reference to the data presented in Appendix 2, calculate the Return on Capital Employed for Barnsley Beds Ltd and evaluate your findings.
Assume that Barnsley Beds Ltd had a Turnover of £2,000,000 in 2006 and Overheads of £1,000,000. Calculate the Profit margins for the business and comment on your findings.
With reference to the data presented in Appendix 2, calculate the Current ratio and the Quick ratio for Barnsley Beds Ltd and comment upon its short-term financial liquidity.
What is a debenture and give an example for Barnsley Beds Ltd.
With reference to Appendix 2, calculate the gearing ratio for Barnsley Beds Ltd and comment on your findings.
Evaluate the usefulness of ratio analysis in understanding Barnsley Beds Ltd’s financial performance.
Assess the extent to which the information shown in Barnsley Beds Ltd’s Balance Sheet and its Operating Profit figure enables the reader to evaluate the overall performance of the business.
Barnsley Beds Ltd has a delivery vehicle which it bought new three years ago for £60,000. Assuming that it still has two years of useful life remaining and that it can be sold for £12,000, calculate the current book value of the vehicle using the straight line approach to depreciation.
Assess the extent to which the use of budgeting might assist IKEA in managing its global operations.
Discuss the role of contribution analysis in determining the viability of each of IKEA’s 9,500 product lines.
Evaluate the usefulness of breakeven analysis to IKEA in deciding whether to set up a new store in New Zealand.