Ikea SWOT analysis Essay

1. guest knowledge one of the key competitory advantages IKEA has the deep knowledge intimately the guest. The company to a lower placestands the purchasing factors that influence customers to debase and implements the best practices to induce that decision. IKEA offers low exp devastationingitures and a broad range of products. Designers forever introduce new design products that look stylish in the look of customers. altogether the products argon intentional so it would be easy to carry-over and assemble. muchover, the company offers the widest product range and positive shopping experience.All of these factors ar aligned with what customers want and choose and which results in higher gross r howeverue. 2. Constantly apply innovations to drive cost down. Low prices atomic number 18 the core stemma of IKEA transaction idea and company always tries to do things as efficient and efficient as possible. To drive costs down all the metre, the company mustiness f ind new and innovative ways to do that and to incorporate them in its concernes model. The business innovations include new real(a)s that help IKEA using the recycle material to become a friendly milieu company or using the newest ways of packaging.3. Supply chain integration. IKEA is committed to long lasting relationships with its suppliers. In this way, the company send packing order large volumes and benefit from lower prices and great prize while suppliers ar assured of guaranteed orders. IKEA sources its materials close to suppliers to reduce transporting costs. All the efforts of closely integrating supply chain results in lower costs and a competitive advantage. 4. Brand theme and grocery presence. According to suppress brand, IKEA is the more or less valuable furniture retailer brand in the adult male, cherished at nearly $US 12.8 billion in 2012. The business operates 332 stores in 38 countries and is present in the major world markets. More than 600 million c ustomers visit IKEA stores every year. Worldwide market presence and bullocky brand reputation ensures that customers volition often choose IKEA over its competitors. 5. modify product portfolio. Unlike IKEAs largest competitors, the company has fairly diversified businesses. In addition to its furniture products, the company operates restaurants, houses and flats.Although, firms main business is designing, manufacturing and selling furniture it is not so affected by the changing forces in this market as other furniture retailers. 6. IKEA uses cheap boil which keeps its costs down and gives them a competitive advantage. Starting from the days when it find that furniture manufactured in Poland was as much as50% cheaper than furniture do in Sweeden, IKEA has started looking for cheap labor. It top five supplying countries ar China (21% of supplies), Poland (17%), Italy (8%), Sweden (6%)and Ger galore(postnominal) (6%).China, as everyone knows, go outs really cheap labor so IK EA gets its largest puffiness of furniture manufactured from there. Cheap labor keeps the costs down and digest them to charge customers low price and helps IKEA patronize its competitive advantage. (IKEA mill 2013 ) Weaknesses 1. forbid publicity. The company has been criticized many an(prenominal) times for issues like poor treatment of employees, problematical advertising practices or lobbying government authorities. Negative publicity decreases brand reputation and customer loyalty. 2. Low quality of products and services.IKEA is unable to find compromise between continuous cost reductions while maintaining the same quality of products. According to UK Customer Insights report on IKEA by Verdict, IKEAs customers argon less satisfied with its product and services quality than the average customer in UK get at other stores. Firms cost reductions lead to diminish product quality, which was followed by higher number of products returned and damaged brand. nurturemore, the Ikea product privation of innovation like KEA designs the price tag first, then the product.IKEAs product strategy council is so much Obsessed with low price that they spend almost no time on product innovation. IKEA has been enjoying sustainable competitive advantage due to their low cost strategy 3. archetype products. IKEAs main competitive advantage derives from low costs, which in lot be achieved due to standardized products. Standardized products attract fewer customer segments. in that locationfore, the business inability to offer better quality more customized products allows its competitors to gather that niche and fortify their position in it.4. It lacks thorough market interrogation on customers preference before write in codeing into a new market. To provide a good quality product and as well value the customers strike and wants should be the organizational motto this is be flummox its a furniture company. IKEA did not do any sort of market explore regarding customers needs and wants. So they should come up with a market research results that volition give them more profit. Furniture Ikea Online Strategic Ikea Design Opportunities 1. Further expansion into snap offing economies.Retail markets grew by at least 5% on average in emerging markets in the last year, enterprise huge opportunities for IKEAs revenue call onth. The company currently operates in most of the developed economies but hasnt firmly stepped into developing economies, except China. there are great opportunities for IKEA to expand into Brazil, Mexico, Indonesia and Malaysia to increase its presence in these markets to sustain future growth. 2. Growing online sales. Online retail sales account for 17% and 4% of total retail sales in UK and US respectively.Online sales grow constantly and with 870 million visitors to its website IKEA could exploit this opportunity and benefit from increased sales and lower costs. 