This article is about a concise SWOT analysis of IKEA. It aims to look into the strengths and the weaknesses of IKEA. Similarly, it aims to examine the opportunities the company should explore and the threats it should keep an eye on.
Introduction to IKEA
Founded in 1943 by a 17 year Swedish, Ingvar Kamprad, IKEA is now the world’s largest furniture retailer. It operates its business from Netherlands. The name IKEA was coined by using initials of founder, his house name and hometown; Ingvar Kamprad (name of the founder), Elmtaryd (name of his family farm), and Agunnaryd (his hometown in Sweden). With a vision ‘to create a better everyday life for the many people’, IKEA designs and sells affordable furniture which are ready to assemble and followers believe their designs are modern & eco-friendly. It operates in 49 countries and owns 411 stores. In 2016, total revenue earned by IKEA was 35.1 billion Euros (IKEA, 2018).
SWOT analysis of IKEA – IKEA SWOT analysis
As mentioned above, this is a brief SWOT analysis of IKEA; however, it addresses some of the key issues as follows:
Strengths of IKEA
Interbrand ranked IKEA as the most valuable furniture retailer in the world and 25th best brand worldwide in 2017. Its value stands at $18 billion. Along with its huge presence in 49 countries, IKEA has a strong brand reputation worldwide and attracts approximately 600 million customers every year (Interbrand, 2017).
Diversified product portfolio
In addition to its furniture retail supermarkets, IKEA has also invested in restaurants and real estate business. Diversified range of businesses works as a lifeline for the company when its main furniture business is in trouble.
Integrated supply chain
Due to long lasting relationships with its suppliers IKEA benefits from lower price supplies while suppliers get guaranteed orders for long time. Unique IWAY approach integrates suppliers with IKEA’s supply chain. This gives IKEA competitive advantage and helps it in reducing costs and producing innovative quality products (IKEA, 2018).
Weaknesses of IKEA
Basic products and DIY skills
IKEA appeals less to people who lacks DIY skills. Customers have also shown dissatisfaction with its products as continuous cost reduction strategy resulted in poor quality basic products. Every year numbers of items returned are increasing. Customers also talk negatively about the reassembling and long lastingness of the products.
IKEA is struggling to maintain its standards across locations worldwide. While the company use the techniques of local responsiveness by adding raw materials and designs from the local operations, some customers see this as evading the original standard and culture of the company.
Some of IKEA’s operations were blamed for its poor environmental policies. As IKEA always promotes it as an environmentally concerned organisation, such news could damage the brand.
Opportunities for IKEA
Environment conscious customers
As customers worldwide are becoming more environment conscious, IKEA’s green business model has great opportunities.
Cost conscious customers
IKEA’s products are considered as value for money. As it is expanding in developing countries, it will be able to attract more price-sensitive consumers from those locations (Lewis, 2017).
Untapped markets of emerging economies and developing countries offer an opportunity for IKEA’s expansion. The company’s cost leadership will give it an extra advantage in this case.
Threats to IKEA
Many companies are copying designs of IKEA. And, it is not difficult for the customers to find counterfeit products on the Internet either.
Customers moving to higher income level
When IKEA’s customers move upwards in income with age they become disillusioned about DIY products. IKEA also needs to offer differently designed upmarket products.
Internet and DIY USP
Flat-pack self-assembly furniture has been IKEA’s unique selling proposition for a long time. But due to proliferation of the Internet, small furniture companies can offer similar products at lower costs (IKEA, 2018).
The above analysis shows that instead of some weaknesses, IKEA has enough strength to survive and flourish as a company. Using the strengths of unique design and diversified products IKEA needs to successfully face the threats of the Internet and counterfeit products and use the opportunity of expanding in developing countries to improve its presence as a brand.
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Last update: 08 April 2018
IKEA, 2018. Who we are. [Online] Available at: http://franchisor.ikea.com/who-we-are-2-2/ (Accessed 05 April 2018)
Interbrand, 2017. Best of Global Brands 2017 Rankings. [Online] Available at: http://interbrand.com/best-brands/best-global-brands/2017/ranking/ikea/(Accessed 04 April 2018)
Lewis, D., 2017. How IKEA used affordable and innovative designs to transform homes. [Online] Available at: http://uk.businessinsider.com/how-ikea-became-successful-2017-10 (Accessed 05 April 2018)
Photo credit: IKEA
Author: Dr. Sewel Sodry
Dr. Sewel Sodry is an internationally acclaimed author and teacher of business management. He is also a specialist coach, trainer and educationalist. He holds a Master of Business degree from Victoria University, Australia and a PhD from King’s College (University of London).