Free Essay Providing IKEA's SWOT Analysis

Published: 2022-09-28
Free Essay Providing IKEA's SWOT Analysis
Type of paper:  Essay
Categories:  SWOT analysis
Pages: 5
Wordcount: 1177 words
10 min read
143 views

Introduction

IKEA is a Swedish multinational home furnishing retailer group that was founded in 1943. It has experienced rapid growth since its foundation. Today it is the largest furniture merchandise that is popularly known for its Scandinavian style. IKEA had a range of about 9500 products (home furniture and accessories) in all of its stores worldwide as of 2008("IKEA case study," n.d.). Today customers can either visit their stores or make their orders online on their website ("IKEA case study," n.d.). Their stores also include restaurant and cafes to serve mainly Swedish foods as well as small shops where Swedish groceries are sold. It records high sales in Sweden, USA, Germany, France, and the UK. As of August 2008, IKEA had 253 stores in 14 countries and 32 stores which were run and owned by franchisees recording 565 million visitors to their stores and further 450 million visits on their website. Their sales increased by 7 percent with sales reaching 21.2 billion Euros that year ("IKEA case study," n.d.). Most of its furniture is flat-packed for the customer to assemble them. By doing so, there is a reduction in packaging costs.

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IKEA's vision is to create a sustainable better life for people while conserving the environment. Since its foundation, IKEA has always put the concern for people and their environment at heart by integrating their needs in their products and process. It ensures better use of raw materials while conserving energy. They also assist in recycling and reusing of used products, a concept of ensuring there are no products in the landfill and using recycled products in making new products. Consequently, they have had an overall positive impact on the environment by reducing carbon dioxide emissions a move to reach green targets.

As part of IKEA's strategy to grow, they ensure products are available at low prices manageable by customers. The products come with a wide range of designs that cater to different lifestyles and life stages of its customers.

Strengths, weakness, opportunity, and Threat (SWOT) Analysis

IKEA uses the SWOT analysis to achieve its vision for a sustainable life. This tool helps them to focus on social, economic and issues while ensuring the growth of the business. Strengths and weaknesses are internal aspects which can be controlled. They may include factors such as finance, marketing, production, and organization structure. Opportunities and Threats are external aspects, therefore, cannot be controlled by the business. They include business environment, the economic atmosphere, social changes or advances in technology (Hitesh, 2018, Noah, 2018. & Ovidijus, 2013).

IKEA group creates opportunities and counters threats by maximizing on its strengths and addressing its weaknesses.

Strengths

IKEA has strengths that have contributed to attracting and retaining its customers. One essential measuring tool IKEA uses in assessing strengths is the Key performance indicator (KPI). IKEA's strengths include:

Worldwide presence. IKEA has 423 stores in 52 markets today ("MindTools," n.d.). However, its products can also be purchased online through its website and mobile apps. This has increased the market base.

Brand image. IKEA has unique brands that cater to all types of furnishing needs. It is the leading brand in its category. It has separate categories for outdoor products creating beautiful exteriors.

Weaknesses

The big size of global business. Due to large market IKEA has, it is difficult to control standards and quality as some stores do not consider implementing legislation to regulate their stores. This has greatly affected customer perceptions of their products.

The need for low-cost products. IKEA maintains that there is no need to compromise quality over low prices. It tends to balance the two. Trying to keep operational costs down has affected their quality in the long run.

Opportunities

IKEA uses its strengths to maximize any chance that may arise (Hitesh, 2018).

The growing demand for greener products and lower carbon emissions. It targets on reducing energy use, using renewable energy sources and reduce the use of transport. Their packaging means more items fit into a crate hence fewer delivery journeys.

Increasing need for lower prices for products. IKEA has realized the necessity for eliminating intermediaries during service delivery to cut on the overall expenses of its products technology (Hitesh, 2018, Noah, 2018. & Ovidijus, 2013).

Threats

Competitive market forces. IKEA faces growing competition in the business environment as more companies are entering into the market of low priced furnishing markets.

Economic regression. Financial struggles of customers are always reflected in sales. During a financial crisis, sales go down making running costs to increase.

Competitive Advantage

Creating a competitive advantage helps a company to compete within its market. Due to the global size of IKEA, it's really important to be effective to compete effectively in the market. Some of the key areas IKEA should focus on include:

Raw materials determine the quality of the products. IKEA should focus on inspecting the products at the source. This way, quality is assured to the end products. Quality at source means defective raw materials are eliminated from the production line.

IKEA has eliminated distributers in the market. They tend to provide customers with direct service. Despite eliminating intermediaries, customers are complaining about delays in deliveries. IKEA should come up with innovative strategies to reduce delivery time in supplies even as it attempts to implement just in time production. This way, it will maintain customer loyalty creating competitive advantage. IKEA should improve on refunds when commodities are returned to the stores.

Even as IKEA continue to maintain quality while still keeping the prices low, it also needs to work on the durability of their products. It should build furniture that lasts longer than their competitors. This has been the main customer concern as they don't want to buy commodities that they will have to throw away after serving them for a short time. This should not be difficult for IKEA given the economies of scale they enjoy in the market.

IKEA is also facing competition in online marketing. It is facing competition from other world's strongest brands having mainly online stores like Amazon and Alibaba group. Today, Amazon and Alibaba group are including furniture offerings to their stores. Therefore, IKEA needs to strengthen their online marketing strategies to meet the goals of customers. One of the strategies would be offering discounts for goods bought online.

IKEA should also put legislations to improve quality at different stores it owns. There have been concerns by customers that they are receiving poor services, especially in Asian stores. This has made customers opt for other stores. However challenging this can be, it needs to address the issue if it is to achieve competitive advantage over its competitors. It should also incorporate culture in the products to meet the diversity of its customers.

References

Hitesh, B. (2018). SWOT Analysis of Ikea.

IKEA case study. (n.d.). SWOT analysis and sustainable business planning. Retrieved from: http://businesscasestudies.co.uk/ikea/swot-analysis-and-sustainableBusiness planning/introduction.html#ixzz39ic1uItD

MindTools. (n.d.). Discover New Opportunities, Manage and Eliminate Threats. Retrieved from: https://www.mindtools.com/pages/article/newTMC_05.htm

Noah, P. (2018). What Is a SWOT Analysis, and How to Do It Right?

Ovidijus, J. (2013). SWOT analysis of IKEA.

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