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A Situational and Strategic Analysis of Ikea and The Future: December 2013
A Situational and Strategic Analysis of Ikea and The Future: December 2013
A Situational and Strategic Analysis of Ikea and The Future: December 2013
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A SITUATIONAL
AND
STRATEGIC
ANALYSIS OF
IKEA AND THE
FUTURE
AUTHOR: ANTHONY
AYODELE
COURSE: BUSINESS
ORGANISATIONAL POLICY
SUPERVISOR: PETER
AKINSOWON
MODULE: PM 204
TABLE OF CONTENT
TABLE OF CONTENT ................................................................................................................................ 3
INTRODUCTION ....................................................................................................................................... 5
1 THE COMPANY ................................................................................................................................ 7
SITUATIONAL ANALYSIS .......................................................................................................................... 8
1.1 MODULES/TOOLS USED TO ANALYSE IKEA ............................................................................. 8
1.1.1 SWOT ANALYSIS .............................................................................................................. 8
1.1.2 PESTEL ANALYSIS ........................................................................................................... 11
1.1.3 PORTERS FIVE FORCES .................................................................................................. 15
1.2 EXTERNAL FORCES AFFECTING IKEA AND PORTERS FIVE FORCES ........................................ 15
MATURITY STAGE AND PRODUCT LIFE CYCLE OF IKEA ..................................................................... 16
PUNCTUATED EQUILIBRUM OF IKEA ................................................................................................ 17
RECOMMENDATIONS ....................................................................................................................... 19
2 APPENDIX ...................................................................................................................................... 22
2.1 IKEA PRODUCT LIFE CYCLE/FUTURE CHART .......................................................................... 22
2.2 SWOT ANALYSIS CHART ........................................................................................................ 24
2.3 PESTEL ANALYSIS CHART ....................................................................................................... 25
2.4 MICHAEL PORTER’S FIVE FORCES CHART.............................................................................. 26
2.5 PERSONAL EXPEREIENCE OF IKEA CUSTOMERS .................................................................... 27
3 Bibliography .................................................................................................................................. 28
Table of Figures
(Cover from top left clockwise)
INTRODUCTION
Chief Executive Officer (CEO) of the company, Anders Dahvig, the company’s
objective has been to provide good design and quality furniture for those with
for both office and home usage. However, over the years competitors have
begun to master the “Ikea Edge,” as companies such as Tesco, Walmart, DFS,
Argos and Carrefour (now selling under Ocado, Gateway or ASDA, which
strategy and are venturing fast into the furnishing and furniture terrain.
(Andyboss, 2011)
It is towards ensuring that the company does not lose this position in the nearby
or distant future that this report has been put together on the company’s
In terms of its product life Cycle IKEA could be said to be at its maturity stage –
considering the success the initial modest company has experienced over the
past 87 years since when founded. Furthermore this report seeks to ensure that
IKEA does not go under as a result of the external change in the business
1 THE COMPANY
IKEA originated from Sweden and was founded in 1926 by Invar Kamprad . It
has since emerged as force to reckon with in the area of affordable furniture. At
2011 stood at 320 in 26 countries with over 140,000 employees by the year 2012
(Torekull, 2011)
The company has adapted a design style for its products which is in line with the
tastes of its home country Sweden– functional and simple, not fashionable or
centred around attraction. These are values that IKEA has exported beyond its
shores, providing an insight into the realistic taste of the average hardworking
Swedish National who believe in being frugal by making best use of resources
SITUATIONAL ANALYSIS
A Situational Analysis has been drawn up to assess the present state of IKEA.
Modules/Tools used for such include A SWOT Analysis, PESTEL and Michael
1.1.1.1 Strengths
reviewed toward ensuring clients get highly competitive services for majority of
the its products, providing IKEA with a Competitive Advantage in the industry.
(Jafry, 2012)
countries, the uniformity in terms of product design and quality across the world
has enhanced the company’s strength and it’s dependability among consumers.
The operational strategy has also been similar, enabling the consumers to know
1.1.1.2 Weaknesses
as well as its limited visibility through promotions and Marketing. Stores are
few and sparsely located (only three in UK) while each one, despite its massive
stores and numerous floors, has few staff whose involvement towards
customers off. Many, employ and pay a third party to assist with assembling
part.
