SWOT Analysis Of IKEA

Strength includes characteristics within the organization that adds value to the business and resulting in the ultimate success of organization. These factors are usually cited as skilled management, manufacturing facilities available and good profit product line available in business. (Finlay, 2000)

IKEA has strong internationally brand name recognition. IKEA’s branding attracts the major demographic customers. Business model of IKEA is unique in its construction as it has no direct competitions on like for like basis. IKEA’s products offer values to customer by delivering low price and innovative products. IKEA carries degree of specialist skills and knowledge within key production areas. (Edvardsson & Enquist, 2009; Lewis, 2005; Torekull & Kamprad, 1999)

Weaknesses

Weaknesses address the internal factors within the business. Those factors that prevent the achievement of successful projects are mainly barriers in communication channels, insufficient resources and conflicts between departments. (Finlay, 2000)

IKEA promotes the low pricing model but services to customers are not satisfactory. Retention of customer focuses that customers should be happy fully with the business services. To repeat business with the same customer base IKEA has to work out on its services that are given to customers. Practices of ecommerce have become necessary for businesses to compete with modern technological world. IKEA needs to adopt such practices for the efficiency of its business. (Ikea, 1995; Levine, 2007)

Opportunities

Opportunity factor in SWOT analysis deals with the external elements that will help the business in the completion of successful projects. Strong network of vendors, healthy relationships with suppliers and prevailing good market conditions these all add values to the project. (Finlay, 2000)

Opportunity available to IKEA is growing demand for green products and growing demand for low price products by the customers. Due to liquidity crunch and high inflation demand for low price products is increasing. IKEA is moving towards the global status because of the development of Eastern and European models. (Edvardsson & Enquist, 2009; Lewis, 2005; Torekull & Kamprad, 1999)

Threats

Final factor of SWOT analysis is threat. Threat represents the external factors that can threaten the success of project. Threat is the negative public image towards business, week vendor relationship, inadequate resources and unavailability of market for the final product. (Finlay, 2000)

Various competitors are entering in market and offering the low cost household and furniture products and causing the threat to IKEA’s business. Due to recession in economy, trend of consumer’s spending and disposal of income has reduced. First time buying pattern by consumers is also threat as consumers spend less when they enter in the market. (Ikea, 1995; Levine, 2007)

Context and Key issues

Wal-Mart is indirect competitor of IKEA. Wal-Mart runs a chain of large stores whereas IKEA deals only with the home furnishing. Wal-Mart offers extensive products and home furnishing is from one of its product lines. Wal-Mart is biggest public company while IKEA is private company.

Wal-Mart has world recognized retail brands as IKEA’s. IKEA has no direct competitors but Wal-Mart has to compete with the direct competitors also. IKEA focuses on the low priced product strategy which will affect Wal-Mart as more customers are moving towards IKEA for home furnishing. Wal-Mart strategy is focused on human resource management and development and IKEA strategy gives emphasize to low price products to customer.

Services given to customers by IKEA are not up to the mark. Wal-Mart can grab customers form IKEA by focusing on the services and by giving values to customer. Retention of customer is possible when their desires are fulfilled along with these desires customer demands good services from the company. Those companies that are providing good customer service are becoming successful. Wal-Mart by using the information technology to assist its logistic systems can precede the IKEA. Information technology can become the core competence of Wal-Mart and by using this core competency Wal-Mart can excel IKEA. (Lewis, 2005; Maon et al., 2007; Tong & Tong, 2006)

IKEA can compete vigorously with Wal-Mart by fulfilling the demand of customers. Demands for greener products, demands for low priced products and demand from low carbon footprints are increasingly. IKEA by serving these demands can gain the opportunity to become successful and strong competitor of Wal-Mart in home furnishing product line. IKEA by developing the Eastern and European models can increase its market shares and Wal-Mart profitability can decline. By providing customer with low priced products IKEA can attract the customer in this economic recession period where customers are not spending their income.

By offering the low priced products to the customer Wal-Mart can do extremely well with IKEA. Due to inflation and down trend in the buying pattern of customers this strategy can gain success to the company. To overcome the threat of low buying pattern of consumer Wal-Mart can take better measures than IKEA as Wal-Mart is running huge retail business than IKEA.

IKEA is providing only home furnishing products. It has more skills and knowledge as it is dealing only with this product line and also IKEA is providing innovative and less price products. IKEA strengths have increased from Wal-Mart in home furnishing products because it is focusing only on this product line. (Lewis, 2005; Maon et al., 2007; Tong & Tong, 2006)

Conclusion

IKEA and Wal-Mart differ in number of ways. For the constructive comparison market segmentation and target market for both IKEA and Wal-Mart has to be considered. Target market of IKEA is only consumers of home furnishing while Wal-Mart deals with huge target market. Influence of IKEA on Wal-Mart is less because Wal-Mart is running huge industry.

Market segmentation of Wal-Mart is different from IKEA like Wal-Mart focuses on different demographic segmentation, Psychographics and life style segmentation and behavioural segmentation. Target market of IKEA is different as it is only providing products to consumers who are keen in home furnishing whereas home furnishing is only the niche of Wal-Mart. Strategies of IKEA and Wal-Mart are also dissimilar. IKEA focuses on the low priced and innovative products to customer whereas Wal-Mart focuses on the human management and development of human skills.

IKEA has no direct competitors so it does not directly influence other businesses through its strengths and weaknesses. Healthy competition is always done on one to one basis. Weakness of IKEA is also that it has no direct competitor. Presence of direct competitor boosts the company performance.

References

Edvardsson, B. & Enquist, B. 2009, Values-based service for sustainable business : lessons from IKEA, Routledge, London; New York.

Finlay, P. 2000, Strategic management : an introduction to business and corporate level strategy, Financial Times Prentice Hall, Harlow.

Ikea, A. S. 1995, Democratic design : a book about form, function and price–the 3 dimensions at IKEA, IKEA, Almhult, Sweden.

Levine, J. 2007, ‘Forbes Life – Billionaires’ Ikea’, Forbes., pp. 328-.

Lewis, E. 2005, Great Ikea! : a brand for all the people, Great brand stories, Cyan, London.

Maon, F., Swaen, V., Lindgreen, A. & University of Hull. Business, S. 2007, Corporate social responsibility at IKEA : commitment and communication, Hull University Business School, [S.l.].

Tong, C. H. & Tong, L. I. 2006, ‘Exploring the Conerstones of Walmart’s Succes and Competitiveness’, Competitiveness review : CR., 16 (2), pp. 143-9.

Torekull, B. & Kamprad, I. 1999, Leading by design : the IKEA story, HarperBusiness, New York.