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IKEA Case Study Analysis

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IKEA Case Study

IKEA is an internationally acclaimed furniture retailer founded in 1943 by a 17-year old carpenter named Ingvar Kamprad from Sweden. The name IKEA is an acronym originating from the initials of the founder “I,” and “K.” The “E” and “A” of IKEA is taken from the farm named “Elmtaryd” he grew up as a child in the Swedish village called “Agunnaryd.” IKEA develops easy to assemble furniture, household appliances, home décor items, home services, food products, kitchen items, and accessories. This company has globally expanded its business and is currently the largest furniture retailer in the world, ever since 2008. This company is well known for its eco-friendly, simplistic Scandinavian style, modernist designs of furniture, décor accessories, and household appliances. IKEA’s attention to cost-control and consistent manufacturing of furniture with contemporary designs suited for various households garners consumer interest. The price of items sold by IKEA is both affordable and sustainable. Due to the continuous supply of products, IKEA can quickly lower its product’s price by 2% or 3%.  We are also providing Kraft Foods UK case study solution.

Kamprad had evaluated and analyzed his market strategies before internationally expanding his business. He has been successful in this venture. By August 2020, IKEA had developed 500 + franchises in almost 60 countries and regions. New stores have opened in Moscow, Kiev, Seoul, Macau, and other major cities worldwide. The first store of IKEA outside Sweden was opened in Norway in 1963. IKEA’s significant areas of operation are Europe, Middle East, South Asia, North America, East Asia, Oceania, and North Africa. Despite the constraints of the pandemic, the IKEA conglomerates have reported retail revenue of EUR 39.6 billion for the Financial Year 2020. The revenue has slightly fallen from the previous financial year’s (2019) retail revenue of EUR 41.3 billion. This reduction can be attributed to the financial and physical challenges (lockdown and quarantine) of the Covid-19 pandemic. However, it was reported that 16% of IKEA’s total retail sales accounted for online sales. The online website traffic analysis of IKEA (www.ikea.com) revealed that the company received 4 billion traffics in 2020 in contrast to 3 billion clicks in 2019. IKEA case study help offered by Assignmenthelp.us.

The number of employees globally working for IKEA groups in 2020 amounted to 217,000. There has been a 70,000 increase in the skilled workforce from 2013 to 2020. Reportedly, 825 million customers visited the outlets of IKEA in 2020.  We are also providing KIA Motors case study solution.

IKEA’s vision

“To create better everyday life for the many people.”

IKEA’s mission

“Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.”

Sales share of Top Countries selling IKEA products in Financial Year 2020

Europe – 72.6%

America – 16.5 %

Asia – 10.9%

SWOT Analysis of IKEA

SWOT analysis is a technique used to determine company attributes, saliency, and the company's internal and external factors that impact business.

IKEA is currently a leading furniture retailer globally and has outdone its contemporary competitors like Walmart and TESCO. Companies like Walmart and TESCO operated on a one-solution-fits-all strategy. While IKEA functions on a profound and extensive cultural understanding of the country, it operates in. Other factors like decreased manufacturing costs due to the DIY featured furniture, use of renewable raw materials in manufacturing furniture, and high-quality products at the affordable price range increase revenue. We are also providing Jaguar case study solution.

However, the DIY technique might not be well-suited for various Asian cultures, and this can clash with the business strategy of IKEA. IKEA has successfully promoted the culture of DIY furniture across the globe by setting business in Indian and Serbian markets.

The following section discusses the SWOT analysis of IKEA.

Strengths

  1. Largest international furniture retailer offering a range of sleek furniture - IKEA has been recognized as one of the most influential, successful, and affordable furniture retailers in the world. IKEA has been listed in Forbes's Top 50 “World’s Most Valuable Brands.” IKEA has consistently focused on the production of sleek, urban, modernist furniture and house accessories, integrating affordability, sustainability, and class. In 2020, it added stores in 7 different regions of the world. IKEA is one of the leading furniture retailers providing innovative and stylish interior designs.
  2. Vast network of global ultra-modern stores – IKEA has established about 445 physical stores by August 2020 worldwide, which were run by 11 franchises in around 60+ markets. The stores have facilities like displayed model studios, machine-controlled silos, interior restaurants, and child care areas. IKEA stores remain open for the highest average time.
  3. Collaborative approach to product development and supply chain- Manufacturing cost significantly cut down by IKEA by selling furniture in pieces which is both easy and fun to assemble for the customers. The packing of the furniture parts is done in a space-efficient manner to reduce transportation costs and manhandling. The sustainable supply of raw materials comes from IKEA’s ownership of 74,700 hectares of forest in Baltic countries  