1.1.1.3 Opportunities
IKEA may identify opportunities in providing greener products for its clientele
and further educating the public on waste reduction in the area of furniture
The company can take it DIY approach of furniture assemblage to another level
Video, Audio and Kinaesthetic (VAK) and providing instructions on such basis
communication link with its consumers and workers all being the stakeholders
of the company. The building of trust in this regard is crucial to the company’s
1.1.1.4 Threats
throughout the United Kingdom and Europe. This has affected the consumers
purchasing power and in turn, general sales in the industry. As stated earlier
more competitors are delving into the home and office furniture industry,
Another threat of the company borders on its size and scale. A super – scale sice
that experts believe waters down innovation (Hammond, 2013) IKEA is steadily
standard and quality while providing low cost products increases with every
The Political climate of the host country of any company has a direct impact on
its performance. The influx of foreigners from European countries on one hand
the United Kingdom on the other have brought about a negative impact on the
Corporate and consumer tax along with business legislation which differs from
country to country are also other influencing factors. In all, these have borne
an influence on the structure of IKEA. They have also, in one way or the other,
currency rates and fluctuating oil prices have equally negatively impacted the
economy. Being the environment in which IKEA operates, these factors have had
an influence. The cost of labour which has a wide disparity in places such as
Poland and China differs greatly to what is obtainable in London or the United
States. These are some of the economic factors that affect IKEA (IKEA, About
Ikea, N/A)
Inter-country migration, for example from the countryside to the city, in search
of jobs due to the close down of industries in the former could drive the
demand for functional low cost furniture in the city, where most of IKEA’s
The absence of good infrastructure in host countries where IKEA is found could
also hinder the company’s growth. The extent of road networks, the presence
that have a direct impact on IKEA successfully doing business in any host
The utilization of the internet has promoted the easiness and freedom with
which people make their decisions. Since this can be accomplished by using
The demographics of the society based on age, income, family size, etc are also
demand than that of a society made up of teenagers and middle class yuppies.
The introduction of RFID Technology in supermarkets and stores has made the
of this technology, coming up with variations of its usage towards providing the
introduced the provision of digital stores that enable customers to walk in and
Environmental
IKEA would do well to comply with such, especially as it has to do with the local
Protective legislations and standards may vary from country to country. The
1979 UK Sale of Goods Acts is a clear example of a legal tool that impacts on
The implications of such are vast and vary including resultant legal battles over
parties. Employee protection acts are also part of legislative issues that could
The competition affecting IKEA has been analysed above. IKEA’s Unique Selling
Point (USP) has been in the area of its ability to provide down-turn, low price
strategies to marketing. Many more high street retailer outfits however have
adapted a similar approach to marketing furniture and fittings and hence IKEA’s
Many have argued that there is no substitute to furniture per se. Rather, the
is the major threat manufacturing companies face in the industry. In the case
of IKEA, taste and design differences is the nearest to any substitute possibility
The Economic recession experienced in developed countries has seen the need
inevitable. In the place of DIY services provided by IKEA some have provided high
discount long-term credit goods such as DFS. Others like Argos have adopted
flat-pack packaging designs similar to IKEA and, with their venturing into
furniture and fittings on a larger scale, have reduced the edge IKEA has over
competition.
There is a low threat posed by new entreats into the furniture and fitting
market considering the high cost involved and economies of scale enjoyed by
As stated earlier, IKEA could be said to be in the matured stage of its Product life
Cycle. It has entered into a stage where it has experienced rapid growth and
stabilized in the market. IKEA has also differentiated its products from those
offered by competition. The company has made its products stand out among
the rest, being able to carve a niche for itself in the Furniture and Fitting industry
(Marketing, 2013)
However it is at this stage that the company needs to be careful to ensure that
in the face of change it does not enter into a declined state but rather that of
innovation that leads to further growth. This is turn would lead to high brand
Another tool that could be used to analyse what the future of IKEA should look
like having applied Strategic Management principles to fulfil its objectives is the
punctuated Equilibrium.
This theory suggests that a group or company continues in a stabilised state until
within the industry that brings about change. When this happens (which is
strategic fit: being its ability to match resources with its opportunities; Strategic
wear out: when a particular strategy applied is no longer useful towards fulfilling
RECOMMENDATIONS
As previously stated IKEA’s main strength has been to use a downward trend,
low cost strategy pricing to maintain the market leader position. It has however
be only on short term basis) into a long- term policy. (Akinsowon, 2013)
A this point the company needs to go back to the drawing board and come up
with another strategy to maintain its position. It also needs to among others
things:
and repurchase section with no assistance from staff) for those who want
Employ and train more customer interfacing friendly staff, realising that
emphasised.
2 APPENDIX
2.1 IKEA PRODUCT LIFE CYCLE/FUTURE CHART
3 Bibliography
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Akinsowon, P. (2013, November 7). Strategic Managment Lecture. Strategic Managment. London,
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