3. Expansion to growing grocery market. The current trend of eat healthier food has resulted in higher demand for grocery products in many developed economies. IKEA has an opportunity to expand its grocery business by introducing more grocery stores in its current retail places. The company is already successfully managing its food outlets, so this expansion opportunity would be wellhead aligned with the current operations. Threats 1. Intensifying competition.Many low cost retailers much(prenominal) as Walmart, ASDA or Tesco are entering seatware specialists market where IKEA operates. These large retailers hasten similar specifics as IKEA, including low costs, well managed supply chain and huge market presence and can easily gain some market share from IKEA. 2. Growth of average consumer income. Growth of average consumer income means that mess buy less low price and low quality products, which is on the nose what IKEA offers in its stores. With the rising income people will be less attracted to IKEA and will turn to retailer s that offer higher quality home ware products. ( IKEA SWOT 2013 )Porters Five forces Analysis 1. Rivalry inside the effort In Sweden there is handful of companies involved in the furniture industry. but there are a lot of retailers in the market. The shape is reasonably much same in regular army. There are Home Depot,Wal-Mart, Costco and many other bitty retailers. On top of this many retailers import from chinaware and sell it in the market at low price. This indicates that the competition within the industry is very high. 2. Bargaining power of suppliers It can be posit that the bargaining power of suppliers is low. IKEA has a well-established relation with suppliers all over the world. cashbox 2008 IKEA has 1380 suppliers in 54 countries 21% of which are in China. Moreover IKEA also own manufacturing company like Swedwood Manufacturer. So it is evident that IKEA can threats the suppliers to enter into their business. 3. Bargaining power of buyers There are a lot of retai lers who are coachly involved in price war against each other. There are importers who are importing from china also in direct competition in the market. So the consumers have many alternatives. They can chose which manufacturers they will buy from. So the bargaining power of buyers is high. 4.Threats of new entrants There are no entry barriers in the industry. But the intensity of competition whitethorn scare off potential entrants. The required initial investment is not too much. Anyone can open a retail shop with small investments. But if someone wants to become a major player in the industry than the firm needs to invest a lot of money, need to establish relation with suppliers, select suitable locations for outlets. These will require a lot patience and capital. So it is safe to say that the threats of new entrants are high if competitors want to do business for a long term.5. Threats of substitutes Since the innate(p) of civilization men are using furniture. The styles are ch anging so as the trends. The industry is moving wood to plywood, rot iron even plastics. As the market is becoming more environment implicated many firms are giving slogan to go green. But the basic serviceable demand has remained the same. So it is safe to say that there are no threats of substitutes Opportunities IKEA can expand its product line by producing high end products From the very beginning IKEAs target market has been the middle split to lower middle class people.This strategy has been worked for a long time but IKEA never wondered about how farther they can reach. In the States the trend was changing people were getting thirstier for elegant design. IKEA can develop products that are designed for the high class people who are sensible about the design and quality and do not care about the price. For example Toyota Lexus. IKEA can expand its business into interior designing and crockery products IKEA can expand its core business of furniture to a bordering level. IK EA can place crockery item swith the kitchenware furniture.This way when a customer walks through the kitchenware department he/she will be attracted to these products and may end up buying some. IKEA can go for environment friendly applied science Customers now a days are now more concerned about the environment than ever. So IKEA can make products that are environment friendly products that consume less water so the carbon trail will be at minimum. Product customization can boost up IKEAs sales IKEA can call for idea from its customers. This will unimpeachably bring in some unique idea to the tent.IKEA can school a service that will allow customers to order customized products for some particular(a) charges. This will help IKEA to capture the particular segment of the market who loves customization Threats ever-changing social trend can hinder the growth of sales of IKEA IKEAs objective is to provide products to its customers at cheaper rate than the competitors. This objecti ve does not complete the necessity of a constant development of design and quality. In the following of becoming a cost leader in the market IKEA can lose a major portion of the market that want quality and well designed products. Accelerated market competition in the StatesThe furniture market of USA is very fragmented. But there are some well-established retailers who are selling functional furniture at a very low cost for example Wal-Mart, Office Depot. These retailers will be in direct competition with IKEA. On top of this there are also some high end retailers who sell high-quality, well designed furniture. These high-end retailers often provide additional services like interior designing, home delivery and free set-up. The risk of global financial crisis The global is under a constant threat of depression since 2007. The whole economy of the world is suffering from a recession since fiscal year 2006-07.This economic condition may affect IKEA. Since the purchasing power of bu yers has gone down they would be reluctant to purchase products that are not vital to them. This can cause a free-fall of sale revenue of IKEA worldwide especially in USA ( Dahman J 2011). Reference Dahman, J 2011, IKEAs Strategic Management, Scribd, viewed 12 October 2013, http//www. scribd. com/ mercantilism/59951004/Case-Analysis-IKEA. SWOT analysis of IKEA, IKEAs Strategic management, viewed 11 October 2013, http//www. strategicmanagementinsight. com/swot-analyses/ikea-swot-analysis. html