SWOT Analysis

A brief analysis of IKEA's strengths, weaknesses, opportunities and threats.

STRENGTHS

1) Brand Reputation

As of the year 2008, Ikea was announced to be the world’s largest furniture retail company offering a wide range of ready-to-assemble furniture that boasts modern architectural design.

2) Market Presence

Ikea has over 332 branches in 38 countries worldwide and still plans to expand its operations within the coming years.

3) Customer Knowledge

Ikea has a general knowledge of its customers since it briefly understands the purchasing factors that influence its customers. Ikea also supplies affordable yet high quality products that gives a wider range of customers the chance to purchase. In addition, the products in Ikea stores are arranged in a way that lets shoppers be able to enjoy and have a more convenient time shopping.

4) Supplier Relationship

Ikea ensures that it has a positive and stable relationship with its suppliers. In this sense, Ikea can order from its suppliers large quantities of products at a cheaper price. This, on the other hand, gives the suppliers an assurance that Ikea will continue making transactions with them. Ikea also tries its best to source its products nearer from its suppliers to lessen transportation costs.

5) Low Cost of Production

Ikea keeps in mind that through innovation it can lower its cost in producing goods. Its business idea is to keep things as efficient as possible to reduce waste.

OPPORTUNITIES

1) Grocery Expansion

Nowadays, the trend in the market shows that groceries are high in demand and since Ikea already offers several retail stores that has a grocery, it can still further expand by providing groceries in more of its retail stores.

2) Online Sales

Statistically, 17% and 4% of retail sales in the UK and US respectively are from online sales. This is a large part in sales so in order for Ikea to expand more, it can take this opportunity and start online retail sales. This can also be a way to lessen costs in selling goods.

3) Cheap Market Trend

Due to the current financial climate, consumers are seeking for more affordable products rather than expensive once. In this case, Ikea could increase its sales and outcompete its competitors like Barker and Stonehouse and John Lewis.

WEAKNESSES

1) Decrease in Product Quality

Ikea has a hard time managing its low cost production with the quality of goods it sells. Many consumers have reported that due to Ikea’s over reduction of costs in manufacturing goods, the quality of these goods produced are becoming of lesser value than that of competitors.

2) Economic Trends

Due to Ikea’s numerous branches worldwide, the company has to cope with currency exchange rate fluctuations and economic factors that affect a country. As an example, from the years 2007-2009, western countries like US or UK experienced the Global Financial Crisis which affected Ikea’s production and employment.

3) Standard Products

Consumers feel that Ikea’s products are standardized and mainstream. Buyers are seeking for products that are more customizable since only a few buyers are attracted to standardized products.

THREATS

Rising Competitors

Many competitors like Walmart, Target and Tesco are entering the furniture and homeware industry. This is a large threat since all those retailers have similar strategies in managing their business like low cost production and well managed branches. Moreover, Ikea also has competitors in regional sectors that know more about regional taste and can offer lower prices.

Consumer Income

The increase in consumer income is a threat for Ikea since consumers will be able to buy more expensive goods. Consumer purchase for cheaper goods, like the goods sold by Ikea, will decrease.