IKEA Case Study SWOT & Pestle Analysis

Background of the IKEA

IKEA mainly functions in the field of furniture collecting and hence the case study must include the case history of the business so that the real field of business processes of the firm can be effortlessly understood as well. The firm is known for marketing ready to assemble equipment and home decorations. The main special characteristics of IKEA is related with the fact that the business gives current architecture designs and also gives close eyes on the unremitting growth of dissimilar goods, development of processes and final the cost. IKEA is a privately-held, global home goods seller that sells flat pack fittings, decorations, and rest room and pantry substances in their retail shops in the different countries of the world.

The company, which established flat-pack design equipment at reasonable values, is nowadays the world's chief furniture store.  IKEA was initiated in the year of 1943 and it was founded by a 17-year-old individual named Ingvar Kamprad in Sweden. The company it is owned by a Dutchregistered organization controlled by the Kamprad family. The organization which was originated in Småland, Sweden, provides their goods through their retail shops. In the year of 2009, in August, the company has almost 301 stores in 37 countries and most of the outlets are located in Asia, North America, Europe, and Australia. The Concept of IKEA was beginning in case of Ingvar Kamprad, a businessperson from the Småland area in southern Sweden, had a ground-breaking idea. In this Småland area, though the soil is thin and deprived, the persons have a standing for working hard, living economically and creating the most out of incomplete properties. So, when Ingvar initiated his business of furniture at the the later stage of 1940s.  The individual applied the lessons he learned in Småland to the market of home furnishings.

The Ingvar’s unique idea was to offer home furniture of unique designs and functions at a lower price segments and it provides a lot of competitive advantages over their market competitors by applying the simple cost-cutting strategy. However, the organization did not allow to reduce quality of the furniture products. The organization had utilized all the possible ways to reduce the prices of the furniture products and the manufacturer compromised all the possible ways to cut the costs except the quality and ideas of manufacturing the furniture. The main vision of IKEA is to generate better quality of everyday life for most of the people as well. For achieving the goals of the organization, the company has decided to provide low price range products without even compromising the quality of the furniture. The organization also takes care about the environment and their customers and around the world, the customers of IKEA also accepted their approach as well.

SWOT Analysis

Strengths-

While discussing about the strengths of the company, it can be reported that the clear vision of the organization in the field of business is one of the strengths of the company. This condition adds worth to its clients regardless of the market circumstances. This has explained into a clear and well-defined commercial approach and a method to retailing, which is ground-breaking in its effortlessness and terminal in its directing of contestants and actual in its market positioning. Another important strength of the organization is its vibrant idea which interprets into a collection of goods that can be accumulated by the clients themselves causing huge discounts in the costs which are then impacted the pricing of the customers as well.

Along with the organization’s single-minded emphasis on cost leadership, IKEA has arisen as the world’s foremost seller of home-based furniture. IKEA examines its strengths using the system of measurement providing by the Key Performance Indicators or KPIs that comprise augmented usage of renewable resources, smarter usage of raw resources, founding and preserving long-term relations with dealers and leveraging the competences and the interactions from the frugalities of scale. Apart from that, the brand value of the company is considered as another strengths of the study and it is placed in the top organizations of the retail sectors. This position is also strengthened by the financial strengths of the company as well.

Weakness-

As a part of the weakness of the organization, it can be reported that being a multinational company, the organization has to operate in different countries of the world and as a consequence the organization must have to maintain the quality and standards of the products. Therefore, it is difficult to maintain the quality and standard of the organization equally in all the countries and it is considered as the weakness of the company. Nevertheless, the corporation tries its best to maintain even excellence across its merchandise range and throughout its places, replicable and ascendable regulator of excellence is a main weakness. The huge focus on the cost leadership can impact the profitability of the company as the prices of the raw materials have gone up and as a consequence the profit margin of the company is reduced eventually.

Opportunities-

As a part of the opportunities of the organization is associated with their expansion of business in the different emerging markets around the world specifically in the developing countries of the world. The organization has an unused client base that can be leveraged for active success of the company in terms of economy. IKEA is previously drawing up tactics to arrive marketplaces like China and India with a strong policy of cost leadership, which is expectations, would produce assistances to the corporation. Another opportunity of the company is the use of the green business model of the company and this strategy of delivering such products will attract more customers towards their products. This strategy also produces a lot of loyal customers which eventually will enhance the business of the company as well. The environmentally conscious customers will attract towards these environmentally friendly products as well.

Threats-

The low-cost business model of IKEA has been copied and cliched by its competitors, which indicates that the firm needs to continually invent if the organization has to sustain in the competition of the furniture market. For example, numerous provincial and local firms have caught on to the DIY bandwagon and are also concentrating on prices which means that to sustain agile and supple, IKEA has to create newer and completely innovative policies. Apart from that, the beginning of the online shopping and internet, DIY as an important driver of tactical achievement is not still the only USP or Unique Selling Proposition of IKEA and with the propagation of online sellers who can deliver even lesser prices as they do not have a physical stores or shops and by this they are breaking the foots of IKEA.

PESTLE Analysis

Political Factors-

As a part of the political factors faced by the organization it can be reported that an unfavourable administration can make importation and transferring foreign things a disturbance. IKEA relies on these relations to be stable, else; their income is at stake. On the other side, a decent association is a sacred sign for IKEA. The political stability of the different countries in which the organization operates may cause trouble to the organization and any type of detrimental stability can affect the revenue of the organization. IKEA may lose their profits in one site over another due to the presence of the different economic policies of different governments as well.

Economic Factors-

As a part of the economic factors, it can be reported that the IKEA is affected by the presence of the international laws and the organization is susceptible to the economy of the world as well. Moreover, it is also very important to mention that there are a few brands that are suffering from the economic recession of 2007. A lot of people have lost their jobs and as a consequence of this people become very conscious regarding their purchases. This factor was considered by the IKEA and budget friendly products are offered by the organization as well.

Social Factors-

Considering the cultures of the different countries is very essential for the company to consider and it helps the company to understand their customers as well. The understanding of the different cultures of the company will help to sustain the organization in different countries of the world as well.

Technological Factor-

As a part of the technological factor the organization must consider the modern technology and should actively use these types of technology in their business process. As a part of this the organization can use the modern technology to showcase their products as well. Online, IKEA aims to deliver an accurate experience for their clients. In case one can’t make it to their stock, one can still preserve a parallel experience online.

Legal Factor-

As a part of the legal factor the organization must consider the copiousness of laws and rules in every country, they function in. Subsequently as they have physical shops, remaining up-to-date with labour laws is indispensable.

Environmental Factor-

As a part of the environmental factors, it can be reported that the organization has concentrated in the production of the eco-friendly products and also invested a lot towards the renewable energy specifically in the poor nations of the world.