SWOT analysis of IKEA (IKEA SWOT)

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SWOT analysis of IKEA (IKEA SWOT)

This is a detailed SWOT analysis of IKEA. It aims to look into the strengths and the weaknesses of IKEA. Similarly, it aims to examine the opportunities the company should explore and the threats it should keep an eye on.

Introduction to IKEA

Founded in 1943 by a 17 year Swedish, Ingvar Kamprad, Ikea is now the world’s largest furniture retailer. Ikea operates its business from Netherlands. The name IKEA was coined by using initials of founder, his house name and hometown; Ingvar Kamprad (name of the founder), Elmtaryd (name of his family farm), and Agunnaryd (his hometown in Sweden).

With a vision ‘to create a better everyday life for the many people’, Ikea designs and sells affordable furniture which are ready to assemble and followers believe their designs are modern & eco-friendly. It operates in 52 countries and owns 455 stores worldwide (Statista, 2021).

SWOT analysis of IKEA (IKEA SWOT)

As mentioned above, this is a detailed SWOT analysis of IKEA which addresses the key issues as follows:

Strengths of IKEA

Brand reputation

Interbrand ranked IKEA as the most valuable furniture retailer in the world and 25th best brand worldwide in 2017. Its value then stood at $18 billion. However, its value in 2020 was 19.5 billion (Gelder, 2020). Along with its huge presence in 52 countries, it has a strong brand reputation worldwide and attracts over 680 million customers every year.

Diversified product portfolio

In addition to its furniture retail supermarkets, IKEA has also invested in restaurants and real estate business. Diversified range of businesses works as a lifeline for the company in years when their main furniture business is in trouble. Many big IKEA stores which have restaurant facilities, see more customers coming in. These customers not only buy furniture, but also buy foods and drinks.

Integrated supply chain

Due to long lasting relationships with its suppliers IKEA benefits from lower price supplies while suppliers get guaranteed orders for long time. Unique IWAY approach integrates suppliers with IKEAs supply chain. This gives IKEA competitive advantage and helps it in reducing costs and producing innovative quality products (IKEA, 2021).

Weaknesses of IKEA

Basic products which require DIY skills

IKEA appeals less to people who lacks DIY skills. Customers have also shown dissatisfaction with some of its products as continuous cost reduction strategy resulted in poor quality basic products. Every year numbers of items returned are increasing. Customers also talk negatively about the reassembling and long lastingness of the products.

Non-standard operations

IKEA is struggling to maintain its standards across locations worldwide. While the company uses the techniques of local responsiveness by adding raw materials and designs from the local operations, some customers see this as evading the original standard and culture of the company.

Environmental concerns

Some of IKEA’s operations were blamed for its poor environmental policies. In the past, it was accused of logging and clear-cutting of old-growth forests which damage ancient and unique forests that have a high conservation value. As it always promotes itself as an environmentally concern organisation, such news could damage the brand.

Opportunities for IKEA

Environment conscious customers

As customers worldwide are becoming more environment conscious, IKEA’s green business model has great opportunities.

Cost conscious customers

IKEA’s products are considered as value for money. As it is expanding in developing countries, it will be able to attract more price-sensitive consumers from those locations (Lewis, 2017).

Developing countries

Untapped markets of emerging economies and developing countries offer a great opportunity for IKEA’s expansion. The company’s cost leadership will give it an extra advantage in this case.

Threats to IKEA

Counterfeit products

Many companies are copying designs of IKEA. Likewise, it is not difficult for customers to find counterfeit products on the Internet either.

Customers moving to higher income level

When IKEA’s customers move upwards in income with age, they become disillusioned about DIY products. IKEA also needs to offer differently designed upmarket products.

Internet and DIY USP

Flat-pack self-assembly furniture was IKEA’s unique selling proposition for a long time. But due to proliferation of the Internet, small furniture companies can offer similar products at lower costs.

Concluding statement

The above analysis shows that instead of some weaknesses, IKEA has enough strength to survive and flourish as a company. Using the strengths of unique designs and diversified products, it can successfully face the threats of the Internet and counterfeit products and use the opportunity of expanding in developing countries to improve its presence as a brand.

We hope the article on the ‘SWOT analysis of IKEA – IKEA SWOT Analysis’ has been useful. You may also like reading SWOT analysis of Amazon. Other relevant articles you may be interested in are:

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Last update: 12 January 2021

References

Gelder, K. (2020) IKEA’s brand value worldwide from 2016 to 2020, available at: https://www.statista.com/statistics/980112/brand-value-of-ikea-worldwide/ (accessed 12 January 2021)

IKEA (2021) Who we are. [Online] Available at: http://franchisor.ikea.com/who-we-are-2-2/ (Accessed 12 January 2021)

Lewis, D., 2017. How IKEA used affordable and innovative designs to transform homes. [Online] Available at: http://uk.businessinsider.com/how-ikea-became-successful-2017-10 (Accessed 05 April 2018)

Statista (2021) Number of stores of the IKEA Group worldwide from 2013 to 2020, available at: https://www.statista.com/statistics/1060053/number-of-ikea-stores-worldwide/ (accessed 12 January 2021)

Photo credit: IKEA

Author: Dr. Sewel Sodry

Dr. Sewel Sodry is an internationally acclaimed author and teacher of business management. He is also a specialist coach, trainer and educationalist. He holds a Master of Business degree from Victoria University, Australia and a PhD from King’s College (University of London).