Ikea Case Study

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Ikea Introduction

The business environment of an organisation is dependent upon their internal and external factors that have a massive influence over their production performance. In order to make sure necessary growth of company is achieved, retail businesses implies influential factors of external environment. This assignment has undertaken IKEA case study to signify their strength and weaknesses through SWOT analytical tool. It has further identified the probable impact of external factors from Pestle analysis. The table labelled with company information provides specific details of IKEA’s area of service, their USP, website and product which are developed for certain range of target group.

Fill the table

Company Name

IKEA International Group

Type of industry

Retail

Headquarters

Netherlands

Sales/Revenue

38.8 billion Euros

Area served

Globally

Number of stores

423

Competition

TESCO, ARGOS, WALMART and AMAZON

USP

Leading edge Scandinavian Design and Boxed packaging system

Target Group

Families with residential property

Products

Furniture and electronics

Website

https://www.ikea.com/

Table 1: Company information on IKEA

(Source: Based on ikea.com, 2019)

Ikea Swot analysis

Strength

  • IKEA has been conducting retail business of furniture in international platform
  • IKEA has been able to acquire increase of 5% profitable revenue by 38.8 billion Euros (ikea.com, 2019)
  • IKEA has been engaging into building affordable homes for UK residents
  • Acquisition of 30% revenue from rent (theguardian.com, 2019)

Weakness

  • IKEA has taken an initiative to reduce 350 UK staff members (theguardian.com, 2018)
  • The cost leadership strategy of IKEA leads them to compromise with product quality

Opportunities

● IKEA has online platform to conduct business

● IKEA has been exploring Asiatic region to increase their business

● IKEA has recorded more than 850 million visitors on their online profile (ikea.com, 2019)

Threats

  • IKEA competes with Argos, NEXT PLC, Amazon and Tesco
  • Increase of online players could reduce profitable income of IKEA

Table 2: SWOT of IKEA

(Source: theguardian.com, 2018)

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Ikea Analysis

International operational activities of IKEA are a positive approach for increasing popularity and result in higher revenue than their competitors in furniture industry. It has been opined by Cepel et al. (2018) that companies striving to conduct business in global platform undoubtedly records better growth model. This viewpoint also reflects the intention of IKEA that allows them to overcome trade and distance issues to invest in regions other than European region. As per the case study of IKEA, it is required by the organisation to not only include new strategic objectives but also imply necessary employee management approach to handle the issues of individuals employed at foreign locations. However, Sun et al. (2018) has highlighted the negative prospect of poor product quality. In order to maintain their current market position, IKEA have to adopt price penetration strategy rather than depending upon cost leadership strategy.

As per the case study of IKEA, it could help the company to not only focus on their premium quality of furniture but also tap into unexplored region through discount offers and relying on low price margin for a shorter period of time. On the contrary, Maletič et al. (2018) has praised the effort of companies making social approach for surrounding communities. Since it is being a developing residential property for average people, it can be expected that their image among UK residents could incline their company to positive and advantageous position in the industry.

Above all UK and other European business region is primarily dominated by Amazon, Wal-Mart and Tesco due to their diversification in product category. As per the case study of IKEA, the competitors of the organisation could be overcome with the help of official website that could be used for commercial purposes. As per the opinion of Toppinen et al. (2019), e-commerce has allowed majority of small and medium and MNCs to expand business portfolio. Similar approach has been undertaken by IKEA for not only conducting business with European residents but also move toward Asian region as most of the online business activity occurs in Asia.

Ikea Pestle Analysis

Areas

Factors

Impact

Political

  • Stabilised political environment in local regions of UK
  • BREXIT led to imposition of trade regulation

Moderate

Economical

  • National bank have decided to increase bank interest by 0.75% (bankofengland.co.uk, 2019)
  • Export in UK has increased by 13% (wits.worldbank.org, 2019)

Positive

Social

  • Diversification of population from multiple cultures and ethnicity
  • Employment rate has set to be stagnant at 76% (tradingeconomics.com, 2019)

Positive

Technological

  • Increase of online business
  • Improvement in technical infrastructure of companies

