A Analysis On Analyzing Ikea Business Essay


Ingvar Kamprad "IKEA" had become in 1943, when he was just 17 in the small town of Agunnaryd in Sweden (IKEA History, n. d. ). IKEA started out offering furniture product in 1947. After getting positive response IKEA opens their first store in Almhult, Sweden in 1958. At the moment IKEA grand total of 301 stores in 37 countries among that IKEA itself possesses 267 stores in 25 countries. Approximated sales revenue in 2009 2009 financial year was 21. 5 billion euro's by making use of 123, 000 co-workers in 25 countries (IKEA group stores, n. d. ). The current global economic downturn has flipped many businesses around and forcing them to close down the business. IKEA was one of the firms which got affected by the global downturn and it led to many job deficits in the business. IKEA handled this environmental situation very well by discovering more strong business technique for healthy future of the business. IKEA is planning to open up about 15 new stores in 2010 2010 in china, Italy, Spain, Poland and a great many other places (Approaching store openings, n. d. ). IKEAs vision is to "create an improved everyday activities for the many people". There business plan helps their vision by providing well designed furniture at good deal so everyone are able it (Our business idea, n. d. ). IKEA came up directly into existence in Keeping on head this vision and ideas of reselling furniture at low priced.

Macro Environment (PESTEL)

The macro environmental factors which affect to the business are political, cost-effective, social, technological, environmental and legal. These are the critical indicators as per the present time. The PESTEL analysis is the tool which helps in determining the future of IKEA.


Political environment includes Federal funding, policies, grants and initiatives while legal environment includes guidelines, polices, legislations, regulatory business and trading guidelines. Every country has different political and legal factors. IKEA works surrounding the world and also have to check out different political and legal factors in different country for e. g. IKEA has to adopt a complete new insurance plan to make business working in China ("IKEA's Globalization Strategies and its Foray in China", n. d. ). IKEA has to compromise in a few countries where there is less political stability whereas anticipated to lot of legal factors IKEA cannot compromise its guidelines in India. In India the existing policy contains IKEA to own and establish a business with 100% Foreign Direct Investment (FDI) and dismantles its ideas to open up a store in India ("IKEA dismantles plans for stores in India, 2009").


Economical environment contains factors that influence the buyer buying electric power and spending structure. IKEA adopts different strategies in various countries around the world by providing wide selection of products that are well known for the quality at the purchase price that can be afforded by the majority of the folks. h3 According to (Scherrer, 2003) progress of the country reflects by its economical climate which influences expectation. IKEA is established surrounding the world but its major way to obtain business is from European countries. Due to strong current economic climate in Europe people who have lower incomes can also find the money for products available from IKEA, whereas scheduled to strong and cheap local market it was very hard for IKEA to sell its products in China ("Facts and figures", n. d. ).

Social Culture:-

Social culture environment includes style, behavior, basic values and consumers lifestyle. Corresponding to Scherrer, 2003 consumer preference, purchasing design and condition under which the product can be sold are influenced by the public culture changes.

The period after 1990's is reported to be the flourishing period. Many countries round the world have altered or revised their county procedures for international companies to boost their own current economic climate ("Pan", 2007). Among all the developing countries china was one of the most effective and strongest overall economy and IKEA got that gain and exposed the first store in Shanghai. But IKEA's insurance plan of do-it-yourself did not work scheduled to social differences in various countries (Anonymous, 2009). IKEA changed it insurance policies and used the cheap labor available in China and provided its product with a free of charge delivery and fully assembled product. After the changes in their own insurance plan IKEA became successful in China and is currently planning to wide open 2 more store and delivering their total to 10 this year 2010.


In current competitive world Technology is a very important factor for each organization. Using innovative technology company can reduce cost, develop new and ground-breaking products and save time by growing these new technology ("Business Environments", n. d. ). IKEA's even pack furniture system demonstrates how IKEA is maintaining at this point with today's technology. The flat pack furniture system established fact by customers about the world as it is very quick and easy to put together IKEA's products. IKEA has created online searching for its customers in order that they can easily browse through their product range and buy any product at any time and any place. Many recent adoption of solutions like IKEA catalogue for iPhone software has helped IKEA to entice more customers ("InteractiveIKEA Catalog iPhone App Launched", n. d. ).


