Case Study- Ikea

CASE STUDY INSTRUCTIONS

Study the case “ IKEA”. SWOT analysis and sustainable business planning” and answer the

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following questions.

 

  1. Describe what is meant by SWOT analysis
  2. Explain the difference between internal and external
  3. Analyse ways in which IKEA has managed to minimise threats to its business
  4. Discuss the contribution of SWOT analysis to Ikea’s business growth

Format

 

Font Size 12 Double spaced

Number of word : Min 1000

All referencing and citations require Harvard Referencing Style

 

Sample Answer

 

Case Study – IKEA

IKEA is a multinational corporation based in Sweden. The company sells a wide range of home furnishings with a distinctly Scandinavian style. The company is recognized as the world’s largest furniture retailer. IKEA operates 253 stores in 24 countries and welcomes around 565 million visitors to the stores each year.

Meaning of SWOT Analysis

SWOT is an abbreviation that stands for strengths, weaknesses, opportunities, and threats. SWOT is a strategic planning tool that allows for the evaluation of the internal strengths and weaknesses of an organization as well as the external opportunities and threats. The strengths aspect of SWOT analysis describes internal attributes that add value to its products or services. Weaknesses explore the factors in the organization that impede the ability of the organization to achieve its goals and need to be improved upon (Bigelow, 2022). Opportunities refer to external factors that can be exploited to the advantage of the organization. Threats are external factors that can adversely affect organizational success.  Strengths and opportunities help the business while weaknesses and threats hinder the business.

A SWOT analysis allows a business to evaluate the current position of the company with consideration to a wide range of factors to allow the business to develop an effective strategic plan to achieve its goals (Nordmeyer, 2019). SWOT analysis is crucial in the development of business goals based on the evaluation of internal capabilities and external opportunities. By undertaking a SWOT analysis, a business places itself in a position to identify and addresses weaknesses. A business can capitalize on the identified strengths to build competitive advantages. Furthermore, the SWOT analysis tool is easy to use which means businesses can effectively use the tool for evaluation and planning.

Difference between Internal and External Factors

An internal factor is within the control of the business. It encompasses various aspects of the business such as finance, marketing, organizational culture, management, and production. Internal factors affect only the business in question. In the SWOT analysis, internal factors are evaluated as strengths and weaknesses. For IKEA, some identified internal factors are branding, organizational vision, economies of scale, and use of technology.

An external factor is outside the control of the business. External factors include the business environment, technological advances, social changes, and economic factors. External factors have an effect on other businesses in the same business environment. In the SWOT analysis, external factors are evaluated under opportunities and threats. Some of the external factors impacting IKEA include the state of the economy, demand for products, social trends and competition in the sector.

IKEA – Minimizing Threats to the Business

IKEA grapples with three external threats. The first threat to IKEA is social trends. The company faces the threat of a slowdown in first-time buyers entering the housing market. The reduction in the number of first-time buyers who are a core market segment for IKEA could impact the company’s financial performance. The second threat to IKEA is market forces. An increasing number of competitors are entering the low price household and furnishings markets. The companies increase the competition in the sector and threaten IKEA’s market position. The third threat facing IKEA is economic factors. The economic recession caused a decline in consumer spending and a reduction in disposable income.

IKEA has managed the treats to reduce the adverse impact on the business. On the threat of changing social trends, the company has established online help to inform customers on how to live a more sustainable life. Through the online site, IKEA shifts the focus to encouraging home improvements for homeowners in the slowing housing market. The online site provides customers with ideas and tips on how they can reduce the impact on the environment. The online site outlines the various ways that customers can save money while minimizing environmental impact.

IKEA has taken steps to address competitive market forces that threaten the company’s market share and position. Firstly, IKEA is a big corporation which has allowed the organization to tap into the economies of scale. Exploiting the economies of scale has allowed IKEA lower average costs in the long term. The company has effectively lowered costs by employing specialized managers and through better use of technology. The cost savings derived from the economies of scale are passed on to IKEA customers who enjoy lower prices. Tapping into the economies of scale also presents barriers to new or smaller home furnishing retailers entering the market.

IKEA has addressed the threat posed by economic factors by pursuing a low pricing strategy. The low prices offered by IKEA are crucial for creating appeal among customers during the economic downturn that has affected spending. The company recognizes that keeping pricing low is vital in situations where the retail sector is depressed. The low-pricing strategy allows IKEA to target low-income consumers who have limited spending power while also appealing to high-income consumers through the unique designs and high quality of the furnishings. Furthermore, IKEA utilizes communication to increase awareness of the low prices. Through the low-pricing strategy, IKEA has managed to weather the threat presented by the worsening economic situation.

 

Contribution of SWOT Analysis to IKEA’s Business Growth

SWOT analysis is central to the business growth of IKEA. Firstly, SWOT analysis allows the company to focus on the most important issues. By carrying out SWOT analysis, IKEA is in a position to recognize the issues that have the highest bearing on the success of the business. Consequently, the analysis allows IKEA to address the key issues to allow the business to perform at an optimum level. For instance, through the SWOT analysis, IKEA recognizes that the intensely competitive environment is a key issue that needs to be addressed to achieve business growth. IKEA has managed to address this issue by tapping into the economies of scale and also by offering lower prices. In this way, the SWOT analysis allows IKEA to effectively and substantively address key issues.

SWOT analysis has contributed to the business growth of IKEA by facilitating the development of sustainable competitive advantages. By undertaking SWOT analysis, IKEA is in a position to identify its internal capabilities and competencies under the strengths section. Afterward, the company taps into its internal capabilities and competencies to build competitive advantages over rival companies in the sector. For instance, the company has identified that its large size allows for economies of scale. The company has tapped into economies of scale to offer low prices which is a competitive advantage that drives business growth.

Finally, SWOT analysis has contributed to IKEA’s business growth by allowing the company to tap into emerging opportunities in the business environment. SWOT analysis allows the company to identify opportunities that the business can take advantage of to achieve growth. Tapping into the identified opportunities enables IKEA to attract more customers, cut costs, and increase sales. For instance, IKEA has achieved business growth by taking advantage of increasing consciousness around sustainability to offer greener low-priced products with a minimal carbon footprint.

 

 

References

Bigelow, S., 2022. What Is a SWOT Analysis? Definition and Examples – TechTarget. [online] SearchCIO. Available at: <https://www.techtarget.com/searchcio/definition/SWOT-analysis-strengths-weaknesses-opportunities-and-threats-analysis> [Accessed 24 March 2022].

Nordmeyer, B., 2019. Advantages & Disadvantages of SWOT Analysis. [online] Small Business – Chron.com. Available at: <https://smallbusiness.chron.com/advantages-amp-disadvantages-swot-analysis-41398.html> [Accessed 24 March 2022].

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