SWOT Analysis of IKEA - Case Study Example

Running Header: Analyses of IKEA Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Table of Contents Running Header: Analyses of IKEA 1 Table of Contents 2 Introduction 3 SWOT Analysis 4 Concepts of IKEA 4 IKEA Success 6 Conclusion 8 Introduction The IKEA is a Swedish enterprise chain which was started by a young man with a vision of enterprising. The name of the young man name was Ingvar Kamprad who before starting IKEA was buying matches from Stockholm and selling them in his rural home of Agunaryd at discounted prices. Later in his life he applied this concept he had learned in the selling of the matches to selling of home furnishings and mattresses all of them at a discounted prices and making sure that the quality was no compromised. IKEA Company was founded in the year 1943 by that time Kamprad was just 17 years of age. From the IKEA’s international website it is recorded the first shop was opened in the town of Sweden in the year 1958. The name IKEA as used by the business is an acronym: the two first letters do represent the name of the founder which is Ingvar Kamprad and the two letters that are used in the last do represent the family farm and town in which he grow up in that is Elmtaryd and Agunnaryd respectively (Albert 2009, p. 56 ). When IKEA was started, the furniture which it offered to the market was the same like the others that were offered by the other manufacturers. IKEA was officially born in the year 1965 when one of the largest stores started its operations in Stockholm (Zahedi & Pahlavan 2010, p.165). During its opening many people were excited by its opening and they flocked inside the store which surprised even the managers because they never expected that. The opening of the store marked the beginning of selling the furnishers at cheaper prices. In the recent years IKEA has recorded a growth which is very rapid and has been reported to be one of the largest retailers in the world who deal with home furniture’s (Burda &Wyplosz 2008, p.45). During its expansion to sell its products globally, IKEA did not consider the retailing rule which states that for companies to succeed internationally they should tailor make their goods and services depending on different preferences and tastes depending with location, beliefs and economies of those countries. IKEA did not change its vision that it is supposed to sell its basic product without changing all over the world. The company still holds its primary focus of production. SWOT Analysis SWOT Analysis is a tool which is used in strategic planning and it is used to make an evaluation of Strengths, Weaknesses, Opportunities and Threats which are involved in business venture or a project or an individual who is in need of a decision to pursue an objective or by an organization with a situation come up with the best solution (Bäcklund 2010, p.63 ). SWOT in normal circumstances do involve close monitoring of the environment in which the company is doing marketing either being external or internal to the organization. SWOT analysis in this paper does help to understand the strategies of marketing that were implemented and used by IKEA. The SWOT analysis in this case are; Strengths: these are characteristics which are helpful to the organization in order for them to achieve their objective, Weaknesses: these are characteristics which are harmful to the organization for them not to achieve their objectives, Opportunities: these are conditions that are external to the company that do help it to achieve its objectives, Threats: these are conditions that are external which are harmful to company and they prevent it from achieving its objectives (Heinken 2009, p.126). IKEA analyzed its strength, weaknesses, opportunities and threats in order to succeed in its businesses. Concepts of IKEA IKEA had some values which included humility, honesty and simplicity. The company did not dream of a big office at a certain corner, may be a personal secretary, business or first class travelling, parking spot which is special or similar perks. These were the basic concepts which distinguished IKEA from the other stores which dealt with furniture. IKEA portrays conservative attitude by making its items from recycled materials (Barlon 2010, p.36). There was a recent product line from the company which included a table which was made from birch heartwood and a major part from the wood was rejected by the manufacturers and a system of storage was made from the recycled milk cartons. The founder of IKEA Ingvar Kampard said that to design a table which would cost $ 5,000 was very easy for designers of furniture, but for them to design a functional and good table it would cost $ 100 and it would only be done by the very best (Robert 2010, p. 63). He indicated that expensive solutions that solve all kinds of challenges are signs of weakness. Normally the costs are put under control which starts at the design level of the chain. IKEA also do keep cost very low by packing its items very efficiently in the flat homogeneous stacking and embalages as much as possible so that they reduce the storage space after and during distribution in the logistic process (Goshal & Westney 2008, p. 59). IKEA invests its money where it is regarded as corporate mantra of observing quality but providing home furnishings which are affordable to the masses. IKEA managers have tried to have a strategy and an organization that do allow both security and independence in a long term consideration o f the group. IKEA have tried to maintain a strong culture which forms one of the critical factors that have made the IKEA to have a continued success. The founder said that when strengthening the culture of the organization it requires that people should translate and understand concept and values into the daily actions and behaviors. IKEA Success IKEA is said to be the first retailer to sell home furnishings in the world. The largest market of the IKEA is said to be the European countries (Ghauri & Gronhaug 2005, p.78). The consumption of the furniture does vary from one country to the other depending on different factors. The second largest market for the furniture is said to be the NAFTA zone. IKEA is said to one of the recognized brands in the continent. IKEA ventured in Scandinavia for the first time in 1973 and a year started its business in Germany. One year later after starting its businesses in Germany, the business was a very big success and the beginning of the 1980’s it decided to intensify it attendance in the Western Europe countries by starting its operations in France. The company was very strict