SWOT Analysis for IKEA
SWOT ANALYSIS: IKEA 2
In business, the acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is an effective strategic management technique that helps to identify a company’s essential strengths and weaknesses and to explore and exploit new opportunities in the market. It also helps to identify threats and devise strategies to counter them. Therefore, SWOT is a management tool that helps organizations reduce their weaknesses and counter potential threats.
This is important in business as it heightens a business’ chance of achieving success. It is crucial
for companies to conduct a SWOT analysis before embarking on any new strategies or before
they make critical business decisions such as investing in new products. The following is a
SWOT analysis of IKEA Company.
Background
IKEA is a favorite brand known for its quality and affordable home and office furniture.
Because of affordable pricing and quality furniture, IKEA has managed to achieve significant
sales, and high popularity, as well as a large customer base. The company has achieved this
success by using a combination of factors. IKEA provides quality, design, values, and utility in
its products and has managed to prove its sustainability (Edvardsson and Enquist, 2015). From
design to packaging, to sourcing, and distribution, the company’s focus has strongly been
founded on quality and affordability of its products. The company aims to provide people with
beautiful and exquisite lives inside their homes. The company majorly distributes its products in
brick and mortar stores as well as through online channels. According to IKEA, its design
process is democratic because it includes customer ideas and opinions (Edvardsson and Enquist,
2015). Some of the factors that make IKEA such a favorite brand are attractive and novel
SWOT ANALYSIS: IKEA 3
designs, a vast array of products, excellent product quality, and also a great chain of distribution.
All these factors contribute to IKEA being considered a great brand.
SWOT Analysis
The table below shows a summary of IKEA’s SWOT analysis.
Strengths
• Worldwide presence
• Brand image
• Affordable products
• Excellent product designs
• An enormous range of products
• Leading brand with a strong financial
position
• excellent store design
Weaknesses
• No strong position
• Demographic design concept may not
be a source of competitive advantage
SWOT ANALYSIS: IKEA 4
Strengths
IKEA has made its presence visible worldwide with over 377 stores in major countries
across the world. Its products are also available online through the company’s website and can be
purchased via the IKEA online store app. The company has over time managed to maintain a
strong brand name, and it is best known for its quality and affordable products. The products are
attractively designed to meet the needs and attention of a wide variety of customers (Torekull and
Kamprad, 2016). The company also prides itself in an extensive product range that customers
can choose from.
IKEA is also a creative and innovative brand that makes homes beautiful by offering a
wide range of furnishing products. It has a separate category of indoors products for beautiful
interiors and outdoors products for beautiful exteriors. The company has strong global brand
recognition and attracts major demographic clients. IKEA has a unique business model that
ensures that it has no direct competitors on a like-for-like basis (Keegan and Green, 2015).
Opportunities
• Business opportunities in emerging
markets
• Strategic partnerships with other
brands
• Production in India and China
• Adding premium quality products
Threats
• Increase in demand for premium
products
• Increased competitive pressure from
the rival brands
SWOT ANALYSIS: IKEA 5
In 2017, the company’s sales grew to 31.9 billion Euros standing at 11% higher than in
2016 (IKEA.com). This is an indication of financial strength. Another significant advantage is in
its stores. IKEA sells 9500 products through its regional stores, and it, therefore, considers
essential to design modern and stylish products majorly designed for the Gen Y customers. IKEA
should continue with these strategies to sustain its competitive advantage and should also look in
to creativity and innovation to keep up with emerging trends.
Weaknesses
IKEA has not managed to perform well in the Asian market as compared to other
markets. In the Asian markets, the company has a low presence as well as demand. Additionally,
the company has seen heightened competition from other stronger brands in the Asian markets
which also provide high quality and affordable furnishing products. The company has also failed
in its demographic design concept. This concept has been unsuccessful in ensuring a sustainable
competitive advantage (Keegan and Green, 2015). Although IKEA’s presence in Asian markets is
improving, this growth is slow-paced and takes a longer time. The company has to involve a lot
of advertising and product branding to strengthen its brand awareness.
Opportunities
IKEA can obtain significant opportunities in Emerging Markets. The company can
increase its revenues and profits if it can be able to improve its brand presence and demand in
these markets. Furthermore, the company can get involved in strategic partnerships with other
SWOT ANALYSIS: IKEA 6
popular brands in emerging markets; especially in Asian markets. Ultimately, Asian countries
have cheaper raw materials as well as labor. IKEA can, therefore, set up production facilities in
countries like India or China to take advantage of cheap labor and raw materials to reduce its
production costs (Garvey, 2017). IKEA also has an opportunity to add premium products and
services to its kitty. This will enable the company to expand its customer base. The company
should also focus on CSR to gain loyalty and brand awareness in countries that it operates.
Threats
The recession period has already passed, and this means that economic activities have
increased globally. The demand for premium products has also gone up as a result of improved
economic conditions. This can be a significant threat to the affordable range of products that the
company provides. Also, more competitors are entering the low price furnishing market, and
therefore the company needs to reinforce its unique products to gain competitive advantage
(Schirone, 2012). Another threat is that IKEA has been unsuccessful in building a strong position
in the Asian Markets and so other similar brands in these markets pose a significant threat to its
overall sales here. Another significant risk to the company is the cost of production. IKEA’s
primary strategy is providing high-quality products at low and affordable prices. However, with
the rising global economy, the number of raw materials, labor, and production are increasingly
becoming high (Garvey, 2017). This can be a threat to IKEA in terms of providing low-cost
products because it risks incurring losses. To counter this the company should try to find a
SWOT ANALYSIS: IKEA 7
balance between the low cost and the cost of production. The company may have to re-evaluate
its production cost and measure it against future production costs to limit losses.
Recommendations
The company should prioritize its focus on improving its presence and demand in the
Asian Markets. IKEA should actively pursue effective marketing strategies to increase its brand
awareness in countries like India and China. Additionally, the company should look in to
partnering with local retail brands to enable it to gain a foothold in emerging markets and also
add new premium quality products to its portfolio. Also, IKEA believes that there cannot be a
compromise between low prices and high-quality products. However, the company needs to
balance its need for low-cost products against that of producing high-quality products. It needs to
differentiate its products from its competitors.
Additionally, IKEA needs to foster good communications with its customers and
stakeholders concerning its CSR and environmental activities. Currently, the company produces
print and online publications and also carries out radio and TV campaigns to enable it to
communicate with its audiences effectively. The company should keep up this trend and improve
on it to gain customer loyalty. The company is also currently focusing its design on Gen Y. This
is a good differentiation strategy, but with the current demand for premium products, the
company should consider including plans for all age groups. Overall, IKEA has made a strong
market position for itself and acquired a strong brand name. However, it may be time for the
company to expand its brand to more corners of the world and grab an even larger market share
through the introduction of products for all age groups and prices.
SWOT ANALYSIS: IKEA 8
References
- Edvardsson, B., & Enquist, B. (2015). Values-based service for sustainable business: Lessons
from IKEA. Routledge. - Garvey, P. (2017). Unpacking IKEA: Swedish Design for the Purchasing Masses. Routledge.
- Keegan, W. J., & Green, M. C. (2015). Global marketing. Upper Saddle River, NJ: Pearson.
- Schirone, D. A. (2012). Customers’ behavior analysis in the furniture field: IKEA case in the
Northern Part of Bari province. Journal of Knowledge Management, Economics and - Information Technology, 2(6), 54-73.
- Torekull, B., & Kamprad, I. (1999). Leading by design: the IKEA story. HarperBusiness.
We can write this or a similar paper for you! Simply fill the order form!
