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IKEA SWOT Analysis

Strengths
IKEAs cost leadership concept keeps it ahead of its competitors.
Justification: whenever IKEA produce their furniture, firstly they fixed the price and then they
started producing. So with the context of cost leadership IKEA is ahead then the other
competitors.
IKEA has successfully combined low cost with good quality.
Justification: As we all know that IKEA, they produce low cost product than the others that
dont really mean that they manufacture low grade product. They always maintain the good
quality product for the customers. From the very beginning they maintain their product quality as
well
IKEAs research and development team finds ways to alter designs to save on manufacturing
costs.
Justification: after a little success, the chief of IKEA Mr. Kamprad appointed a designer to
design good quality product. Moreover the designer finds out the strategy to make the product
manufacturing cost as low as possible.
A key feature of IKEA furniture is self-assembly.
Justification: with regards to low price strategy, IKEA come up with a good strategy and that is
self-assemble. IKEA tried to make their customers knowledgeable about their product. They also
tried to create a good impression toward their furniture to the customers that, customers can rely
on their furniture.
IKEA uses cheap labor which keeps its costs down and gives them a competitive advantage.
Justification: if we talk about the competitive advantage of IKEA furniture, than that is the cheap
labor cost. Whenever they discovered that furniture manufactured in Poland was as much as 50%
cheaper than furniture made in Sweden, they started to get the competitive advantage of that.
Its strong long-term relationship with its suppliers gives it a competitive edge.
Justification: whenever IKEA started their production in Poland, they made a very good
relationship with the suppliers. A strong relationship established with the suppliers provides a
very smooth supply chain which saves IKEA from quite a lot of additional costs and hassles.

IKEA has the ability to adapt its tactics according to the market.
Justification: IKEA has a very good strategy to adapt the way according to the market. If we see
the scenario of America, than we can realize that whenever Americans didnt their not accept
the previous on and within a very short time they come up with new target market as well as with
reflection of customers needs and want.

Weaknesses
Its organizational culture can become a demotivating factor for many of its employees.
Justification: According to Mr. Kamprad, people work at IKEA this is because of they liked the
atmosphere of IKEA. They follow a very informal environment over there. But the most painful
part is they did not have any hierarchy. So to sustain properly and to do well in this sector they
should have an organizational hierarchy. This is because, after have the hierarchy it could be
strength for them and also a motivational factor as well.
IKEA is not at all customer focused.
Justification: one of the bad parts of IKEA is, they are not at all customer focused. They always
preferred the cost first. The world is changing every day. Customer needs customize product or
they might have some preferences which IKEA should consider.
It lacks thorough market research on customers preference before entering into a new market.
Justification: to provide a good quality product and also value the customers need and wants
should be the organizational motto; this is because its a furniture company. IKEA did not do any
sort of market research regarding customers needs and wants. So they should come up with a
market research results which will give them more profit.
IKEA never took economic issues into consideration before being faced with the problem.
Justification: whenever any company wanted to go global, they should consider some critical
issues like in American market where the goods were priced in the Swedish kronor, which was
strengthening against the American dollar. This drove up the price of goods in IKEAs American
market. So this sort of mistake should be done by IKEA.
IKEA has a tendency of making mistake first and then realizing that it should have taken matters
into consideration beforehand.
Justification: to be a successful furniture company, IKEA should take the customer preference
first and then they should start producing. Whatever, they did not do and research about the need
Page | 16 of customers. After failed with any furniture they started change the design and style

and all those things. Kamprad does not take into consideration the change of times. Justification:
in this world, everyone wants an entity or identity, a designation. The employees used to stick
with the company because they loved their work beyond anything else. However, times have
changed and with that peoples want out of their job has also changed. With regards to time
changes, Kamprad should come up with a proper hierarchy.
IKEAs strategy is not exactly aligned with its vision.
Justification: Actually, in this case we see that, Kamprad just focused on low cost furniture
producing. After that, he tried to expand his business all over the world, but the problematic part
was he did not have any long term goal that where actually he wanted to see his business in
future.

Opportunities
IKEA can expand its product line by producing high end products
Justification: usually IKEA manufacture their product for the middle class, upper middle class
family. But if we consider the present market situation then we can see that, people wants elegant
design and they are ready to pay for that, so IKEA can come up with a new target customer that
is upper class and grab the market as well.
IKEA can expand its business into interior designing and cookeries products
Justification: as furniture is highly related with interior designing and also interior designing
become very popular nowadays, so IKEA can come up with a new idea and that is interior
designing division to maximize their market share as well as their profitability. Moreover
cookeries also can be an ideal product for IKEA.
IKEA should listen to the customer demand to make more sustainable solution
Justification: The people are becoming very conscious about the environment nowadays. So to
be a successful furniture company they can come up with environmental friendly furniture with
vast customization.
Product customization can boost up IKEAs sales
Justification: As we know, IKEA manufactured very stylish product but general, whereas if
IKEA can come up with a customize product for their customer then if could be a very profitable
business for IKEA. People wants customize furniture and there is no substitute product of
furniture.