in its marketing and it expanded its presence that one out of three people could access its services in the stores easily. The IKEA learned consumer behavior that the customers tend to buy smaller furniture’s and they change them more than one during their lifetime (Hakansson & Johanson 2009, p.47). Customers also portrayed a new trend over the years and there was the personalization of individual furniture. There was a characteristic that the people preferred buy elements which were separate for them to create their own interior and they were not necessarily supposed to rely on the any specialized advice from any one. The last one decade there has been an entrance of many young households who are able to buy the current modern designs which are sold at a reasonable price and they have helped to rejuvenate the market and the style for the rustic and ancient furniture has slowly decreased. The main aim of IKEA is to lower its prices of the services and products on its complete offering. It even goes lower prices that usual when it is competing with their competitors. Normally the retailer looks at the competitor prices and they reduce their prices by half. In our case the people in France do value items which are cheap compared to people in the Scandinavian countries who are normally used to item being sold at high prices (IKEA 2012). So IKEA knows very well that it cannot set high prices to people in France because they cannot buy these goods and for people in the Scandinavian countries the prices can be set high because people there can even buy at high prices. Twenty years later the officially launching of the company, there were competitors who ventured in the market such as the Fly and the Habitat, but one of the competitors by the name Conforama but it stagnated despite the fact that it represented about 25% of the market share. Habitat was one of the competitors of IKEA and it started its business in 1973. It had opened 26 stores in France which dealt with French furnishing in the furniture market in the city centre. Habitat was also targeting the customers at low prices and exhaustive offers in terms of styles, ranges and products. Habitat produced items that were specifically prepared for the interior of the house (Johnson & Scholes 2004, p. 85). The quality was good and their design was proper. The Habitat Company failed to compete with the IKEA because IKEA has developed a good loyalty with its customers and the services and products it offered to the market were all in fair prices which were affordable by the customers. The IKEA had positioned itself very well in the market and it offered a wide range of products that were well designed and the home furnishing products were functional which were offered at low prices and most of the people were able to afford them (Jonathan & Holger 2010, p. 98). IKEA also provided value addition services which differentiated it from its competitors. Although IKEA‘s customer service assistance was limited, it offered opportunities to the customers for them to choose between assembling units of furniture or transportation. IKEA standardized its products to people (Kotler & Astrong 2007, p.125). The major role of communication is to make people change their style and attitude of the interior. The main of the communication was to show people that for people who thought that they were not fit to buy product from them that it was not true. The communication targeted the young people who are in the change of their life. IKEA also has it own website which it uses for its marketing to the world. The main goal of the website is to update people of the products and services that are offered by IKEA. Each store has its own space and it can communicate with its clients and inform them about their promotions, information and events. Conclusion In the coming future IKEA has to reconsider its furniture products to acclimatize to the needs of people who consume the product in the domestic market. The way consumption, culture and values vary from one country to the other thus IKEA has to customize his product to fit to different cultures (Neil 2009, p.38). For example a bed made for an American cannot be used a person from china for the reason that the American people are tall and they like big things and on the contrary the people from china re short so IKEA has to produce different types of for different people and make maximum use of its resources. The most possible option for the IKEA is to create a joint venture in each market so that it could easily saturate furnishing models in work and country narrowly with local players of the market. IKEA main mission is to provide great range of home furnishing products of good function and design, the furniture’s to good quality and durability, to make prices to low as possible for the majority of the people to afford it. The company do aim for the customer who put much emphasis on value and he is willing to do very little to serve themselves, the company do the transportation of the items to their homes and assemble them for a good price. The IKEA’s unique marketing mix of components can be summarized by saying that the product of the company are standardized, but for the promotion, place and prices are normally adapted to fit the French market. References Albert, H 2009, SWOT, Stanford University, California Burda, L & Wyplosz, J 2008, Macroeconomics, University Press, OXFORD Bäcklund, J 2010, Standardization and local adaptation, University of Stockholm, Stockholm. Barlon, K 2010 The concept of the marketing mix, University of Finland, Finland Goshal, S & Westney, E 2008, Organization theory and the multinational corporation. Macmillan, London Ghauri, P & Gronhaug, K 2005, Research methods in business studies: Practical guide, Pearson , New Jersey Hakansson, H & Johanson, J 2009, Formal and informal strategies in international Industrial Networks, pearson, New Jersey IKEA, 2012, Living room furniture, IKEA online, viewed on 29th February 2012. http://www.ikea.com/gb/en/catalog/categories/departments/living_room/ Johnson, G & Scholes, K 2004, Exploring Corporate Strategy, Prentice Hall, London Jonathan, H & Holger, W 2010, Why does the “law of one price” fail? University of Stockholm, Stockholm Kotler, L & Astrong, N 2007, The principles of marketing, Prentice Hall, New Jersey Neil, H 2009, The concept of the marketing mix, Journal of advertising research, Vol. 4, no. 5, pp. 15-49. Robert, M 2010 Contemporary Strategy Analysis, Blackwell Heinken, W 2009, Introduction to SWOT anaysis, Wiley, Canada. Zahedi, H & Pahlavan, K 2010, Value Chain Theory, Wiley, Indianapolis Read More