Environmental factors which for IKEA can be a huge barrier as it is a furniture making company. IKEA makes almost all of its furniture from lumber however the image of IKEA is an environmental accountable company and calls for the required initiatives to ensure that the procedures does not have any adverse have an effect on on the surroundings. A lot of the products created by IKEA are eco-friendly, being eco-friendly it uses real wood chips and recycling plastic instead of normal timber. IKEA is offering energy saving lights which uses less vitality (IKEA's Environmental techniques, n. d. ).


Comparing IKEA's macro environmental factors using PESTEL examination demonstrates IKEA has performed well by implementing new changes when required. IKEA shows that they have well been able through the recent cost-effective downturn gives a very strong image of the business. IKEA has to face all environmentally friendly factors before entering the Chinese market however they used the right plans and showed that they achieved success in China. In six ages of IKEA's experience they have went through many challenges but the company stayed strong and focused on their regulations and beat all the hurdles which came across whether it was politics, economical, public, legal, technological or environmental.

IKEA's competitive strategy using PORTERS framework

Buyer electric power:-

IKEA has many opponents but the reason behind them being of top is because of their low priced and durable goods. The unique and ground breaking products always attracted their customers ("IKEA Analysis", 2010). This uniqueness of their product makes IKEA's product limited amongst the rivals.

Supplier electricity:-

IKEA has more than 2000 suppliers in over 50 countries. IKEA have good control over it suppliers and also have maintain relationship very well from a long time. IKEA's strategy is the fact they give their product design to many suppliers for the same product. This does not give more space with their supplier to control which gives IKEA buyers electricity ("FAQ", n. d. ).

Competitive rivalry:-

As per the growing demand and the competitive world market IKEA is facing very tough competition from the rivalries about the world. Many of the furniture industry are following the same route of IKEA. Rival companies like Conrin Concentrate on who only concentrates reselling furniture at an extremely low price whereas Ethan Alan has targeted high portion market ("IKEA Analysis", 2010). They all are engaged in reselling furniture in different ways. IKEA has made a very strong image on everyone's mind by providing its unique, stylish and durable low priced best for almost six generations which weak their rivals.

Threat of alternative:-

Substitute of wooden furniture can only just be furniture made out of the process real wood and plastic material. IKEA makes their product special is by giving new style designs according to the latest development by using their technology.

Threat of new Entrants:-

Pass, Sturgess & Wilson (1994) state that it is difficult for entrants with unknown products to get viable market talk about as customer devotion exists with the prevailing company. IKEA adopts new technology to develop services smarter with a low cost which gives them loyalty using their company customers. It makes it very difficult for just about any new entrant to supply the volume of products IKEA is providing. New entrant can only just have to check out the market like small metropolitan areas and towns where IKEA havent yet step in.

Marketing Mix

Marketing mix is a tool which organization adapt to their marketing objectives in the mark market. The firm pursues marketing combine which include 4Ps product, price, place and campaign. To determine what their customer respond for this target market (Armstrong & Kotler 2006).


According to Phhilip Kotler 2003 product is thought as anything that can be afford to satisfy a want or a need. IKEA is having an enormous range of product and are well know for his or her poduct design according to customer need and affordability. This unique product makes them not the same as their challengers.


IKEA's idea is based on providing smartly designed home furnishing product at a low cost that can be afforded by way of a common man. Rates is the main reason by which IKEA have gained big market talk about amongst their rivals. IKEA can sale goods up to 30 percent30 % less because of their bulk purchasing electricity gets goods at an extremely good deal.


Promotion is the key marketing tool for promoting products. IKEA encourages its products via TV, Holdings, Radio, paper and online. The primary tool of IKEA's campaign is the IKEA catalogue which draws in most of their customers. IKEA is having their major market talk about from UK and IKEA established fact by their controversial Television marketing campaign. To let people find out about their brand differs from other ("FAQ", n. d. ).


IKEA have exposed their stores in the suburbs of the city which are often accessible to their customers. IKEA has opened up its new store in Perth, Australia closer to Bus stop, Train Stop and close to entry and leave point of Freeway and by giving enough airport parking bays rendering it easy to get at by their customers.

Value Chain

IKEA has something which gives customers with a low price home furniture around the world. IKEA creates products which are good quality, durable, modern design and good working. IKEA is order to operate efficiently and to provide their products with high quality it stays on focused on the relationship with their suppliers and customers as shown in shape 3. IKEA has such a huge brand that it offers them a competitive advantages over its competitors. Insurance firms such big buying power, IKEA can sale its products with an extremely competitive price which keeps their customers happy and dedicated to the company.

