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 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

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).

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 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 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.

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.

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