Positive

Legal

  • Consumer Rights Act, 2015 and Sale of Goods Act, 1979

Moderate

Environmental

  • Conservation of fuel while transporting products

Negative

Table 3: PESTLE of IKEA

(Source: Wits.worldbank.org, 2019)

IKEA Analysis

The political stability in a country plays a vital role for promoting the interest of business communities and paves the way for their success. As per the case study of IKEA, internal politics of UK region has seen stability from political organisation which could be a green signal for IKEA to expand their market into UK. On the other hand, political turbulence due to BREXIT has caused the majority of businesses to lower their export in EU region due to an increase in trade regulation charges. This could have a moderate impact over IKEA as they can be able to focus on internal regions of UK and other countries viable for furniture business through offline and online mode. Influenced by the views of Jahanmir and Cavadas (2018) it can be mentioned that economic stability through export results in increase of growth index for companies situated within the region.

As per the case study of IKEA, the increase of export option in UK can allow this organisation to exploit their market capabilities and increase operational region of the company. On the contrary, Raza et al. (2018) has cautioned about the adoption of high-tech techniques of transportation as it could increase financial budget of the company. As per the case study of IKEA, the organisation could face disturbed financial condition as they have to shell out additional charge for not complying with environmental norms of UK. It can also reduce their profit margin due to higher amount of cost to maintain fuel conservation techniques.

However, IKEA can manage to overcome economic and environmental issues due to influx of diversified population in UK. It might be profitable for IKEA to serve maximum amount of population through online and offline means of communication. As per the case study of IKEA, complying with legal guidelines can provide this retail furniture company authentic stature of business organisation and also empower them to acquire support of law enforcement agencies. The advent of online business opportunity can be certainly helpful for IKEA to make relevant changes into their technical infrastructure and also remains updated with consumer demands. Increase in employment rate is a positive sign for IKEA to improve product quality as more number of consumers could find pleasure in purchasing premium quality of furniture.

Reference List

bankofengland.co.uk (2019). HOMEPAGE. Available at: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate [Accessed 4 August 2019]

Cepel, M., Stasiukynas, A., Kotásková, A. and Dvorsky, J., (2018). Business environment quality index in the SME segment. Journal of Competitiveness10(2), p.21.

ikea.com (2019). HOMEPAGE. Available at: https://www.ikea.com/ [Accessed 7 August 2019]

Jahanmir, S.F. and Cavadas, J., (2018). Factors affecting late adoption of digital innovations. Journal of business research88(4), pp.337-343.

Maletič, M., Maletič, D. and Gomišček, B., (2018). The role of contingency factors on the relationship between sustainability practices and organizational performance. Journal of cleaner production171, pp.423-433.

Raza, S.A., Qazi, W. and Shah, N., (2018). Factors affecting the motivation and intention to become an entrepreneur among business university students. International Journal of Knowledge and Learning12(3), pp.221-241.

Sun, S., Cegielski, C.G., Jia, L. and Hall, D.J., (2018). Understanding the factors affecting the organizational adoption of big data. Journal of Computer Information Systems58(3), pp.193-203.

theguardian.com (2018). Ikea to cut 350 UK jobs as it refocuses on small outlets and online. The Guardian [Online]. Available at: https://www.theguardian.com/business/2018/nov/21/ikea-to-cut-350-uk-jobs-as-it-refocuses-on-small-outlets-and-online [Accessed 6 August 2019]

theguardian.com (2019). Ikea gets green light to build affordable homes in UK. The Guardian [Online]. Available at: https://www.theguardian.com/business/2019/jun/26/uk-council-ikea-affordable-housing-worthing-boklok [Accessed 7 August 2019]

Toppinen, A., Sauru, M., Pätäri, S., Lähtinen, K. and Tuppura, A., (2019). Internal and external factors of competitiveness shaping the future of wooden multistory construction in Finland and Sweden. Construction Management and Economics37(4), pp.201-216.

tradingeconomics.com (2019). United Kingdom Employment Rate. Available at: https://tradingeconomics.com/united-kingdom/employment-rate [Accessed 5 August 2019]

wits.worldbank.org (2019). United Kingdom trade statistics. Available at: https://wits.worldbank.org/CountryProfile/en/GBR [Accessed 5 August 2019]

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