Threats
Changing social trend can hinder the growth of sales of IKEA
Justification: from the very beginning IKEA is emphasize on the low cost product but if we
consider the customer trend then we see that, a large number of people wants quality product. So
there is high possibility to lost that market who wants good product. So IKEA should come up
with a good quality product strategy with their low cost strategy.
Accelerated market competition in USA
Justification: some of the well established retailer sale furniture with low cost than IKEA, so it
could be very difficult for IKEA to continue their business with only low cost strategy. If we
consider walmart, Office depot price then we can see that, their price is 20% to 30 % lower than
IKEA. So, IKEA should come up with another strategy besides low cost strategy as early as
possible.
The risk of global financial crisis
Justification: The world wide recession is a major factor of bad economic condition. Since 2007,
globally most of the business organizations turnover is decreasing. So it might have some bad
effect on IKEA.

e. IKEA Business Strategy


Low Cost
From the very beginning, IKEA maintain the price leadership strategy. The founder of IKEA Mr.
Ingvar Kamprad started the business whenever he was only 17 years old. It was established in
Sweden in the year of 1943. Mr. Kamprad always tries to give up a structure of elegance to the
furniture. So it was really nice to the customer that, they found their desired furniture in a very
low price. Whenever Kamprad started producing furniture at Sweden, it was very expensive
there. So Kamprad come up with a good strategy that, make a good design furniture with start
adapted to machine production and also cheap to assemble. As a part of giving low price product
for the customers, Kamprad undercut the retailers and sold it to the own warehouse.
Product development
As we know that, Mr. Kamprad always try to give up the stylish product and as a part of this
stylish furniture provided to the customer he hired a designer named Gillis Lundgren. Mainly he
always helped Mr. Kamprad to make the furniture better and also took the photos of the furniture
to give them into the catalog. After hired the designer Gillis Lundgren, he started to design more
and more furniture, where many of them were the best seller in that moments. According to Mr.

Kamprad, he always said that, good furniture should be priced such a way that a flat wallet
holder can also buy the furniture. In this regard, Kamprad tried to come up with some cost
efficient manufactured furniture. Moreover the new designer always tried to explore some new
ideas that, how to save the manufacturing cost with new design.

Large warehouse store


This is one of the best parts of IKEA furniture that, they used large showroom for show their
furniture to the customers. Moreover in the home furniture fair of 1957 they exhibit their product
to the customer. The productive part of being a large warehouse was, customer can see that how
it looks after arranging the total furniture setup. IKEA design their warehouse such a way that,
after crossing a maze it seems that its a finishing or logout of one area. The goal was too simple,
to make the customer feel that, after arranging the furniture it will be like this. Moreover IKEA
provided flat packed furniture which is very safe to carry and assemble also. Furthermore the
idea of making a restaurant within the warehouse was very effective. It was established in the
middle of the warehouse. And last but not the least, IKEA sold their furniture with reduce price
of 30% 50% than the competitors.

Market development and expansion


After making a large amount of profit and as well as the market share in Sweden, Kamprad go
for Poland. After go to Poland, Kamprad discover that, the manufacturing cost of Poland was
50% lower than the manufacturing cost of Sweden. So he started to develop his business to
Poland. The people of Poland preferred Vodka as their business celebration and Kamprad go on
that way and make them happy with Vodka. Kamprad establish a very good relationship with the
suppliers over there. Moreover IKEA started their business in Poland, Norway, UK, USA,
Switzerland etc. in 1965 they expand their business to Norway, in 1973 they expand into the
Scandinavian area, in 1976 to 1982 they expand their business to UK and Canada

Market penetration
From the very beginning IKEA stated to get the majority market share with providing the low
price furniture with stylish furniture. As a part of that market penetration they expand their
business to several countries. IKEA started expansion their business in Poland, Norway, UK,
USA, Switzerland etc. in 1965 they expand their business to Norway, in 1973 they expand into
the Scandinavian area, in 1976 to 1982 they expand their business to UK and Canada. And lastly
they started their business to USA to grab the USA market as well

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