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SWOT Analysis of IKEA by Mariam Pasha

This report is written for Ms. Devanshi Sharma, as the second Approaches to Learning assessment of the first semester. It may be read by other faculty members and/or students. SUMMARY A brief compilation of various strengths and weaknesses of IKEA (a well-known furniture retailer) as written in the 2011 sustainability report, published on their website (IKEA, 2004). Any opportunities or threats are also considered and appropriate suggestions are then specified.

3 CONTENTS Introduction ___________________________________________________________________page 4 Method ______________________________________________________________________ page 4 Result ________________________________________________________________________ page 5 Conclusion _____________________________________________________________________page 7 Recommendations ______________________________________________________________ page 7 Bibliography____________________________________________________________________ page 8

4 INTRODUCTION IKEA is an international private limited company that trades in retail furniture. It was founded by Ingvar Kamprad in Sweden, in the year 1943. Since then, IKEA has expanded to over 38 countries all over the world. Its main aim consists of manufacturing high quality furniture at the lowest possible cost price, along with minimizing carbon footprint. METHOD IKEA prides itself on its continuous effort towards being a better company, always looking for more environmentally friendly ways to incorporate into its production and packaging. Therefore, in order to create awareness of its achievements and future goals to the public, IKEA publishes an annual sustainability report on its website highlighting all of its milestones reached so far and how much closer the company is to its current aim. The published report was thoroughly read and analysed for the purposes of identifying the companys strengths, weaknesses, opportunities and threats.

5 RESULT With over 332 stores across the globe, IKEA has managed to retain itself as an internationally recognized enterprise, dealing in furniture. The company has a number of strengths and a handful of weaknesses which will now be looked upon. One of the greatest reasons IKEA is considered successful is because of its aim to use renewable materials wherever possible. About 40 stores, across 7 countries have installed solar panels and wind turbines to produce a greener source of electricity. In addition to that, all of the IKEA bags are made out of 100% recycled paper. Overall, the study reports across several years show that the percentage of renewable materials being used by IKEA has increased from 71% in 2007, to 75% in 2009. IKEA aims to use-up its waste materials and/or reduce the amount of material used to make a particular product. An example of this would be the GLA chair over the years, IKEA has managed to significantly reduce the amount of wood which is used to make this particular chair (the solid used is a waste product of saw mills). Other examples include the NORDEN table and the LACK table while the first one is produced from knotty (rejected) birch wood, the other uses stiff card between its sheets of wood in order to reduce material usage. Long term plans are made with the suppliers of IKEA, which allows the company to negotiate lower prices for a bulk order. Furthermore, most of the manufacturing takes place in developing countries to keep the cost-level as low as possible, even though they have been originally designed in Sweden. IKEAs motto is to create quality products, within a set price. This allows their business to boom even within a price-sensitive market. Its ready-to-assemble and flat-packaged furniture cuts back on costs and lets the customer buy it at a relatively cheap price. While the above were some of the companys strengths, the following are some of its weaknesses. Since IKEA has a low cost dictum, many would question the quality and durability of the furniture being offered at the store. The recycled paper-bag idea was considered an effective, environment-friendly option until the idea was implemented and the drawbacks were noticed. What one plastic bag could hold, now took up approximately seven paper bags. Most of the IKEA stores are largely situated towards the suburbs or the outskirts of the city due to its enormously sized warehouse; this may put-off many potential customers. To make-up for its weaknesses, IKEA tries to avail every possible opportunity it can, with the purpose of maximising potential customers. IKEAs expanding due to its eco-friendly manner of trading with stores opening up in various cities across the world. Its aim towards renewable electricity has been seen through solar panels being

6 introduced in countries with year-round sunshine, while wind turbines being installed across European cities. The company publishes an annual catalogue show-casing all of the products available that year and is considered to be one of the greatest marketing tools of IKEA. It also attracts customers with an In-store restaurant. They became a popular hit soon as they were introduced at the first outlet in Sweden and are now an integral part of every store. The company offers traditional Swedish products, as well as local food to cater to every customers needs. Month-long food offers are also a part of IKEAs promotion advertised in the annual catalogue. IKEAs As is section gives displayed items and slightly damaged products a second chance; customers may buy the faintly defected product at a much cheaper price. IKEA jumps at any opportunity offered to minimise waste as much as possible. While IKEA may be availing several opportunities, a few external threats A cause of concern are new customers who are not used to the IKEA way of shopping that is noting down your product and picking it up at the warehouse station they may hesitate and/or be put off by this. The recession which hit a couple years ago saw a slight decrease in the number of sales; while this did not majorly affect any part of the company, it did in fact slow down the business. The idea of cheaper, more environment-friendly furniture is gaining popularity and so competitors are now in phase with IKEA while they may not be as globalized as this enterprise, they do in fact lower the number of maximum potential customers.

7 CONCLUSION Taking every aspect of IKEAs SWOT into consideration, it can be stated that the enterprise will not hinder at the opportunity of expanding itself. Its main goal consists of using a 100% renewable energy (as of 2009, it was 75%) and it is constantly trying to improve itself to achieve this aim. RECCOMENDATION Biodegradable plastic bags could be considered as an alternative to the previously used paper-bags, since it is both eco-friendly, and also has the potential to carry sizeable objects. Perhaps an express version of IKEA could be set-up at major malls or shopping destinations, where customers may visit for small items and drive over to the suburbs for larger, bulkier items.

8 BIBLOGRAPHY [ONLINE] IKEA (2004). Available at: http://www.ikea.com. [Accessed 24 November 2012].
[ONLINE] IKEA. (2011). Sustainability Report 2011. Available at: http://www.ikea.com/ms/en_AE/about_ikea/pdf/ikea_ser_2011.pdf. [Accessed 23 November 2012].