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IKEA SWOT analisys

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Adriana Davcheva

on 4 November 2013

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Transcript of IKEA SWOT analisys

Weaknesses/Opportunities
Opportunities/Strenghts
SWOT table
Made by:
Adriana Davcheva 13114150
Antoaneta Stoyanova 13114149
Mariq Mitova 13114163
Valeriq Kuteva 13114154
Miroslava Kovacheva 13114167

IKEA’s image has been damaged over the past few years because of certain issues like poor treatment of employees, questionable advertising practices or lobbying government authorities. In order to face this problem of negative publicity the company has participated in charities and campaigns such as the World Wildlife Fund, UNICEF and Save the Children. Another type of campaigns it has taken part in are the ‘going green’ ones, like tree plantation, save the environment or other related CSR(Corporate Social Responsibility). Because of these activities customers regained their trust in the company.
Another flaw is the similar product line. Moreover, these products are not appropriate for all the customers in a particular country, because of the different requirements and preferences. In order to overcome this problem IKEA needs to do more market research and to take different customers’ wants into consideration. This is crucial for the company’s innovation and development.
Because of IKEA size and scale it is difficult to control quality and standards in every subsidiary. So the company needs to improve the communication between the employees, managers and co-workers in different branches in order to become more sustainable. Another solution of the problem is to impose more restrictions and to hire more inspectors who should keep an eye on the working process.
IKEA has a definite amount of financial flaws - IKEA is greatly vulnerable to the changes of prices of raw materials due to the company strategy of low profit margin for each individual product. One of IKEA opportunities is to waste no landfill, to reduce the water usage, to reuse already used products and to participate in different sustainable resource programs.
There is a lack of balance between prices and quality. IKEA has to find a way to reduce expenditures in order to keep prices low but at the same time to produce high quality products. This can be done by reducing labor costs, locating different factories in different countries in order to reduce taxes and transport expenses.
Most of the stores have a very bad location and customers have difficulty in reaching them. So the company can improve online shopping in order to benefit from online sales and lower costs. Obviously this helps the business to overcome problems with out-of-town stores since consumers can stay at home to shop and then request that goods are delivered to their doorstep. In that way both sides are pleased with the results – shopping is easier for consumers and more profitable for IKEA
I
II
III
IV
V
VI
I
Recession is a macroeconomics issue which leads to less production and consumption. So IKEA has to lower prices and to keep balance between low prices and good quality as high prices is one of IKEA’s weaknesses.
II
Fewer first-time buyers is a serious threat for IKEA. IKEA has to meet the needs of all the social groups, including young people. This can be done only by overcoming one of its weaknesses-lack of innovations. By investing in innovation, IKEA will be able to meet the demands of more people and not only loyal, but also first-time buyers will be pleased.
III
Growth of competition threatens IKEA. IKEA’s competitors can take advantage of the negative publicity, connected with issues like poor treatment of employees, questionable advertising practices or lobbying government authorities. IKEA is a global brand and finds it hard to control high quality of the products everywhere so it’s easy for competitors to copy or outdo some of the products. The company has to take care of these two weaknesses, as they can pose serious threat to the company.
IV
Due to the inconvenient locations of IKEA stores including areas outside the cities, consumers can hardly reach them. So customers have to travel large distances to visit the stores. They have to not only cost their travelling expenses, but they also have to collect large packages of furniture and take them home. This would be a competitive disadvantage. One way to avoid this is to offer a bonus when buying large pieces of furniture. The store will take care of transporting the goods to a place, defined by the consumers. Thus, purchasing furniture from those stores will increase.
V
Standardized IKEA products attract fewer customer segments. Therefore, the business inability to offer better quality more customized products allows its competitors to fill that niche and fortify their position in it. Another factor affecting the number of people willing to buy furniture from IKEA is changing in social trends. Customers` preferences also change and they head to pieces of furniture of higher class. To turn this competitive disadvantage into a competitive advantage, IKEA have to cover more market shares including consumers of high social classes.
VI
The size and scale of IKEA could make it hard to control standards and quality. Some countries where IKEA products are made do not implement the legislation to control working conditions. This could represent a weak link in IKEA's supply chain, affecting consumer views of IKEA's products and causing a bad impact on the image of the company. To control standarts, working conditions and quality of products, it should be introduced a system. This will include a course of training before accepting people to work in the firm. It will also include inspectors visiting factories to make sure that suppliers meet the requirements. (IWAY code)
