Ikea Case

Introduction
In this report we will take a deep look into IKEA, the worlds leading home furnishing retailer. Through SWOT and the Five Force analysis we will identify some key issues for the company, and then come up with practical recommendations to tackle those problems.

Basic Company Background

In 1943, IKEA was founded by Ingvar Kamprad and in 1954, the company managed an asset of 15 co-workers and it bid the start of expansion including a number of furnishing for home, stores and companies. The success of the IKEA is explained through the relationship of the three ideas that are involved in the business the entrepreneur, the business idea, and the company culture. From a small furnishing shop in 1943 to nearly 300 stores around the world today, Kamprad at the age of 80s makes him one of the worlds greatest entrepreneurs. The business idea is focused on the concept of help create a better everyday life. The idea of offering a wide range of home furnishings that combine good design, good function, and good quality at the low prices made it possible for the people to buy them. Their company culture which is guided by the organizational objectives enables their strategy to make customers keep coming back. The company believes in providing people with quality home furnishing at low prices, while weakening the competitors market share. As part of the national or global trends and changes, IKEA is just one example of firms that are successful in both domestic and international business(2003). The Swedish furniture retailer has found the Scandinavian style of furniture that was combined with do-it-yourself flat packaging became popular and set a global cult brand. The Company, due to the economic changes and trends are adopting different kind of strategies that will take an appeal on their customers and aiming to own the customer loyalty. The strength of IKEA grew from the ownership transfer of the business to the Stitching Ingka. It granted the Kampard family more control over the company so the company could adopt other furniture style such as dinnerware, lightings and even rugs. Yet, the economic conditions affected the companys market performance and declared a slowdown because of lacking the strategic direction. In order to generate the high performance of the business, IKEA should be careful in analyzing and considering the key issues that involved in any aspects of the business and act accordingly.

SWOT Analysis
Strengths IKEA have a strong internationally known brand attracting key demographic customer groups. The IKEA business model is unique in its construction and execution with little direct competition on a like for like basis. Success has been driven from the price architecture offering value to the customer in innovative but functional products. Despite the large shed operations IKEA operate there is a degree of specialist knowledge within key product areas where purchases are more considered and require assistance such as kitchen installations. Weakness Whilst an international brand there is a level of reliance on European markets with 90% of the stores based in Europe and the balance across America, Middle East and Asia. Although the model promotes low prices it has been identified there is an associated low level of customer service which couples this suggesting there is a need to work on service to ensure a complete shopping experience and ensure repeat business within the existing customer base. As a reaction to marketplace movement the development of Ecommerce has been necessary to compete in a modern technological world however there is also a consideration this movement into multi-channel retailing moves away from the fundamental vision of the customer being able to see and touch the product. Opportunities IKEA are moving from International to global status through the development of Asia and Eastern European models. Traditional product for IKEA has been within value, low price high volume product however the movement into mid and higher price points will see an opportunity to move the demographic base and increase the average basket value with less reliance on a limited demographic group. Although there are negative associations within the development of the IKEA Ecommerce site there is an associated opportunity to achieve growth and increase levels of customer service as the additional transactional capability will reduce pressure from stores to a certain degree. Threats Within growing competitive retail markets mainstream retailers are beginning to

mirror the model of low cost value flat packed furniture which will impact on the buoyancy of IKEA. With economic concerns over rising living costs and depleting disposable income there is an overall threat to the performance of the business in UK and American markets specifically.

Porters Five Forces Analysis

Power of the Buyers

There is a little power because of the exiting low-price options. Furniture and other small items have an alternative and consumers have limited alternative choices that make the IKEA unique among its competitors. In addition, the low price strategy is another way of the company to response in buyers needs. Power of Supplier

IKEA has its thousands of suppliers that set standards in delivering the materials. Once in a while, for some products, the IKEA bids for the contracts with multiple companies to craft the same products. Most of the suppliers work in IKEA and compete with other suppliers, and they have a little bargaining power. Because of the low-pricing, IKEAs profit margin also affects the prices in raw materials than by prices in labor. Competition

The IKEAs furniture competitors offers different styles and functionality. Conrin targets a new low cost in terms of furniture line; Cratel & Barrel offers a furniture in a box which is subject in higher prices; Ethan Allen aimed at a more upscale market; Wal-Mart is equipped in a big box furniture that is categorized under the general store must-have-items, but dont have much of a style. IKEA is the most successful in delivering the complete package for the customers that reflects on weak rivalries. Substitutes

There is no specific product that can be a substitute for the furniture but IKEA at least, have to keep up with the latest trends, to avoid becoming out of style. Another advantage is that, through their cutting and leading technology, IKEA could copy any new style fairly and move each the product into its stores. Entry Barriers

Another furniture company is rolling on a low-cost strategy and should compete with the IKEA as the excellent company in delivering the furniture and house wares. IKEA stores do not reach many small towns and this is an opportunity for the new competitors to move into small and midsize cities with smaller stores and less selection. But not easier in city because new entrants have to establish a vast supply chain and create a unique brand name.

Key Issues