Swedish company IKEA is the world’s largest furniture retailer since the early 1990’s. It sold inexpensive furniture of Scandinavian design. The company operated in 55 countries with a workforce of 76000. IKEA offered nearly 12000 items to the home furnishings market worldwide. It sold a wide range of products including furniture, accessories, bathrooms and kitchens at 186 retail stores in 30 countries across Europe, North America, Southeast Asia, Middle East and Australia. IKEA is well known for its exclusive model, low price, wide range of product and flat packing. IKEA’s success was recognized to its vast experience in the furniture retail market, its product differentiation and cost leadership. The company sold its furniture in kits, to be assembled by the customers at home. In addition to furniture, IKEA also sold utility items such as utensils, hooks, clips, stands, etc. IKEA’s founder Ingvar Kamprad (Kamprad) had built an international furniture chain of more than 250 stores in Europe, Africa, Asia and the US. The biggest sales countries are Germany, USA, France, UK and Sweden. IKEA held a market share of not more than 10% in the markets in which it operated. In spite of this, it had been successful in almost all countries, because of public awareness of the IKEA brand.
SWOT Analysis of IKEA
Strength
IKEA is a highly known brand attracting key demographic customer groups.The IKEA business model is unique in its construction and execution with little direct competition on a like for like basis. Success has been driven from the price architecture offering value to the customer in innovative but functional products. Despite the large shed operations IKEA operate there is a degree of specialist knowledge within key product areas where purchases are more considered and require assistance such as kitchen installations.
Weakness
Whilst an international brand there is a level of reliance on European markets with 90% of the stores based in Europe and the balance across America, Middle East and Asia. Although the model promotes low prices it has been identified there is an associated low level of customer service which couples this suggesting there is a need to work on service to ensure a complete shopping experience and ensure repeat business within the existing customer base. Because of marketplace movement the development of Ecommerce has been necessary to compete in a modern technological world however there is also a consideration this movement into multi channel retailing moves away from the fundamental vision of the customer being able to see and touch the product.
Opportunities
IKEA are moving from International to global status through the development of Asia and Eastern European models. There is a new and emerging market in China as the country undergoes a huge industrial revolution IKEA’s traditional product value is low price high volume product but the movement into mid and higher price points will see an opportunity to move the demographic base and increase the average basket value with less confidence on a limited demographic collection. At a time of recession in the global economy, it may appear that some companies will reduce take up of services that Ikea’s offers. However, in tough times clients tend to focus upon cost reduction and outsourcing – with are strategies that Ikea’s offers. Although there are negative associations within the development of the IKEA Ecommerce site there is an associated opportunity to get growth and increase levels of customer service as the additional transactional ability will reduce pressure from stores to a certain degree.
Threats
Within growing competitive retail markets normal retailers are beginning to copy the model of low cost value flat packed furniture which will impact on the enthusiasm of IKEA.With economic concerns over rising living costs and depleting disposable income there is an overall threat to the performance of the business in UK and American markets specifically.
To conclude, SWOT analysis suggests that IKEA have to keep on making changes as per the market trend which could be internally or externally. Strength and weakness are considered as an internal part of the company. IKEA can increase their Strength in areas like increasing more product range and bringing new innovative concepts before their competitors. Threat and opportunities are the external factor of the company. To decrease the threat of new entrants in the market IKEA has to keep up to date with the latest technology and develop new products according to customer’s requirement. They should implement modern designs and try to increase the range of their products. IKEA can get more competitive by manufacturing its products in developing countries.