[IKEA CASE STUDY]

NUST Business School

MGT-120 Introduction to Business

ASSIGNMENT: IKEA CASE STUDY

Submitted to;
Ms. Nida Karim

Submitted by;
Ahmed Sharif
Asadullah Sher
Hashim Naeem
Raahym Khan
Sabeen Ibrahim
BS ACF 2K16 A

Date: 15TH January, 2017.

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1. Describe what is meant by a SWOT analysis.

SWOT is acronym for Strengths, Weaknesses, Opportunities and Threats.

SWOT analysis is a strategic planning tool. It is a kind of audit of an
organizations environment. SWOT is the first stage of planning and looks at
the Strengths, Weaknesses, Opportunities and Threats involved in a project
or business venture. This tool helps businesses and organizations analyze the
internal and external threats they are facing. This analysis provides such
information that can be used to compare an organizations resources and
abilities to the competitive environment in which it operates.

2. Explain the difference between internal and external factors.

Strengths and weaknesses are internal aspects. They can be controlled by

better and efficient management and operations. This means that they are
within the control of the business. They may refer to aspects of marketing,
finance, manufacturing, organization hierarchy or operations. Strengths and
weaknesses are relative for different industries. One firms strength can be
weakness for another firm.

Opportunities and threats are external factors. This means that they are
outside the control of the business. These may include the shifts in political
environment, the economic situation, social changes or technological
advances, such as the internet. Opportunities and threats mainly arise when
changes in external environment occur. Thus, the businesses need to mold
according to these factors to stay in the respective markets.

3. Analyze ways in which IKEA has managed to minimize threats

to its business.

IKEA addresses these issues in many ways. It manages weaknesses and

threats to create a positive outcome.

Social trends: IKEA is building online help to guide customers to a more

sustainable life. Here it can focus on home improvement in the slowing
housing market. It supports customers with tips and ideas on its website to
reduce their impact on the environment. This will also save them money.
Staff is trained on sustainability, both on what IKEA is doing and how they
can take responsibility to become sustainable for themselves.

Market forces: IKEA is large enough to enjoy economies of scale. This

lowers average costs in the long run through, for example, better use of
technology or employing specialized managers. Economies of scale also give
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a business a competitive edge if cost savings are then passed on to

customers in the form of lower prices. This puts up high barriers to entry for
smaller companies entering the market.

Economic factors: IKEAs low prices create appeal amongst its customers
in tough financial times. It is vital to keep prices as low as possible when the
retail sector is depressed. IKEAs pricing strategy targets consumers with
limited financial resources. Its products will also appeal to those with higher
budgets through good quality and design. The company must ensure that it
is always recognized as having the lowest prices on the market in the future.
Communication plays an important role here

4. Discuss the contribution of SWOT analysis to IKEAs business

growth.

IKEA is now a well-known global brand with hundreds of stores across the
world and is not an ordinary furnisher. They have their own legacy of
economic and sustainable furniture which they must maintain to keep in the
competitive market.In order to improve performance, it must assess its
external and competitive environment. This will reveal the key opportunities
it can take advantage of and the threats it must deal with.

IKEA responds to both internal and external issues in a proactive and

dynamic manner by using its strengths and reducing its weaknesses.
Through this, IKEA is able to generate the strong growth it needs to retain a
strong identity in the market.

The strong global brand image of IKEA and their democratic design has
helped IKEA to retain its customers. By identifying their opportunities like the
more demand for greener products, lower carbon footprints IKEA is able to
focus on its work with sustainability. So IKEA decides to reduce carbon
footprints using more advanced renewable energy. Moreover, by identifying
their weaknesses IKEA will be able to improve their standards and quality by
providing quality products at low prices and maintain good communication
with its consumers. The most important part of SWOT analysis is to identify
the threats to the organization. For this purpose, IKEA uses a particular
strength to defend itself from the threats in market forces, social trends and
economic trends. This has resulted for IKEA a positive outcome.

In conclusion through all this IKEA has discovered that being responsible and
sustainable is not only good for their customers but also for the business
growth.
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