IKEA have increased dedicated customers by providing them excellent customer support. IKEA's philosophy towards it customer is to make their product easier, cheaper and faster. This gives high satisfaction to customer this creates value and goodwill of the IKEA.

PORTER's and Value String Summary:-

After discovering the PORTERS construction value chain provides knowledge of why is IKEA market innovator amongst their opponents. Their unique design and low priced of product reduces their swap and new entrants. The main reason behind selling with their low priced quality product is due to strong romantic relationship with the suppliers and devoted returning customers. They may have been able to make value with their product by giving great customer server and also after sales service.

SWOT Analysis

Strength, weakness, opportunities and threat analyses the existing and future of the organization. Durability and weakness are inside part of the organization and can be changes while opportunities and hazards are exterior part of firm which is hard to change.

Strength:- h3

  • IKEA the name fastened with strong idea of quality, latest design at low priced. That earns consumer loyalty towards brand.
  • IKEA is very dedicated towards its eyesight " create an improved everyday life for many people"
  • IKEA's designers are always considering customer's needs and latest market trade.
  • Their particular idea of flat-pack and do-it-yourself which reduce move cost and make sure they are not the same as their competition.
  • IKEA is eco friendly and uses its raw-material very smarter way. They may have began using recycle or reclaimed waste product to create energy across all stores.
  • They may have long term connection with suppliers. IKEA can discuss with their prices as they are buying goods from suppliers which they have since very long time which also provides their suppliers with a security of regular business with the company.


  • As IKEA is very big company, management may find it difficult to put into practice any quick changes or new strategies.
  • It can be problems with quality management as IKEA have amount of suppliers all over world making the same product. h3
  • Many Chinese suppliers offer same products as IKEA and even at cheaper price.


  • Increasing the number of product.
  • Manufacture their product form the expanding country where they get labor at cheap price.
  • Beginning new stores in where dealer like IKEA don't exist. h3
  • Providing unique shopping experience for customers.
  • Develop e-commerce.


  • Scandinavian design and style are not accepted by everyone around the world so IKEA have to build up designs differently in specific countries.
  • Reduction in the demand of Scandinavian design furniture.
  • Economic downturn reduces the buyer purchasing electricity.

SWOT Conclusion:-

Study of SWOT evaluation suggests that IKEA have to keep on making changes according to the market trend which could be internally or externally. Strength and weakness are believed as an internal part of the company. IKEA can increase their Power in areas like increasing more product range and providing new innovative ideas before their challengers. Threat and opportunities are the exterior factor of the business. To decrease the risk of new entrants in the market IKEA has to keep up to date with the most advanced technology and develop services regarding to customer's necessity. They should use modern designs and make an effort to increase the range of their products. IKEA can have more competitive by developing its products in producing countries.


Analyzing IKEA's record it shows how IKEA could make their strong position even after having a financial storm. PESTEL analyses showed how IKEA shown all the external factors to achieve the success in the market. IKEA has to deal with all the current exterior factors which are different surrounding the world.

IKEA has been able to provide its customers with a wide range of affordable products which makes them unique among its rivals. IKEA has implemented a unique marketing mix which includes resulted in an enormous growth of the company. To reach your goals about the world IKEA has to change its marketing strategies round the world and also have to adopt new ways of achieve success. IKEA has 80% of the business from Europe and its own now seeking to increase in China. IKEA is planning to open up 2 new stores in China to get more customers and get more talk about of income from China.

PORTER's five force analyses show how IKEA is exclusive and have a cutting edge on the suppliers and customers. IKEA has more buying electricity and it has many suppliers over the world making the same product gives them capabilities to provide their products to their customers with an extremely competitive price. Using this plan it makes it harder for new entrants to get in the similar market and helps IKEA to fortify its position internationally.

SWOT analysis show that IKEA must use new modern design and try to get away from the old Scandinavian design which is not accepted all over the world. IKEA has integrated environmentally friendly principles and used technology to bring new product runs before their competitors does. IKEA has put in place technology in their business by providing their customers to see online catalogue, iPhone software and online shopping. This shows how IKEA is using its strategies in expanding quality low priced products and increasing their show on the market.

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