Weaknesses/Threats
Threats/Strenghts
I
The bad working conditions are a serious problem for IKEA. As we know, IKEA is one of the biggest furniture retailers in the world and it has numerous stores all around the world. Worldwide market presence ensures that customers will often choose IKEA over its competitors. But what can make the brand reputation not so glorious are exactly that kind of problems. And the main reason for the bad quality of working conditions is the large scale of IKEA because it is really hard to supervise the work and the activity in all factories.
II
The growing of the average consumer income is also a treat because when consumer has more money he (or she) is prone to pay more, expecting something better. For example, the concept of 'ready to assemble' furniture and appliances not always justifies customer`s expectations because the assembling of a furniture looks much difficult than it is presented. To conclude, when people pay more they want better, or let`s say the best of everything. IKEA should produce different quality goods with different levels of prices to satisfy all consumers` wants.
III
Another treat for IKEA is the position of stores. They are often located out of the town and this makes very difficult for customers to pick up and transport the furniture to their homes. That is why in the far 1950s, when IKEA first started selling furniture in packages and boxes. In order to make easier the transportation the furniture is tend to be designed with maximum flexibility in mind.
IV
One of the most important external factors is the treat of recession. The condition of economics has a big influence over the sales. When a recession is occurred, there is a big danger of reducing sales because of unemployment and bankruptcies. The strength that will help IKEA in this kind of crisis is its popularity and the pursuit to attract certain key groups of customers. Thank to the loyalty of these customers, IKEA would be able to pass from this period without significant losses. So the company should attempt to make more consumers loyal.
V
Of course, the most common treat for all big companies is the growing competition. IKEA does not make exception. Rivals and other discount retailers are also companies which offer furniture of better quality and new designs. But the fact that IKEA has been proved in the market and because of its prestige IKEA still has competitive advantage over other furniture retailer brands. Another example that shows the priority of IKEA over other companies is the company`s innovative developments in order to be more closely to what the customers want.
I
IKEA is participating in charities and campaigns like tree plantation, save the environment or other related CSR (Corporate Social Responsibility) activities. IKEA is trying to reduce water usage and lower carbon footprints. The company could promotes programs for reusing already used products by more investments in renewable energy sources like solar panels and wind turbines. IKEA gives online tips and ideas for recycling and reusing products, aiming at no products ending up at landfill and the recycled materials used in producing new IKEA products. For example, IKEA generated 34% of the energy it used last year through renewable energy sources – and now plans to double its investment in renewables by 2020.
II
IKEA has the opportunity to reduce the prices of the products by minimizing transport and labour costs. The company is reducing the transport costs by possessing a big network of suppliers closely attracted to supply chain processes that helps in gaining industrial knowledge continuously and enhances information flow facilitation and operational efficiency. Moreover, the company is reducing the labour costs by building branches in low-cost manufacturing nations with close proximity to raw materials and distribution channels.
III
IKEA is amongst the biggest retailers of furniture in the world and because of that many people have trust in IKEA, the company has the opportunity to ask what people want and need. The company could improve its competitive advantage using its image. For example, according to Interbrand, IKEA is the most valuable furniture retailer brand in the world. In the past year, IKEA kept close to customers and doubled its Facebook and Twitter followers and created the Shared Space website where customers can post pictures of rooms they’ve redecorated.
IV
In order to have better trading and to increase its profit, the company should improve its sites and starts offering more services. Over the past years the online sales have grown constantly and this allows the company to develop innovations that could attract more customers, who are pleased with that because they could shop from their homes. For example IKEA has created ‘Augmented Reality’ app for iOS and Android, which is an innovative way for advertising IKEA`s products that could make online sales` rate exploding.
Strengths:
1) Strong global brand attracting key consumer groups
2) Same quality and range worldwide
3) Its vision “to create a better everyday life for many people”
4) Wide range of well-designed and functional products at low prices
5) Ideal balance between function, quality, design and price
6) Increasing use of renewable materials and 'Smarter' use of raw materials
7) Creating long-term partnerships with its suppliers
8) Bulk buying and cheaper unit cost
9) Reducing transport costs by sourcing materials close to the supply chain
10) Direct deliveries from the supplier to IKEA stores –reducing handling costs, road miles and lowers the carbon footprint
11) Usage of new technologies

