PBUS 101 INTRODUCTION TO BUSINESS

SWOT ANALYSIS ASSIGNMENT – IKEA

DEADLINE – THURSDAY, 3rd OCT 2024 BEFORE 11:59 PM

Read the IKEA case study and follow the instructions below:

IKEA is a well-known brand in many countries, especially in

North America, Europe, and Australia. The Swedish
conglomerate is known for offering an impressive range of
affordable ready-to-assemble furniture based on traditional
Scandinavian designs. The company operates in over 60
countries worldwide and has more than 230,000 workers.

Let’s examine some of the key internal features which give

IKEA a significant competitive advantage over its competitors.

IKEA has a clear vision and has carved out a niche for itself as a reliable source of affordable, yet
surprisingly durable furniture and other home accessories.

IKEA has been the largest furniture retailer in the industry since 2008 and enjoys several benefits
which come with this position. This includes a loyal customer base, a consistent revenue stream,
favourable brand equity, and the advantages which come with the widespread popularity of the
brand. Its large market share also allows IKEA to spend less money on advertising.

Another advantage is the high barrier of entry this situation creates for IKEA’s competitors. They
have a more challenging time carving out a niche for themselves since IKEA is already fully
entrenched within the market, meaning that they will spend more to acquire new customers.

IKEA as a company has built its image and entire business model as a budget-friendly alternative
where people can purchase furniture, kitchen appliances, home decorations, and so on. They
achieved this in several ways, but it can mainly be described as utilizing cost-saving techniques which
allow the customer to enjoy lower prices.

IKEA makes use of a flat packaging system that allows furniture

to be transferred as disassembled pieces instead of a whole unit.
This economizes space, cuts down shipping costs, and will enable
customers to choose custom pieces.

The company also makes use of a range of innovative design and

production techniques, which allow them to cut down on costs
by reducing the number of raw materials required.

IKEA also runs a string of self-help stores that allow

customers to browse through and choose their furniture
without too much interference from staff. This helps lower
wage costs and, by extension, increases the profit margin of
the company.
 PBUS 101 INTRODUCTION TO BUSINESS

SWOT ANALYSIS ASSIGNMENT – IKEA

IKEA also has a Take It Home policy, which will enable buyers to purchase and transport their items
independently, allowing IKEA to avoid delivery costs.

IKEA sells ready-to-assemble furniture. This means the company does not assemble its furniture
before selling it to a customer, but rather shifts this task to the buyer.

Despite all their strengths, there are some areas within the IKEA business model which could be
improved upon.

Although IKEA is well-known for the reliability of their products, the affordability of those same
products comes at a cost which is quality. Accusations of shabby workmanship and a disregard for
safety regulations are relatively commonplace and have also become one of the somewhat defining
features of the brand. For example, multiple complaints have been lodged over the flimsiness of
several of their particleboard-based furniture, uncomfortable mattresses, and weak glassware.

These complaints have also extended to their food

courts, with the menu being described generally as
straightforward, and affordable, with some
standout dishes but generally mediocre. This, of
course, detracts from their reputation and improves
the position of competitors who offer higher-end
products and services.

While the company is still in a strong place

financially, its financial reports in 2022 showed a
significant fall in net profits from €1.6 billion posted
in 2021 to only €287 million posted in 2022 after taxes.

These developments reduced the company’s operating profit margins from 7% to 4%, a significant
blow to a business model which already operates on an operating profit margin below the industry
standard. This is especially difficult because the company’s business strategy is built strongly on
offering cheaper prices than its competitors, so increasing the prices of its goods and services would
be especially damaging to its reputation.

In the mid-2010s, the company also faced mounting

pressure and criticism over several deaths among young
children caused by poorly designed furniture. This led to
the recall of over 29 million products and as well as a
wrongful death lawsuit that cost the company over $50
million in compensation to the families of the deceased
children.

There was also a significant stir within its food sector when
it was discovered that its famous Swedish meatballs contained traces of horse meat, leading the
brand to cut ties with several of its key suppliers. However, the damage had already been done.
 PBUS 101 INTRODUCTION TO BUSINESS

SWOT ANALYSIS ASSIGNMENT – IKEA

Here are some external factors IKEA can capitalize on to
improve its business model and position within the
market.

IKEA should leverage its vast resources and superior

brand value to expand into various untapped markets
such as South America, Africa, and Asia.

The company has seen significant growth in its e-commerce capabilities, with the proportion of
online sales climbing steadily over the years. E-commerce is fast becoming the most popular way
people purchase items. By investing smartly in this area, IKEA can give itself a competitive advantage
over other players in the industry. Most of its online sales come from its furniture and appliances
section, but there is still room for the company to expand its e-commerce sales in other areas of the
company.

The company is known for offering various groceries both as a part of its physical outlets and as a
part of its online e-commerce site as well. Though the company has made significant investments in
expanding this area within the past few years, there is more room for growth as groceries only make
up a minor part of its revenue stream.

Here are some external factors that could be detrimental to the growth and survival of the company.

While IKEA is still the major player in the retail furniture industry, several other brands have
appeared which offer the same value proposition of affordable furniture and home appliances.
Brands such as Walmart now offer a wide range of furniture and home appliances which are also
budget-friendly and also do not require any further assembly.

IKEA is also well known for being faithful to a particular aesthetic which has served them well over
the years. However, rapid changes in customer preferences and a stubborn refusal to innovate and
change with changing times may pose a significant risk to the continued survival of the business.

IKEA runs a business that is strongly dependent on its ability to organize and capitalize on an
increasingly complex supply chain that spans multiple continents and involves dozens of
independent companies. The company has already seen significant disruptions to its supply chain in
subsequent falls in revenue during the COVID pandemic, as well as during the Russian invasion of
Ukraine. Therefore, such unexpected supply chain disruptions cause significant harm to the business.

IKEA is a force to be reckoned with within the world of furniture retail. Although, it has a lot of
strengths there are significant threats to its position as a market leader. Despite this, IKEA does not
seem poised to relinquish this position anytime soon.
 PBUS 101 INTRODUCTION TO BUSINESS

SWOT ANALYSIS ASSIGNMENT – IKEA

You are required to do two things in this assignment. (20 Marks)

1. Highlight all Strengths, Weaknesses, Opportunities and Threats in the article above. (Use
the same color code as shown or 2 marks will be deducted)
2. Write the Strengths, Weaknesses, Opportunities and Threats in the box below.
3. Submit on Moodle and make sure the filename has your Name and ID. (Otherwise 2 marks
will be deducted)

STRENGTHS WEAKNESSES

1. 1.

2. 2.

3. 3.

4. 4.

OPPORTUNITIES THREATS

1. 1.

2. 2.

3. 3.