Corporation That I Choose Is IKEA. My

¶ … corporation that I choose is IKEA.

My first choice for a merger will be with Wal-Mart. This is because IKEA is based on the hybrid position of Bowman's Strategy Clock. (Bowman elaborates on Porter's Model of how firms can compete / find their niche by explaining the cost and perceived value combinations that many firms use). The hybrid position is exemplified by IKEA employing moderate price/moderate differentiation where the company offers fair prices for reasonable goods -- for instance discount department stores. ('If it wasn't for Ikea," writes British design magazine Icon. 'Most people would have no access to affordable contemporary design" (Bloomberg Business Week.com p.708)). The company works long and hard to identify functional and quality style materials and least costly suppliers. Whilst it sets the price in middle class tastes, focusing on quality, it also accentuates reasonable price tags, consciously showing its tendency to slit prices. Josephine Rydberg-Dumont, president of Ikea of Sweden, describes IKEA's objective as producing beautiful products that are inexpensive and functional (Bloomberg Business Week.com).

This approach is advantageous in that it cements customer loyalty, as, indeed, IKEA does. On the other hand, it is tricky in that IKEA has to constantly slash its prices in order to compete, and this is where it runs into difficulties. Companies need to produce a high margin. They need to demonstrate profit from their business activities in order to keep afloat. Constantly producing quality products (with punctilious care involved in production) whilst simultaneously lowering prices is, as Rydberg-Dumont pointed out, challenging. This is particular so when it means assessing the competitor's price and 'slashing that in half' (as per Mark McCaslin, manager of Ikea Long Island, in Hicksville, N.Y.) (Bloomberg Business Week.com., 709).

Wal-Mart, on the other hand, follows Bowman's Low Price position and is unusually lucky in that it succeeds when doing so. The Low Price defines companies as driving their prices down to their minimum, whilst balancing low margin with high volume. With large enough volume and strong strategic position, the company can succeed; otherwise, price wars can be triggered that benefit only consumers. Wal-Mart's strategic position can provide IKEA with the security whilst IKEA provides it with high quality.

How would I finance this merger?

By bank loan. The advantages of bank loans are that I retain ownership of my company; I need not produce collateral or security; the documentation, as compared to other loans, is remarkably little; I do this at a relatively low cost; and I achieve the loan facilely and within a few hours. More so, interest rates offered by banks are competitively low, and the worked out repayment terms are mutually low and acceptable in comparison to unconventional lenders.

My second and third choices for a merger would be with Chinese corporations whose store productions are similar to those of IKEA's. This is because Chinese companies are demonstrating business structures that follow a convex cost curve, which rises slowly across the quality spectrum with prices rising along with it. Many customers indicate preference for such a pattern, which gives individuals the freedom to choose lower-cost items that are lower in quality too along the curve. IKEA does not provide that liberty, and, therefore, to protect its margin it may benefit from mergence with such a Chinese company. In all cases, I would seek a bank loan, from that specific country or one from a bank agreed with by both companies, in order to finance the venture.