Opportunities:
1) A growing demand for greener products
2) A growing demand for lower price products
3) Demand for reduced water usage and lower carbon footprints
4) Developing social responsibility
5) Sustainable use of resources
6) Solutions for a sustainable life at home
7) Being open to all its stakeholders
8) Further expansion into developing economies
9) Growing online sales
10) Expansion to growing grocery market

Weaknesses :
1) Difficulty in controlling standards, quality and working conditions because of IKEA size and scale
2) Need for balance between low cost products and good quality in order to differentiate itself from competitors
3) Need to keep good communication with its stakeholders and customers
4) Negative publicity
5) Lack of innovations
6) Stores density – more stores, the same number of customers
7) Location of stores
8) Financial flaws
9) Advertising problems
10) Standard products

Threats:
1) Recession
2) Growth of average consumer income
3) Social trends - Fewer first-time home buyers
4) Reduced consumer spending
5) Growth of competition
6) Inability of consumers to pick up, transport and assemble the furniture
7) High cost in terms of time needed to maintain social media relationships
8) Changes in social trends – consumers may prefer buying pieces of furniture associated with high class in society
9) Poor working conditions in IKEA – bad impact on the brand image
10) Economic crisis – financial losses for IKEA

Combined Threats/Strengths:
1) Diversity in prices and quality for different customers` needs
2) Designing funiture with maximum flexibility in mind
3) Loyal customers
4) company`s innovative developments

Combined Threats/Weaknesses:
1) keep balance between low prices and good quality
2) invest more in innovation; a greater diversity in product line
3) offering a bonus when buying large pieces of furniture – free transportation
4) covering new market shares
5) training before accepting people to work in the firm
6) introducing a system for supervising working process

Combined Opportunities/Weaknesses:
1) Participation in charities and campaigns (World Wildlife Fund, UNICEF, Save the Children, ‘going green’, etc.)
2) More market research and taking different customers’ wants into consideration
3) Imposing more restrictions and to hire more inspectors to keep an eye on the working process
4) Reducing water usage, reusing already used products
5) Reducing expenditures
6) Improving online shopping

IKEA SWOT analysis
Opportunities-Strenghts
1) Taking part in CSR activities; recycling and reusing products 2) Minimizing labour and transport costs – reducing prices 3) Online evaluation form of IKEA 4) Offering more services and improving the company’s sites
IKEA is a Swedish company registered in the Netherlands that designs and sells ready-to-assemble furniture, appliances and home accessories. As of January 2008, the company is the world's largest furniture retailer. It is founded in Sweden in 1943 by the 17-year-old Ingvar Kamprad, who is one of the world's richest people in 2013. The company's name is an acronym that consists of the initials of Ingvar Kamprad, Elmtaryd (the name of the farm where he grew up), and Agunnaryd (his hometown). The company is known for its modern architectural designs for various types of appliances and furniture, and its interior design work is often associated with an eco-friendly simplicity. In addition, the firm is known for its attention to cost control, operational details, and continuous product development, corporate attributes that allowed IKEA to lower its prices by an average of two to three percent over the decade to 2010 during a period of global expansion. As of October 2011, IKEA owns and operates 332 stores in 38 countries.
The world's five largest IKEA stores are:
1. Stockholm Kungens Kurva, Sweden 2. Shanghai, China 3. Shenyang, China 4. Tianjin, China 5. Berlin Lichtenberg, Germany
Conclusion
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.
IKEA believes that there is no compromise between doing good business and being a good business. It aims to go beyond profitability and reputation. IKEA is intent on becoming a leading example in developing a sustainable business. This will create a better everyday life for its customers. IKEA has discovered a business truth being sustainable and responsible is not just good for customers and the planet, it is also good for business!

Extra materials

http://businesstoday.intoday.in/story/how-ikea-adapted-its-strategies-to-expand-in-china/1/196322.html

http://www.cs.unitn.it/~andreaus/bs1213/stakeholder_IKEA.pdf

http://www.ipedr.com/vol28/6-ICEMM2012-T00023.pdf

http://hig.diva-portal.org/smash/get/diva2:326248/FULLTEXT01
Extra materials
http://english.peopledaily.com.cn/102774/7875424.html
Extra materials
http://www.ikea.com/ms/en_GB/pdf/people_planet_positive/People_planet_positive.pdf
Extra materials
http://www.slideshare.net/OsamaAlbarrak/ikea-strategic-case-study
Extra materials
http://www.ivoryresearch.com/free-swot-analysis-generator/
Extra materials
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