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Weakness

  1. Questionable usability and durability of products offered – The durability of IKEA furniture has been consistently questioned by customers. However, IKEA still continues to dominate the market due to its affordable, ultra-modern product portfolio.
  2. Location of Stores – Some stores are located away from the city centers to accommodate space, making it difficult for customers to access. Several major cities of countries they operate in do not have stores, and online stores do not deliver products internationally.
  3. Similar product portfolio worldwide – IKEA sticks to a standard portfolio of products for every store across the world irrespective of the preferences of the people of the operating country. This is why customers have to narrow their tastes and requirements while shopping for furniture similar to their neighbor’s.

Opportunities

  1. Appealing to eco-friendly customers – IKEA might soon become the advocate of “Ethical chic” products and attract several consumers who are interested in investing in ecologically friendly, sustainable products made of renewable resources.
  2. Global cost-leadership – IKEA’s determined focus on cutting production and manufacturing costs has allowed customers to buy highly affordable furniture while retaining the value of money.
  3. Expansion of the market in developing countries – IKEA has a high opportunity in increasing profitability by entering new markets of developing countries like India and providing to the untapped customer base there.

Threats

  1. Imitation of IKEA’s business model by competitor companies – Walmart, Amazon, and TESCO is also implementing the concept of a cost-effective business model to increase sales and profitability, drawing in many customers of IKEA.
  2. Weak online operations – IKEA’s online retail store is not as functional as their physical stores. Many products are not made available online alongside issues related to delivery. This is IKEA’s Achilles heel where other strong online retail markets like Amazon and Flipkart might be poking.

PESTLE Analysis of IKEA

PESTLE analysis helps a company determine the Political, Economical, Social, Technological, Legal, and Environmental factors that might positively or negatively impact the company’s business positively or negatively.

Political Factors

The 60+ countries in which IKEA operates might have different trade policies and legislation. It depends on the political stricture and system of the operating country if IKEA will lose revenue or not. Countries like India and some Chinese countries are highly tolerant of international brands. However, some American countries might interfere with the exporting and importing of foreign goods, hampering revenue flow.

Economic Factors

IKEA sells luxury items within an affordable range. A cost-effective strategy puts IKEA in an advantageous position. However, during the recession that occurred in 2007, thousands were unemployed, and buying necessities were prioritized rather than buying luxurious items. IKEA’s revenue will fall with recession and rise within a comparatively stable economy. The revenue incurred by IKEA is also influenced by the exchange rates of the currency in the country in which it operates. Strong dollars increase IKEA’s profit and weak dollars-decrease it.

Social Factors

IKEA is known to follow a socially tailored product catalog for different cultures. It is imperative for every company to evaluate the social values of the socio-cultural milieu they are operating in. IKEA was once put under scrutiny for putting a homosexual couple in their Russian catalog. Russia is not yet tolerant of homosexuality. IKEA has to determine its product design and portfolio considering the socio-cultural beliefs of the people in the concerned country.

Technological Factors

IKEA aims to provide a life-size experience to their customers before they choose their products. Their online store also allows customers to view products according to their preferences – affordability, design, price range, color, rooms, etc. However, their online delivery and the operating system have to improve. Many customers complain of never receiving the products they ordered online.

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Legal Factors

The quality issue of IKEA’s products has been highlighted several times during their operational tenure. There were reported causes of falls and breaking of furniture brought from IKEA, leading to death and injury. They might end up caught in litigation with customers. Even though they might recover financially from these lawsuits, their reputation will be disparaged forever.

Environmental Factors 

IKEA has invested in designing and manufacturing eco-friendly furniture. They are developing measures to use sustainable and recyclable raw materials like jute, wood, cotton, and natural fabrics to manufacture household products. These products are non-toxic, ensuring child and pet-friendliness.

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