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Perform a SWOT analysis for IKEA Essay

IKEA is one of the world’s top furniture retailers. The company offers customers a wide range of nearly 10,000 Scandinavian-style products from housewares to leather sofas and from plush toys to curtains. IKEA has ability to sustain the strategic competitive advantage to the road of success through few factors such as the cost leadership strategy where their attention are directed towards minimising costs to operate more efficiently than the competitors. As a result of their majority of furniture is flat-pack, their costs and packaging can be reduced.

Besides that, IKEA is success through their wide expansion of market because IKEA now has 37 stores in the U. S. and more than 300 IKEA stores in 38 countries. Furthermore, the low price is affordable to everyone and is reasonable with their high quality and stylish products. IKEA has always been social responsible through environmental goal setting. IKEA concerns for the environment by increasing the use of recycled and reusable materials, waste reduction, etc. Its socially and environmentally responsible approach to business is recognised as a benchmark for retailers around the world.

SWOT analysis is the analysis of the organisation and analysis of its environment, the internal analysis of organisational strengths and weaknesses as

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well as the external analysis of environmental opportunities and threats. It is the initial stage of planning and helps producers to target issues. Strength is the capability within the organization that provides a competitive advantage in the market whereas weakness is any existing or potential force which could serve as a barrier to maintaining or achieving a competitive advantage in the market.

On the other hand, opportunity is any existing or potential force in the external environment that, if properly leveraged, could provide a competitive advantage. Last but not least, threat is any existing or potential force in the external environment that could erode a competitive advantage. The first part of SWOT analysis is covered by strengths. There are five points of strengths which IKEA hold. First of all, brand recognition. IKEA is an internationally known brand and is a strong global brand which attracts key consumer groups. It ranges worldwide and promises the same quality.

Since IKEA was founded in 1943 and had 253 stores in 24 countries, it has a strong brand awareness. Everyone knows about IKEA. Secondly, IKEA’s strong concept and clear vision. IKEA has its clear vision which is “to create a better everyday life for many people” and its concept focuses on simple, low cost, stylish and functional products. It reaches an ideal balance between function, quality, design and price. They not only taken into account of good functions and high quality products but also well and modern design as well as low price to attract customers.

Furthermore, IKEA enjoyed the economies of scale. IKEA bulk buying of materials that stem from operating on a large scale and maintained long-term relationships with the suppliers reduces the average cost and could access to high quality materials at reasonable prices. IKEA committing to buy large volumes over a number of years so IKEA can negotiate for lower prices. Next, IKEA has a good market share. IKEA has a large market share as it is the world’s largest furniture retailer, it grown rapidly since it was founded and has more than 200 stores all over the world in different countries.

Lastly, IKEA owned the skilled workforce in its organisation. IKEA is always highly focuses on training for management and staff to ensure all the staff provide quality services for the consumers. Their training for staff varies from sales person, customer relations, logistic co-workers, cashiers, human resource, etc as all of them requires a degree of specialist knowledge to provide assistance for example kitchen installations. The next part covered in this analysis is the weakness. IKEA has to recognize its weaknesses in order to improve and manage them.

This is important for objectives setting and develops new strategies. There are five weaknesses of IKEA. The first weakness is the size and scale of its global business. The large scale of business that IKEA practicing making it hard to communicate with its consumers and other stakeholder about its environmental activities. It has to put much larger effort in promoting and advertising for its products and activities. The large scale of IKEA’s global business also caused quality concern of its products in some area.

Some of the countries where IKEA’s products have made do not complement the regulation on the working condition. Next weakness is the privately owned & needed of real estate. The privately owned characteristic of IKEA’s business will restricts the capital owned. This formed a restriction for the business investment. The capital limitation restricts the business to invest high capital project and prevent it response faster to the environment changes. Another weakness of IKEA is from the real estate point of view.

It requires extremely large areas for building its warehouse and stores. However, it is always not an easy job to get a strategic location or area within budgeted cost. The high cost of real estate will increase the cost of the business. Another weakness of IKEA is the demand for low cost products. This needs to be balanced against producing good quality. IKEA also needs to differentiate itself and its products from competitors. It believes there is no compromise between being able to offer good quality products and low prices.

Then, IKEA has no direct competition. IKEA as the world’s largest furniture retailer has no direct competition. This is because most of its competitors having smaller scale of global business and is hard to compete with IKEA. IKEA has no motivation to improve its business and products due to lack of competition. If this situation sustain continuously, the business will short of crisis awareness to the environment changes. Then, opportunities are the next part in this analysis.

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