IKEA is an internationally known home furnishing retailer. It has grown fast since it was founded in 1943. Today it is the world’s largest furniture retailer, recognized for its Scandinavian style and the low priced high quality furniture items. Most of IKEA’S furniture is flat-pack. This allows a reduction in costs and packaging. IKEA has around 9500 products, including home furniture and accessories. The products are available in all IKEA stores and customers can order them as well online through IKEA’S website. There are about 140 IKEA stores in the world in 30 different countries. IKEA stores include restaurants and café’s serving typical Swedish food. They also have small food shops selling Swedish groceries, everything from the famous meatballs to jam.
2. Analysis of current situation
IKEA’S mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them. They aim to attract customers who are looking for quality products at reasonable prices, but who are willing to assemble their furniture themselves and participate in a self-service culture. The typical target customers are young families with a low to middle low income.
Their recent goals is that all new stores will be built to a certified green building standard and sell more organic goods. And to encourage their customers to travel with public transport to visit their store. They want to be more recognized as an eco-friendly business.
The basis of IKEA’S strategy is a mixture of innovate their own modular designs, mass produced components and a dedicated supplier network all geared towards serving price conscious customers while still maintaining a
to high standard of goods and workmanship. They design their own furniture and it’s a self-service, that is a big part of their strategy. They also have a lot of facilities to offer. For instance they offer paper and pencils, computers so you can look certain things up, they have a playground for children and a restaurant with delicious and payable food. Since IKEA was founded it always had concern for people and the environment. The IKEA vision is “to create a better everyday life for many people”. IKEA’S concern for people and the environment encourages it to make better use of both raw materials and energy. This keeps costs down and helps the company to reach its green targets and have an overall positive impact on the environment.
3. Internal environment
Strengths could include a company’s specialist marketing expertise or its location. They are any aspect of the business that adds value to its product or service. IKEA’S strengths include: It’s a worldwide brand which attracts a lot of consumer groups, they also offer the same quality and range in their stores. its vision ‘to create a better everyday life for many people’ A strong concept based on offering a wide range of well designed, functional product at low prices. A positive Human Resource Management approach towards its staff, which leads to a positive attitude among the staff and increased performance for the company. This makes the staff happy with their jobs. The staff has an equal treatment, no matter which background they have. This makes them adapt to the consumers in different countries en within different cultures. They adapt quickly to change.
They use the latest technology such as IKEA IT (information technology), this provides IKEA with all its system requirements such as common business solutions, architecture, infrastructure, service and support. Such as KPI (Key performance indicators) it helps IKEA to measure the progress of its vision and long-term goals by setting targets and monitoring progress towards it. Environmentally friendly policy.
Volume commitments IKEA believes in creating long-term partnerships with its suppliers in order to achieve this. By committing to buying large volumes over a number of years IKEA can negotiate lower prices. This also benefits the suppliers because they enjoy the greater security of having guaranteed orders. Economies of scale for instance, bulk buying at cheaper unit costs. Good marketing.
IKEA has to acknowledge its weaknesses in order to improve and manage them. This can play a key role in helping it to set objectives and develop new strategies. The size and scale of its world wide business. This could makes it difficult to control all the stores, the staff and the standards. The need for low cost products. This needs to be balanced against producing good quality. That is hard to do, sometimes they do have low quality. IKEA also needs to be different from competitors. IKEA needs to keep good communication with its consumers and other stakeholders about its environmental activities. The scale of the business makes this a difficult task.
4. External environment:
A business uses its strengths to take advantage of the opportunities. a growing demand for greener products
a growing demand for low priced products.
Low economy makes low priced furniture even more appealing.
demand for reduced water usage and lower carbon footprints
– Threats Porter’s 5 forces model:
● Threat of buyers growing bargaining power:
– there is a little power because of the existing low price options. – IKEA ensure that their customers in all aspects will be satisfied for quality
service they provide – Focused their marketing approach on demands and needs of the buyer. – IKEA uses their corporate responsibility as a good public image to their customers. – IKEA family card as a membership.
●Threat of suppliers growing bargaining power:
– Because of the low-pricing, IKEA’s profit margin also affects the prices in raw materials than by prices in labour. – IKEA has a wide network of 1300 suppliers. They carefully select the manufacturer of its products. The company has own production factories and designers which makes it less dependent on others. – Bargaining power of supplier could be threat for the profit of the company.
●Threat of substitute products or services:
– There is no specific product that can be a substitute for the furniture but IKEA at least, have to keep up with the latest trends, to avoid becoming out of style. – Problems faced due to distribution channels.
●Rivalry among existing firms:
– The IKEA’s furniture competitors’ offers different styles and functionality – IKEA is the most successful in delivering the complete package for the customers that reflect in weak rivalries. – There will always be substitutes for furniture’s but IKEA competes with price and there isn’t competitors in the same price range. ●Threat of new Entrants:
– IKEA stores do not reach many small towns and this is an opportunity for the new competitors to move into small and midsize cities with smaller stores and less selection. But not easier in city because new entrants have to establish a vast supply chain and create an unique brand name. – The furniture market is already highly competitive, the risk of new entrants is not extremely high.
IKEA is a well-known global brand with hundreds of stores across the world.
In order to improve performance, it must assess its external and competitive environment. This will reveal the key opportunities it can take advantage of and the threats it must deal with. IKEA responds to both internal and external issues in a proactive and dynamic manner by using its strengths and reducing its weaknesses. Through this, IKEA is able to generate the strong growth it needs to retain a strong identity in the market.
◦ Low price – high quality
◦ Positive Human Resource Management
◦ Environmentally friendly policy
◦ Good marketing
◦ A growing demand for greener products
◦ A growing demand for low priced products.
◦Low economy makes low priced furniture even more appealing. ◦ Demand for reduced water usage and lower carbon footprints Weaknesses
◦ Low communication of environmental activities
◦ The size of their worldwide business
◦ The need for low cost products
◦ The IKEA’s furniture competitors
◦ New trends
◦ IKEA family card
◦ Bargaining power of supplier
This assessment is about the company IKEA. I will discuss several issues including an introduction of the company, an analysis of the current situation within the internal (Strengths and Weaknesses) and external environment (Opportunities and threats) . The treats are described in Porter’s 5 forces model. The answers of my research can be found in the conclusion and SWOT analysis.
2. Analysis of current situation4
3. Internal environment5
4. External Environment6,7
●Continuing Case by Alan Hogarth